Agenda

The Total Economic ImpactTM Of Windows 7 — A Multi-Company Case StudyBen Gray

Senior Analyst

Jeffrey North

Principal Consultant

Forrester ConsultingFebruary 22, 2010


Agenda

• Study Overview / Forrester Approach

• What Is TEI?

• Composite Case Study

• Approach

• Costs

• Benefits

• Risks

• Flexibility

• Conclusions & ROI


Agenda


• What Is TEI?


• Approach

• Costs

• Benefits

• Risks

• Flexibility



Windows 7 will be the next desktop standard for firms worldwide

• With the introduction of SP2 in August 2004, Windows XP has been a venerable OS for organizations worldwide.

• It has delivered the compatibility, security, and reliability that enterprises had hoped for and to this day remains the desktop standard for most firms.

• Even two-and-a-half years after the general availability of Windows Vista, Windows XP still powers almost 80% of all Windows-based enterprise PCs.

• However, some factors are converging that will finally provide businesses with a compelling reason to shake the status quo, which will end Windows XP's corporate reign. These include:

– Businesses are supporting aging infrastructure that must be refreshed.

– Windows XP's support is nearing an end.

– Windows XP availability will eventually get squeezed.

– Firms are finding compelling business reasons for a Windows 7 upgrade.

– Client virtualization has matured and can accelerate deployment plans.


Corporate desktop operating systems trends, Q2 2009 to Q3 2009

Source: July 22, 2009, “Corporate Desktop Operating System Trends, Q3 2008 To Q2 2009” Forrester report


Study overview / Forrester approach

• The study was commissioned by Microsoft and delivered by the Forrester Consulting group.

• Customers for the interviews were provided by Microsoft.

• Leveraged data from existing Forrester research.

• Interviewed Windows 7 product management and strategy personnel.

• Conducted a series of in-depth interviews with 12 organizations currently using Windows 7.

• Created a composite company.

• Constructed a financial model representative of the interviews.


Study overview / Forrester approach (cont.)

The Microsoft customers interviewed for the study:

• A large US municipality.

• A global IT services firm.

• A multinational manufacturer and marketer of processed foods.

• One of the world’s largest providers of products and services to the energy industry.

• A leading technology research, manufacturing, and services company.

• A North American manufacturer of home building and remodeling products.

• A large retail and commercial bank.

• A worldwide provider of oil field products and services.

• A national sports and entertainment franchise.

• An oil and gas company based in northern Europe.

• A European accounting and professional services firm.

• A large air transportation management company.


Study overview / Forrester approach (cont.)

The composite company:

Forrester constructed a composite organization to illustrate the quantifiable costs, benefits, risks, and flexibility of implementing Windows 7:

• Generates $1 billion in annual revenue from operations in half a dozen sites across the US and Canada as well as several locations across the globe.

– Operations and staff are decentralized in this environment.

• 5,000 employees — many of whom travel frequently to client locations.

• For the purpose of this study, the composite organization is viewed as “well managed,” meaning standardized processes and tools are in place to deploy, manage, and support the desktop environment.

• Has a mix of Windows XP and Vista in place prior to implementation.

– Covered with Software Assurance.

• Three-year workstation refresh cycle, with a 35/65 desktop/laptop ratio.


Reasons for investment in Windows 7

• Reduce support and management costs by optimizing desktop infrastructure.

• Improve protection of the PC environment.

• Increase business user productivity.

• Increase IT staff productivity.

• Provide a more reliable, higher-performing computing environment.

• Save costs due to lower power consumption.


Agenda


• What Is TEI?


• Approach

• Costs

• Benefits

• Risks

• Flexibility



• Forrester’s TEI is the “Language of Value.”

• TEI ≠ TCO.– TEI provides a complete economic picture of tech purchase decisions .

• Based on existing customer experience with the product / service.

• Third-party, objective case study.

• The four fundamental elements of TEI:

What is Total Economic Impact (TEI)?

Costs (TCO)

Benefits

Flexibility

Risk

Total Economic

Impact(TEI)


Agenda


• What Is TEI?


• Approach

• Costs

• Benefits

• Risks

• Flexibility



Costs

• IT labor — pilot and project management ($81,720)

– For the composite company the pilot engages 500 users requiring 2 IT managers (FTEs) for 6 months time.

• IT labor — application testing ($61,290)

– Assumes 250 applications will be tested for the composite company.

• One and a half IT staff are assigned to this with each application requiring an

average of 6 hours of labor — high variable here depending on the application.

– Two IT managers required for 6 months.

• IT labor — PC deployment ($112,365)

– Analysis assumes deployment costs will decrease over time.

– Given 1 hour per PC for the pilot (500 total) and 1,500 PCs each year following — time decreasing by 25% per year.


Costs (cont.)

• Training — users ($330,750)

– Assumes users would spend 1.5 hours on average getting oriented.

• Training — curriculum and materials development ($9,000)

– Assumes 2 FTEs working a total of 100 hours during the initial period.

• IT labor — Windows Server 2008 R2 ($28,602)

– The composite company will spend an estimated 50 days (400 man-hours) implementing DirectAccess.

– BranchCache for the 6 branch offices will require 25 days (200 man-hours) to implement.

– Changes to the server environment will require 100 man-hours.

• Hardware costs ($66,000)

– To support its Windows Server 2008 R2 implementation, the composite company will need to purchase 12 additional servers at $5,500/server.


Total costs: Composite company

Initial (pilot) Year 1 Year 2 Year 3 Total

IT labor — pilot and project management

$81,720 $81,720

IT— application testing $61,290 $61,290

IT — PC deployment $20,430 $45,968 $30,645 $15,323 $112,365

Training — users $27,000 $101,250 $101,250 $101,250 $330,750

Training — curriculum and materials development

$9,000 $9,000

Hardware costs $33,000 $33,000 $66,000

IT labor — Windows Server 2008 R2

$14,300 $14,300 $28,602

Total $199,440 $194,519 $179,196 $116,573 $689,727

Source: Forrester Research, Inc.


Benefit: PC build and deployment savings

Year 1 Year 2 Year 3 Total

Number of PCs deployed per year 1,500 1,500 1,500

Time savings per PC (hours) 1.5

IT labor cost per hour $40.86

PC build deployment savings $91,935 $91,935 $91,935 $275,805

• Improved image development, deployment, and management; fewer images to manage; fewer software updates; and leveraging the Multilingual User Interface (MUI) capabilities result in at least a 50% reduction in the time required to provision users with new or rebuilt machines.

• The table below shows the calculation of this benefit category. Not including the 500 PCs involved in the pilot stage, the composite organization can be expected to save 1.5 hours per machine for each of the 1,500 machines per year over the course of its PC refresh cycle, or a total of more than $275,000.



Benefit: Help desk call reduction — new PC questions


Number of PCs with Windows 7 2,000 1,500 1,500

Number of calls avoided per PC 2.5

Cost per call $20

Help desk call reduction — new PC questions

$100,000

$75,000

$75,000 $250,000

• Forrester conservatively assumes 2.5 calls per new machine would be avoided due to better OS stability and fewer crashes and reliability issues, fewer software corruption issues due to users installing unsupported applications, and fewer connectivity issues with the manual VPN connection experience removed altogether.

• At a conservative per-call cost estimate of $20, the resulting value is $250,000 over three years, which can be re-invested from mundane tasks and applied to business-critical initiatives.



Benefit: Help desk workload reduction — troubleshooting, fewer malware incidents, and VPN issues

• Greater system stability, Windows Troubleshooting Packs, Problem Steps Recorder, Resource Monitor, Startup Repair, Reliability Monitor, and user self-help features result in a drop in call volume to the company’s help desk as well as shorter calls when issues are resolved faster.

• The table below shows the calculation of a 20% IT support workload reduction, which accrues to the composite company as the PC refresh cycle with Windows 7 machines rolls out over three years. The resulting value totals $546,000 over the three-year period.

Ref. Calculation Year 1 Year 2 Year 3 Total

L1 Number of help desk staff 20

L2 Hours 2,080

L3 Workload reduction percentage 20%

L4 Hourly compensation $31.25

L5 Windows 7 percentage — rollout schedule 40% 70% 100%

LtHelp desk workload reduction — troubleshooting, fewer malware incidents, and VPN issues

L1*L2*L3*L4*L5

$104,000 $182,000 $260,000 $546,000



Benefit: Remote and mobile workers — PC failures avoided


Number of remote PC failure incidents avoided

65 115 160

Compensation per hour $75

Number of hours saved per incident 16

Remote d mobile workers — PC failures avoided

$78,000 $138,000 $192,000 $408,000

• For the composite organization, with many of its consultants working at client sites or traveling, a reduction of such incidents of remote workers is a significant benefit that results from greater system stability and greater supportability.

• If each incident avoided results in two days of computing and PC communication that would otherwise have been lost, then the calculated benefit is greater than $400,000 over three years.



Benefit: Improved protection of company IP

• With many users on the move, intellectual property (IP) and sensitive data are constantly exposed to loss and theft. Forrester conservatively assumes that the composite company would confront a dozen instances per year where the firm could be exposed to financial loss due to IP loss or theft.

• Assuming the cost to address the failure is $100,000 per instance, then the value of the reduction of this risk is up to $114,000 annually, as shown in the below table. Note that this calculation is exceedingly conservative and is not based on any estimates provided by the interviewed companies.

Ref.Calculation Year 1 Year 2 Year 3 Total

N1 Potential number of incidents 12

N2 Potential exposure $100,000

N3Probability of exposure — without BitLocker, BitLocker to Go

10%

N4 Probability of exposure — with BitLocker 0.5%

N5 Percent captured (per rollout schedule) 40% 70% 100%

Note Improved protection of company IPN1*N2*

(N3-N4)*N5$45,600 $79,800 $114,000 $239,400



Benefit: PC power savings

Calculation Year 1 Year 2 Year 3 Total

Number of PCs with Windows 7 2,000 3,500 5,000

Number of Windows 7 PCs at company locations

#PCs*40% 800 1,400 2,000

Power cost savings per PC $35

PC power savings $28,000 $49,000 $70,000 $147,000

• Several organizations interviewed described forecasts for power cost savings of $30 to $60 per machine. Forrester research corroborated this range of savings, which results from greater use of the sleep/standby/hibernate function on more machines, enforced by Group Policies.

• Below we calculate the value of $35 annual power cost savings for only the machines that are regularly connected at company facilities (40%) and not for remote or mobile workers who often work at their clients’ offices.



Benefit: IT management savings — DirectAccess

Calculation Year 1 Year 2 Year 3 Total

Number of FTEs 2.5

Hourly rate per FTE $40.86

Number of hours (saved) 7 hours*52 weeks 364

Percent captured 40% 70% 100%

IT management savings $14,875 $26,031 $37,188 $78,094

• The composite organization also sees management savings for its IT team due to the use of DirectAccess. IT engineers will be able to manage the PCs of mobile workers as easily as they can for the desktops of users at corporate facilities.

• This saves the 2.5 IT engineers responsible for these PCs 7 hours per week each. For one year, these savings translate to 364 hours saved. At an hourly rate per FTE of $40.86, the total IT management savings for the composite organization over three years is $78,000.



Benefit: Bandwidth upgrade cost avoidance — BranchCache


Number of branch offices (upgraded)

3 3

Cost per location $30,000 $30,000

Bandwidth upgrade cost avoidance — BranchCache

— $90,000 $90,000 $180,000

• The composite organization can expect to avoid a planned $30,000 bandwidth upgrade to meet access requirements at the branches and would have had to incur bandwidth upgrades in subsequent years.

• The organization will set up a hosted cache, with a server running Windows Server 2008 R2 at each branch, with Windows 7 Enterprise installed on all desktops at the branch offices. This will save the company $180,000 over three years.



Other possible benefits

– Search and federated search.

– Faster startup time.

– Better overall system stability.

– Improved productivity.


Total benefits: Composite company


PC build and deployment savings $91,935 $91,935 $91,935 $275,805

Help desk call reduction — new PC questions

$100,000 $75,000 $75,000 $250,000

Help desk workload reduction — troubleshooting, fewer malware

incidents, and VPN issues$104,000 $182,000 $260,000 $546,000

Remote and mobile workers — PC failures avoided

$78,000 $138,000 $192,000 $408,000

Improved protection of company IP $45,600 $79,800 $114,000 $239,400

PC power savings $28,000 $49,000 $70,000 $147,000

IT management savings — DirectAccess

$14,875 $26,031 $37,188 $78,094

Bandwidth upgrade cost avoidance — BranchCache

$90,000 $90,000 $180,000

Total $462,410 $731,766 $930,123 $2,124,299



Risk

The Risk component in the TEI methodology is used as a filter to capture the uncertainty surrounding different cost and benefit estimates.

• Risk-adjusted numbers should be taken as “realistic” expectations:

– Raise the original cost estimates.

– Reduce the original benefit estimates.

• Risk adjustment makes the numbers more conservative:

– If a risk-adjusted ROI still demonstrates a compelling business case, it raises confidence that investment is likely to succeed.


Risk

Example — labor cost for pilot and project management.

• $81,720 or 1000 hours can be considered the “most likely” value.

• The actual benefit will vary based on several factors:– Number of users.

– Language requirements.

– Server configuration.

– And more.

• Forrester creates a triangular distribution to reflect the range of expected benefit.

– 110% as the mean.

• $89,982 is the risk adjusted amount.

High Most likely Low Mean

130% 100% 100% 110%



Risk factors — costs

Initial (pilot) Year 1 Year 2 Year 3 Total

Present value

IT labor — pilot and project management

(110%)$89,892 $89,892 $89,892

IT— application testing (127%)

$77,634 $77,634 $77,634

IT — PC deployment (107%)

$21,860 $65,580 $65,580 $65,580 $218,601 $184,949

Training — users (107%)

$28,890 $108,338 $108,338 $108,338 $353,903 $298,309

Training — curriculum and materials

development (107%)$9,630 $9,630 $9,630

Hardware costs (103%) $33,990 $33,990 $67,980 $58,991

IT labor — Windows Server 2008 R2 (110%)

$15,731 $15,731 $31,462 $27,302

Total $227,906 $207,244 $190,849 $124,733 $750,731 $667,749



Risk factors — benefits

Year 1 Year 2 Year 3 TotalPresent

value

PC build and deployment savings (87%)

$79,983 $79,983 $79,983 $239,950 $198,907

Help desk call reduction — new PC questions (87%)

$87,000 $65,250 $65,250 $217,500 $182,040

Help desk workload reduction — troubleshooting, fewer malware

incidents, and VPN issues (92%)$95,333 $166,833 $238,333 $500,500 $403,609

Remote and mobile workers — PC failures avoided (87%)

$67,860 $120,060 $167.040 $354,960 $286,414

Improved protection of company IP (87%)

$39,672 $69,426 $99,180 $208,278 $167,958

PC power savings (87%) $24,360 $42,630 $60,900 $127,890 $103,132

IT management savings — DirectAccess (87%)

$12,941 $22,647 $32,353 $67,942 $54,789

Bandwidth upgrade cost avoidance — BranchCache (94%)

$84,600 $84,600 $169,200 $133,479

Total $407,150 $651,430 $827,640 $1,886,220 $1,530,326



Flexibility

An investment in additional capacity or agility today that can be turned into future business benefits at some additional cost in the future.

• Provides an organization with the “right” or the ability to engage in future initiatives — but not the obligation to do so.

• Expand usage.

• Pursue new initiatives.

• Uses the Black-Scholes option pricing model.


Flexibility

Although data for calculating the value of several flexibility options is insufficient at this time, Forrester identified the following areas that present flexibility options for the composite organization through Windows 7:

• The Microsoft Desktop Optimization Pack (MDOP).

– Available to Software Assurance customers.

– Enhances application deployment and compatibility, increases IT responsiveness and end user uptime, and helps reduce costs of desktop software and IT management.

• Leveraging leading-edge technology to ensure a flexible, supportable, and secure desktop environment as well as leveraging to attract and retain employees.


Project ROI: Composite company

Summary financial results

Original estimate

Risk-adjusted estimate

ROI 182% 129%

Payback period (months) 8.9 12.7

Total costs (present value) ($611,954) ($667,749)

Total benefits (present value)

$1,723,953 $1,530,326

Total

(net present value)$1,112,000 $862,577



TEI case study conclusions

Forrester’s interviews with Windows 7’s customers yielded several important observations. Forrester found that organizations can realize benefits in the form of:

• IT labor costs savings, improved IT management, and help desk call volume reduction.

• Fewer PC failures, especially those of remote users that become expensive to fix.

• Improved protection of company data and intellectual property.

• PC power management savings.


TEI case study conclusions (cont.)

Additionally, early adopter customers experienced:

• Smoother connectivity for remote workers without VPN barriers.

• Productivity savings for IT management as well as bandwidth cost savings for branch offices by implementing BranchCache through Windows 7.

• Overall boosts to user productivity stemming from a more stable platform, faster boot-up and machine response times, improved enterprise search, faster access to company data, and faster, reliable remote connectivity.

• Users and IT staff can expect high levels of satisfaction and machine responsiveness.


Ben Gray

+1 617 613-6143

[email protected]

Jeff North

+1 617 613-6461

[email protected]

www.forrester.com

Thank you

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