total cost of ownership tco - windows 2003 vs. linux · page 1 of 46 total cost of ownership (tco)...

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Total Cost of Ownership (TCO) of Windows 2003 versus Linux in Indian Enterprises

Measuring the total cost of ownership (TCO) of mission critical information systems comprising hardware, software, IT services, internal staff costs and post-implementation maintenance and extension costs, for selected workloads across select verticals in India

October, 2006

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Disclaimer This research service aims at assessing the total cost of ownership (TCO) of mission critical information systems comprising hardware, software, IT services, internal staff costs and post-implementation maintenance and extension costs, for selected workloads across select industries in India.

Frost & Sullivan does not take responsibility for any incorrect information supplied by the respondents. Quantitative market information is based primarily on interviews and therefore is subject to fluctuation.

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Audit Report

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Table of Content 01. Executive Summary 7

02. Introduction 15

03. Objectives of the Study 17

04. Research Framework, Terminology and Methodology 18 Research Process 18

TCO: Frost & Sullivan Framework 19

Sampling Methodology 21

Windows 2003 and Linux Configuration 22

Data Collection 22

Target Respondents 23

Period covered 23

05. Server TCO: Findings and Analysis 24 TCO Analysis by Servers 27

Application Server 27 File/Print Server 30 Web Server 33 Networking server 36 Mail Server 39

06. Conclusions and Recommendations 42

07. List of Industry Participants 45

08. References 46

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List of Tables:

Table 1-1 Total Cost of Ownership of Indian Enterprises 9

Table 1-2 Total Cost of Ownership – Overall 10

Table 1-3 Total Cost of Ownership and Cost Break up across servers 11

Table 1-4 Percentage Break-up of cost amongst various components across all servers 12

Table 4-1 Split of sample size as per adoptions of 1/2/4 ways (Windows and Linux) 22

Table 4-2 Vertical Split of sample size (%) 23

Table 5-1 Total Cost of Ownership of Indian Enterprises 24

Table 5-2 Total Cost of Ownership – Overall 25

Table 5-3 Workload Split 27

Table 5-4 Total Cost of Ownership for application server 27

Table 5-5 Total Cost of Ownership for File/Print server 30

Table 5-6 Total Cost of Ownership for Web server 33

Table 5-7 Total Cost of Ownership for Network server 36

Table 5-8 Total Cost of Ownership for Mail server 49

Table 6-1 Benefits perceived by Users 44

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List of Charts:

Chart 1-1 Total Cost of Ownership – Overall (Linux Vs Windows 2003) 11

Chart 1-2 Total Cost of Ownership – Overall (Percentage Split of TCO amongst various components) 12

Chart 1-3 Hardware Costs as a Percentage of TCO across servers 13

Chart 1-4 Operations and Management costs as a percentage of TCO across all servers 13

Chart 4-1 Flowchart on the research designs 18

Chart 4-2 Frost & Sullivan TCO Model 20

Chart 4-3 Strategic Alignment Maturity Model 22

Chart 5-1 Total Cost of Ownership – Overall (Percentage Split of TCO amongst various components) 25

Chart 5-2 Cost of Ownership – Overall (Linux Vs Windows 2003) 26

Chart 5-3 Percentage split of TCO amongst various components 26

Chart 5-4 Total Cost of Ownership for Application server (Linux Vs Windows 2003) 28

Chart 5-5 TCO of application server Percentage Split amongst various components) 29

Chart 5-6 Total Cost of Ownership for File server 31

Chart 5-7 TCO of File server (Percentage Split amongst various components) 32

Chart 5-8 Total Cost of Ownership for Web server 34

Chart 5-9 TCO of Web server (Percentage Split amongst various components) 35

Chart 5-10 Total Cost of Ownership for Network server (Linux Vs Windows 2003) 37

Chart 5-11 TCO of Network server (Percentage Split amongst various components) 38

Chart 5-12 Total Cost of Ownership for Mail server (Linux Vs Windows 2003) 40

Chart 5-13 TCO of Mail server (Percentage Split amongst various components) 41

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01. Executive Summary

When companies decide about their IT investments, one common problem they face is that many of them capture the initial purchase cost of the hardware or software. CIOs realize they need analysis that goes beyond initial purchase cost of a hardware or software, and indicates post-implementation operation, support and maintenance costs too. Hence, there is a need to capture the total cost of ownership (TCO), the sum total of all direct and indirect costs associated with the life-cycle of an IT asset. This Frost & Sullivan study focuses on the comparison of the total cost ownership (TCO) of Microsoft Windows Server 2003 and Linux.

Frost & Sullivan developed a framework taking into account the costs of selection, implementation, maintenance, upgrades, and associated soft costs (such as project planning efforts, configuration, etc) of a server over its life-cycle. The framework was used to assess the total costs of ownership for five workloads: application, file/print, web, networking and networking server. The framework was externally validated by Capgemini and CIO/CTO’s of few Indian enterprises. Capgemini after a thorough revision of framework certified that “The TCO concept and research methodology developed by Frost & Sullivan is comprehensive enough to capture all the necessary cost components in purchase and operations of platforms.” Based on this audited framework data was collected from 54 Indian companies from July 2006 to October 2006.

Key Findings Our analysis of five-year TCO across 54 Indian organizations reveals: ■ Hardware is the largest component of TCO of Indian enterprises. This is strikingly

different from the TCO of North American enterprises where Staffing is a significant cost.

■ Software cost is just about 15% of the Capital expense and just 6.8% of TCO.

■ Soft costs (costs related to planning, configuration and project management of server environment) are about 17% of TCO, significantly higher than software costs.

■ Maintenance and Downtime costs constitute about 9% each of the TCO in Indian enterprises.

■ On an aggregate level (weighted average of different servers) the Windows 2003 environment across enterprises was close to 15.9 percent lower TCO as compared with the Linux servers.

■ Windows 2003 server constitutes lower TCO in 70% of the instances encompassing application servers, email servers and network servers. For the balance 30% instances, that encompass Web and File/Print Server- where Linux scores lower TCO, enterprises can gain TCO advantage over Linux by way of shifting to Windows Web Edition and Storage Edition.

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■ On an aggregate level, Linux servers had a significantly higher OPEX of approximately 53.1 percent over Windows 2003, primarily due to the high cost of support and manpower costs.

■ Our results indicate “search costs”, time and effort in selection and evaluation of server is significantly higher on Linux. Decision makers were consulting their counterparts in other organizations before selecting the server operating systems because deployment histories of Linux system were not easily available.

■ On an aggregate level, training costs are 60% higher on Linux servers than Windows 2003 server. The relative low availability of the numbers of IT professionals trained on Linux servers and tools and less complete penetration of Linux in Indian Enterprises are the primary reasons.

■ On an aggregate level, downtime costs on Linux servers are 25% higher than Windows 2003. Increasing complexity of Database and proprietary application integration and poor system administration are the primary reasons.

■ On an aggregate level, Linux environments exhibit 30% higher soft costs than Windows 2003 server environments. Costs associated with organizational level planning, configuration, project management costs tend to be high on Linux because of low availability of Open source IT consulting expertise.

■ Microsoft Windows 2003 environment offered TCO advantage in three of the five workloads, namely, application server, Network server and Mail server.

■ The TCO for different verticals under study exhibited the same trend and the findings did not differ across Banking, Financial Services and Insurance (BFSI), Manufacturing, Public Sector and Government, IT and ITeS and Telecom verticals.

■ Windows has a clear cost advantage over Linux in application servers. The TCO of Linux is significantly higher, 22.4% higher than that of Windows 2003. Linux application server despite having low capital expenditures, costs significantly higher in operational expenses.

■ Despite running higher workloads, Microsoft 2003 application server has a lower TCO advantage of about 11% over Linux application servers.

■ Linux server environment has a lower TCO advantage in File/print (4.7%) servers and Web servers (24%) over Windows 2003.

■ Windows 2003 environment has lower TCO advantage for Networking servers (11%) and Mail servers (8.25%) over Linux environments.

■ Workloads significantly differ between Linux and Microsoft 2003 servers; Microsoft servers tend to run more workloads/server in comparison with Linux, except in the case of Web servers.

■ Most organizations today view IT, as the key resource to attain and sustain competitive advantage. Organizations in India are increasingly moving towards having a detailed information policy along with well defined IT objectives.

■ The business understanding of IT in most organizations is on the rise. However, information technology as a function is yet to get fully integrated in the business planning cycle of most organizations in India. Even the extent of cross-functional integration in Indian organizations is not high.

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Following paragraphs highlight some key results.

Table 1-1: TCO of Indian Enterprises

TCO Key Insights Hardware 4.69 Software 0.69 Capex 5.38 Training 0.42 Upgrade 0.40 Downtime 0.91 Installation 0.22 Maintenance 0.93 Search 0.07 Soft cost 1.77 Opex 4.72 Total 10.10

Hardware constitutes about 46% of the TCO. Software cost is just about 6.8% of the TCO. Soft costs (costs associated with planning, deployment and integration of the IT asset) constitute about 17% of the TCO Maintenance and Upgrade costs are about 9% of TCO each.

Note: All figures are rounded off and are in INR Lakh. Source: Frost & Sullivan

Hardware is the most significant cost component of TCO of Indian enterprises. Contradicting the general perception that software costs constitute a significant portion of TCO, our results indicate Software cost is just about 13% of the Capital expense. Soft costs (costs related to associated planning, configuration and project management of server environment) are significantly higher than software costs. Maintenance and Downtime costs are about 9% each, and are higher than software costs in the overall TCO of Indian enterprises. Our result indicates there is cost involved with search and evaluation of servers and search costs are higher on Linux servers across different work loads.

The TCO of Indian enterprises shown above indicates some significant departures from previous studies. Software costs are about 4.6% of the TCO of North American Enterprises (IDC, 2002), and it is about 25% of the TCO of Chinese enterprises (CCW Research, 2005). Staffing costs are the major costs of the TCO for North American enterprises (IDC, 2002), while for both Indian and Chinese enterprises hardware are the largest components of their TCO. The TCO of Linux and Windows 2003 server environments show significant differences. On an aggregate level (weighted average of different servers) the Windows 2003 environment across enterprises has close to 15.9 percent lower TCO as compared with the Linux environment. At an overall level, the hardware cost of Windows System is higher than that of a Linux system. This could be explained by the fact that the Linux system deployments were more recent than that of Windows systems; this allowed Linux users to pay lower hardware prices as compared to Windows as the hardware prices are constantly declining. Linux however has around 14.4 percent CAPEX advantage over Microsoft. But, Linux also has a significantly higher OPEX of approximately 53.1 percent over Windows 2003, primarily due to the high cost of support and manpower costs.

Administrator

Administrator

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Table 1-2: Total Cost of Ownership – Overall

Linux Windows 2003

Difference in Percentage Key Insights

Hardware 4.54 4.74 4.2% Software 0.30 0.80 62.5% Capex 4.84 5.54 12.6% Training 0.59 0.37 - 59.4% Upgrade 0.50 0.37 -35.1% Downtime 1.09 0.87 -25.2% Installation 0.69 0.09 - 666.6% Maintenance 1.33 0.82 - 62.2% Search 0.12 0.06 -100.0% Soft cost 2.17 1.66 -30.7% Opex 6.48 4.23 -53.2% Total 11.32 9.77 -15.9%

Windows 2003 server has a TCO advantage of about 15.9% over Linux Servers. Windows 2003 environments have lower training, upgrade, downtime, installation, maintenance and search costs Soft costs are lower by 30% on Windows 2003 environments

Note: All figures are rounded off and are in INR Lakh. Source: Frost & Sullivan As indicated in Table 1-2, proportion of training cost is higher on Linux servers, except the web server, than Windows 2003 server. We attribute the higher costs to the relative low availability of the numbers of IT professionals trained on Linux servers and tools. This could also be because of less complete penetration of Linux in Indian Enterprises. Also Frost & Sullivan enterprise studies indicate that mature platforms have certain advantages as more qualified IT professionals are available thus acquisition costs tend to be low, problem-solving and trouble shooting becomes easy because of better documentation and support. Our research findings show the Linux based application servers as the ones having the highest total cost of ownership (TCO), at INR 14.34 Lakh. Interestingly, the Linux based web server comes out as the one having the lowest TCO. Mail servers (both Linux and Windows 2003) have emerged as a category that has the highest TCO, next only to application servers. One interesting aspect of our study is that workloads significantly differ between Linux and Microsoft 2003 servers, Microsoft servers tend to run more workloads/server in comparison with Linux, except in the case of Web servers.

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Chart 1-1: Total Cost of Ownership – Overall (Linux vs. Windows 2003)


Table 1-3: Total Cost of Ownership and cost break-ups across servers

Server OS Capex Opex TCO Key Insights

Linux 5.69 8.65 14.34 Application

Windows 2003 6.49 5.23 11.72

Linux 2.70 1.14 3.84 File/Print

Windows 2003 2.90 1.13 4.03

Linux 2.07 1.02 3.09 Web

Windows 2003 3.07 0.99 4.06

Linux 2.61 2.92 5.53 Networking

Windows 2003 2.61 2.39 4.99

Linux 3.20 3.49 6.69 Mail

Windows 2003 3.45 2.72 6.18

TCO of Windows 2003 Application server is 22% lower than Linux servers.

While Linux server has overall low TCO on File/Print and Web server, the Opex costs of Windows 2003 platform is lower for both servers.

Windows 2003 server environment has a TCO advantage of 11% for Networking Server and 8.25% for Mail server.

Low Operations and downtime on Windows 2003 web server

Low training, maintenance and operations cost on Windows 2003 Networking server


As seen from Table 1-3, Windows 2003 had lower TCO advantage for application, networking and mail servers.

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Chart 1-2: Total Cost of Ownership – Overall (Percentage Split of TCO amongst various components)

Note: All figures are rounded off. Source: Frost & Sullivan

Hardware costs, across all categories of servers and across all platforms (Linux and Windows 2003) constitute the highest share of total cost of ownership (TCO). As indicated by our research, hardware costs of web servers based on Windows 2003 platform share the highest proportion of the TCO. Share of hardware costs in total TCO is lowest for application servers based on the Linux platform.

At an overall level, the hardware cost of Windows System is higher than that of a Linux system. This could be explained by the fact that the Linux system deployments were more recent than that of Windows systems; this allowed Linux users to pay lower hardware prices as compared to Windows as the hardware prices are constantly declining.

Table 1-4: Percentage break-up of costs amongst various components across all servers

Hardware (%)

Software (%)

Training (%)

Operations & Maintenance

(%)

Downtime (%)

Linux Windows

2003 Linux Windows 2003 Linux Windows

2003 Linux Windows 2003 Linux Windows

2003 Application Server 38 47 2 8 6 4 44 31 10 10

File /Print Server 64 64 6 9 1 0 28 27 1 0

Web Server 67 72 2 4 3 5 20 17 8 2

Networking Server 41 48 3 4 5 4 46 38 5 6

Mail Server 47 48 1 7 1 4 39 29 12 12

Note: All figures are rounded off and are in percent. Source: Frost & Sullivan

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Chart 1-3: Hardware Costs as a percentage of TCO across all servers


The software costs for all server types based on the Linux platform are higher than that of the servers based on the Windows 2003 environment. Operations and maintenance costs for all servers based on the Linux platform are higher compared to the servers based on the Windows 2003 environment. Operations and maintenance cost of networking servers based on the Linux platform share the highest proportion of the TCO amongst all server types.

Chart 1-4: Operations and Management costs as a Percentage of TCO across all servers


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Downtime costs as a percentage of the TCO across all server categories and OS platforms is highest for mail servers. Downtime costs, which account for 12 percent of the TCO of mail servers and 10 percent for application servers, is indicative of the finding that users do not efficiently implement patching and anti-virus management. Inefficient patching, anti-virus-policies, deploying of auto-patching, and anti-virus technologies, translates into increased downtime of mail servers, and greater impact upon the end users.

Problem seems that with Linux systems people get a lot of flexibility and raw capabilities. People often tempted to do things on their own where otherwise they would have paid for the software. With this, the Linux documentations are often patchy. The maintenance cost increased with various compiler issues and network card drivers. While post administration was one of the crucial issues with maintenance, the quality of help and response varied. The help, which typically came from the community, was application specific and system administrators continued with hodgepodge systems. There were some wonderfully skilled and disciplined system administrators, who adhered to the standards and extensively documented changes. With attrition and personnel churn, poor documentation increased the cost of these Open Source systems.

This study strongly recommends that IT professionals considering deployment of the workloads evaluated consider not just the initial acquisition costs. IT professionals should consider the support costs, application integration costs, performance considerations and availability of IT skills to implement and maintain a platform before they decide on a particular platform.

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02. Introduction

In the highly competitive market situation existing today, many companies are focusing on optimizing their business processes and drive down the cost of operations. CIOs are seeking detailed and comprehensive cost analysis procedures that offer a level of transparency to evaluate IT/IS products. They are looking for frameworks and approaches to measure and evaluate IT investments. CIOs realize they need analysis that goes beyond the initial purchase cost of a hardware or software, and indicates post-implementation operation, support and maintenance costs, too. When companies capture only the initial investment, they more often than not end up wondering why even after successful initial deployment, their IT costs and efforts keep increasing. The reason is the failure to capture the total cost of ownership accounting for not only direct costs, but also indirect costs.

That is where the TCO, as a framework comes to the aid of a CIO interested in capturing direct and indirect costs incurred throughout the lifecycle of an IT asset, including its initial acquisition, deployment, operations, support, upgrade and retirements. Total Cost of Ownership (TCO) is the summation of all costs that enterprises incur in course of providing services to internal or external IT users through investments made in end-user computing devices, servers, software both at the desktops and servers, local area network hardware, and the labor costs associated with each of the components.

TCO provides strategic insights on three aspects, namely,

■ A framework for financial analysis of IT investment,

■ Forms the baseline for IT costs

■ Provides deeper understanding for evaluating IT projects beyond initial investment.

The focus of this report is on analysing the Total Cost of Ownership (TCO) of five common workloads amongst Linux and Windows 2003 platforms in Indian enterprises.

There are four primary reasons for this study.

■ Firstly, most TCO studies were carried out in the United States and European countries (IDC, 2002). Extending the conclusions from studies based on these developed countries to a developing economy such as India may lead to incorrect analysis. The Indian conditions are quite different from that of western countries especially when labor (staff, administrative, etc) costs are to be considered. Hence the US Study is not the true way to evaluate the Indian market.

■ Secondly, previous studies, which acknowledge the free nature of the open source software do not account for other costs such as installation and support costs, which may skew the results. Linux has gained a lot of publicity because it is widely perceived as being free. However Linux being “free” is often misunderstood. “Free” needs to be interpreted as being freely available, and not at zero cost.

■ Thirdly, some of the TCO studies conducted so far focus on the cost aspects (quantitative) and not much emphasis has been given to the qualitative aspects such as reliability, productivity improvement, capabilities, etc. that occur over a significant time period. Moreover, previous studies have analyzed the costs based on

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information provided by the supplier directly, with a very limited information being sourced from the end users/enterprises themselves.

■ Finally, none of the studies have made attempts to compare the TCO of IT assets based on the IT maturity of the organizations in which they are deployed. Research by Henderson and Venkatraman (1993) indicates that companies based on their IT alignment could be categorized into five stages indicating a formative stage where IT and Business alignment is weak to stage 5 wherein IT and business alignment is high. The TCO of an IT asset would vary across two different organizations at different stages of IT maturity because the time and efforts that would be expended to select, deploy, maintain and extend an IT asset would differ based on the capabilities, processes and organizational elements.

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03. Objectives of the Study

The objectives of this report were twofold:

a) To establish the TCO of Indian Enterprises, and

b) To do an independent analysis of Total Cost of Ownership (TCO) of both Windows 2003 and Linux platforms over a five year time period

While it is daunting to qualitatively analyse all of the TCO factors at play, quantitative estimates for the instantiation and operation of a complete server environment can be undertaken to understand the TCO of these two platforms.

Specifically, we attempted an evaluation of TCO across the following key verticals:

■ Banking, Financial Services and Insurance ■ Manufacturing ■ Public Sector and Government ■ IT and ITeS ■ Telecom

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04. Research Framework, Terminology and Methodology

Research Process Frost & Sullivan developed a proprietary framework to capture various cost components of IT asset based on literature and key interviews with CTO/CIO of Indian enterprises. Based on this conceptual framework (detailed in later sections) a pilot study of four Indian enterprises is carried out. The conceptual framework and the results of pilot were validated by an external agency, Capgemini and couple of CTO/CIO of Indian enterprises. The role of the third party auditor, Capgemini was to thoroughly review the TCO framework developed by Frost & Sullivan, identify gaps, if any, and recommend suggestions to further improve the framework. Capgemini after a thorough revision of framework and the pilot data shared with them certified that "Frost & Sullivan methodology for measuring TCO is a fairly accurate representation of real world TCO in enterprises".

After externally validating the framework and pilot analysis, we embarked upon a larger sample study of Indian enterprises. We contacted 246 companies in the Frost & Sullivan Database informing them about the background of this research and the outcomes. Of these 62 companies consented for the study and 8 companies dropped out later citing proprietary and Non-disclosure reasons. Data was collected data from 54 Indian companies from July 2006 to October 2006.

Chart 4-1: Flowchart on the research design

Capturing various cost elements of TCO is complex, especially in India as few organizations have deployed Cost Management systems capturing activity-based costs. Hence, data was directly measured based on the inputs provided by the CTO/CIO of the concerned organizations. The cost estimates were shown to at least three senior IT professionals within each company to ensure reliability of the data. The following

Industry sources

(CTO/CIO)

Report Presentation

Industry Players

Third Party Validation (Cap

Gemini)

Primary Data

Analysis

Pilot & External Validation

Research Framework

In-Depth Interviews

with Enterprises

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paragraphs present the research framework, sample and data collection details. Data collected across Windows 2003 and Linux platform is analysed to assess the TCO of various platforms.

TCO: Frost & Sullivan Framework Frost & Sullivan’s India ICT Consulting Practice has developed the following framework for measurement of TCO. We believe TCO as a tool should capture all the managerial activities and costs elements over the lifecycle of an IT asset. Frost & Sullivan enterprise IT infrastructure reports suggest that companies spend substantial investment in selection, installation, maintenance, extension and upgrades of IT assets. CIO/CTOs invest time and efforts in search and evaluation of alternate platforms. They often consult peers, academic experts and companies that have invested in the technologies in recent times to evaluate vendor’s presentations. If the IT asset is going to host mission critical applications, many CIO/CTOs prefer formal multi-level evaluation(s).

Once the IT asset is selected, there are direct and indirect costs involved in establishing the compatibility of the asset with other resources. A project team may have to be formed that assesses IT infrastructure requirements and associated changes with the deployment of the new IT asset. Once the IT asset is deployed, maintenance of patches, interfaces may be required as new applications are added or new features get enabled. The IT asset may also require scheduled maintenance to ensure system robustness and may also require attending to unscheduled maintenance to ensure availability. Service disruption due to unavailability affecting number of users and levels of users affected is a good measure of indirect effects of IT asset maintenance. As IT system vendors upgrade their platforms, enterprises may need to upgrade their IT infrastructure and hence there is a cost associated with upgrade. Hence, there is a need to capture not just purchase costs, but also the costs of evaluation (how easy it was to obtain reference cases, referrals), operations costs (what additional hardware/software investments were required), upgrade and extensions (components, features or modules that needed extensions or upgrades) and finally what the end-user experience was (to what extent the deployments are used and how it has impacted individual and group level productivity). Summing up, TCO thus should encompass costs related to

■ Initial purchase cost ■ Selection (search and evaluation) ■ Manpower costs (training, retraining costs, hiring costs) ■ Installation (capital and deployment costs) ■ Maintenance and downtime (both planned and unplanned) ■ Upgrades of software systems (patches, etc) ■ Soft costs (such as project planning, Configuration management, Information system

planning) Purchase price includes all direct purchases for a server. Generally speaking we are talking about the hardware, OS, base set of utilities and applications. Training costs include all direct and indirect expenses for training activity required in effectively running the server. Cost and method of training may vary from local vendors to out-of-station vendors, or local experts or local classes or Computer-based training (CBT). Application compatibility costs are the costs associated in ensuring the IT asset can maintain

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compatibility and interoperate within the enterprise. This may vary from tools needed for a transaction on a server-side. Maintenance and support costs include the personnel and labor force required to adequately support and maintain the server environment. This could include direct cost of manpower, cost of help-desk, etc. The cost incurred also includes indirect costs associated with planning, audit and other incidental costs such as consulting, roll-out, configuration management, bug-fixing and testing, and module integration.

All these activities are carried out to ensure smooth running of software systems. Broadly these cost elements capture the capital and operational expenditures of an IT asset over its lifecycle. Hence, we capture investments and benefits right from the evaluation stage, preparation stage, Implementation, Post-Implementation (till 5 years) to include associated investments in human resources, organizational process and routines and decision making as presented in Chart 4-1.

Chart 4-2: The Frost & Sullivan TCO Model

Server Applications The Components of TCO that have been considered for the analysis are: ■ Search costs ■ Software Purchase ■ Hardware Purchase and Maintenance ■ System Support and Administration ■ Soft Costs

Pre-selection Investment

Hardware/Software Investment IT Infrastructure, System Software, Application Software, manpower costs

Implementation and transition investment

Business process design, organizational change, Project Staff and Organization, configuration management, testing and bug fixing, roll out, training, post-implementation support , business disruption costs

Hardware and Software ongoing IT infrastructure and software additions, system operations and application integration costs

Business Process Improvements

Hardware and Software Upgrades

CPI investments, associated hardware and software investments/write-off

Other Costs

IT, system, Application upgrades, feature/module addition investments

Standardization of servers Vs a non-standard set of servers, Monitoring and Diagnosis tools, Documentation, anti-virus software

Search, comparison, information availability

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Search Costs: Include cost of number of employees who were involved in the selection process, average salary of employee, number of hours spent in search and validation of the product.

Software Purchase: Includes the up-front purchase costs for the web server application and any additional costs.

Hardware Purchase and Maintenance: Includes the hardware purchase costs and the yearly maintenance costs. The hardware purchase costs can be extremely high in cases where the hardware and software are sold in one proprietary bundle as in the case of Solaris servers. Maintenance costs too tend to be much higher in these cases. Hardware costs for applications that run on x86 architectures are typically lower.

System Support and administration costs include the cost of externally purchased support and administrator salaries.

Soft costs include security, cost of un-availability, and scalability. Security costs include costs for system downtime due to breach of security. They may range from direct cost of downtime such as loss of service revenues or potential losses as a consequence of lawsuits due to loss of data. The standard security costs include the following components:

■ The amount of system downtime each server has historically averaged due to

intrusions or viral infections. ■ The amount of system downtime each server has historically averaged due to the

need to install patches and system updates. ■ The cost/hour of downtime for a given system. ■ The amount of time and the cost of that time that administrators spend monitoring

security bulletin services and software vendor security portals for patches, and installing and supporting those patches.

■ Amount of time and cost of that time that administrators spend performing emergency repair activities after a disruptive incident occurs.

Cost of non-availability: Operating system stability is only one aspect of availability. Along with other factors, the hardware platform plays a significant role here. Scalability refers to the capability for scaling up an application to take on an additional processing load. Open source applications such as Linux cannot properly handle as many CPUs as applications such as MS SQL/Solaris can, but this does not necessarily make it more expensive.

Sampling Methodology The major limitation of doing multi-vendor TCO analysis is the challenge of sample size selection. While a representative sample approach is highly recommended, given the limitations of time and other efforts involved we chose to collect the data based on the status of IT alignment within an enterprise and ensure we have equal number of observations amongst Microsoft and Open Source OS Platforms. We used the “Strategic Alignment Maturity Model” by J. N. Luftman (2003) adopted from the Henderson and Venkatraman (1993) model to analyze the IT Business alignment of Enterprises under study. The objective was to make an apple-to-apple comparison of TCO of organizations based on commonality in terms of Platform and stage of IT alignment.

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Chart 4-3: Strategic Alignment Maturity Model

Windows 2003 and Linux Configuration Frost & Sullivan focused on the Windows 2003 environment using data from companies with pure Windows 2003 or mixed Windows environment where majority of the servers were running on Windows 2003. The study sample is dominated by dual process configuration and 4-way SMP systems. For Linux, Red Hat and SUSE Linux were included.

Table 4-1: Percentage split of sample in 1/2/4 Ways (Windows and Linux)

Windows Linux

1 Way 17% 26%

2 Way 57% 49%

4 Way 26% 25% Data Collection We developed a TCO questionnaire to collect all relevant data. Cost data were captured in accordance with the Frost & Sullivan TCO Framework enunciated above. The measures in the questionnaire are both quantitative (cost) and qualitative (a Likert type interval 1-5 scale, where 5 represents the highest to capture the stages of IT alignment).

Frost & Sullivan conducted in-depth face-to-face interviews with 54 large enterprises (enterprises with more than 5,000 employees) and mid-sized enterprises (enterprises with 500 to 5,000 employees) for this study across the 5 verticals as mentioned in the

Initial / Rudimentary Process■ Communications: Business/IT lack understanding■ Competence/value: some/functional technical measures■ Governance: No/Tactical formal process■ Partnership: Conflict: IT at a cost of doing/IT emerging as

asset

Established focused ■ Communications: Good understanding■ Competence/value: balanced, dash board established■ Governance: Relevant process enabler■ Partnership: Conflict: IT seen as an asset, process enables

Transformed Process■ Communications: Bonding, Unified, Informal, pervasive■ Competence/value: extended ecology■ Governance: Integrated across the organization &/or partners■ Partnership: Conflict: IT Driven Strategy/Business co-adaptation

Stag

e 1

Stag

e 2

Stag

e 3

Initial / Rudimentary Process■ Communications: Business/IT lack understanding■ Competence/value: some/functional technical measures■ Governance: No/Tactical formal process■ Partnership: Conflict: IT at a cost of doing/IT emerging as

asset

Established focused ■ Communications: Good understanding■ Competence/value: balanced, dash board established■ Governance: Relevant process enabler■ Partnership: Conflict: IT seen as an asset, process enables

Transformed Process■ Communications: Bonding, Unified, Informal, pervasive■ Competence/value: extended ecology■ Governance: Integrated across the organization &/or partners■ Partnership: Conflict: IT Driven Strategy/Business co-adaptation

Stag

e 1

Stag

e 2

Stag

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Table 4-2 below. Of the companies surveyed, 44 percent of companies were large enterprises and remaining 56 percent companies were mid sized enterprises.

Table 4-2: Vertical Split of Sample Size (%)

Verticals Sample (%)

Banking Financial Services and Insurance 18

Manufacturing 31

IT and ITeS 18

Government and PSUs 24

Telecom 9

The split of companies amongst different verticals surveyed is as shown above.

Target Respondents The target respondents consisted of senior IT professionals (consisting of CIO, CTO, Head of Information Technology, General Manager - Information Technology, Senior IT Managers, and Senior System Analysts) of large and mid-sized enterprises (500 and more employees) with Windows/Linux Server (Web, File, Networking, Application, and Mail) Operating Systems. The verticals that the target respondents came from are banking financial services and insurance sector, government and public sector units, IT and IT enabled services companies, manufacturing and telecom domains. To capture the required data points accurately, multiple interviews were conducted within the same company.

Period covered To calculate TCO we have considered 5 years as the average technology operational lifetime.

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05. Server TCO: Findings and Analysis

TCO in Indian Enterprises Our analysis of TCO for Indian companies presents some interesting results. Unlike the North American enterprises where staffing is the significant cost (IDC 2002), hardware is the most significant component for Indian enterprises. This result is similar to the overall TCO of Chinese enterprises (CCW Research, 2005). The TCO of Indian enterprises reveals that operational expenses form about 47% of the TCO; soft costs (costs associated with planning, configuration and project management of server environment) are significantly higher than software costs. Maintenance and Downtime costs are higher than software costs in the overall TCO of Indian enterprises. Table: 5-1: TCO of Indian Enterprises TCO Key Insights

Hardware 4.69 Software 0.69 Capex 5.38 Training 0.42 Upgrade 0.40 Downtime 0.91 Installation 0.22 Maintenance 0.93 Search 0.07 Soft cost 1.77 Opex 4.72 Total 10.10

Hardware is the largest component of Indian enterprises TCO. Software costs are 6.8% of TCO Soft costs constitute about 17% of the TCO. Maintenance and Downtime costs are 9% each of the TCO


Contradicting the general perception that software costs constitute a significant portion of TCO, our results indicate Software cost is just about 13% of the Capital expense. Soft costs (costs related to associated planning, configuration and project management of server environment) are significantly higher than software costs. Our result indicates there is cost involved with search and evaluation of servers and search costs are higher on Linux servers across different work loads.

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Chart 5-1: Percentage split of TCO amongst various components


The TCO of Linux and Windows 2003 server environments shows significant differences. On an aggregate level (weighted average of different servers) the Windows 2003 environment across enterprises has close to 15.9 percent lower TCO as compared with the Linux environment. Linux however has around 14.4 percent CAPEX advantage over Microsoft. But, Linux also has a significantly higher OPEX of approximately 53.1 percent over Windows 2003, primarily due to the high cost of support and manpower costs.

Table 5-2: Total Cost of Ownership – Overall

Linux Windows

2003 Difference in Percentage

Key Insights

Hardware 4.54 4.74 4.2% Software 0.30 0.80 62.5% Capex 4.84 5.54 12.6% Training 0.59 0.37 - 59.4% Upgrade 0.50 0.37 -35.1% Downtime 1.09 0.87 -25.2% Installation 0.69 0.09 - 666.6% Maintenance 1.33 0.82 - 62.2% Search 0.12 0.06 -100.0% Soft cost 2.17 1.66 -30.7% Opex 6.48 4.23 -53.2% Total 11.32 9.77 -15.9%

Windows 2003 server has a TCO advantage of about 15.9% over Linux Servers. Windows 2003 environments have lower training, upgrade, downtime, installation, maintenance and search costs Soft costs are lower by 30% on Windows 2003 environments


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Chart 5-2: Total Cost of Ownership – Overall (Linux vs. Windows 2003)


Chart 5-3: Percentage split of TCO amongst various components


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TCO Analysis by Servers Table 5-3: Workload Split Server % split by Workload % split by Sample Networking 31 5.8 Application 30 71.9 Email 9 4.9 Multifunction 9 12.9 Web 2 5.8 We considered the application, File/Print, Web, Network and Mail server workloads for TCO analysis. The rationale for considering the above workloads is that a recent Frost & Sullivan Enterprise IT study indicates the adoption rate of networking servers is about 31%, mail about 9%, web 2%, application about 30% and multifunction servers is about 9%. We did not include Security and Management Servers because Indian enterprises are yet to deploy these servers in sizeable numbers. Application Server

Application Servers are dedicated systems that run combination of vendors installed OS and packaged applications (including both pre-packaged, like SAP ERP, and proprietary packages).

Table 5-4: Total Cost of Ownership for an Application Server

Linux Windows 2003


Hardware 5.45 5.52 1.3% Software 0.24 0.97 75.3% Capex 5.69 6.49 12.3% Training 0.79 0.48 - 64.5% Upgrade 0.62 0.40 -55.0% Downtime 1.47 1.12 -31.3% Installation 0.95 0.05 -1800.0% Maintenance 1.80 1.00 - 80.0% Search 0.16 0.08 -100.0% Soft cost 2.86 2.10 -36.2% Opex 8.65 5.23 - 65.4% Total 14.34 11.72 -22.4%

Windows 2003 application server has 22.4% lower TCO than Linux server Windows 2003 application server has 64% lower training costs, 55% lower upgrade costs, 32% lower downtime costs than Linux server Windows 2003 has 36% lower soft costs (project management, DB integration, configuration) than Linux server

Note: All figures are rounded off and are in INR Lakh. Source: Frost & Sullivan While the capital expenses of Windows 2003 application server are higher than Linux, its overall TCO is lower than Linux server. Windows 2003 application servers offer significant TCO advantages in terms of lower training, upgrade, downtime, installation, maintenance and soft costs.

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Our study shows that the application servers were the costliest among all the other servers used, irrespective of the server being on Windows 2003 or Linux. Organizations purchase expensive and highly-configured hardware in order to optimize the use of applications software loaded on the critical servers. Hardware is the major TCO component and companies purchase high end hardware to ensure high reliability and availability. Workloads indicate more companies adopt Windows 2003 for mission critical high-transaction application environments, while Linux is deployed for medium-transaction application workloads.

Chart 5-4: Total Cost of Ownership for Application Servers (Linux vs. Windows 2003)


Windows 2003, despite higher workloads, has a clear cost advantage over Linux in application servers. The TCO of Linux is significantly higher, 22.4% higher than that of Windows 2003. This rate of 22.4% was the highest among all the servers. The main reasons for this were:

Firstly, Windows 2003 has lower operational costs than those incurred on the Linux platforms. Microsoft platforms have a 57% lower upgrade, installation, maintenance and downtime costs.

Secondly, the operations and maintenance cost for the Linux platform is significantly higher than Windows (Linux is higher by 76% over Windows in operations and maintenance costs). The primary reason is because skilled Linux resources are costly and they have limited availability.

■ The cost of hiring an entry level engineer trained on the Microsoft platform is around INR 6,000 per month, while the cost of a similar Linux resource is around INR 8,000 per month.

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■ The cost of a middle-level engineer trained on the Microsoft platform is around INR 13,000 INR per month, while that of the Linux is around INR 18,000 per month.

■ The cost of a senior-level engineer trained on the Microsoft platform is around INR 23,000 per month, while similar skill sets for Linux cost around INR 27,000 per month.

■ Microsoft 2003 allows companies to increase IT staff efficiency by reducing the number of IT administrations per server and IT support staff per server.

■ Our study also found that for the Linux based Operating System the highest proportion of Training cost is deployed on Application servers. The highest proportion of Operations and Maintenance is deployed on Application Servers.

This high operations and maintenance cost for the Linux platform is also attributed to poor documentation. Linux servers require longer time to recover from security attacks than a Windows server primarily due to poor documentation. Poor documentation leads to more time spent by administrators on searching for the appropriate document and available security patches to restore the server. Chart 5-5: TCO for Application Server (Percentage Split amongst various components)


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File/Print Server

While most organizations have file and print functions onto a common server, we also came across some organizations using separate file and print servers allowing each function as the organization evolves. However, discussions with CIOs indicate that they would prefer a combined cost evaluation as more deployments would be on a common server.

File server workload includes services such as FTP, NSS, CIFS, etc. However we excluded NAS and SAN devices because these are built for customer specific requirements.

Print servers for our study include services such as IPP, LPD, etc. Table 5-5: Total Cost of Ownership for File/Print Server

Linux Windows 2003


Hardware 2.48 2.54 2.4% Software 0.22 0.36 38.8% Capex 2.70 2.90 6.8% Training 0.02 0.01 -100.0% Upgrade 0.24 0.27 11.1% Downtime 0.02 0.03 33.3% Installation 0.12 0.08 -50.0% Maintenance 0.42 0.38 -10.5% Search 0.00 0.00 0% Soft cost 0.32 0.36 11.1% Opex 1.14 1.13 - 0.9% Total 3.84 4.03 4.7%

Linux server has about 4.7% lower TCO advantage for file/print server. Windows 2003 software costs are higher because most companies had deployed Standard or enterprise edition. Windows 2003 storage edition, which does not require CAL’s can significantly reduce the software cost Windows 2003 environments enjoy significantly lower training, maintenance and installation costs.

Note: All figures are rounded off and are in INR Lakh. Source: Frost & Sullivan Linux server environment has a marginally lower TCO over the Microsoft environment. Microsoft environment is costlier mainly due to the higher software costs; software cost for Microsoft platform is higher than for the Linux platform. Software costs for Windows 2003 server are 38% higher than Linux servers because 84% of our sample had deployed Standard or enterprise edition of Windows 2003, which require Client access licenses. Deployment of a Windows 2003 Storage Server, which allows both file/print functions and does not require Client access licenses, could substantially alter the TCO in favour of Windows 2003 environments.

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Chart 5-6: Total Cost of Ownership for File/Print Server (Linux vs. Windows 2003)


The maintenance and upgrades costs of Windows 2003 file/print servers are cheaper than Linux environment. Because Windows 2003 provides integrated, and user friendly file sharing and printing features, costs of feature addition/deletion, enhancement does not require too much troubleshooting. Given the poor documentation of Linux systems and its flexibility system administrators often resorted to on-the-wheel troubleshooting. With high attrition and lack of documentation, often the maintenance staff had as little as root passwords. Moreover, the complexity to maintain Linux is high as additional drivers to support file/print sharing applications are required.

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Chart 5-7: Percentage Split of TCO amongst various components for File/Print server


The research findings also indicate that Linux is mostly used by an enterprise, which requires basic file/print functionality whereas Windows 2003 is deployed by enterprises, which require mature functionalities and have much higher file size requirements.

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Web Server

Web server covers internet, intranet and extranet services delivering JSP, HTML, ASP, PERL and PHP pages. Table 5-6: Total Cost of Ownership – Web Server

Linux Windows

2003 Difference in Percentage Key Insights

Hardware 2.02 2.89 30.1% Software 0.05 0.18 72.2% Capex 2.07 3.07 32.5% Training 0.10 0.22 54.5% Upgrade 0.15 0.24 37.5% Downtime 0.24 0.09 -166.6% Installation 0.00 0.00 0% Maintenance 0.10 0.08 -25.0% Search 0.00 0.00 0% Soft cost 0.44 0.36 -22.2% Opex 1.02 0.99 - 3.0% Total 3.09 4.06 23.9%

Linux server has about 24% lower TCO than Windows 2003 server However, Windows 2003 server has significant downtime, maintenance, and soft cost advantages over Linux platforms

Note: All figures are rounded off and are in INR Lakh. Source: Frost & Sullivan The results of this study show that the TCO for web server on the Linux platforms is about 24 percent lower that that of Windows 2003 environments. Few companies (less than 13%) had deployed the Web edition of windows 2003 with 2GB RAM, which does not require client access licenses and thereby reduces the cost of software acquisition.

The Capex of Linux environments are 33% lower than Windows 2003 environment, but their Opex is marginally higher than Windows 2003 systems. Indian enterprises witnessed higher downtimes on Linux systems when deploying remote desktop administration, terminal server mode and web services (UDDI). Limited availability of trained manpower affected the Linux deployments.

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Chart 5-8: Total Cost of Ownership for Web server (Linux vs. Windows 2003)


For web servers operating In the Windows environment, hardware costs are not only significantly higher as compared to web servers operating in the Linux environment, but also they have higher percentage share (72% in the total costs in Windows as against 67% in Linux) of the total cost of ownership for web servers. The Linux system deployments were more recent than that of Windows systems; this allowed Linux users to pay lower hardware prices as compared to Windows as hardware prices are constantly declining.

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Chart 5-9: TCO for Web server (Percentage Split amongst various components)


Our research shows that web servers that run on Windows 2003 systems incur significantly higher costs on Hardware compared to the Linux based servers.

However, web servers running on Windows 2003 system enjoy lower downtime when compared to Linux run web servers. The high downtime for Linux is primarily due to frequent system upgrades and security lapses.

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Networking server

Networking servers provide basic infrastructure services such as DHCP, DNS, WINS, Directory services, Catching services, Remote access application sharing services. The study does not include devices such as dedicated routers, hubs, switches, etc.

Our research findings suggest that the Capex of networking servers operating on both Linux and Windows 2003 are similar. In contrast, however, the Opex of the Linux based networking servers are significantly higher compared to the Windows 2003 based ones. Many of the Capex constituents such as maintenance costs, training costs, and installation and upgrade costs of Linux based networking servers are higher than the Windows 2003 based servers.

Table 5-7: Total Cost of Ownership – Networking Servers

Linux Windows 2003


Hardware 2.41 2.39 - 0.8% Software 0.20 0.22 9.1% Capex 2.61 2.61 0% Training 0.29 0.18 - 61.1% Upgrade 0.42 0.34 -23.5% Downtime 0.28 0.29 3.4% Installation 0.17 0.10 -70.0% Maintenance 0.34 0.04 -750.0% Search 0.10 0.00 0% Soft cost 1.32 1.43 7.7% Opex 2.92 2.39 - 2.2% Total 5.53 4.99 -10.8%

Windows 2003 networking servers have 11% lower TCO advantages than Linux servers. Windows 2003 server has several advantages: training costs are 61% lower, Upgrade costs are 23% lower, Installation costs are 70% lower, and maintenance costs are 750% lower than Linux server.

Note: All figures are rounded off and are in INR Lakh. Source: Frost & Sullivan ■ TCO of Microsoft Windows 2003 is lower than Linux for networking server by ~11%.

■ Windows 2003 has a lower TCO because of better match of network applications with hardware

■ Number of system administrators are lower (0.014/server) for a network server running on Windows 2003 versus a network server running on the Linux platform, which needs 0.084 system administrators per server.

■ Windows 2003 helps to optimize the network cost performance across the value chain because of better compression techniques thus saving in transmission costs.

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Chart 5-10: Total Cost of Ownership for Networking Servers (Linux vs. Windows 2003)


For the networking servers, the ones based on the Linux platform have significantly higher operations and maintenance costs. This could be because training costs of Linux are comparatively higher.

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Chart 5-11: TCO for Networking Servers (Percentage Split amongst Various Components)


According to our research findings networking servers based on the Linux platform have a lower share of hardware costs. However, users of Linux based networking servers incur a greater proportion of operations and maintenance cost when compared to users of Windows 2003 based networking servers.

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Mail Server

Mail servers move and store mail over corporate networks (via LANs and WANs) and across the Internet. Mail servers used by hosted mail service providers have been excluded from this study.

The study indicates that e-mails today are inseparable applications of daily work. Most vital documents and messages are transferred via e-mail today. This has necessitated that organizations pay close attention to their mail servers and is thus leading to the appointment of more IT engineers to undertake operations and maintenance work. This translates into higher proportion of operational expenditures.

Table 5-8: Total Cost of Ownership – Mail Servers

Linux Windows 2003


Hardware 3.10 3.03 -2.3% Software 0.10 0.42 76.2 Capex 3.20 3.45 7.2% Training 0.08 0.25 68.0% Upgrade 0.38 0.31 -22.5% Downtime 0.79 0.71 -11.3% Installation 0.42 0.66 36.4% Maintenance 1.24 0.49 -153.1% Search 0.18 0.00 0% Soft cost 0.40 0.30 -33.3% Opex 3.49 2.72 - 28.3% Total 6.69 6.18 -8.3%

Windows 2003 mail server has about 8.25% lower TCO than Linux servers. Windows 2003 mail servers enjoy lower hardware (2.3%), upgrade (22%), downtime (11%), maintenance (153%) and soft costs (33%) over Linux servers

Note: All figures are rounded off and are in INR Lakh. Source: Frost & Sullivan Frost & Sullivan estimates suggest that mail servers running on the Microsoft platform have a close to 8 percent lower TCO than mail services running on the Linux platform. While the total hardware and software capital expenditure incurred initially is higher for the Microsoft platform, maintenance expenditure for mail on the Linux environment is double as compared to maintenance expenditure for mail in the Microsoft environment. Microsoft also enjoys a high brand recall amongst system administrators and IT decision makers within enterprises. Hence, for mail solutions enterprises do not experience any search costs compared with the approximately 3 percent-spend incurred for evaluating mail solutions in the Linux environment.

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Chart 5-12: Total Cost of Ownership for Mail Servers (Linux vs. Windows 2003)


The TCO for mail servers based on Linux is more than that of Windows 2003 based systems. On an overall basis the Capex for Windows based systems is marginally more than the Linux based servers, but Opex for Linux based servers is significantly higher as compared to the Windows 2003 based servers. Operations and maintenance emerges as a major cost for Linux based servers and it constitutes 39 percent of the TCO for Linux based mail servers, which is in stark contrast with the Windows 2003 based mail servers, where the operations and maintenance costs are just 29 percent of the TCO.

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Chart 5-13: TCO for Mail Servers (Percentage Split amongst various components)


The research findings indicate that hardware costs are the single largest cost component of the TCO for mail servers (both Linux and Windows 2003), accounting for close to half of the total cost, which is significantly higher than the proportion of operations and maintenance costs. However, operations and maintenance costs are the second largest component of the TCO, and this is by no means insignificant, as the operations and maintenance costs are 39 percent and 29 percent for Linux and Windows 2003 based mail servers, respectively. Linux mail servers would score over the Windows 2003 based ones due to lower operations and maintenance costs. Windows based mail servers have reported higher operations and maintenance costs, when compared to the Linux based ones, and this could be because more Windows 2003 users build their complicated office automation systems on the Microsoft Exchange and Lotus Domino, and Linux users mostly use their mail servers just for simple e-mail services.

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06. Conclusions and Recommendations

Conclusions Our research establishes that

■ Hardware is the largest component of TCO of Indian enterprises. This is strikingly different from the TCO of North American enterprises where Staffing is a significant cost.

■ Software cost is just about 15% of the Capital expense, and just 6.8% of the overall TCO.

■ Soft costs (costs related to planning, configuration and project management of server environment) are significantly higher than software costs. Maintenance and Downtime costs are higher than software costs in the overall TCO of Indian enterprises.

■ While the initial investments for hardware are higher in Windows 2003 servers, users of Linux based servers incur a higher proportion of operations and maintenance costs. Moreover, Windows 2003 platform offered better integration, easy-to-use and install feature in comparison to Linux. Soft costs (costs associated with the organizational planning, ISP, system integration) were lower on Microsoft than Linux environments.

■ For the five-workloads compared, Microsoft Windows 2003 has a clear TCO advantage over Linux for Application, Networking and Mail servers. Windows 2003 application servers had a higher workload than Linux servers.

■ The TCO for different verticals under study exhibited the same trend and the findings do not differ across these verticals.

■ Mail servers (both Linux and Windows 2003) have emerged as a category that has the highest TCO, next only to application servers.

■ Workloads significantly differ between Linux and Microsoft 2003 servers, Microsoft servers tend to run more workloads/server in comparison with Linux, except in the case of Web servers.

■ Our results indicate that “search costs”, time and effort in selection and evaluation of server are significantly higher on Linux. Decision makers were consulting their counterparts in other organizations before selecting the server operating systems, because deployment histories of Linux system were not easily available.

■ Training costs are marginally higher on Linux servers (except the web server), than Windows 2003 server. The relative low availability of the numbers of IT professionals trained on Linux servers and tools and less complete penetration of Linux in Indian Enterprises are the primary reasons.

■ Downtime costs as a percentage of the TCO across all server categories and OS platforms is highest for mail servers.

■ Windows has a clear cost advantage over Linux in application servers. The TCO of Linux is significantly higher, 22.4% higher than that of Windows 2003. Linux

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application servers despite having low capital expenditures, cost significantly higher in operational expenses.

■ Linux servers have marginal TCO advantage in File/print and Web servers.

■ Windows 2003 has lower TCO for Networking and Mail servers.

■ It is also to be noted that Linux based servers have a higher overall downtime compared to Windows 2003 based servers. Downtime costs for Linux are more than 24 percent higher than Windows 2003.

■ Our research findings indicate that the TCO for companies using multiple OS is significantly higher than the companies using a single OS. The higher TCO for companies using multiple OS is due to the increased complexity of IT systems and multiple OS skill sets required in operating and maintaining multiple OS.

■ Organizations high on the IT maturity scale have a higher TCO as these organizations perceive IT as an important business unit and IT is extensively used by all the units of the organization to improve productivity. These organizations generally use multiple enterprise applications with a very high number of everyday transactions.

Recommendations

Based on our study findings, Frost & Sullivan believes that the TCO approach helps organizations in improving productivity and reduce the cost over the lifecycle of the product; establishing a consistent and standard way to track and compare costs over the life of the IT product; creating awareness about the total cost of IT indicating that the initial cost of procurement is actually a small component as compared to the total cost incurred over the life of the IT product.

Frost & Sullivan believes that organizations could significantly reduce their total cost of ownership by

■ Deploying a single operating system for all the different servers.

■ Developing standard configurations and reviewing them regularly.

■ Limit the number of vendors to have much higher bargaining power.

■ Aggressively replace the legacy hardware and software system with more advanced systems.

■ Adopt a systematic and scientific approach while deploying an operating system. The initial costs (CAPEX) for the Linux operating system might be low but the operating expenses could be significantly higher as compared to the Windows 2003 operating system. Companies should consider both the Capex as well as Opex while evaluating an operating system.

■ As indicated earlier in the report, the skill sets required to operate and maintain the Windows OS are abundant and cheap whereas for Linux these are scarce and costly. By deploying the Windows OS, organizations can also mitigate System Admin

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attrition risk as it is easier to find and replace system admin staff with Windows OS skill than that of Linux.

■ Currently, user knowledge for Linux is very limited and this makes it more important for organizations to deploy a system, which is user friendly. Also Linux still has many challenges to overcome such as different standards adopted by different vendors, limited support service, etc.

■ Though the standard version of Linux is almost free, the Linux enterprise version has a license cost similar to the Windows OS. Organizations need to consider and fully evaluate the risks associated with Linux.

■ Our study findings indicate that the benefits perceived by organizations with Windows 2003 OS are much higher as compared to Linux as indicated in the Table 8-1 below

Table 6-1: Benefits perceived by Users:

Benefits perceived by Users Windows 2003 Linux

Better matched applications and hardware √ √

Better scaling of applications √ √

Consolidate server workloads √ √

Consolidate application workloads √ √

Increased IT staff efficiency while reducing the number of system administrators √

Reduced IT staff training costs √

Reduced system maintenance time, cost and efforts √

Standardize on one set of tools √

Source: Frost & Sullivan

■ To determine the right technology, organizations must thoroughly examine the cost, performance and risk analysis of different technology options available. This would help them in achieving optimum results and avoid needless deployment problems and expenses.

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07. List of Industry Participants

Frost & Sullivan would like to thank and acknowledge some of the Industry participants who participated in the study. Some of the industry players who participated in this study are listed below.

■ Ashok Leyland

■ Aztecsoft

■ B2K Corp

■ Bharat Sanchar Nigam Limited

■ Bokaro Steel

■ Directorate of Treasuries, West Bengal Government

■ Food Corporation of India

■ Godrej Industries Limited

■ Haldia Petrochemicals

■ ITI Limited

■ National Insurance Company

■ Tamil Nadu Small Industries Development Corporation Limited

■ Sundaram Clayton

■ Tamil Nadu Water Supply and Drainage Board

■ Timken India

Note: The above company list is not comprehensive and only includes the names of companies who agreed to be acknowledged for this study.

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08. References

CCW Research, “Linux, Windows NT, and Windows 2000/2003: TCO Research in Enterprise Computing”, March 2005

IDC, Windows 2000 Versus Linux in Enterprise Computing: An Assessment of Business Value for Selected Workloads”, 2002

Henderson, J, and Venkataraman, N, Strategic Alignment: Leveraging Information Technology for Transforming Organizations, IBM System Journal, 32, 1993.

Luftman, J.N. Competing in the Information Age: Align in the sand, Oxford University Press, 2003.

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