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Achieving Business Value with
Managed Services An IDC InfoBrief, sponsored by Avanade | May 2014
An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
Business Value Highlights 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:
RETURNING OVER $5
Payback period just over four months. ROI: 446%.
Lowering annual operations cost by $2.2 M while increasing revenue
IN BENEFITS FOR EVERY $1 INVESTED
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%
* 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.
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Lowering infrastructure costs by an average of 13%
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
Transforming the Economics of IT 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.
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
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
The Ultimate Goal 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-aservice, including access to new intellectual property.
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
Considering Avanade 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:
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
Avanade is a Managed Services specialist for Microsoft technologies Source: Avanade, 2014
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
IDC Business Value Study Financial Benefits
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.
Non-Discounted Average Annual Benefits per 100 Users $100,000
$23,009
$80,000 $60,000
$6,465
$2,807
$5,458
1. IT Staff Productivity Gains 2. B usiness Productivity Gains in Operations 3. B usiness Productivity Gains Resulting in Higher Revenue 4. R isk Mitigation Benefits
$51,279
$40,000
Total: $89,018 per 100 users
$20,000
Avanade’s managed services 5 key areas
5. IT Infrastructure Cost Reduction
$0 IT staff productivity gains
Business productivity gains – operations
Business productivity gains – revenue
Risk mitigation benefits
Infrastructure cost reduction
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
Study-Finding Spotlight #1: IT Staff Productivity Gains 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. DIRECT FROM THE CUSTOMER:
IT Staff Activity Time Savings 78% 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
“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.” Home
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
Study-Finding Spotlight #2: Business Productivity Gains in Operations Organizations are realizing fiveyear 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.
Average Annual Business Productivity Benefits per 100 Users $25,000 $20,000
$19,565
$1,479
$1,965
$15,000 $10,000
Total: $23,009 per 100 users
$5,000 $0
Improved user productivity
Faster time to market
Reduced external spend on contractors
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.” Home
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
Study-Finding Spotlight #3:
Business Productivity Gains Resulting in Higher Revenues Business Productivity Enhancements — Revenue 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.
Annual Value Value per 100 Users
Revenue impact — reduced downtime Reduced downtime — hours per year Lost revenue per hour of downtime Lost revenue recognized in study
21 $480,000 25%
Revenue impact — additional revenue $2,523,951 from reduced downtime
$26,287
Revenue impact — improved operations Additional revenue from improved operations Additional revenue related to Avanade Sum of additional revenue Realized revenue benefit Net revenue benefit
$575,000
$5,988
12% $3,098,951
$32,276
20% $619,790
$6,465
Source: IDC, 2014
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
Study-Finding Spotlight #4: Risk Mitigation Benefits 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.
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
67
Source: 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.” Home
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
Study-Finding Spotlight #5: IT Infrastructure Cost Reduction 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.
Average Annual IT Infrastructure Cost Reductions per 100 Users $6,000
$5,458
$5,000 $4,000
$3,368
$3,000 $2,000 $1,000 $0
$1,436 $146 $248 $260
Initial solution versus alternatives Server hardware Aggregate bandwidth Storage and networking Management software tools
Source: IDC, 2014
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
Business Value Highlights 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
$28.6M
• L owering 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
5 YEAR AGGREGATE BENEFIT
$297,835 IN DISCOUNTED BENEFITS PER 100 USERS OVER 5 YEARS
• Mitigating risks by reducing downtime by 64% • L owering infrastructure costs by an average of 13%
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
Overall ROI 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.
Cost Benefit Analysis Per 100 Users $400,000
$367,031 in non-discounted cumulative net benefits over 5 years
Investment Benefits Cumulative net benefit
$350,000 $300,000 $250,000 $200,000 $150,000
$99,420
$100,000 $50,000
$0
$0
-$50,000 $(30,461) Initial
$100,179
$101,027
$101,974
$28,265 $(8,513) Year 1
$(8,513)
$(8,513)
Year 2
Year 3
$(8,513) Year 4
$(8,513) Year 5
Source: IDC, 2014
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
Inside Avanade
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.
Avanade Lifecycle of Application and Infrastructure Managed Services Application Managed Services
Infrastructure Managed Services
• Custom Application • Microsoft Dynamics • Collaboration • Analytics
• Private Cloud • Workplace • Unified Communications & Collaboration
Service Level Agreements Business Outcome Oriented
Custom
Availability
Support Response & Resolution
Velocity of Changes
Migration Velocity
Pricing Pay for Use
Custom
Multi-Year
Monthly Fixed/Variable
Transactional
Platform On Premise
Mobile
Public Cloud
Private Cloud
Hosted
Hybrid
Source: Avanade, 2014
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An IDC InfoBrief, sponsored by Avanade | Document #247693
Achieving Business Value with
Managed Services
Inside Avanade Specializing 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.
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