Total Economic Impact™ IBM System Storage SAN, Volume Controller

A Forrester Total Economic Impact™ Study Prepared For IBM

Total Economic Impact™ IBM System Storage SAN
Volume Controller
Project Director: Sadaf Roshan Bellord
Contributors: Jon Erickson
May 2012

Forrester Consulting
Total Economic Impact™ IBM System Storage SAN Volume Controller

TABLE OF CONTENTS
Executive Summary ................................................................................................................................................................................. 2

IBM SAN Volume Controller Reduces IT Capital And Operating Costs ............................................................................... 2

Factors Affecting Benefits And Costs ............................................................................................................................................. 3

Disclosures ........................................................................................................................................................................................... 4

TEI Framework And Methodology...................................................................................................................................................... 5

Analysis ...................................................................................................................................................................................................... 6

Interview Highlights .......................................................................................................................................................................... 6

Costs...................................................................................................................................................................................................... 8

Benefits ............................................................................................................................................................................................... 10

Flexibility............................................................................................................................................................................................ 14

Risk...................................................................................................................................................................................................... 15

Financial Summary................................................................................................................................................................................ 17

IBM System Storage SAN Volume Controller: Overview.............................................................................................................. 18

Appendix A: Composite Organization Description ....................................................................................................................... 18

Appendix B: Total Economic Impact™ Overview ............................................................................................................................ 19

Appendix C: Glossary ........................................................................................................................................................................... 20

Appendix D: Endnotes.......................................................................................................................................................................... 20

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Executive Summary
In June 2011, IBM commissioned Forrester Consulting to examine the total economic impact and potential return on
investment (ROI) enterprises may realize by deploying System Storage SAN Volume Controller (SVC). The purpose of
this study is to provide readers with a framework to evaluate the potential financial impact of System Storage SAN
Volume Controller on enterprise organizations. SVC is designed to simplify and centralize storage infrastructure and
offer benefits of storage virtualization for large enterprises.

IBM SAN Volume Controller Reduces IT Capital And Operating Costs
Our interviews and surveys with 11 existing customers and subsequent financial analysis found that a composite
organization based on the organizations interviewed experienced the risk-adjusted ROI, costs, and benefits shown in
Table 1.1 See Appendix A for a description of the composite organization. (All numbers have been rounded).

Table 1
Composite Organization Three-Year Risk-Adjusted ROI

ROI Payback Total benefits Total costs Net present
period (PV) (PV) value

75% 18 months $6,151,813 ($3,520,622) $2,631,191

Source: Forrester Research, Inc.

 Benefits. The composite organization experienced the following benefits that represent those experienced by the
interviewed and surveyed companies:

o Capital cost avoidance. This benefit represents the capital costs avoidance associated with reduction of 650
TB of storage.

o Reduction in expected staff growth. This benefit represents the savings associated with managing future
headcount growth while the storage environment is rapidly growing.

o Improved efficiency of existing IT staff. This benefit represents the reduction in administrative costs of
managing storage compared to the prior environment.

o Improving data availability to end users. This benefit represents improvement in system availability for
end users.

 Costs. The composite organization experienced the following costs:

o Total software license and maintenance fees. This cost represents the investment in software licenses and
support costs for SVC implementation.

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o Total hardware and support costs. This cost represents the investment in hardware and its related support
costs.

o Internal implementation costs. This cost represents the internal resources used to support the
implementation.

o Administrative costs. This cost represents the ongoing administrative effort associated with the deployment
of IBM SVC.

Figure 1
Composite Organization Three-Year Risk-Adjusted ROI

$9,000,000

$8,000,000

$7,000,000

$6,000,000

$5,000,000
Risk‐adjusted Costs
breakeven point Benefits
$4,000,000
at 18 months

$3,000,000

$2,000,000

$1,000,000

$0
Initial Year 1 Year 2 Year 3


Factors Affecting Benefits And Costs
Table 1 illustrates the risk-adjusted financial results that were achieved by the composite organization. The risk-
adjusted values take into account any potential uncertainty or variance that exists in estimating the costs and benefits,

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which produces more conservative estimates. The following factors may affect the financial results that an organization
may experience:

 IT efficiency. Improvements in IT process efficiency are variable and are largely based on getting staff to change
their behavior to the new environment. Possible factors that might affect the magnitude of the gains from IT
efficiency include the staff skill set, what new tasks staff members are transferred to do, as well as the speed to
implement the new solution.

 Impact of availability. The overall benefit of improved availability will depend on the type of supported
application as well as the productive value of the type and number of end users.

 Capital cost impact. Reducing capital cost of storage is dependent in part on the current per terabyte cost of
storage, the pre investment growth of storage, as well as how quickly the organization can move to the new
environment.

Disclosures
The reader should be aware of the following:

 The study is commissioned by IBM and delivered by the Forrester Consulting group.

 Forrester makes no assumptions as to the potential return on investment that other organizations will receive.
Forrester strongly advises that readers should use their own estimates within the framework provided in the
report to determine the appropriateness of an investment in IBM System Storage SAN Volume Controller.

 IBM 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.

 The customers for the interviews were provided by IBM and an external third-party organization.

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TEI Framework And Methodology

Introduction
From the information provided in the interviews, Forrester has constructed a Total Economic Impact™ framework for
those organizations considering implementing IBM System Storage SAN Volume Controller. 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 IBM System Storage SAN Volume Controller can have
on an organization (see Figure 2). Specifically, we:

 Interviewed IBM marketing, sales, and consulting personnel and Forrester analysts to gather data relative to
System Storage SAN Volume Controller and the marketplace for System Storage SAN Volume Controller.

 Received primary data from a combination of in-depth customer interviews as well as a broader survey of
customers who are currently using IBM System Storage SAN Volume Controller to obtain data with respect to
costs, benefits, and risks.

 Designed a composite organization based on characteristics of the interviewed and surveyed organizations (see
Appendix A).

 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 as applied to the composite organization.

Figure 2
TEI Approach

Conduct Construct financial
Perform due Design composite Write case
customer model using TEI
diligence organization study
interviews framework


Forrester employed four fundamental elements of TEI in modeling IBM/System Storage SAN Volume Controller’s
service:

1. Costs.

2. Benefits to the entire organization.

3. Flexibility.

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4. Risk.

Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester’s
TEI methodology serves the purpose of providing a complete picture of the total economic impact of purchase
decisions. Please see Appendix B for additional information on the TEI methodology.

Analysis

Interview Highlights
In-depth interviews were conducted for this study, involving representatives from:

1. A large regional US-based financial institution with more than $170 billion worth of assets managing over
1,600 retail branches and 2,800 ATMs. The organization services clients nationally and offers a full
selection of technology-based banking channels including online, customer service centers, and the latest
mobile devices.

2. A survey-based interview with 10 enterprise clients of SVC located within North America. These
organizations had between 200 TB and 1,500 TB of storage within their environment and had been using
the IBM SVC product for at least 12 months.

Interactions with SVC clients uncovered the following characteristics which formed the basis of the financial model:

 All of the interviewed organizations were large enterprise clients with at least 200 TB of primary storage within
their environment prior to the investment in SVC. In most cases, storage assets and storage administrators were
distributed across multiple geographical locations, increasing the complexity of the storage environment.

 A common recurring theme across the interviewed organizations was the need to better react to increasing
demands from business owners for increased storage. For many organizations, the storage volume was
increasing roughly 15% to 30% per year, particularly for data-rich applications.

 While these organizations struggled with the increased capital cost burden from the growth of storage, they also
felt increased pressure to increase staff to manage the increasingly complex storage environment. However,
many organizations could not effectively ramp staffing to meet the growth of storage either due to lack of skilled
staff or budget cutbacks across the enterprise. As a result, organizations were faced with a growing storage
environment that became less efficient to maintain over time while they were also unable to increase staff.

 Organizations invested in SVC to improve the efficiency and effectiveness of their IT storage environment. SVC
allowed organizations to improve the efficiency of their existing staff while at the same time better manage the
demand for additional staffing resources as the demand for storage capacity grew. Organization could perform
specific storage administrator functions including provisioning new storage, storage maintenance, as well as
scheduled and unscheduled backups and recovery more efficiently with SVC.

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 In terms of improved effectiveness, organizations could now better control and manage storage capacity,
reducing spiraling upward trends around storage growth and allowing the organization to postpone future
investments in storage assets. Organizations can better utilize existing storage through SVC’s thin provisioning
features.

 While the interviewed organizations did note a positive return from their investment, the decision to go ahead
with SVC was not without risk. In particular, organizations noted the importance of effective planning and
change management within storage environment to realize benefits quickly and demonstrate value rapidly in an
environment of ongoing cost-cutting.

Composite Organization
Based on in-depth interviews with an existing customer provided by IBM and surveys of 10 customers using IBM SVC,
Forrester constructed a TEI framework, a composite company, and an associated ROI analysis that illustrates the areas
financially affected. The composite organization that Forrester synthesized from these results represents a large
organization with 5,000 employees that is managing more than 4 PB of data. The organization deployed IBM SVC to
better manage its growing storage needs.

Framework Assumptions
Table 2 provides the model assumptions that Forrester used in this analysis.

Table 2
Model Assumptions

Ref. Metric Calculation Value

A1 Hours per week 40

A2 Weeks per year 52

A3 Hours per year (M-F, 9-5) A1*A2 2,080

A5 Average fully loaded salary of storage administrator $120,000

A6 Fully loaded hourly rate of storage administrator (A5/A3) $58

A7 Average fully loaded salary of end user $100,000

A8 Fully loaded hourly rate of end user (A7/A3) $48


The discount rate used in the PV and NPV calculations is 10% and time horizon used for the financial modeling is three
years. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are

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urged to consult with their respective company’s finance department to determine the most appropriate discount rate
to use within their own organizations.

Costs
This section describes and lists the costs related to planning, testing, and implementing IBM SVC over the three-year
period. Cost consumptions are based on detailed interviews with an organization using IBM SVC and a survey
completed with 10 existing IBM SVC customers. All costs are based on list prices and recommended vendor discount.
These costs do not include any negotiated discounts. The following cost model for the composite organization serves as
a framework for other organizations.

Total Software License And Maintenance Fees
This category represents 79% of the overall investment. There are three components to the software costs: base system
software, FlashCopy, and Remote Mirror. IBM recommends 45% as a representative vendor discount for software
purchased for this investment. The software maintenance costs for Year 1 are included in the initial software licensing
cost. The maintenance cost starts in Year 2 and equates to 20% of the software license list price. Table 3 illustrates the
calculation.

Table 3
Total Software License And Maintenance Fees

Ref. Metric Calculation Initial Year 1 Year 2 Year 3

B1 Base pricing $1,056,000 $0 $211,200 $211,200

B2 FlashCopy — source only $356,224 $0 $71,245 $71,245

Remote Mirror — source and
B3 $682,083 $0 $136,417 $136,417
target

Total software license and
Bt B1+B2+B3 $2,094,307 $0 $418,862 $418,862
maintenance fees


Total Hardware And Support Costs
This category represents 6% of the overall investment in IBM SVC. It includes hardware costs and related maintenance
costs for SVC engines without SSD. IBM recommends 45% as a representative vendor discount for hardware purchased
for this investment. Table 4 presents the calculation.

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Table 4
Total Hardware And Support Costs

Ref. Metric Calculation Initial Year 1 Year 2 Year 3

C1 Hardware $154,000 $0 $30,800 $30,800

Total hardware and
Ct C1 $154,000 $0 $30,800 $30,800
support costs


Internal Implementation Costs
The next component of costs is internal implementation costs. It describes the internal resources required to plan and
implement IBM SVC. During this phase, the organization used the equivalent of three full-time resources allocated 30%
of their time to planning, testing, and implementation. The organizations interviewed and surveyed used SVC to
simplify their storage environment and eliminate downtime resulting from outdated equipment. This category
represents 3% of the overall investment. Table 5 illustrates the calculation.

Table 5
Internal Implementation Costs

Ref. Metric Calculation Per period

D1 Number of people 3

D2 Average fully loaded hourly rate $120,000

D3 Percent of time spent 30%

Dt Internal implementation costs D1*D2*D3 $108,000


Temporary Administrative Support
The final category of costs represents the temporary resources to manage hardware migration. It represents 12% of the
overall investment. Organizations interviewed used equivalent of two full-time contractors for two years to support
planning, testing, and deployment. These individuals were tasked to provision new hardware and decommission old
hardware. Table 6 presents this calculation.

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Table 6
Temporary Administrative Costs

Ref. Metric Calculation Initial Year 1

E1 Number of people 2

E2 Hourly rate per person $110,000

Et Temporary administrative costs E1*E2 $220,000 $220,000


Total Costs
Table 7 summarizes costs associated with the implementation of IBM SVC.

Table 7
Total Costs — Non-Risk-Adjusted

Present
Costs Initial Year 1 Year 2 Year 3 Total
value

Total software license and
($2,094,307) ($418,862) ($418,862) ($2,932,029) ($2,755,170)
maintenance fees

Total hardware and support costs ($154,000) ($30,800) ($30,800) ($215,600) ($202,595)

Internal implementation costs ($108,000) ($108,000) ($108,000)

Temporary administrative costs ($220,000) ($220,000) ($440,000) ($420,000)

Total costs ($2,576,307) ($220,000) ($449,662) ($449,662) ($3,695,629) ($3,485,765)


Benefits
The benefits that we had sufficient data to quantify financially were: 1) capital cost avoidance; 2) reduction in expected
staff growth; 3) improved efficiency of existing staff; and 4) improved data availability to end users. These benefits
represent business and IT operating savings and capital savings that represented a three-year risk-adjusted PV of
$6,151,813. Readers should note that these benefits represent the values that the interviewed and surveyed organizations
received from deployment of IBM SVC.

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Capital Costs Avoidance
Customers interviewed have been able to decommission as much as 650 TB of storage or 15% of overall storage as a
result of freeing up unused capacity as well as reducing growth of storage within their environment. For existing assets,
organizations indicated improved flexibility to increase capacity utilization within the storage pool, using existing
storage more efficiently rather than purchasing new storage. In addition, improved flexibility allows organizations to
control their storage growth by rightsizing their environment to the storage needs of current applications. This capital
savings over three years of investment equates to roughly $5,000,000 driven by an improvement of capacity utilization
of between 20% and 30% as well as a yearly reduction in the growth of storage by on average 15%. The savings includes
hardware costs savings and resources required to manage and provision. Table 8 illustrates this calculation. This
category represents 62% of the overall benefits.

Table 8
Capital Costs Avoidance

Ref. Metric Calculation Year 1 Year 2 Year 3

Capital cost avoided associated with
F1 $1,000,000 $1,500,000 $2,500,000
decommissioned terabytes of storage

Ft Capital costs avoidance F1 $1,000,000 $1,500,000 $2,500,000


Reduction In Expected Staff Growth
Organizations interviewed and surveyed have shown double-digit growth in the volume of data that they are managing
while keeping their staff size flat. In the pre-SVC environment, organizations struggled to keep up with data growth,
resulting in the need to increase staff at the same rate as data. The increase in staff was necessary to manage the
escalation in physical storage equipment.

After implementing SVC, its virtualization capability enabled the organizations to better manage capacity between their
primary and secondary storage environment. These organizations were able to manage physical storage equipment of
different brand through a single source. It allowed storage administrators to manage and control a greater share of
storage per staff member over a multiple locations. As a result, the organization did not have to hire additional staff at
the same rate as the baseline data growth.

To estimate this saving for the composite organization, we assume that the organization would have been required to
hire five people in various IT roles to manage the growth within the storage environment. The reduction in staff growth
isn’t limited to storage administrators and will include staff who would be involved in planning, provisioning, and
ongoing management. Table 9 demonstrates the calculation used. This category represents 23% of the overall benefits.

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Table 9
Reduced Staff Growth

Ref. Metric Calculation Yearly

G1 Number of workers saved 5

G2 Annual fully loaded salary $120,000

Reduction in expected staff
Gt G1*G2 $600,000
growth


Improved Efficiency Of Existing Staff
In addition to trimming the growth of staff, organizations also noted their existing storage administration staff was
made more efficient through the use of SVC tools. For example, the use of thin provisioning features allowed staff to
reduce the time it took to make changes or updates to the storage environment.

For the composite organization, we estimate that 10 IT staff members with fully loaded annual salary of $120,000
allocated 70% of their time to provisioning and ongoing management. Interviewed and surveyed organizations cited
that their teams experienced 26% in staff efficiency improvement as compared to the prior environment. To remain
conservative, we estimate that the organization realized 50% of benefits in Year 1, 75% in Year 2, and 100% in Year 3.
Table 10 exhibits this calculation. This category represents 7% of the overall benefits.

Table 10
IT Productivity Savings

Ref. Metric Calculation Initial Year 2 Year 3

H1 Number of workers 10 10 10

H2 Annual fully loaded salary $120,000 $120,000 $120,000

Percent of time allocated to
H3 provisioning and ongoing 70% 70% 70%
management

Percent improvement in staff
H4 efficiency compared with 26% 26% 26%
previous environment

H5 Percent of benefit realized 60% 100% 100%

Improved efficiency of
Ht H1*H2*H3*H4*H5 $131,040 $218,400 $218,400
existing staff

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Improving Data Availability To End Users
With increased complexity within the storage environment, another area affected by the investment in SVC was backup
and recovery of data. Interviewed organizations noted that with the increase in data growth, the time to perform
scheduled backups increased at a constant rate. For many organizations, having storage across multiple geographies
compounded the time and effort to perform scheduled backups. In particular, several organizations noted that many of
the actual backups went beyond the expected backup windows, impacting the productivity of users accessing data.

Several organizations noted that using SVC to virtualize has improved availability of data access to applications.
Organizations interviewed cited the ability to move application data between storage resources within a virtualized
environment without having to take the application offline has significantly reduced downtime. By maintaining
application availability to storage resources, organizations were able to maintain consistently high levels of uptime
versus the environment prior to SVC.

For the composite organization, we estimate on average 1,500 employees at a fully loaded hourly rate of $48
experienced 20 hours of downtime annually prior to the investment in SVC. This downtime was specifically a result of
increasing backup and recovery windows. The downtime affected end users’ ability to access data and reduced system
availability. Data from interviews and surveys revealed that organizations’ ability to get new storage capacity
operational has improved by 17% as compared to the prior environment. Table 11 illustrates the calculation. This
category represents 8% of the overall benefits.

Table 11
Improving Data Availability To End Users

Ref. Metric Calculation Initial Year 2 Year 3

I1 Total number of employees 1,500 1,500 1,500

I2 Average fully loaded hourly rate $48 $48 $48

Average time spent on backup
I3 20 20 20
and recovery

Percent improvement to get
new storage capacity
I4 17% 17% 17%
operational faster as compared
to previous environment

I5 Percent of benefit realized 60% 100% 100%

It Improving data availability to G1*G2*G3*G4 $146,880 $244,800 $244,800

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end users


Total Benefits
Table 12 summaries the total quantitative benefits associated with implementation of IBM SVC.

Table 12
Total Benefits — Non-Risk-Adjusted

Benefits Year 1 Year 2 Year 3 Total PV

Capital costs avoidance $1,000,000 $1,500,000 $2,500,000 $5,000,000 $4,027,047

Reduction in expected staff
$600,000 $600,000 $600,000 $1,800,000 $1,492,111
growth

Improved efficiency of existing
$131,040 $218,400 $218,400 $567,840 $463,710
staff

Improving data availability to
$146,880 $244,800 $244,800 $636,480 $519,763
end users

Total benefits $1,877,920 $2,563,200 $3,563,200 $8,004,320 $6,502,632


Flexibility
As defined by Forrester, flexibility 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 SVC 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).

If the following metrics are available — the asset value by measuring the benefits (that is, costs avoided or saved,
revenue generated, and/or capital saved), the costs to acquire the solution, and the number of years to measure the
investment — we can estimate the flexibility option by using the Black-Scholes option pricing model.

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Table 13
Flexibility Benefit Framework

Metric Calculation

Asset value (benefit) IT or business costs avoided, revenue generated, capital saved

Cost to acquire option Planning and discovery, subscription, and annual maintenance are examples of costs to
consider

Expiration Time-to-expire (in years)

Flexibility Black-Scholes option pricing model


Risk
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 IBM System Storage SAN Volume Controller 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 SAN Volume Controller,
resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for cost
and benefit estimates.

Quantitatively capturing investment and impact risk by directly adjusting the financial estimates results in more
meaningful and accurate estimates and a more accurate projection of the ROI. In general, risks affect costs by raising
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 implementation risks that affect costs are identified as part of this analysis:

 The implementation costs could vary based on the internal skill set and competencies.

 The implementation costs could take longer than anticipated due to lack of planning and testing of the solution.

The following impact risks that affect benefits are identified as part of the analysis:

 The improvement in administrative effort could vary depending on the prior infrastructure and virtualization
effort.

 The amount of excess capacity reclaimed and the level of storage growth reduced could be lower than originally
anticipated, leading to reduced storage cost savings.

 The level of downtime reduced could be lower than originally anticipated.

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Table 14 shows the values used to adjust for risk and uncertainty in the cost and benefit estimates. The TEI model uses a
triangular distribution method to calculate risk-adjusted values. To construct the distribution, it is necessary to first
estimate the low, most likely, and high values that could occur within the current environment. The risk-adjusted value
is the mean of the distribution of those points. Readers are urged to apply their own risk ranges based on their own
degree of confidence in the cost and benefit estimates.

Table 14
Cost And Benefit Risk Adjustments

Most
Costs Low High Mean
likely

Total software license and maintenance fees 98% 100% 105% 101%

Total hardware and support costs 98% 100% 105% 101%

Internal implementation costs 98% 100% 105% 101%

Administrative costs 98% 100% 105% 101%

Most
Benefits Low High Mean
likely

Capital cost avoidance 80% 100% 103% 94%

Reduction in expected staff growth 80% 100% 103% 94%

Improved efficiency of existing staff 90% 100% 105% 98%

Improving data availability to end users 90% 100% 105% 98%


Readers are urged to apply their own risk ranges based on their own degree of confidence in the cost and benefit
estimates.

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Financial Summary
The financial results calculated in the Costs and Benefits Sections can be used to determine the return on investment,
net present value, and payback period for the organization’s investment in SAN Volume Controller. These are shown in
Table 15 below.

Table 15
Cash Flow — Non-Risk-Adjusted

Categories Initial Year 1 Year 2 Year 3 Total PV

Costs ($2,576,307) ($220,000) ($449,661) ($449,661) ($3,695,629) ($3,485,765)

Benefits $1,877,920 $2,563,200 $3,563,200 $8,004,320 $6,502,632

Net benefits ($2,576,307) $1,657,920 $2,113,539 $3,113,539 $4,308,691 $3,016,867

ROI 87%

Payback period 17 months


Table 16 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying
the risk-adjustment values from Table 14 in the Risk section to the cost and benefits numbers in Tables 7 and 12.

Table 16
Cash Flow — Risk-Adjusted

Categories Initial Year 1 Year 2 Year 3 Total PV

Costs ($2,602,070) ($222,200) ($454,158) ($454,158) ($3,732,585) ($3,520,622)

Benefits $1,776,362 $2,427,936 $3,367,936 $7,572,234 $6,151,813

Net benefits ($2,602,070) $1,554,162 $1,973,778 $2,913,778 $3,839,648 $2,631,191

ROI 75%

Payback period 18 months


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IBM System Storage SAN Volume Controller: Overview
SAN Volume Controller is a storage virtualization system that enables a single point of control for storage resources to
help support improved business application availability and greater resource utilization. The objective is to manage
storage resources in the IT infrastructure and to make sure they’re used to the advantage of business — and do it
quickly, efficiently, in real time, while avoiding increases in administrative costs.

SAN Volume Controller provides an easy-to-use graphical interface for central management. With this single interface,
administrators can perform configuration, management and service tasks in a consistent manner over multiple storage
systems, even from different vendors, which help to improve productivity.

Because it hides the physical characteristics of storage from host systems, SAN Volume Controller is designed to help
insulate host applications from physical changes to the storage pool. This ability can help applications continue to run
without disruption while changes are made to the storage infrastructure, which can help businesses increase availability
to customers.

Storage and server virtualization are complementary technologies that help enable organizations to build a completely
virtualized infrastructure. When used together, server and storage virtualization are intended to enable businesses to
derive greater benefit from each technology than if they deployed them alone.

Appendix A: Composite Organization Description
For this TEI study, Forrester has created a composite organization to illustrate the quantifiable costs and benefits of
implementing System Storage SAN Volume Controller. The composite company is intended to represent a large
organization with 5,000 employees and is based on characteristics of the interviewed and surveyed customers.

The composite company has more than 4 PB of storage existing within the environment. In purchasing System Storage
SAN Volume Controller, the composite company had the following objectives:

 Manage disparate storage assets. Use a single management platform to reduce the cost around storage growth
and improve the efficiency of storage administrators, while at the same time maintaining high levels of availability
for end user applications.

 Improve existing storage capacity utilization. As their storage environments grew, the capital cost required to
increase physical storage space increased. Interviewed and surveyed organizations also saw the need to pool their
existing resources through virtualization, allowing them to better maximize the use of their existing assets by
having the flexibility to shift data to less costly resources.

 Pressure to do more with existing staff. Another common theme among the interviewed organizations was the
need to control storage administration costs with increasing amount of storage under management. Storage
virtualization allowed the interviewed organizations to centralize their storage administration leading to higher
levels of efficiency.

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For the purpose of the analysis, Forrester assumes that the organization had invested in SVC as part of an overall
initiative to contain the overall costs of storage management while increasing the availability and scalability of primary
and secondary storage.

Appendix B: Total Economic Impact™ Overview
Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology
decision-making 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, risks, and flexibility.

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.

Risk
Risk measures 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 minimum, three values are calculated to estimate the underlying
range around each cost and benefit.

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

Page 19


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 in time. However,
having the ability to capture that benefit has a present value that can be estimated. The flexibility component of TEI
captures that value.

Appendix C: Glossary
Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Although the
Federal Reserve Bank sets a discount rate, companies often set 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
organization 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 net present value of cash flows.

Payback period: The breakeven point for an investment. 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 (shown in Framework Assumptions section) at the
end of the year. Present value (PV) calculations are calculated for each total cost and benefit estimate. Net present value
(NPV) calculations are not calculated until the summary tables and are the sum of the initial investment and the
discounted cash flows in each year.

Appendix D: Endnotes

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1
Forrester risk-adjusts the summary financial metrics to take into account the potential uncertainty of the cost and
benefit estimates.

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