A Forrester Total Economic
Impact™ Study
Commissioned By HP and Intel
The Total Economic
Impact™ Of HP ProLiant
BL660c Generation 8
Blade Server
As Deployed And Used By An
Engineering Company
Project Director:
Sebastian Selhorst
May 2014
Table Of Contents
Executive Summary .................................................................................... 1
Disclosures .................................................................................................. 2
TEI Framework And Methodology ............................................................ 3
Analysis ........................................................................................................ 4
Financial Summary ................................................................................... 14
HP ProLiant BL660c Gen8 Server: Overview ........................................ 15
Appendix A: Total Economic Impact™ Overview................................. 16
Appendix B: Glossary............................................................................... 17
Appendix C: Supplemental Material ....................................................... 18
Appendix D: Endnotes.............................................................................. 18
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1
Executive Summary
Despite widespread awareness and intention to move workloads to
the cloud, the reality of current enterprise IT is that on-premises
infrastructure is still the dominant processing resource for most
companies. IT hardware decision-makers continue to tell Forrester
that consolidation and virtualization top their list of IT infrastructure
1
and data center priorities. Given the demonstrated importance of
core infrastructure in IT budgets and planning, the economic impact
of potential infrastructure assumes a prominent place in overall IT
planning.
HP and Intel commissioned Forrester Consulting to conduct a Total
Economic Impact™ (TEI) study and examine the potential return on
investment (ROI) enterprises may realize by deploying HP ProLiant
BL660c Gen8 blade server within the HP BladeSystem solution.
The purpose of this study is to provide readers with a framework to
evaluate the potential financial impact of the HP ProLiant BL660c
on their organizations.
“With the BL660c Gen8, we are
finally able to deliver on some
of the hardware expectations
that we have been waiting for
a number of years. It enables
us to realize some massive
consolidation of workloads
and minimize our footprint.”
~ITC infrastructure manager at engineering
company
The HP ProLiant BL660c Gen8 blade server delivers four-socket
computing in a singlewide, full-height form factor and is powered by up to four Intel Xeon processors. For a more detailed
overview of the HP ProLiant BL660c Gen8, please refer to page 14.
To better understand the benefits, costs, and risks associated with an HP ProLiant BL660c deployment, Forrester
interviewed a large engineering company based in Australia that had invested in four HP ProLiant BL660c Gen8 servers and
had experience in using them in production for more than a year. Prior to the HP ProLiant BL660c Gen8 servers, the
organization also used HP blade servers and therefore had the HP BladeSystem infrastructure already in place. However,
the production workload became too big for the previous generation two-socket blade servers, which had a negative impact
on performance and limited the number of virtual machines. In addition, the existing blade chassis in the data center were
fully occupied. The company was looking for a solution to add more capacity without having to increase the infrastructure
footprint.
THE HP PROLIANT BL660C GEN8 SERVERS ENABLED THE INTERVIEWED COMPANY TO DRIVE CONSOLIDATION
AND REALIZE COST SAVINGS
Our interviews with this engineering company and subsequent financial analysis found that this organization expects to
2
experience the risk-adjusted ROI and financial metrics shown in Figure 1.
The financial analysis points to estimated benefits of nearly $1.08 million versus hardware and deployment costs of
approximately $290,000, adding up to a net present value (NPV) of $790,000.
FIGURE 1
Financial Summary Showing Three-Year Risk-Adjusted Results
ROI:
270%
Source: Forrester Research, Inc.
NPV:
$790,000
Payback:
within 12 months
2
›
›
Benefits. In conducting in-depth interviews with this existing HP customer, Forrester found that the company expects to
3
achieve risk-adjusted benefits of about $1.08 million over a three-year period. In particular, the interviewed organization
achieved:
•
SAN storage cost avoidance of approximately $687,000. For each of the four new blade servers the company
added 22 TB of local storage. The company used this extra local storage capacity to isolate workloads and move
them from the SAN. According to the organization, the life of the SAN has been extended and the investment in
additional SAN storage capacity has been deferred for several years.
•
Software consolidation cost savings of $192,000. The server virtualization and consolidation enabled the
company to reduce the number of database server licenses by four.
•
Hosting cost avoidance of nearly $154,000. The high density of the HP ProLiant BL660c Gen8 allowed the
company to increase the computing capacity while keeping the same infrastructure footprint in the data center. It
avoided adding an additional blade chassis.
•
Administration cost savings of approximately $40,000. The four new blade servers replaced 14 physical twosocket servers in the production environment. This has a positive impact on the efforts required to administer and
maintain the servers.
•
Hardware cost avoidance due to repurposing the two socket servers valued at $12,000. The 14 previous
generation two-socket servers that were removed from the production environment were either moved into
development or testing environments or repurposed for other nonproduction workloads. The residual value of each
server was estimated at $1,000, which was used as the net benefit estimation (cost avoidance) per server.
•
Increased performance. The interviewed organization also noted an increase in general performance and a
positive impact on the business users as some larger workloads and reports now take less time to complete.
However, the interviewed company considers the increased speed of execution as a soft benefit and it has therefore
not been quantified in financial terms in this case study.
Costs. To realize the above benefits, the interviewed organization experienced the following risk-adjusted costs:
•
Hardware costs of approximately $289,000. At the time of the interview, the company had invested in four HP
ProLiant BL660c Gen8 servers at $70,000 each, including 22 TB of local attached storage. The total hardware costs
also included $20,000 that the organization had to spend on upgrading the network card of the chassis.
•
Labor costs of approximately $3,500. These internal labor costs account for 10 man-days that were required for
deploying the new HP ProLiant BL660c servers, migrating the workloads, putting the servers into production, and
retiring the previous servers.
Disclosures
The reader should be aware of the following:
›
The study is commissioned by HP and Intel and delivered by Forrester Consulting. It is not meant to be used as a
competitive analysis.
›
Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises
that readers use their own estimates within the framework provided in the report to determine the appropriateness of an
investment in HP ProLiant BL660c Gen8 blade servers.
›
HP reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings
and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.
›
HP provided the customer names for the interviews but did not participate in the interviews.
3
TEI Framework And Methodology
INTRODUCTION
From the information provided in the interviews, Forrester has constructed a Total Economic Impact™ (TEI) framework for
those organizations considering deploying HP ProLiant BL660c Gen8 blade servers. The objective of the framework is to
identify the cost, benefit, flexibility, and risk factors that affect the investment decision.
APPROACH AND METHODOLOGY
Forrester took a multistep approach to evaluate the impact that HP ProLiant BL660c Gen8 blade servers as part of the HP
BladeSystem solution can have on an organization (see Figure 2). Specifically, we:
›
Interviewed HP marketing and sales personnel, along with Forrester analysts, to gather data relative to the HP ProLiant
BL660c and the marketplace for blade servers.
›
Interviewed one organization currently using HP ProLiant BL660c Gen8 servers to obtain data with respect to costs,
benefits, and risks.
›
Constructed a financial model representative of the interviews using the TEI methodology. The financial model is
populated with the cost and benefit data obtained from the interviews.
›
Risk adjustment is a key part of the TEI methodology. While the interviewed organization provided cost and benefit
information, various numbers are based on estimations. For that reason, the concerned cost and benefit totals have been
risk-adjusted. The adjustments are detailed in each relevant section.
Forrester employed four fundamental elements of TEI in modeling the financial impact of HP ProLiant BL660c Gen8 servers:
benefits, costs, flexibility, and risks.
Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester’s TEI
methodology serves to provide a complete picture of the total economic impact of purchase decisions. Please see Appendix
A for additional information on the TEI methodology.
FIGURE 2
TEI Approach
Perform
due diligence
Source: Forrester Research, Inc.
Conduct customer
interviews
Construct financial
model using TEI
framework
Write
case study
4
Analysis
INTERVIEWED ORGANIZATION
For this study, Forrester interviewed the ITC infrastructure manager of a multidisciplinary engineering company based in
Australia. The company provides a range of services from design and manufacture to construction, installation, maintenance,
and off-site repair to companies in the resources, energy, and infrastructure sectors. In 2013, the company employed more
than 2,600 people, including 70 IT staff.
INTERVIEW HIGHLIGHTS
The interviews were conducted in March 2014.
Situation
HP products have been incumbent for many years on the back end of the company’s IT environment. The organization went
from HP rack-mounted servers to HP blade servers as soon as the
p-Class blades became available. Seven years ago, the company
then moved on to the HP BladeSystem c-Class blades with the HP
“We got to a point where the
ProLiant BL460c. Due to performance limitations with the SAN, the
company decided to leverage local direct-attached storage on the
hard drive size and the RAM
blade servers to host its virtual machines as opposed to using the
that you could fit in our former
SAN. This triggered the addition of HP BL480c servers with multiple
hard drives and I/O accelerator cards.
While the organization was very satisfied with the HP BL480c
servers, this solution eventually also reached its performance limits.
The workload grew larger than what the I/O card could handle and
the company needed to find a way to continue its virtualization and
consolidation efforts.
In addition, there was no more available space in the existing blade
chassis and the organization wanted to avoid investing in an
additional rack, which would have increased its colocation costs.
blade servers really reached a
peak and limited the amount
of virtual machines we could
host.”
~ITC infrastructure manager at engineering
company
Solution
The high density and performance of the HP ProLiant BL660c Gen8 blade servers, as well as the option of inserting two 1.2
terabyte I/O cards, made it a promising choice for the interviewed organization. In June 2012, the company was offered a
beta testing program for the HP ProLiant BL660c Gen8. The server was put straight into production and was quickly
considered as being the right solution for the company.
In November 2012, the interviewed customer decided to invest in two HP ProLiant BL660c Gen8 blade servers in order to
increase the capacity and start consolidating the server infrastructure. Virtual machines that were previously running on the
HP ProLiant BL460c or HP BL480c blade servers and the SAN were moved to the new HP ProLiant BL660c Gen8 servers
and their direct-attached storage. Each HP ProLiant BL660c was able to run up to 100 virtual machines. About eight
previous generation two-socket physical servers were moved out of the data center and repurposed for handling
nonproduction workloads.
One year later, in November 2013, the company purchased two more HP ProLiant BL660c Gen8 servers to continue the
virtualization of the environment. This time, the two new four-socket blades replaced six two-socket servers that were also
moved out of the data center into nonproduction environments.
5
At the time of the interview, the company had plans to invest in two
more HP ProLiant BL660c Gen8 servers.
Results
The interview revealed that:
›
The HP ProLiant BL660c Gen8 drives consolidation and
virtualization efforts. The company moved the existing virtual
machines onto the new HP ProLiant BL660c Gen8 servers and
continued to transform physical into virtual workloads. In total, the
four new HP ProLiant BL660c Gen8 servers replaced 14 physical
previous generation two-socket blade servers. Moreover, due to
the high density of the HP ProLiant BL660c Gen8 servers, the
company did not have to invest in an additional blade chassis
and therefore avoided related hosting costs.
“The BL660c [Gen8] enables us
to minimize our hardware
footprint while increasing our
capacity. It is a steppingstone
in getting more equipment out
of the door and less equipment
to manage.”
~ITC infrastructure manager at engineering
company
›
The new server environment is considered less complex and
more stable. The consolidation of many servers into a few reduced the complexity of the server infrastructure and the
efforts required to maintain it. Fewer servers to monitor, patch, and manage also resulted in a more stable environment for
the interviewed organization.
›
The HP ProLiant BL660c servers in conjunction with the I/O acceleration cards boosted the performance.
Examples of improved performance include an ERP archiving process that used to take more than three hours and that is
now done in 20 minutes or reports that now only take a fraction of the time they used to take.
›
The use of direct-attached storage enabled the company to defer the investment in additional SAN storage
capacity. For each of the four HP ProLiant BL660c Gen8 blade servers, the company added 22 TB worth of storage
blades. The company used this local capacity to isolate workloads and move them from the SAN. The organization
considers that it has thus extended the life of the SAN and deferred the investment in additional SAN storage capacity for
several years.
›
The consolidation resulted in software license costs savings. By virtualizing most database workloads and
consolidating the workloads onto the new HP ProLiant BL660c servers, the company was able to reduce the number of
required database server licenses by four.
›
The retired two-socket servers still provide value. The previous generation two-socket servers that have been removed
from the data center and withdrawn from the maintenance contract are still used by the organization. They have been
repurposed within development or test environments or now process other nonproduction workloads.
6
BENEFITS
The interviewed organization reported quantifiable benefits in terms of hardware and hosting cost avoidance, software
consolidation cost savings, simplified server administration, and SAN storage cost avoidance. Together with the interviewee,
we tried to quantify these benefit categories, which are discussed below.
Another important benefit mentioned by the interviewed organization was an increase in overall performance. Some larger
workloads and reports now take less time to complete. While the interviewed company considers that all of these workloads
were also achievable before — just at a slower speed, it also notes a positive impact on the business users. Nevertheless,
the company considers the increased speed of execution as soft benefit and it has therefore not been quantified in financial
terms in this case study.
“Being able to generate reports in minutes instead of hours certainly showed what efficiency we gave back to the
business.”
~ITC infrastructure manager at engineering company
SAN Storage Cost Avoidance
The interviewed organization invested in four HP ProLiant BL660c Gen8 blade servers. For each of the four HP ProLiant
BL660c Gen8 servers the company added 22 TB worth of storage blades. The company used this extra local storage
capacity to isolate workloads and move them from the SAN. The organization considers that it has thus extended the life of
the SAN and deferred the investment in additional SAN storage capacity for several years.
For the sake of this analysis, we assume that the interviewed organization avoids investing in 44 TB of SAN storage capacity
starting from Year 1 of the analysis and additional 44 TB starting from Year 2. We further assume a fully loaded storage price
of $5 per GB per year. The resulting SAN storage cost savings are represented in Table 1.
To take into account the uncertainty of the above assumptions, this benefit was risk-adjusted and reduced by 25%. The riskadjusted total SAN storage cost savings over the three years are $844,800.
TABLE 1
SAN Storage Cost Avoidance
Ref.
A1
Metric
Number of TB of SAN storage avoided per
new blade server
Calculation/
assumption
Number of new blade servers (cumulated)
A3
Amount of SAN storage avoided in GB
A4
Assumed fully-loaded annual costs per GB
At
SAN storage cost avoidance
A3*A4
Risk adjustment
 25%
SAN storage cost avoidance (risk-adjusted)
Source: Forrester Research, Inc.
Year 2
Year 3
22TB
A2
Atr
Year 1
A1*A2*1,024
2
4
4
45,056
90,112
90,112
$225,280
$450,560
$450,560
$168,960
$337,920
$337,920
$5
7
Software Consolidation Cost Savings
The consolidation of the hardware also had an impact on the software license costs. With the introduction of the third and
fourth HP ProLiant BL660c Gen8 servers in Year 2 of the analysis, the company virtualized most database workloads and
was able to reduce the number of database licenses by four. With an assumed annual cost of $32,000 per database license,
the company realizes annual savings of $128,000, as indicated in Table 2.
To take into account the uncertainty of the above assumption, this benefit was risk-adjusted and reduced by 5%. The riskadjusted total cost savings over the three years are $243,200.
TABLE 2
Software Consolidation Cost Savings
Calculation/
assumption
Ref.
Metric
B1
Reduced number of database server licenses
B2
Assumed annual cost of one license
$32,000
Bt
Software consolidation cost savings
B1*B2
Risk adjustment
 5%
Btr
Year 1
Year 2
Year 3
4
Software consolidation cost savings (riskadjusted)
$0
$128,000
$128,000
$0
$121,600
$121,600
Source: Forrester Research, Inc.
Hosting Cost Avoidance
One of the objectives of the interviewed organization was to increase the computing capacity while avoiding an increased
footprint of the server infrastructure. Due to the high density of the HP ProLiant BL660c Gen8 servers, the company did not
have to host an additional blade chassis. The customer estimates that the hosting of an additional blade chassis would have
cost between $60,000 and $70,000 per year.
To take into account the uncertainty of the above assumption, this benefit was risk-adjusted and reduced by 5%. The riskadjusted total cost savings over the three years is $185,250 as indicated in Table 3.
TABLE 3
Hosting Cost Avoidance
Ref.
Metric
Calculation/
assumption
C1
Number of additional chassis avoided
C2
Estimated annual hosting fees avoided per
chassis
Ct
Hosting cost avoidance
C1*C2
Risk adjustment
 5%
Ctr
Hosting cost avoidance (risk-adjusted)
Source: Forrester Research, Inc.
Year 1
Year 2
Year 3
1
$65,000
$65,000
$65,000
$65,000
$61,750
$61,750
$61,750
8
Administration Cost Savings
The interviewed organization reports that the new consolidated environment is easier to maintain and administer. To come
up with a high-level estimation of the time savings for administrators, the company assumes that each physical server in the
production environment requires on average one hour of administration effort per week. The number of physical production
servers was reduced by six in Year 1 of the analysis and by four additional servers in Year 2. With an assumed average
hourly salary rate of $38, the company realizes administration cost savings of nearly $12,000 in Year 1 and $20,000 in years
2 and 3, as indicated in Table 4.
To take into account the uncertainty of the above assumptions, this benefit was risk-adjusted and reduced by 5%. The riskadjusted total administration cost savings over the three years are $48,807.
TABLE 4
Administration Cost Savings
Ref.
D1
D2
D3
Metric
Average administration hours spent per
physical server per week
Reduced number of physical servers
(cumulated)
Cumulated number of administration hours
saved per year
Calculation/
assumption
Year 3
6
10
10
D1*D2*52
312
520
520
$80,000 per
year/2,080
hours per
year
$38
$11,856
$19,760
$19,760
$11,263
$18,772
$18,772
Average fully-loaded hourly salary rate
Dt
Administration cost savings
D3*D4
Risk adjustment
 5%
Administration cost savings (risk-adjusted)
Year 2
1
D4
Dtr
Year 1
Source: Forrester Research, Inc.
Residual Value Of Legacy Blade Servers
With the introduction of the HP ProLiant BL660c Gen8 servers, the company was able to repurpose a total of 14 previous
generation HP ProLiant BL460c and HP BL480c servers. In Year 1 of the analysis, the company removed eight two-socket
servers and six more in Year 2. The servers were moved out of the data center and into development or testing
environments or repurposed for other nonproduction workloads.
For the sake of this analysis, we assume that each previous generation two-socket blade server had an average residual
value of $1,000. This can be considered as an investment in hardware for nonproduction workloads that the company did not
have to do. The resulting financial value is represented in Table 5.
To take into account the uncertainty of the above assumption, this benefit was risk-adjusted and reduced by 5%. The riskadjusted total benefit over the three years is $13,300.
9
TABLE 5
Residual Value Of Repurposed Two Socket Servers
Ref.
Calculation/
assumption
Metric
E1
Number of retired servers
E2
Assumed residual value of a server
$1,000
Et
Residual value
E1*E2
Risk adjustment
 5%
Etr
Residual value (risk-adjusted)
Year 1
Year 2
Year 3
8
6
0
$8,000
$6,000
$0
$7,600
$5,700
$0
Source: Forrester Research, Inc.
Total Benefits
Table 6 shows the total of all benefits across the five areas listed above, as well as present values (PVs) discounted at 10%.
Over three years, the interviewed organization expects risk-adjusted total benefits to be a PV of $1.08 million.
TABLE 6
Total Benefits (Risk-Adjusted)
Benefit
SAN storage cost
avoidance
Software consolidation
cost savings
Initial
Year 1
Year 2
Year 3
Total
Present
value
$0
$168,960
$337,920
$337,920
$844,800
$686,757
$0
$0
$121,600
$121,600
$243,200
$191,856
Ctr
Hosting cost avoidance
$0
$61,750
$61,750
$61,750
$185,250
$153,563
Dtr
Administration cost
savings
$0
$11,263
$18,772
$18,772
$48,807
$39,857
Etr
Residual value
$0
$7,600
$5,700
$0
$13,300
$11,620
Total benefits
$0
$249,573
$545,742
$540,042
$1,335,357
$1,083,653
Ref.
Atr
Btr
Source: Forrester Research, Inc.
10
COSTS
This section describes and lists the incremental hardware and labor costs incurred by the interviewed organization for
deploying the HP ProLiant BL660c Gen8 servers within its environment.
Hardware Costs
The interviewed organization invested in a total of four HP ProLiant BL660c Gen8 servers. Each server is equipped with four
Intel Xeon E5-4600 processors, 500 GB of RAM, two 1.2 TB I/O accelerator cards, and two 11 TB storage blades. The
company initially purchased two HP ProLiant BL660c Gen8 servers and then added another two one year later. The
approximate cost per server was $70,000, including the local attached storage. In addition, the company had to upgrade the
network component on the back of the BladeSystem chassis for about $20,000 in order to make the system compatible with
the new Gen8 blade servers.
To take into account the uncertainty of the above approximated costs, this cost was risk-adjusted up by 5%. For the
interviewed organization, the total risk-adjusted hardware costs were $315,000.
TABLE 7
Hardware Costs
Ref.
Metric
Calculation/
assumption
F1
Number of BL660 Gen8 servers
F2
Cost per server
F3
Chassis upgrade costs
Ft
Hardware costs
(F1*F2)+F3
Risk adjustment
 5%
Ftr
Hardware costs (risk-adjusted)
Initial
Year 1
2
Year 2
Year 3
0
2
0
$160,000
$0
$140,000
$0
$168,000
$0
$147,000
$0
$70,000
$20,000
Source: Forrester Research, Inc.
Labor Costs
The interviewed organization reports that the process of deploying the new blade servers, migrating the production
workloads, and retiring the previous generation two-socket servers was very straightforward. It estimates the total efforts for
internal IT resources took 10 man-days. This is partly due to the fact that a large part of the production environment was
already virtualized.
Nevertheless, in order to take into account the uncertainty of the above estimation, the internal labor costs were risk-adjusted
up by 25%. For the interviewed organization, the total risk-adjusted labor costs were $3,850.
11
TABLE 8
Labor Costs
Ref.
G1
Metric
Number of man-days for setup and
migration
Calculation/
assumption
Year 1
Year 2
5
$80,000 per
year/260
working
days per
year
G2
Average fully-loaded daily salary
rate
Gt
Internal labor costs
E1*E2
Risk adjustment
 25%
Gtr
Initial
Internal labor costs (risk-adjusted)
Year 3
5
$308
$1,540
$0
$1,540
$0
$1,925
$0
$1,925
$0
Source: Forrester Research, Inc.
Total Costs
Table 9 shows the total of all costs, as well as associated present values, discounted at 10%. Over three years, the
investment represents a net present value of a little more than $290,000 for the interviewed organization.
TABLE 9
Total Costs (Risk-Adjusted)
Ref.
Cost
Ftr
Hardware costs
Gtr
Internal labor costs
Total costs
Source: Forrester Research, Inc.
Initial
Year 1
Year 2
Year 3
Total
Present
value
($168,000)
$0
($147,000)
$0
($315,000)
($289,488)
($1,925)
$0
($1,925)
$0
($3,850)
($3,516)
($169,925)
$0
($148,925)
$0
($318,850)
($293,004)
12
FLEXIBILITY
Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business
benefit for some future additional investment. This provides an organization with the “right” or the ability to engage in future
initiatives but not the obligation to do so. There are multiple scenarios in which a customer might choose to implement HP
ProLiant BL660c blade servers and later realize additional uses and business opportunities. Flexibility would also be
quantified when evaluated as part of a specific project (described in more detail in Appendix A).
The interviewed organization sees more room for consolidations and — at the time of the interview — had already planned
on purchasing more HP ProLiant BL660c Gen8 servers. This planned investment will bring incremental value to the
company in the short term; however, the company’s vision goes even further as explained by the interviewee:
“In the future, we want to deliver on that private cloud vision. For me, this is the window into the future of saying how
we’re going to be positioned in running these kinds of workloads.”
~ITC infrastructure manager at engineering company
RISKS
Forrester defines two types of risk associated with this analysis: “implementation risk” and “impact risk.” “Implementation risk”
is the risk that a proposed investment in the HP ProLiant BL660c Gen8 blade server may deviate from the original or
expected requirements, resulting in higher costs than anticipated. “Impact risk” refers to the risk that the business or
technology needs of the organization may not be met by the investment in HP ProLiant BL660c Gen8 servers, resulting in
lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit
estimates.
TABLE 10
Benefit And Cost Risk Adjustments
Benefits
Adjustment
SAN storage cost avoidance
 25%
Software consolidation cost savings
 5%
Hosting cost avoidance
 5%
Administration cost savings
 5%
Residual value
 5%
Costs
Adjustment
Hardware costs
 5%
Internal labor costs
 25%
Source: Forrester Research, Inc.
Quantitatively capturing implementation risk and impact risk by directly adjusting the financial estimates results provides
more meaningful and accurate estimates and a more accurate projection of the ROI. In general, risks affect costs by raising
13
the original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers should be taken
as “realistic” expectations since they represent the expected values considering risk.
The following impact risks that affect benefits are identified as part of the analysis:
›
The benefits around cost savings and cost avoidances are based on unit cost estimations that might be lower than initially
expected.
›
Administrator productivity gains can be difficult to recapture and use effectively.
›
The residual value of the legacy servers is based on estimates and might be lower than originally expected.
The following implementation risks that affect costs are identified as part of this analysis:
›
Hardware costs of the servers and the network card are based on approximate values and might be slightly higher.
›
Internal labor costs often exceed initial expectations.
Table 10 shows the values used to adjust for risk and uncertainty in the cost and benefit estimates. Readers are urged to
apply their own risk ranges based on their own degree of confidence in the cost and benefit estimates.
14
Financial Summary
The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback
period for the organization’s investment in HP ProLiant BL660c Gen8 servers.
Table 11 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the
risk-adjustment values from Table 10 in the Risks section to the unadjusted results in each relevant Costs and Benefits
section.
FIGURE 3
Cash Flow Chart (Risk-Adjusted)
$1,200,000
$1,000,000
$800,000
Cash Flows
$600,000
$400,000
$200,000
$0
($200,000)
($400,000)
Initial
Total Costs
Year 1
Total Benefits
Year 2
Year 3
Cumulative Total
Source: Forrester Research, Inc.
TABLE 11
Cash Flow: Risk-Adjusted
Costs
Benefits
Net benefits
Initial
Year 1
Year 2
Year 3
Total
Present value
($169,925)
$0
($148,925)
$0
($318,850)
($293,004)
$0
$249,573
$545,742
$540,042
$1,335,357
$1,083,653
($169,925)
$249,573
$396,817
$540,042
$1,016,507
$790,649
ROI
Payback period
Source: Forrester Research, Inc.
270%
Within 12
months
15
HP ProLiant BL660c Gen8 Server: Overview
The following information is provided by HP. Forrester has not validated any claims and does not endorse HP or its offerings.
The HP ProLiant BL660c Gen8 Server Blades deliver four-socket computing in a singlewide, full-height form factor which
includes support for:
›
Up to four Intel Xeon E5-4600/4600 v2 processors, each with up to 12 cores and 130 watts without system configuration
restrictions.
›
32 DDR3 DIMM sockets for up to 1.0 TB of HP SmartMemory and a maximum memory speed up to 1866 MHz.
›
Three PCIe 3.0 expansion slots (two x16) supporting the high performing mezzanine option cards.
›
Choice of embedded networking supports up to four 10 Gb FlexFabric ports with the Gen8 FlexibleLOM solution.
HP ProLiant Gen8 design innovations to optimize application performance and proactively improve uptime:
›
Built-in life-cycle management tools to increase administrator productivity such as HP Active Health for continuous,
proactive health monitoring with 100% of configuration changes logged with no impact to application performance for
faster problem resolution, and Smart Update with system maintenance capabilities for industry leading uptime.
›
Accelerates virtualized and data intensive application performance with a balanced system architecture to eliminate much
of the cost and complexity caused by common performance bottlenecks.
›
Built-in smart sensors that reduce power and cooling requirements to deliver more compute per watt, increasing data
center capacity for future growth.
Improved memory, storage, and I/O performance:
›
HP SmartMemory, which uses less power, leveraging low-voltage registered DIMMs (RDIMMs).
›
Gen8 embedded Smart Array P220i RAID controller with optional 512 MB flash backed write cache (FBWC), which
supports the HP Smart Storage and SmartDrive carrier, and a choice of a very wide section of hot plug SAS, SATA, SAS
SSD, and SATA SSD hard drives.
›
PCIe 3.0 I/O technology with one x8 and two x16 slots to support reduced latency and additional bandwidth per I/O
expansion slot as compared to G7 blade servers.
›
FlexibleLOM, which customizes the server networking bandwidth, technology, OEM provider, and number of ports while
meeting future server networking needs without overhauling server hardware.
16
Appendix A: Total Economic Impact™ Overview
Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decisionmaking processes and assists vendors in communicating the value proposition of their products and services to clients. The
TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior
management and other key business stakeholders.
The TEI methodology consists of four components to evaluate investment value: benefits, costs, flexibility, and risks.
BENEFITS
Benefits represent the value delivered to the user organization — IT and/or business units — by the proposed product or
project. Often, product or project justification exercises focus just on IT cost and cost reduction, leaving little room to analyze
the effect of the technology on the entire organization. The TEI methodology and the resulting financial model place equal
weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on
the entire organization. Calculation of benefit estimates involves a clear dialogue with the user organization to understand
the specific value that is created. In addition, Forrester also requires that there be a clear line of accountability established
between the measurement and justification of benefit estimates after the project has been completed. This ensures that
benefit estimates tie back directly to the bottom line.
COSTS
Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business units
may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the investments and
expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures any incremental costs
over the existing environment for ongoing costs associated with the solution. All costs must be tied to the benefits that are
created.
FLEXIBILITY
Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can typically be
the primary way to justify a project, Forrester believes that organizations should be able to measure the strategic value of an
investment. Flexibility represents the value that can be obtained for some future additional investment building on top of the
initial investment already made. For instance, an investment in an enterprisewide upgrade of an office productivity suite can
potentially increase standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration
feature may translate to greater worker productivity if activated. The collaboration can only be used with additional
investment in training at some future point. However, having the ability to capture that benefit has a PV that can be
estimated. The flexibility component of TEI captures that value.
RISKS
Risks measure the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in two
ways: 1) the likelihood that the cost and benefit estimates will meet the original projections, and 2) the likelihood that the
estimates will be measured and tracked over time. TEI applies a probability density function known as “triangular distribution”
to the values entered. At a minimum, three values are calculated to estimate the underlying range around each cost and
benefit.
17
Appendix B: Glossary
Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Companies set
their own a discount rate based on their business and investment environment. Forrester assumes a yearly discount rate of
10% for this analysis. Organizations typically use discount rates between 8% and 16% based on their current environment.
Readers are urged to consult their respective organizations to determine the most appropriate discount rate to use in their
own environment.
Net present value (NPV): The present or current value of (discounted) future net cash flows given an interest rate (the
discount rate). A positive project NPV normally indicates that the investment should be made, unless other projects have
higher NPVs.
Present value (PV): The present or current value of (discounted) cost and benefit estimates given at an interest rate (the
discount rate). The PV of costs and benefits feed into the total NPV of cash flows.
Payback period: The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs)
equal initial investment or cost.
Return on investment (ROI): A measure of a project’s expected return in percentage terms. ROI is calculated by dividing
net benefits (benefits minus costs) by costs.
A NOTE ON CASH FLOW TABLES
The following is a note on the cash flow tables used in this study (see the example table below). The initial investment
column contains costs incurred at “time 0” or at the beginning of Year 1. Those costs are not discounted. All other cash flows
in Years 1 through 3 are discounted using the discount rate at the end of the year. PV calculations are calculated for each
total cost and benefit estimate. NPV calculations are not calculated until the summary tables are the sum of the initial
investment and the discounted cash flows in each year.
Sums and present value calculations the Total Benefits, Total Costs and Cash Flow tables may not exactly add up, as some
rounding may occur.
TABLE [EXAMPLE]
Example Table
Ref.
Source: Forrester Research, Inc.
Metric
Calculation
Year 1
Year 2
Year 3
18
Appendix C: Supplemental Material
Related Forrester Research
“Strategic Benchmarks 2014: Server Virtualization,” Forrester Research, Inc., March 6, 2014
“Predictions For 2014: Servers And Data Centers,” Forrester Research, Inc., December 19, 2013
“Consolidate And Optimize Your IT Infrastructure And Data Centers Into 2014 And Beyond,” Forrester Research, Inc.,
September 30, 2013
Appendix D: Endnotes
1
According to Forrester’s Forrsights Hardware Survey, Q3 2013, 77% deem server, storage and network virtualization and
consolidation a high or critical priority for their organization. Source: “Consolidate And Optimize Your IT Infrastructure And
Data Centers Into 2014 And Beyond,” Forrester Research, Inc., September 30, 2013.
2
Forrester risk-adjusts the summary financial metrics to take into account the potential uncertainty of the cost and benefit
estimates. For more information see the section on Risks.
3
All monetary values in this section are indicated as three-year risk-adjusted present values (PV).