Quantifying the Business Benefits of Red Hat Enterprise Linux Solutions

Transcription

1 WHITE PAPER Quantifying the Business Benefits of Red Hat Enterprise Linux Solutions Sponsored by: Red Hat Al Gillen April 2014 Randy Perry EXECUTIVE SUMMARY Enterprises are increasingly adopting Linux as a secure, reliable, and high-performing platform that lowers acquisition and operating costs while providing the agility needed to anticipate and react to changing business conditions. In particular, the Red Hat Enterprise Linux (RHEL) operating environment, which is based on the Linux open source kernel, has become widely deployed by medium-sized and large businesses, by enterprises in their datacenters, and in private and public cloud infrastructures. RHEL is distributed and supported by Red Hat Inc., the world's largest provider of open source software solutions, accounting for 74.7% of the worldwide Linux operating system (OS) revenue. As a development and deployment platform, RHEL offers an efficient, scalable, and robust operating environment with certified security and flexible deployment options in physical and virtualized environments. To assess and quantify the business benefits of RHEL, IDC recently conducted in-depth interviews with IT staff members of 21 companies using RHEL servers. The organizations represent a broad range of industries and have an average of 22,700 employees. RHEL servers accounted for 23% of the servers deployed at these organizations. Business Value Highlights Reduced annual IT infrastructure costs by over $4,000 per 100 users Increased IT staff productivity by 44% Reduced the number of downtime incidents by 54% Lowered the number of help desk calls by 32% Returned a three-year ROI of 361% Paid for itself in 5.1 months IDC asked a series of quantitative questions on the organizations' server environments, including infrastructure and IT support costs, and on downtime and agility metrics. IDC then compared the results against industry averages to determine the financial benefits provided by the RHEL servers. April 2014, IDC #247845

2 The organizations reported substantial savings from increased IT staff productivity, reduced infrastructure costs, and increased user productivity (see Figure 1). Overall, the average annual savings amounted to $18,548 per 100 users. FIGURE 1 Annual Benefits (per 100 Users) User productivity $5,040 Infrastructure $4,008 IT staff $9,500 Total = $18,548 With the RHEL servers, organizations were able to support 30% more users per server than the average enterprise and double the number of servers per administrator. IDC used the savings to calculate the return on investment (ROI) from deploying the RHEL servers, utilizing the methodology described in the Appendix. The ROI analysis shows the organizations had an average payback period of 5.1 months, and an average ROI of 361%, after deploying the RHEL servers. SITUATION OVERVIEW Linux became popular initially as a low-cost server operating environment in the early 2000s. However, it is now recognized as a rich and powerful platform, valued for its portability, flexibility, and built-in networking capabilities. Linux provides a stable multiuser, multitasking environment that can be customized to perform almost any computing task. As a result, enterprises are deploying Linux increasingly to run mission-critical applications in a variety of environments, including virtual and public and private cloud ecosystems. Many of the organizations interviewed for our study were running their database operations on RHEL. Mission-critical use builds on the traditional infrastructure-oriented workloads that Linux has long excelled at supporting IDC #

3 Linux continues to expand its footprint in enterprise datacenters and today has become a mainstay of cloud service infrastructures. Web companies, hosters, and other cloud service providers have heavily embraced open source computing to react faster to growing customer demands and to swiftly deploy and scale their IT infrastructure. Red Hat's role as the largest provider of Linux server operating environments continues to grow, with the company's growth meeting or surpassing overall Linux market growth on a worldwide basis. IDC data shows Red Hat accounting for 74.7% of the worldwide Linux operating system revenue, having added seven points of revenue share in the past four years. RED HAT ENTERPRISE LINUX SOLUTIONS Red Hat's subscription model provides a straightforward, scalable scheme that is based on the number of processors in a server, the virtualization rights desired, and the level of technical support desired. Subscription costs remain the same regardless of the number of users or additional PCs connected to the RHEL server. Customers can also contact Red Hat to discuss best practices for configuring, deploying, and maintaining the RHEL platform to maximize application performance, reliability, and security. Anticipating the growth in cloud computing, Red Hat has endorsed and embraced the rapidly evolving OpenStack private/public cloud software solution. By assigning dozens of developers to work on OpenStack, Red Hat has become the leading contributor to the project. The company has also introduced the Red Hat Enterprise Linux OpenStack Platform, combining RHEL with OpenStack to help enterprises and service providers construct a private or public cloud infrastructure more rapidly without sacrificing security or performance. BUSINESS VALUE Study Demographics To quantify the business benefits of deploying Red Hat Enterprise Linux solutions, IDC conducted indepth telephone interviews with IT staff members from 21 companies in North America and EMEA that have deployed RHEL servers. IDC asked a series of quantitative questions on the server environment, including questions about infrastructure and IT support costs. It also asked questions on downtime and agility metrics such as time to deploy physical and virtual servers and time to deploy a new business application or upgrade mission-critical applications. The interviewees were asked to compare their RHEL environments with other server environments in the organizations. Being large organizations, they had multiple environments (as many as five). IDC then compared the RHEL results against industry averages, drawn from a variety of alternative platforms, to determine the quantitative benefits provided by the RHEL servers IDC #

4 The organizations represent a broad range of industries, including airlines, banking, education, healthcare, travel, government, insurance, media, natural gas, service providers, pharmaceuticals, and business services. On average, the organizations had about 22,700 employees three-quarters of whom used the enterprise IT services in addition to close to 155,000 external users (see Table 1). All the organizations had deployed RHEL servers. On average, RHEL servers accounted for 23% of the 8,342 servers collectively deployed across all the organizations studied. TABLE 1 Demographics Employees 22,697 Internal users 1,385 External users 154,795 Percent of RHEL servers 23% Percent of employees IT users 74% Total physical servers 8,342 Storage Industries Regions 1,000TB Airlines, banking, education, healthcare, travel, government, insurance, media, natural gas, service provider, pharmaceuticals, business services North America, EMEA FINANCIAL BENEFITS ANALYSIS Survey Results From the interviews it conducted, IDC was able to measure the financial benefits of deploying Red Hat Enterprise Linux servers by comparing the reported performance and costs against industry averages that IDC has established from conducting multiple similar projects on IT infrastructures. In particular, IDC was able to determine the average benefit realized from enhanced IT staff productivity, increased user productivity, and reduced IT infrastructure costs. The results also quantified the performance and scalability improvements provided by RHEL servers. According to the companies interviewed for the survey, when compared against industry averages, the RHEL servers deployed supported 30% more users, on average, and enabled server administrators to 2014 IDC #

5 manage twice as many servers (see Table 2). The RHEL servers also reduced the average time to deploy a new business application by 13% and the average time to upgrade mission-critical applications by 34%. TABLE 2 IT Performance Key Performance Indicators RHEL Other Advantage (%) Average number of users per server Average number of physical servers per server administrator Time to deploy a new business application (days) Time to upgrade mission-critical applications (hours) Infrastructure Cost Reduction By deploying Red Hat Enterprise Linux servers, the organizations interviewed were able to reduce IT infrastructure costs substantially. On average, their annual costs for server hardware amounted to almost $6,000 per 100 users, or 24% below the industry average for such costs (see Figure 2). The hardware differential was based on the organizations estimating what the CPU requirements would have been for the same application had they selected a different server platform or compared with the platform that RHEL replaced. RHEL's lower CPU counts ranged from 10% to more than double. The reasons given for the higher CPU count varied as well. Those companies running heavy-duty workloads felt that RHEL was optimized for those types of environments. Other organizations said that their experience with other platforms revealed that the additional overhead required to run the other servers, or the additional memory required to achieve similar levels of performance, drove up the CPU count (and the cost). Annual software costs for applications, operating systems, and tools averaged $26,700 per 100 users, a figure 7% below industry averages. Overall, the organizations were able to reduce their infrastructure costs by an average of 11%, compared with industry standards, or an average annual saving of $4,008 per 100 users IDC #

6 FIGURE 2 Annual Infrastructure Cost (per 100 Users) 40,000 ($) 35,000 30,000 25,000 20,000 15,000 10,000 $7,864 $5,976 $26,700 $28,820 Annual server hardware Annual software (apps, OSs, tools) 5,000 0 RHEL Other IT Staff Productivity IT staff productivity is a measure of how effectively IT managers and their staff use their time. Besides reducing operating costs, gains in IT productivity can free up staff to implement new initiatives more rapidly, helping create a competitive edge. With the Red Hat Enterprise Linux servers, the organizations interviewed were able to increase the efficiency of their IT staff by an average of 44% compared with industry averages (see Figure 3). IT staff were more than 30% more productive in the majority of their management functions, and more than 40% more productive in configuration management, scheduled maintenance, application management, patching, and storage management. The greatest savings were in network performance management, where IT staff members were an average of 54% more productive than their counterparts in other organizations. Collectively, the annual savings from increased IT staff productivity averaged $9,500 per 100 users compared with industry standards. RHEL's superior ease of management stems from multiple causes: Linux stability. Not surprisingly, the vast majority of companies expressed their praise of Linux as a stable environment that was also "more forgiving" than other environments. Frequency of upgrades. With RHEL, the frequency is typically yearly. Other platforms upgrade as frequent as monthly. The organization does not have a lot of control over the frequency, and sometimes the updates cause problems. Extensive service issues and patching. One company estimated that with the legacy system it replaced with RHEL, the amount of time spent resolving service issues (unplanned and scheduled) with the vendor itself would require twice the staff to run its current workloads IDC #

7 Time to support OS. A few of the companies felt that time requirements for hardware support were similar for their legacy and RHEL replacements. This was also the case for adding users, updating, and services tuning the database and related activities. However, with OS support, the legacy systems required up to 10 times additional effort. Other support activities. While most of the activities are server related, several of the organizations spoke about the additional time requirements for security, DBAs, and application developers. As one manager explained, "I do think that it's easier to do things in RHEL. On other platforms, it might not be as straightforward. So it might be 10% or 20% more effort." FIGURE 3 Top IT Efficiencies Network performance management 54 Configuration management Patching, service packs Storage management Scheduled maintenance Application management (% advantage) User Productivity User productivity depends, in part, upon service uptime since productivity may be degraded or even severely impaired when users are unable to access the applications they need to perform business operations. User productivity also suffers when employees have to wait for help desk support or other IT administrative tasks to resolve problems. Since deploying the Red Hat Enterprise Linux servers, the organizations interviewed have reduced the number of downtime incidents to an average of 0.29 per month, which is 54% lower than the industry average (see Table 3). They were also able to reduce the percentage of users affected, with the combined result of adding 3.3 hours of productive time for each user resulting in an annual average benefit of $4,255 per 100 users (an advantage of 62%) from increased user productivity IDC #

8 TABLE 3 User Productivity Downtime RHEL Other Advantage (%) Downtime incidents per month Hours per incident Downtime hours per user per year User productivity loss from downtime per 100 users $2,609 $6, Help desks at the organizations interviewed also had 32% fewer calls than the industry average, leading to each user adding another seven hours of productive time each year. Average annual value for help desk reduction totaled $2,180 per 100 users (a 38% advantage) from increased user productivity (see Table 4). Since users are often able to move to other business applications when service interruptions or performance degradations occur, IDC only includes a small fraction of the potential lost productivity in its calculation of total savings. On average, the annual savings from increased user productivity due to less downtime and fewer help desk calls amounted to about 10 hours, or $3,325 per 100 users. TABLE 4 User Productivity Help Desk RHEL Other Advantage (%) Number of calls per week Resolution time per call (minutes) Hours lost for help desk issues per year per user User productivity loss from help desk per 100 users $3,600 $5, IDC #

9 ROI ANALYSIS The organizations interviewed made an average initial investment of $4,768 per 100 users (see Figure 4). Investments are highest in the year Red Hat Enterprise Linux servers are purchased; investments decline during the following years and subsequently level off. As a result of the initial and subsequent investments, compared with industry standards, the organizations realized average benefits of $23,132 per 100 users (see Table 5). The ROI analysis shows that after deploying the RHEL servers, the organizations had an average payback period of 5.1 months and an ROI of 361%. FIGURE 4 Cost Benefit Analysis (per 100 Users) ($) 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, ,000-10,000 $39,318 $17,996 $11,783 $15,820 ($504) ($504) ($504) ($4,768) Initial Year 1 Year 2 Year 3 Investments Benefits Cumulative benefit TABLE 5 Three-Year ROI Analysis (per 100 Users) Benefit $23,132 Investment $5,018 Net present value (NPV) $18,114 ROI (NPV/investment) 361% Payback period 5.1 months Discount factor 12% 2014 IDC #

10 CHALLENGES/OPPORTUNITIES As the survey results show, Red Hat Enterprise Linux allows enterprises to increase business agility, reduce downtime, and support more users with fewer IT personnel, resulting in improved IT staff and user productivity and lower costs. These benefits will help Red Hat continue expanding its penetration of Web companies, enterprise datacenters, and organizations deploying public and private cloud computing infrastructures. Linux will be highly successful as the backbone of many future cloud infrastructure deployments. IDC estimates that cloud services spending will continue to grow at double-digit rates for the next few years, growth that will create continued opportunity for Red Hat. Conversely, the challenge will be for Red Hat to build an effective subscription business with cloud service providers, which will be an increasingly important customer segment. Because of their massive scale, these cloud providers will be able to negotiate harder than enterprise customers could. Given a relatively high level of technical sophistication and on-staff expertise, service providers also have the option, in many cases, of deploying free open source software and self-supporting their software choices. Red Hat also faces challenges from two other industry trends: the verticalization of software products into an increasingly integrated stack, and the movement into cloud-enabled offerings. Red Hat has made a good start by endorsing and embracing OpenStack and pre-integrating the private/public cloud software solution into Red Hat Enterprise Linux. The company's goal in assigning dozens of developers to work on the OpenStack project was to build deep expertise around the technology and ensure that the company was able to fully support customers building their cloud infrastructure with open source software. Red Hat also realized that if it was not deeply engaged with the community, it would be a lot harder to get customer-required updates into the upstream code base. Red Hat is now able to push patches, fixes, and enhancements into the upstream code base and have those changes work well with its other products. The company also decided to maintain a version of Red Hat Enterprise Linux with no OpenStack technology so that customers that value the maturity and stability of Red Hat Enterprise Linux would not be concerned by the inclusion of a far less mature block of code. This parallel product approach makes sense to IDC because OpenStack is still evolving very quickly and any attempt to stabilize the technology and deliver long-term support for it could be undermined by the continued evolution of the OpenStack code base. Having Red Hat ratchet up its cloud story helps the company stay in synch with the larger industry. More importantly, it gives Red Hat a more comprehensive turnkey solution. Ultimately, this is a major initiative for Red Hat that will do much to increase interest in its infrastructure software going forward, including Red Hat Enterprise Linux and its KVM virtualization engine, both standalone (Red Hat Enterprise Virtualization) and when integrated in Red Hat Enterprise Linux. The full OpenStack story has yet to be written, but from what IDC has seen, the trajectory is impressive steeper than any open source solution we have seen before. This is a technology solution that Red Hat needs to help lead. As cloud computing investments heat up, it's vital for Red Hat to continue being a leader and not a follower IDC #

11 Finally, the larger challenge that Red Hat and other infrastructure software vendors face is a larger movement over time to a more service-oriented world. As next-generation applications are written to platform-as-a-service (PaaS) environments, it is up to Red Hat to define the value proposition that a RHEL-based PaaS environment offers over other alternatives, which may be based on Linux or on other operating systems such as Windows. This transition, however, will be years in the making, providing a lengthy period of time for vendors to adjust to the new consumption model for tomorrow's compute. CONCLUSION With the ability to help reduce infrastructure costs and increase IT staff and user productivity, Red Hat Enterprise Linux servers are finding increasing use in medium-sized and large companies, enterprise datacenters, and public and private cloud computing infrastructures. IDC was able to quantify the benefits realized by deploying RHEL servers in a two-step process: first by interviewing 21 companies that use the servers and then by comparing their reported performance and costs with industry averages, IDC compiled these averages from past projects on IT infrastructures. As is commonly found, when IDC conducts ROI studies, almost half the savings came from improved IT staff productivity. The survey found that the organizations were able to increase the efficiency of their IT staff by an average of 44% compared with standard industry figures based on alternative platform use. The organizations were also able to reduce their IT infrastructure costs by an average of 11% compared with industry standards. Help desks had 32% fewer calls, and the number of downtime incidents were 54% fewer than the industry average. On average, the organizations realized an ROI of 361% from deploying the RHEL servers and had a payback period of 5.1 months. APPENDIX IDC utilized its standard ROI methodology for this project. This methodology is based on gathering data from current users of the technology as the foundation for the model. Based on these interviews, IDC performs a three-step process to calculate the ROI and payback period: 1. Measure the savings from reduced IT costs (staff, hardware, software, maintenance, and IT support), increased user productivity, and improved revenue over the term of the deployment. 2. Ascertain the investment made in deploying the solution and the associated training and support costs. 3. Project the costs and savings over a three-year period and calculate the ROI and payback for the deployed solution IDC #

12 IDC bases the payback period and ROI calculations on a number of assumptions, which are summarized as follows: Time values are multiplied by burdened salary (salary + 28% for benefits and overhead) to quantify efficiency and manager productivity savings. Downtime values are a product of the number of hours of downtime multiplied by the number of users affected. The impact of unplanned downtime is quantified in terms of impaired end-user productivity and lost revenue. Lost productivity is a product of downtime multiplied by burdened salary. Lost revenue is a product of downtime multiplied by the average revenue generated per hour. The net present value (NPV) of the three-year savings is calculated by subtracting the amount that would have been realized by investing the original sum in an instrument yielding a 12% return to allow for the missed opportunity cost. This accounts for both the assumed cost of money and the assumed rate of return. Because every hour of downtime does not equate to a lost hour of productivity or revenue generation, IDC attributes only a fraction of the result to savings. As part of our assessment, we asked each company what fraction of downtime hours to use in calculating productivity savings and the reduction in lost revenue. IDC then taxes the revenue at that rate. Further, because IT solutions require a deployment period, the full benefits of the solution are not available during deployment. To capture this reality, IDC prorates the benefits on a monthly basis and then subtracts the deployment time from the first-year savings IDC #

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