An IDC InfoBrief, sponsored by Avanade | May 2014
Managed Services Achieving Business Value with
pg 2
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
* IDC utilized its standard ROI methodology for the results shown in this electronic book, which were adapted from the IDC White Paper, Achieving Business Value with Avanade’s Application and Infrastructure Managed Services, by David Tapper and Randy Perry. This methodology is based on gathering data from current users of Avanade’s services as the foundation for the model. For more information, please visit www.avanade.com/managedservices.
IDC’s research and analysis* demonstrates that Avanade’s Application and Infrastructure Managed Services delivered an average payback period of just over four months from going live, and an ROI of 446% through the following benefits:
Business Value Highlights
Payback period just over four months.
ROI: 446%.
Lowering annual operations
cost by $2.2 M while increasing
revenue
Helping IT staff achieve 67% time savings and productivity gains on
application development and 42% on application
management
Mitigating risks by reducing downtime
by 64%
Lowering infrastructure costs by an
average of 13%
IN BENEFITS FOR EVERY $1 INVESTED
RETURNING OVER $5
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
pg 3
As more employees treat business IT like it was theirs – bringing their own mobile devices to work, or leveraging social media to pursue business opportunities, or adopting a cloud service for important business processes – more pressure grows on IT departments to overcome obstacles presented by these technologies and capitalize on the opportunities.
Yet, when asked to use technology to innovate while also maintaining a steady state, IT struggles to respond without the needed resources and skill sets.
IDC research shows that enterprises increasingly turn to managed services to mitigate risk and achieve 5 important business goals.
Transforming the Economics of IT
Business Goal #1: Optimize Financial Management While
Meeting Key Performance Metrics
Business Goal #2: Allocate Talent and Skills to Focus
on Core Competencies
Business Goal #3: Support Need for Greater Business Agility and Operational Excellence
Business Goal #4: Provide Access to Flexible
Sourcing Models
Business Goal #5: Implement Strategic Change
pg 4
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
Most importantly, enterprises are looking to managed services providers to enable and help drive more strategic capabilities and continuous innovation.
Of course, buyers still want providers to help standardize and consolidate their IT environments. But, increasingly, enterprises also want to optimize the value of their existing software assets and move to innovative delivery models such as cloud and software-as-a-service, including access to new intellectual property.
The Ultimate Goal
The ultimate goal is to gain new capabilities from the managed service provider that buyers can use to innovate new products and services in order to grow their business.
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
Avanade’s application and infrastructure managed services can help organizations achieve each of the business goals previously listed.
Avanade, a joint venture between Microsoft and Accenture, brings together a set of core competencies and capabilities that combine the best of both companies:
Considering Avanade
Avanade is a Managed Services
specialist for Microsoft
technologies
Microsoft’s comprehensive enterprise platform of technologies and access to
Microsoft’s R&D resources
Accenture’s industry and business acumen, cross-industry solutions, and horizontal solutions accelerators
Source: Avanade, 2014
pg 6
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
IDC conducted interviews with Avanade’s application and infrastructure managed services customers to measure the financial impact to these organizations of their use of Avanade’s services. These organizations are realizing financial benefits from their use of Avanade’s managed services in 5 key areas.
Avanade’s managed services 5 key areas
1. IT Staff Productivity Gains
2. Business Productivity Gains in Operations
3. Business Productivity Gains Resulting in Higher Revenue
4. Risk Mitigation Benefits
5. IT Infrastructure Cost Reduction
IDC Business Value Study Financial Benefits
IT staff productivity
gains
Business productivity
gains – operations
Business productivity
gains – revenue
Risk mitigation benefits
Infrastructure cost
reduction
$51,279
$23,009$6,465
Total: $89,018 per 100 users
$2,807$5,458$100,000
$80,000
$60,000
$40,000
$20,000
$0
Non-Discounted Average Annual Benefits per 100 Users
Source: IDC, 2014
pg 7
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
Because of the talent, skills, and experience that Avanade offers, the IT staff of customer organizations have become much more productive and are realizing significant time savings for completing important tasks. For example, Avanade has helped the IT staff achieve average time savings of 78% for forecasting and configuration management activities and 67% for application development activities.
Study-Finding Spotlight #1: IT Staff Productivity Gains
DIRECT FROM THE CUSTOMER:
“If it’s a situation where we’re in a long-term project, and we need to deliver over time, then our ability to switch out needed skill sets with Avanade could easily save us 50% of the calendar time it would otherwise take.”
IT Staff Activity Time Savings78%
67% 66%
42%
27%
12%
Forecasting/ configuration management
Application development
Help desk and responding to
downtime
Application management
Training Time dealing with vendor
Source: IDC, 2014
pg 8
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
Organizations are realizing five-year average annual business productivity gains of $23,009 per 100 users, or $2.21 million per organization, with Avanade. The most significant driver of these business productivity benefits is improved productivity among non-IT staff, enabled by Avanade.
Study-Finding Spotlight #2:Business Productivity Gains in Operations
Improved user productivity
Faster time to market
Reduced external spend on contractors
$19,565$1,965
$1,479
Total: $23,009 per 100 users
$25,000
$20,000
$15,000
$10,000
$5,000
$0
Average Annual Business Productivity Benefits per 100 Users
Source: IDC, 2014
DIRECT FROM THE CUSTOMER:
“With the products and features that Avanade has helped us create, the typical user saves time. Our ability to create these types of features more than doubles with Avanade. These features help to increase revenue because it helps us improve our primary product that we sell to our customers.”
pg 9
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
Your downtime could be costing you $480k/hour. Organizations are reducing the incidences of downtime and average time to recover from downtime. Organizations are also leveraging their use of Avanade’s managed services to increase their revenue by a five-year annual average of $6,465 per 100 users, or $620K per organization.
Study-Finding Spotlight #3: Business Productivity Gains Resulting in Higher Revenues Business Productivity Enhancements — Revenue
Annual Value Value per 100 Users
Revenue impact — reduced downtime
Reduced downtime — hours per year 21
Lost revenue per hour of downtime $480,000
Lost revenue recognized in study 25%
Revenue impact — additional revenue $2,523,951 $26,287 from reduced downtime
Revenue impact — improved operations
Additional revenue from $575,000 $5,988 improved operations
Additional revenue related to Avanade 12%
Sum of additional revenue $3,098,951 $32,276
Realized revenue benefit 20%
Net revenue benefit $619,790 $6,465
Source: IDC, 2014
pg 10
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
Organizations report that their help desk operations have become more efficient since moving to Avanade’s managed services. They have reduced the time it takes on average for their help desks to handle a call by 67% with Avanade.
Study-Finding Spotlight #4:Risk Mitigation Benefits
Reliability KPIs Advantage Without With with Avanade Avanade Benefit Avanade (%)
Downtime
Downtime incidents per year 10.30 6.14 4.16 40
Downtime hours per incident 3.34 2.18 1.16 35
Annual downtime hours per user 18.37 6.65 11.73 64
Service desk
Level 2/3 calls per week 123.50 24.70 98.80 80
Minutes per call 26.25 8.75 17.50 67
Annual hours per user 1.39 0.46 0.93 67Source: IDC, 2014
DIRECT FROM THE CUSTOMER:
An Avanade customer noted that its help desk operations were “a more personalized service” with Avanade that “get the user back up and running faster — 15 minutes versus 5 minutes.”
pg 11
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
Organizations are avoiding costs that they would otherwise bear to develop comparable internal solutions or to use another service provider and reducing spending on server hardware. On average, organizations are avoiding an average of $5,458 in costs per 100 users per year over five years, or $520K per organization.
Study-Finding Spotlight #5:IT Infrastructure Cost Reduction
Average Annual IT Infrastructure Cost Reductions per 100 Users
Source: IDC, 2014
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
Initial solution versus alternativesServer hardwareAggregate bandwidthStorage and networkingManagement software tools
$3,368
$1,436
$260$248$146
$5,458
pg 12
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
IDC’s research and analysis demonstrates that Avanade’s Application and Infrastructure Managed Services delivered an average payback period of just over 4 months from going live, and an ROI of 446% through the following benefits:
• Returning over $5 in benefits for every $1 invested
• Lowering annual operations cost by $2.2 M while increasing revenue
• Helping IT staff achieve 67% time savings and productivity gains on application development and 42% on application management
• Mitigating risks by reducing downtime by 64%
• Lowering infrastructure costs by an average of 13%
Business Value Highlights
5 YEAR AGGREGATE
BENEFIT
IN DISCOUNTED BENEFITS PER
100 USERS OVER 5 YEARS
$28.6M
$297,835
pg 13
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
The five-year ROI analysis shows that on average, the organizations in this study will spend $54,592 per 100 users ($5.24 million per organization) on Avanade’s managed services and achieve $297,835 in discounted benefits per 100 users over 5 years ($28.60 million per organization). This results in an net present value (NPV) of $243,244 in discounted benefits per 100 users over 5 years ($23.53 million per organization) for their use of Avanade.
Overall ROI
InvestmentBenefitsCumulative net benefit
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
-$50,000
$28,265$0
$100,179 $101,027 $101,974
$367,031 in non-discounted
cumulative net benefits over 5 years
$(30,461)
Initial Year 1 Year 2 Year 3 Year 4 Year 5
$(8,513)$(8,513)$(8,513)$(8,513)
$99,420
$(8,513)
Cost Benefit Analysis Per 100 Users
Source: IDC, 2014
pg 14
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
According to the company, Avanade’s portfolio of services provides enterprises with a full lifecycle of options to support their needs across the entire IT environment for both business applications and infrastructure.
Inside Avanade
Avanade Lifecycle of Application and Infrastructure Managed Services
Pricing
Service Level Agreements
Business Outcome Oriented
Pay for Use
On Premise
Migration Velocity
Transactional
Hybrid
Velocity of Changes
Monthly Fixed/Variable
Hosted
Custom
Mobile
Availability
Custom
Public Cloud
Support Response & Resolution
Multi-Year
Private Cloud
Application Managed Services Infrastructure Managed Services
Platform
• Custom Application • Microsoft Dynamics • Collaboration • Analytics
• Private Cloud • Workplace • Unified Communications & Collaboration
Source: Avanade, 2014
pg 15
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with Managed Services
Inside AvanadeSpecializing in Microsoft technologies, this portfolio includes consultative services, which range from strategy, design, architecting, development, deployment, systems integration, and migration of IT and application technologies to 24 x 7, ongoing, proactive management and support.
According to Avanade, the key for its customers is that all these service elements form part of the company’s managed services portfolio. As a result, Avanade is able to offer a menu of managed services that, for example, effectively include systems integration and application development delivered as a managed service.
Additional information can be found at www.avanade.com/managedservices
Avanade is able to deliver against its commitment to provide continuous improvement and innovation as part of its application and infrastructure managed services agreement.