The Total Economic Impact of the Symantec Enterprise Vault Largest General Contractor in the Western US

Transcription

1 Prepared for Symantec May, 2006 The Total Economic Impact of the Symantec Enterprise Vault Largest General Contractor in the Western US Project Director: Contributors: Jeffrey North, Senior Consultant, TEI Practice Jon Erickson, Senior Consultant, TEI Practice

2 TABLE OF CONTENTS Executive Summary...4 Purpose...4 Methodology...4 Approach...5 Key Findings...5 Disclosures...6 Symantec Enterprise Vault: Overview...7 Analysis...8 Interview Highlights...8 TEI Framework...9 Introduction...9 Framework Assumptions...9 Costs...9 Software...9 Professional Services...10 Hardware...10 Labor Costs for PST File Migration...10 Total Costs...10 Benefits...11 Labor Cost Savings IT / Administration...12 Labor Cost Savings IT / Discovery...12 Labor Cost Savings Legal Department...13 Exchange Server Cost Savings

3 Total Benefits...14 Risk...14 Flexibility...17 TEI Framework: Summary...17 Study Conclusions...19 Appendix A: Total Economic Impact Overview...20 Benefits...20 Costs...20 Risk...20 Flexibility...20 Appendix B: Glossary...21 Appendix C: Adjusting For Investment Risk (Example)...22 Appendix D: About The Project Team , Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, Forrester's Ultimate Consumer Panel, WholeView 2, Technographics, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each figure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to Information is based on best available resources. Opinions reflect judgment at the time and are subject to change

4 Executive Summary In December 2005, Symantec commissioned Forrester Consulting to examine the total economic impact and potential return on investment (ROI) enterprises may realize by deploying Enterprise Vault software. Enterprise Vault (EV) is an archiving platform for the long-term retention and management of unstructured content, most notably from and file systems. According to Symantec, Symantec Enterprise Vault software provides a flexible archiving framework to enable the discovery of content held within , file system and collaborative environments, while helping to reduce storage costs and simplifying management. Enterprise Vault manages content via automated, policy-controlled archiving to online stores for active retention and seamless retrieval of information. One of the key aims of Enterprise Vault is to allow seamless access to the archived content for the end user. The end user need not be aware that content has been archived. In addition, the built-in search and discovery capabilities of Enterprise Vault are complemented by specialized client applications for legal protection, risk management and corporate governance. The customer profiled in this case study is a large general contracting company headquartered in Silicon Valley and operating throughout the western United States. The firm s 400 salaried employees maintain $2.4 billion in active construction contracts, which include office buildings, biotech-, health care- and resort facilities, and high-density residential projects. Their Exchange environment encompasses over 700 mailboxes; their Enterprise Vault contains over 600 gigabytes of data. This customer developed a solution using Symantec s Enterprise Vault for responding to requests for stored messages (and attachments) and creating a more efficient repository for construction project information storage. In conducting in-depth interviews with the customer, Forrester found that this company achieved a risk-adjusted return on investment (ROI) of 134% with a payback period of 9 months. Purpose The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Enterprise Vault within their organizations. Forrester s aim is to clearly show all calculations and assumptions used in the analysis. Readers should use this study to better understand and communicate a business case for investing in Enterprise Vault. Forrester has constructed a financial framework to examine the benefits, costs, risks and flexibility options and uses the customer interviews to validate these elements. The case study contents and analyses are driven by the information provided by Symantec s customer Methodology Symantec selected Forrester for this project because of Forrester s industry expertise in information life-cycle management (ILM), enterprise content management (ECM) and Forrester s Total Economic Impact (TEI) methodology. TEI not only measures costs and cost reduction (areas that are typically accounted for within IT) but also weighs the enabling value of a technology in increasing the effectiveness of overall business processes

5 For this study, Forrester employed four fundamental elements of TEI in modeling Enterprise Vault: 1. Costs and cost reduction 2. Benefits to the entire organization 3. Risk 4. Flexibility Given the increasing sophistication that enterprises have regarding cost analyses related to IT investments, Forrester s TEI methodology serves an extremely useful purpose by providing a complete picture of the total economic impact of purchase decisions. Please see Appendix A for additional information on the TEI methodology. Approach Forrester used a four-step approach for this study. 1. Forrester gathered data from existing Forrester research relative to Symantec s Enterprise Vault, and the message archiving market in general. 2. Forrester interviewed Symantec s Enterprise Vault marketing and sales personnel to fully understand the value proposition of Enterprise Vault solutions. 3. Forrester conducted a series of in-depth interviews with the customer and other organizations currently using Enterprise Vault solutions. 4. Forrester constructed a financial model representative of the interviews. This model can be found in the TEI Framework section below. Key Findings Forrester s study yielded the following key findings: ROI: Based on the interviews with this customer, Forrester constructed a TEI framework and the associated ROI analysis illustrating the financial impact of the Enterprise Vault implementation. As seen in Table 1, the risk-adjusted ROI for this company is 134% with a breakeven point (payback period) of just over 9 months after deployment. Benefits: The main benefits to this customer have been labor cost savings for the IT and Legal departments around administration and discovery. Other benefit areas include ease of data capture for archiving content associated with specific construction projects and cost avoidance for Exchange servers. After installing Enterprise Vault, discovery requests are now processed in minutes instead of weeks, with the benefit of an audit trail, the certainty that all relevant and attachments have been captured, and output in court-ready format. Total benefits over three years totaled over $286,000 ($229,000 present value). Costs: The main costs for this implementation were expenditures for hardware, software, professional services and labor costs for migrating data of approximately $92,600 ($85,200 present value)

6 Table 1 illustrates the risk-adjusted cash flow for the customer organization, based on data and characteristics obtained during the interview process. Forrester risk-adjusts these values to take into account the potential uncertainty that exists in estimating the costs and benefits of a technology investment. The risk-adjusted value is meant to provide a conservative estimation, incorporating any potential risk factors that may later impact the original cost and benefit estimates. For a more in-depth explanation of risk and risk adjustments used in this study, please see the Risk section. Table 1: ROI, Original and Risk-Adjusted Summary Financial Results Original Estimate Risk- Adjusted ROI 169% 134% Payback period (months) Total costs (PV) $(85,223) $(92,889) Total benefits (PV) $228,831 $217,383 Total (NPV) $143,608 $124,493 Disclosures The reader should be aware of the following: The study is commissioned by Symantec and delivered by the Forrester Consulting group. Symantec reviewed and provided feedback to Forrester, but Forrester maintained editorial control over the study and its findings and did not accept changes to the study that contradict Forrester s findings or obscure the meaning of the study. The customer names for the interviews were provided by Symantec. 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 Enterprise Vault. This study is not meant to be used as a competitive product analysis

7 Symantec Enterprise Vault: Overview According to Symantec, Enterprise Vault software provides a flexible archiving framework to enable the discovery of content held within , file systems and collaborative environments, while helping to reduce storage costs and simplifying message management. Enterprise Vault manages content via automated, policy-controlled archiving to online stores for active retention and retrieval of information. The built-in search and discovery capabilities of Enterprise Vault are complemented by optional application modules for corporate governance, risk management and legal protection. In discussions with Symantec, Forrester understands that there are five major benefits that make up the value proposition for Symantec s customers: application storage management; compliance retention and discovery; operational excellence; knowledge utilization; and upgrade, migration and consolidation. Application Storage Management Enterprise Vault software acts as an online archive for older items that are moved from primary application storage according to customer-defined policies. The software securely retains archived data in such a way that it can be fully utilized and expired when it is no longer required. Messages are full-text indexed while message/information stores are reduced by 50% or more using compression and single-instance (de-duped) storage. It supports any Windows NTFS compliant storage solution including magnetic or optical disks, Storage Area Network (SAN) or Network Attached Storage (NAS). Compliance Retention & Discovery Many organizations are required to keep all electronic information for long periods of time to enable policies for corporate governance. This typically includes , file share content, SharePoint content and instant messages. Enterprise Vault can be used to act as a secure repository for items that need to be retained for defined periods of time for legal or regulatory reasons. The Discovery Accelerator module is a solution for organizations required to produce discovery of content in response to litigation. Operational Excellence Enterprise Vault archiving can increase the operational excellence of primary applications. Service Level Agreements (SLAs) for backup can be improved via archiving because the majority of data is moved out of the Exchange stores allowing SLAs to be planned and achieved. In addition, endusers can service their own requests for old and lost information without consuming help desk or administration resources. Enterprise Vault integrates seamlessly with Outlook, Exchange and other frontline systems for quick and easy search and retrieval of archived items. Shortcuts and Webbased search functions give users fast access to all and content. Knowledge Utilization Enterprise Vault software acts as an "information warehouse" for personal and corporate data, which can then be mined as a knowledge resource using the built-in index and search technology. Special purpose products such as Enterprise Vault Compliance and Discovery Accelerators then offer solutions to specific problems such as regulatory surveillance and legal discovery. Upgrade, Migration & Consolidation Enterprise Vault can reduce Exchange or file server storage requirements, resulting in more users housed or supported on each server, thus allowing server consolidation

8 Analysis As stated in the Executive Summary, Forrester took a multistep approach to evaluate the impact that implementing Enterprise Vault can have on an organization: Interviews with Symantec marketing and sales personnel In-depth interviews with the Senior Vice President and CIO for a large general contracting firm that is currently using Enterprise Vault Construction of a financial framework around the implementation of Enterprise Vault Interview Highlights The customer profiled in this case study is the largest general contracting firm in the western United States. Headquartered in San Mateo, California, the company operates eight branch offices in California, and has open contracts totaling over $2.4 billion. Clients include the largest software makers, hotel chains, health care companies, real estate developers, big box retailers, banks and universities. In 2003, this customer installed Enterprise Vault with the Discovery Accelerator and PST Migrator modules. The customer saw a need to address the problems of a) labor-intensive processes for gathering to fulfill discovery requests, b) overburdened Exchange servers, and c) difficulty locating important information that was often hidden away in employees PST files and in attachments that are unsearchable using Exchange tools. The interviews uncovered a number of important aspects of the customer s archiving environment. is critical o o Million-dollar decisions are made by architects, engineers and building construction supervisors via . is relied upon over voice communication because there is a documentation trail for future reference. o A typical message may carry with it many-megabyte size attachments architectural drawings, charts, schematic diagrams, etc. o o The number of mailboxes had been growing by about 50% per year in 2002 and 2003, with a growth rate of about 25% thereafter. Workers at remote job sites rely on Palm OS handheld units running wireless messaging software; the archiving solution needed to include wireless . Discovery is a challenge o The customer is subject to regulations that generally require records to be saved for 10 years. Storage is a challenge, but precision retrieval is the bigger challenge: to retrieve efficiently only the relevant records that may be requested

9 o o This private company must comply with Sarbanes-Oxley rules related to its publicly-held clients. Self-insuring for health care, this contractor must comply with applicable Health Insurance Portability and Accountability Act (HIPAA) regulations. TEI Framework Introduction From the information provided in the in-depth interviews, Forrester has constructed a TEI framework for those organizations considering implementation of Enterprise Vault. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that impact the investment decision. Framework Assumptions Table 2 lists the discount rate used in the present value (PV) and net present value (NPV) calculations and time horizon used for the financial modeling. Table 2: General Assumptions General assumptions Value Discount rate 12% Length of analysis Three years Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult with their finance department to determine the most appropriate discount rate to use within their own organization. In addition to the financial assumptions used to construct the cash flow analysis, Table 3 provides salary assumptions used within this analysis. Costs The key cost categories associated with the Enterprise Vault are: 1) software license and maintenance fees; 2) hardware costs; 3) professional services fees for design, training and installation of the solution; and 4) labor costs to restore backup tapes and move the data into Enterprise Vault. The project is measured on a three-year basis. The following are the cost inputs to the financial analysis: Software The customer selected Enterprise Vault along with the Discovery Accelerator and PST Migrator modules. The typical cost of the software in this application is $22,000, plus an annual maintenance fee of 23% or $5,060 per year (increasing to $10,000 per year in Year 3 due to growth in the number of mailboxes). Additionally the customer installed software infrastructure upgrades, including Windows 2000 and SQL 2003 plus a service pack. The license cost of this miscellaneous software is estimated at $20,000 with annual maintenance fees totaling 20% or $4,000 starting in Year 2 and $6,000 in Year with the addition of more client access licenses (CALs) for Windows

10 Professional Services The customer engaged Symantec s Technical Support team for assistance during installation. One week of consulting services were employed for installation and training at a cost of $2,500 per day and a total of $12,500. Hardware An additional HP server was required at a cost of $5,000. Labor Costs for PST File Migration Locating and migrating all of the users personal archive files was an important task because important content from many of the company s projects were archived on PST files. Furthermore, for discovery requests, it is important that all messages and attachments that could be relevant in legal proceedings be archived under one roof to enable to fast search, retrieval and audit, and production of court-ready request packages. In this effort, using the PST Migrator module, one IT staff earning $50 per hour was able to complete the task in about 20 hours for a total cost of $1,000. Total Costs Table 3 summarizes the costs of purchasing, installing and maintaining Enterprise Vault including attendant services and labor as well as the present value of these costs. Table 3: Total Costs Total Costs Year 0 Year 1 Year 2 Year 3 Total Present Value Enterprise Vault license & maintenance $22,000 $5,060 $5,060 $10,000 $42,120 $37,669 Misc. software: Win 2000, SQL $20,000 $0 $6,000 $6,000 $32,000 $29,054 Professional services $12,500 $0 $0 $0 $12,500 $12,500 HP Proliant server $5,000 $0 $0 $0 $5,000 $5,000 PST migration - labor $1,000 $0 $0 $0 $1,000 $1,000 Total $60,500 $5,060 $11,060 $16,000 $92,620 $85,

11 Benefits We used to have to spend hours going through boxes of tapes, trying to determine which ones were relevant based on handwritten labels. Enterprise Vault streamlines the process greatly. Chief Counsel Discovery searches now take only minutes versus a full week just to restore mailboxes. Senior Vice President and CIO In interviews with the customer, the following key benefits of implementing the Enterprise Vault solution were identified: 1. Reducing labor costs (in the IT and Legal departments) for restores and discovery while assuring compliance in maintaining records for up to 10 years as required by law 2. Ensuring that ALL and attachments requested by a judge or regulator are produced 3. Providing an easy interface so users do not have to change behavior or, for that matter, do anything to archive their 4. Saving capital costs through more efficient storage. The Enterprise Vault customer described in this study operates as a general contractor in the construction industry, where state governments and courts regularly inquire about safety, liability and warranty issues connected with the company s projects. In 2005 there were eight message discovery requests, so an average of two per quarter. Processing these requests formerly involved server restores from backup tapes. A typical request would take approximately 100 hours to complete, and producing 100 percent of the requested material was never assured. In addition to labor cost savings, this customer also acquired a higher degree of certainty around a) the speed at which a request could be completed and b) the completeness of the messages and attachments that were discovered and handed over for legal review. The customer purchased the Discovery Accelerator module in addition to basic Enterprise Vault, so a restore can be performed once and retrieved or re-processed many times. The data remains online, de-duped, and it can be retrieved at any time. This feature enables the customer to employ an automated case-based approach to and file discovery with audit trails. The customer thus reduced the number of server space dedicated to storing requested and attachments. Enterprise Vault has eliminated the burden (and legal exposure) on IT to sort relevant and content. Prior to using Enterprise Vault, IT guys would go through the s to determine relevance [in fulfilling discovery requests], explained the CIO. I don t want IT guys going through ; they aren t protected by attorney-client privilege. I had nightmares about our Exchange administrator getting served with a subpoena. Now only Legal needs to see it. Other benefits include: Enterprise Vault has resulted in increased operational efficiencies; previous compromises in Exchange server performance due to overload have been eliminated. The solution supports the archiving needs of both office and mobile users

12 Users can find the information they need. Knowledge management has been greatly improved as policy-driven project archives have replaced years of content stored in individual user s PST files. Enterprise Vault operates without disruption to users OR requiring users to change their work habits. Users require no training or help desk support. Labor Cost Savings IT / Administration The company s CIO recalled the operations of his department before Enterprise Vault: Before we had centralized archiving, it was archeology and library science. My staff spent a lot of time digging for ancient s and shelving material from old projects. The customer s CIO estimated that four technician days per months were spent on administration. Virtually all that effort is gone now. Users can find their own s and archiving is automatic. The work was performed by technicians earning $750 per day; estimated annual savings amounted to approximately $36,000 (4*750*12) as shown in Table 4. Table 4: Labor Cost Savings IT / Administration Reduction in labor - IT / Administration Year 1 Year 2 Year 3 Total Technician days per month Daily rate per technician $750 $750 $750 Reduction in IT labor for administration $36,000 $36,000 $36,000 $108,000 Labor Cost Savings IT / Discovery The customer has benefited from large savings in labor costs associated with archiving and discovery. A typical discovery request that previously took up to 100 hours is now completed in minutes. The work was performed at a cost of $50 per hour. Assuming an annual number of discovery exercises of eight and a conservative 75 hours per discovery request, the resulting annual amounts of $30,000 (75*$50*8) as shown in Table 5. Table 5: Labor Cost Savings IT / Discovery Reduction in labor - IT / Discovery Year 1 Year 2 Year 3 Total Number of hours per discovery request (low estimate) Cost per hour $50 $50 $50 # Discovery requests Reduction in labor - manual tape restores $30,000 $30,000 $30,000 $90,

13 Labor Cost Savings Legal Department After installing Enterprise Vault, the customer s legal department is now able to comply swiftly with requests from regulators and courts for stored and related content. Enterprise Vault and Discovery Accelerator enable the precision search and collection of only messages and files that are relevant to a specific discovery request. Attorneys can therefore save time that would otherwise be required to filter the content for relevancy. Another benefit of Enterprise Vault is more efficient production and packaging of requested . Discovery Accelerator produces and packages court-ready collections of documents. Internal legal staff requires less time to prepare discovery requests for the requesting parties. Conservative estimates of ten hours each for two attorneys, who earn $125 per hour, multiplied times the estimate of eight discovery efforts per year result in a savings estimate of $20,000 (8*125*2*10) per year. Table 6 summarizes the assumptions and calculations of this benefit. Table 6: Cost Savings for Attorneys Efficiencies in labor - Legal Year 1 Year 2 Year 3 Total # Discovery requests Hourly pay rate $125 $125 $125 # Attorneys # Hours saved per request, per attorney Total labor savings - Legal $20,000 $20,000 $20,000 $60,000 Exchange Server Cost Savings The customer recounted that the installation of Enterprise Vault resulted in a cost savings of $28,000 by avoiding the cost of additional Exchange servers even as the number of mailboxes had been growing. By keeping the volume of MS Exchange storage roughly constant, maintenance cycle times are shorter and maintenance costs are lower than would be the case without Enterprise Vault. The benefit of avoiding the cost of two servers every two years, plus the maintenance fees, equals $28,000 over the three-year period. Table 7: Exchange Server Cost Savings Server Cost Avoidance Year 1 Year 2 Year 3 Total Exchange server cost avoidance $10,000 $0 $10,000 $20,000 Exchange server maintenance cost avoidance $2,000 $2,000 $4,000 $8,000 Total $12,000 $2,000 $14,000 $28,

14 Total Benefits Table 8 summarizes the benefits experienced by this customer of installing Enterprise Vault and shows the present value for each benefit category. Table 8: Total Benefits Total Benefits Reduction in IT labor for administration Year 1 Year 2 Year 3 Total Present Value $36,000 $36,000 $36,000 $108,000 $86,466 Reduction in IT labor for discovery $30,000 $30,000 $30,000 $90,000 $72,055 Reduction in attorney labor for discovery $20,000 $20,000 $20,000 $60,000 $48,037 Exchange server cost avoidance $10,000 $0 $10,000 $20,000 $16,046 Exchange server maintenance cost avoidance $2,000 $2,000 $4,000 $8,000 $6,227 Total $98,000 $88,000 $100,000 $286,000 $228,831 Risk Forrester defines two types of investment risk associated with this analysis. Implementation risk is the risk that a proposed technology investment may deviate from original resource requirements needed to implement and integrate the investment resulting in higher than anticipated costs. Impact risk refers to the risk that the business or technology needs of the organization may not be met by the technology investment 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 risk, by directly adjusting the financial estimates, results in more meaningful and accurate estimates and a more accurate projection of the return on an investment. The following implementation risks are identified as part of this analysis: Installation and testing could demand more days of consulting services Data in Enterprise Vault could be lost or corrupted during initial rollout, requiring extensive (and expensive) restoration from backup tapes Level of infrastructure investment could be higher than originally anticipated The following impact risks are identified as part of the analysis: Amount of infrastructure cost savings could be less than anticipated Extent of Legal labor cost saving could be lower than projected, given any special production, packaging, or audit requirements

15 Steps for measuring investment risk In order to calculate the final risk adjusted estimates, Forrester applies a multi-step process examining the impact of bias and variance on cost and benefit estimates. Step 1: Calculate original cost and benefit estimates. This is the initial calculation of the cost and benefit estimates without accounting for the impact of investment risk. Step 2: Calculate the impact of bias for cost and benefit estimates. To account for the impact of bias (most organizations overestimate benefits and underestimate cost estimates) this step recalculates the original cost and benefit estimates by using the average of the original estimate (calculated in Step 1) and a low and a high estimate. Step 3: Calculate variance for cost and benefit estimates. This step measures the impact of variance on cost and benefit estimates. Variance is a measure of the possible range of outcomes for cost and benefit estimates. Higher variance implies a wider range of possible outcomes, increasing the uncertainty in cost and benefit estimates. The three steps are used to identify and incorporate the full impact of risk as part of a technology decision. The tables below illustrate the impact of implementation and impact risk on cost and benefit estimates. For more information on the application of risk, please see Appendix C. Table 9: Risk Adjustment Costs Step 1 Step 2 Step 3 Costs Original Estimate High Low Bias Adjustment Risk Adjusted % Value % Value Enterprise Vault license & maintenance $42,120 $42,120 $42, % $42, % $42,120 Misc. software: Win 2000, SQL $32,000 $40,000 $24, % $32, % $33,633 Professional services $12,500 $25,000 $10, % $15, % $17,911 HP Proliant server $5,000 $7,000 $3, % $5, % $5,537 PST migration - labor $1,000 $1,500 $1, % $1, % $1,235 Total $92,620 $115,620 $80,620 $96,286 $100,436 The following assumptions have been used to calculate the Original, High and Low cost amounts in Table 9: Software license Since this amount has been determined by contract, no risk adjustment is applied

16 Software maintenance As with the license cost, this amount has been determined by contract, therefore no risk adjustment is applied. Professional services The Original estimate is set at a total of 5 days of consulting services at $2,500 per day. The High estimate adds another 5 days of services. The Low estimate is set at 4 days. Miscellaneous software Estimates of 10,000, 12,500 and 25,000 are established to build in a wide, conservative range for this cost. HP Proliant server The Low, Original and High estimates are set at $3,500, $5,000 and $7,500, respectively, to adjust for various server configurations that might be required. PST migration labor The Original and Low estimates are both set at 20 hours. The High estimate adds another 10 hours as a conservative estimate to account for any complications encountered. Table 10: Risk Adjustment - Benefits Step 1 Step 2 Step 3 Benefit Original Estimate High Low Bias Adjustment Risk Adjusted % Value % Value Reduction in IT labor for administration Reduction in IT labor for discovery Reduction in attorney labor for discovery Exchange server cost avoidance $108,000 $135,000 $81, % $108,000 95% $102,489 $90,000 $112,500 $67, % $90,000 95% $85,407 $60,000 $75,000 $45, % $60,000 95% $56,938 28,000 39,200 19, % $28,933 93% $26,859 Total $286,000 $361,700 $213,100 $286,933 $271,693 The following assumptions have been used to calculate the Original, High and Low benefit amounts in Table 10: Reduction in IT labor for administration The Low, Original and High estimates are set at 3, 4, and 5 technician days, respectively, at a cost of $750 per day

17 Reduction in IT labor for discovery The number of hours required for each discovery and the number of discoveries are variable. Estimates used are 50 hours (Low), 100 hours (High) and the midpoint of 75 hours (Original). The number of discoveries avoided is also an unknown; estimate used are 6 (Low), 8 (Original) and 10 (High). Reduction in attorney labor for discovery This benefit assumes 2 attorneys earning $125 per hour saving 10 hours each for each discovery, based on the same number of manual restores noted immediately above. Exchange server cost avoidance The Low, Original and High estimates are set at $3,500, $5,000 and $7,000, respectively, to adjust for various server configurations that might be required Flexibility Flexibility, as defined by Forrester s TEI methodology, represents an investment in additional capacity or agility today that can be turned into future business benefits at some additional cost. Flexibility benefits typically increase with the scalability of the technology investment. This provides an organization with the right or the ability to engage in future initiatives but not the obligation to do so. In the case of Enterprise Vault, there are multiple scenarios in which a customer might choose to implement the Vault alone, and decide at a later date to add Discovery Accelerator, Compliance Accelerator, the PST migration tool, or a combination of additional modules which sit on top of the core Enterprise Vault software. While Forrester believes organizations that adopt Enterprise Vault can take advantage of these flexibility options, quantification (using the financial industry standard Black-Scholes or the binomial option pricing models) of the additional value associated with these options for this customer would require scenario development and forward-looking analysis which is not available at this time. The value of flexibility is unique to each organization, and the willingness to measure its value varies from company to company (see Appendix A for additional information regarding the flexibility calculation). TEI Framework: Summary Considering the financial framework constructed above, the results of the costs, benefits, and risk and sections can be used to determine a return on investment, net present value, and payback period, as shown in Tables 11 and 12 below. Tables 11 and 12 below show the risk-adjusted cost values, applying the risk adjustment method indicated in the Risks section and the values from Table 3 and 8 to the numbers in Tables 9 and 10, respectively

18 Table 11: Risk Adjusted Costs Total Costs - Risk Adjusted Year 0 Year 1 Year 2 Year 3 Total Present Value Enterprise Vault license & maintenance Misc. software: Win 2000, SQL $22,000 $5,060 $5,060 $10,000 $42,120 $37,669 $21,021 $0 $6,306 $6,306 $33,633 $30,536 Professional services $17,911 $0 $0 $0 $17,911 $17,911 HP Proliant server $5,537 $0 $0 $0 $5,537 $5,537 PST migration - labor $1,235 $0 $0 $0 $1,235 $1,235 Total $67,704 $5,060 $11,366 $16,306 $100,436 $92,889 Table 12: Risk Adjusted Benefits Total Benefits - Risk Adjusted Year 1 Year 2 Year 3 Total Present Value Reduction in IT labor for administration $34,163 $34,163 $34,163 $102,489 $82,053 Reduction in IT labor for discovery $28,469 $28,469 $28,469 $85,407 $68,378 Reduction in attorney labor for discovery $18,979 $18,979 $18,979 $56,938 $45,585 Exchange server cost avoidance $9,593 $0 $9,593 $19,185 $15,393 Total $91,204 $81,611 $91,204 $264,019 $211,409 It is important to note that values used throughout the TEI Framework are based on in-depth interviews with one organization. Forrester makes no assumptions as to the potential return that other organizations will receive within their own environment. Forrester strongly advises that readers use their own estimates within the framework provided in this study to determine the expected financial impact of implementing Enterprise Vault

19 Study Conclusions Forrester s in-depth interviews with this Enterprise Vault customers yielded several important observations: By more efficiently storing and file system content in an archive system such as Enterprise Vault, organizations can gain from significant labor cost savings proportionate to the amount of search and discovery required. Based on information collected in interviews with this current Enterprise Vault customer, Forrester found that organizations can realize benefits in the form of capital cost savings from hardware and software consolidation. The financial analysis provided in this study illustrates the process for an organization to evaluate the value proposition of Enterprise Vault in its environment. Based on information collected in customer interviews, Forrester calculated a three-year risk-adjusted ROI of 134% for this customer s organization with a payback period of just over 9 months. All final estimates are riskadjusted to incorporate potential uncertainty in the calculation of costs and benefits. Based on these findings, companies looking to implement Enterprise Vault can see infrastructure cost savings and productivity benefits around discovery initiatives. Using the TEI framework, many companies may find the potential for a compelling business case to make such an investment. Table 1: ROI, Original and Risk-Adjusted Summary Financial Results Original Estimate Risk- Adjusted ROI 169% 134% Payback period (months) Total costs (PV) $(85,223) $(92,889) Total benefits (PV) $228,831 $217,383 Total (NPV) $143,608 $124,

20 Appendix A: Total Economic Impact Overview Total Economic Impact is a methodology developed by Forrester Research, Inc. 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. For the purpose of this analysis, the impact of flexibility was not quantified. 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 forms 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: the likelihood that the cost and benefit estimates will meet the original projections and 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. 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 enterprise wide upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce licensing costs. Additionally, 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. The ability to capture that benefit has a present value that can be estimated. The flexibility component of TEI captures that value

21 Appendix B: 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 12% for this analysis. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult their 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 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 one through three are discounted using the discount rate shown in Table 2 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. Example Table Category Year 0 Year 1 Year 2 Year 3 Total

22 Appendix C: Adjusting For Investment Risk (Example) This example provides a high-level illustration of the measurement of investment risk to a single benefit estimate. The table below provides a high-level overview of the following steps. Step 1 Step 2 Step 3 Benefit Original Estimate High Low Bias Adjustment Risk Adjusted % Value % Value Benefit 1 $2,000 $2, % $ % $1395 Step 1: Calculate original cost and benefit estimates Suppose that an organization is trying to estimate the different types of benefits that might arise from a given technology investment. One potential expected benefit is savings per employee from the use of the technology. A sample benefit calculation is as follows: Ref. Metric Calculation Estimate A1 Number of employees 200 A2 Savings per employee $10 A3 Total yearly estimated savings A1 * A2 $2,000 The $2,000 represents the organization s original estimate of the yearly impact of the technology investment. Step 2: Calculate the impact of bias for cost and benefit estimates In Step 2, we account for the impact of bias in our original cost and benefit estimates. To measure the impact of bias, we need to calculate the range of possible outcomes of our original estimate by estimating possible high/low variables around our original estimates. Ref. Metric Calculation Estimate Low High A1 Number of employees per year 200 A2 Savings per employee $10 A3 Total yearly estimated savings A1 * A2 $2,000 $400 $2,400 B1 Bias Adjusted Estimate ($2,000+$400+$2,400)/3 $1,

23 In the case of our example, we have calculated our original estimate ($2,000), our low estimate ($400), and our high estimate ($2,400). The unbiased estimate is calculated as the mean of the high and low estimates: [($2,000 + $1,200 + $2,400)/3 = $1,600]. The revised estimate is now $1,600. Reference A4 in the above table presents the revised estimate. Step 3: Calculate the impact of variance on cost and benefit estimates Once we have determined the impact of bias in our original estimates, the next step is to calculate the impact of variance. Variance measures the possible spread within our estimates. In the case of our example, the variance is based upon the low estimate ($400), the high estimate ($2,400) and the revised estimate ($1,600). A wider spread would create higher uncertainty, and as a result, greater risk. To calculate the impact of variance, we need to use the following calculations: [( Lx) + ( x2) + ( Hx) ] ( Lx) ( x2) ( Lx) ( Hx) ( x2) ( x2) ( Hx) 18 = Var( x2) Where Lx Low estimate $400 X2 Revised (Biased Adjusted) estimate $1,600 Hx High estimate $2, [( 400) + ( 1600) + ( 2400) ] ( 400) ( 1600) ( 400) ( 2400) ( 1600) ( 2400) The standard deviation represents the square root of the variance: ( x 2) = Var( x2) ( 2 ) = = 411 x 18 = The final calculation in our analysis is to create a measure for the impact of risk on the cost or benefit estimate. To do this, we use the following equation: Risk Impact = Risk impact: [(standard deviation of estimate)/ (unbiased estimate)] * ½ [ ( x2) ] 1 x

24 = = Risk Impact = % 87.2% The logic behind the equation for risk impact is as follows: We first divide the standard deviation into the unbiased estimate to get an estimate of the magnitude of the mean of the distribution to the possible spread of the distribution. This ratio allows us to compare the impact of risk multiple cost and benefit estimates by reducing it to a percentage. We next multiply the original ratio by ½ to measure only the likelihood of the potential downside of the estimate. Multiplying by ½ allows us to look at the part of the distribution where the likelihood that the costs will be higher than estimated (the right side of the distribution) or benefits that are lower than originally estimated (the left side of a normal distribution). The table below illustrates the progression of the original benefit estimate to the risk-adjusted benefit estimate, accounting for the impact of variance. Impact Of Bias And Risk Original estimate $2,000 Revised estimate $1,600 Risk-adjusted estimate $1,

25 Appendix D: About The Project Team Jeffrey North, Senior Consultant Jeffrey North is a senior consultant with Forrester's Total Economic Impact (TEI) consulting practice. The TEI methodology focuses on measuring and communicating the value of IT and business decisions and solutions, as well as providing an ROI business case based on the costs, benefits, flexibility, and risk of investments. Jeff came to Forrester with consulting and operating experience, notably working with fast-growth companies. He was a founding member of the digital strategy practice at Cambridge Technology Partners, where he specialized in business value justification of technology investments and customer advocacy. As a director in the international and catalog business units at Staples, Jeff built and managed metrics and reporting programs in North America and Europe as the company experienced significant growth. He has also consulted in a business-it capacity to retailers and life sciences companies. Jeff holds a B.A. from St. Lawrence University and an M.B.A. with a concentration in international management and finance from Thunderbird, the Garvin School of International Management. Jon Erickson, Senior Consultant Jon is a senior consultant for Forrester's Total Economic Impact (TEI) service. He focuses on developing methodologies for measuring and communicating the value of technology to the corporate environment and examining the increasing role that operational risk plays in an enterprisewide risk management strategy. Jon also covers financial risk measurement tools for technology investments. Jon came to Forrester through its acquisition of Giga Information Group. Prior to joining Giga, he worked for Sabre Capital, Inc., a merger and acquisitions firm in Raleigh, N.C., developing the company's external Web site and streamlining its database tools to take advantage of customer queries. Jon has B.A. degrees in economics and industrial relations from the University of North Carolina at Chapel Hill, as well as an M.S. in economics with a minor in statistics from North Carolina State University