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Windows TCO – Best Practices for Managing Costs and Maximizing ROI

Thomas PiselloCEO and co-founder

Alinean™ - The IT Value Experts™Author of “ROI for IT Solution Providers” (IEP – 2002)

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Why Is TCO Important?

IT investment proposals increasingly require financial analysis and justification. CIO’s and senior IT managers are increasingly facing pressure to cost justify IT investments on a financial basis. - Gartner Group

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1995 1996 1997 1998 1999 2000 2001200

250

300

350

400

450

500

550

600

650 $642

$573

IT Spending Peaks

IT spending rose from 18.2% of all US business capital investments to a peak of 46.7%

Source: Bureau of Economic Analysis, Table 5.5. Real Private Fixed Investment by Type, [Billions of chained (1996) dollars], December 21, 2001,

Est. 20 % declinein US IT Spendingfrom 2000 to 2003

Flat Spending Predicted 2002 to 2003, Up-tick in late 2003/early 2004

Hosted byIT Spending / Revenue

3.73%

0.82%

2.72%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

Avg. US Company Best 25 Companies(>$500M)

Lowest 25 Companies(>$500M)

I T Spending / Revenue

Alinean ValueIT™ Peer Comparison Software – Database of over 20,000 US and international companiesBest /Worst Ranking based on Information Productivity® = EVA/SG&A (Strassmann, Inc.)

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PeerMap™ - IT Performance vs. Spending

Frugal Leaders Investing Leaders

Frugal Followers Investing Followers

Hosted byCharacteristics of Value Leaders

Market Position• 65% of companies success related to market position (PIMS Program –

Empirimetric)

Frugal• Strong project selection committees with fiscal discipline• Modest new project budgets• Self service to reduce administrative overhead• Standardization and consolidation• Agility: Able to scale spending to performance/market conditions quickly

Higher Project Success Rates• Smaller projects with more milestones• Strategic alignment, planning and benchmark measurement• ROI, TCO and Value management discipline• Strong business unit collaboration

Focus on Core Competencies• Strategic outsourcing• Higher training and career development spending• Lower staff turn-over, satisfied employees• Culture and mission

Alinean, LLC

Hosted byCIO Top Priorities – Spending Accountability

Prove and improve the value of IT Over 80% of companies now require ROI and TCO analysis to be

performed on most IT investments 65% of companies indicated that they do not have the knowledge or

tools needed to do ROI and TCO calculations 75% have no formal processes or budgets in place for measuring

the ROI and TCO of IT projects 68% do not measure ROI and TCO on IT projects 6 months after the

work is completed.

Do more with less

IT Spending will remain flat in 2003 budgets, but spending backlog is building

Communicate more effectively to stakeholders 44% say either the CEO or CFO is heavily involved in the decision

making process Business units are gaining control over the majority of IT decisions

Sources: IDC, E&Y, ComputerWorld

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The TCO of Windows: Managing Costs and Maximizing ROI

Technology investments now hinge less on features and functions and more on finance. - CFO Magazine

Businesses are done with mere technology. From now on, the role of the CIO is to make money. - Paul Strassmann, ComputerWorld Columnist

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TCO – Capturing All Lifecycle Costs

Deploy

Manage and MaintainChange and

Evolve

Retire

Plan

3 to 5 year lifecycle

Acquire

Hosted byTCO and ROI – Project Timeline

Total ExpensesAnd TCO Today

Total Expenses and TCO After Project

Project Costs

Total TangibleBenefits

IT Budget &BusinessOperatingExpenses

Revenue Before

Revenue After

Revenue &Profit

As Is To Be

Hosted byWindows 2000 TCO

Windows 2000 TCO

3%

23%

14%

30%

23%

TCO = $6,845 annual per PC

Alinean 2003 – Windows 2000 environment with low best practices

Hosted byWindows 2000 TCO by Category

$2,738

$3,902

Alinean 2003 – Windows 2000 environment with low best practices

Hosted byTCO Drivers

Management PracticesCapability and Maturity

Complexity and Use

Service Levels, Availability and Performance

Up to a 26% Savings with Best Practices

$500 to $1,500 per PC to implement Est. savings of $1,845 per PC/year

Alinean 2003

Hosted byBest Practices

Implementing a cohesive set of best practices can lead to cost reductions of more than 26% in PC TCO

However, need to factor in cost of achieving best practices ….. ROI

Alinean 2003

Hosted byWindows Client TCO by Platform

0

2,000

4,000

6,000

$8,000W

in95

Win

98

NT

W4

Win

2000

Win

95

Win

98

NT

W4

Win

2000

Win

95

Win

98

NT

W4

Win

2000

UnmanagedDesktop

Typical ManagedDesktop

Highly ManagedDesktop

HW/SW

IT OpsAdmin.

End-UserOps.

Downtime

Copyright © 2001

Hosted byMobile Computer TCO by Platform

0

2,000

4,000

6,000

8,000

10,000

12,000

$14,000

Win95 Win98 NTW4 Win2000 Win95 Win98 NTW4 Win2000

Day Extender Road Warrior

HW/SW

Ops

Admin.

End-UserOps

Down-time

Copyright © 2001

Hosted byMigrating to Windows 2000 and AD

Est. at $1,000 per

desktop

PC Lifecycle

• 36 month desktop

• 24 month mobile

Upgrade vs. Replace

• $45 per admin hour

3rd party tools

TCO Considerations:

• System replacements and

replacement labor

• System upgrades and upgrade

labor

• Software Licensing

• IT and User Training

• Migration Labor

• Migration related Help Desk

Calls

• Migration related User

Downtime

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Pre-Migration Planning TCO Considerations

• Asset analysis for replacement /

system upgrade

• Develop Business Case

• IT Training

• Identify obsolete users

• Identify expired Computer Accounts

• Identify trust relationship

• Identify Administrator Privileged

Users

• Security Impact (ACL)

• Detecting Naming Conflicts

• NT Service Account Identification

20% of total migration

costs

Administration and

Support Labor

3rd party tools required

Hosted byMigration

TCO Considerations• Windows Migration

System Replacement and Upgrades OS and System Distribution Migrate User Accounts and Rights Migrate Computer Accounts and Rights Rename Machines Directory Updates Updating Access Permissions to File / Print

Services Maintenance of Access to Exchange Preserving End User Desktop and Applications

(Profile) Preserving System Registry Access SID History Cleanup User Training

• Exchange Migration Account creation and deletion User properties Distribution groups and lists Mail forwarding / delivery restrictions User Training

80% of Migration Costs

Systems and Software Costs

IT Ops and Admin Labor Costs

User Training

Downtime Impact• User Productivity Loss

(salary)

• Business Loss (profit)

Hosted byChange Management

TCO Considerations• Software distribution

Remote Installation Services Windows Installer Services SMS System Restore

• Directory and Resource Security and Administration

Create/Delete/Add / Remove a Group or User

Permissions Management Role Based Delegation Changing Directory Security Reset Passwords Change User and Personal

Information Manage Print Queue User Auditing and Reporting

IT Operations and

Administration Labor

Support Calls

Downtime

Hosted byChange Management

TCO Considerations• File Security Administration

Change File Security Service Account Maintenance Visualizing Permissions Searching Replacing Permissions Security Auditing and Reporting

• Group Policy Administration Resultant set of Policies Analysis and Documentation Backup and Restore / Versioning

• Physical MACs Imaging Shipping Staging Standardization

IT Operations and

Administration

Labor

Support Calls

Downtime

Hosted byOperational Management TCO Considerations

• Availability Management Microsoft Operations Manager

(proactive system monitoring and event management)

Microsoft Application Center Advanced Enterprise Server -

clustering/failover System Restore Hierarchical

Storage Management (HSM)

• Security Management Encryption, PKI, Kerberos Anti-virus (requires systems >

300MHz for background anti-virus protection)

Respond and Resolve

Labor

Support Calls

Downtime

Hosted byAsset Management

TCO Considerations

• Maintaining Standards

Image management

Systems standardization

Group policy management

Systems Management

Server (SMS)

• Centralized Procurement

Standardization

Systems Purchasing

Software Licensing

IT Ops & Admin Labor

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Customer Services TCO Considerations

• Centralized support

• Standardization

• Remote diagnostics and control

• Password management

• Self-service

• User Training

Support Calls

User Downtime

Low Medium High

Typical Help Desk Costs per Call $15 $18 $25

Typical Call Volume (Average number

of calls per user per month)

1.2 2.0 2.5

Hosted byBusiness Value - Productivity

Mobility• Additional 6-8 productive hours per week

• At Meetings, Road, Home

• Migration from desktops to mobile computers

• Wireless

• Higher TCO by 25 to 50%

Business Agility• New applications

• New business opportunities

• Important in uncertain times

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Alternative 1: PC as a Utility

Benefits

• Re-allocate IT Operations and Administration Staff• Improve Service Levels• Increase Availability• Migrate to Latest Platform and Best Practices • No large up-front investment required

Managed Services

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Alternative 2: Linux

• Lower Software Licensing Costs• Slightly Higher IT Ops & Admin Costs• Better Availability• Slightly Less Agility

Lower TCO?

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Conclusions

Potential 26% savings with a well managed Windows

environment - $1,845 per PC / year

Requires Active Directory and Policy Management

Migration costs average $1,000 per PC

Implementing best practices can cost an additional

$500-$1,500 per PC

Typical payback in 12-18 months from deployment

Other alternatives, such as Managed Services deserve

serious consideration

Hosted byThank You!

Thomas Pisellotpisello@alinean.com

www.alinean.com

• Additional ROI research

• Free on-line peer comparison tool

• Sample reports and ROI/TCO benchmarking and analysis software