HP Networking Portfolio: Delivering ROI and Value from Edge to Core

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1 Sponsored by: HP Authors: Rohit Mehra Randy Perry Nolan Greene March 2014 Business Value Highlights Average annual benefits (per 100 users): $28,833 Reduction in cost of networking: 35% Annual business productivity benefits (per 100 users): $12,404 Reduction in downtime: 64% Five-Year ROI: 489% Payback period: 8.3 months HP Networking Portfolio: Delivering ROI and Value from Edge to Core EXECUTIVE SUMMARY IDC is observing a once-in-a-generation shift in computing and technology that we refer to as the rise of the 3rd Platform. The 1st Platform was the rise of computing in general. The 2nd Platform was ushered in by the PC and client/server paradigm, enabling greater personalization of computing and networked user access to enterprise applications. Over the past five years, the 3rd Platform has emerged and is being shaped by mobility, Big Data, cloud, and social technologies that enable employees to access critical corporate applications anywhere, anytime. With the explosion of new technologies in the 3rd Platform, the networking needs of the enterprise are transforming rapidly. As the network has grown in strategic importance, it has become more complex and difficult to manage. To combat this trend, enterprises are looking for ways to embrace solutions that incorporate simplicity and greater manageability into their network infrastructure. Architectural openness, common operating systems across all network devices, and solutions enabling centralized management of all network resources in a single pane of glass platform have become elements that can provide competitive advantage for the enterprise network. To this end, HP offers a solution that provides integrated wireless and wired management through a single pane of glass; the solution can be used not only in HP-only networks but also where other vendors equipment may be part of the infrastructure. HP s networking portfolio is architected using open standards to help organizations transition from their current network infrastructure to a simplified modern network. IDC conducted a study of eight medium-sized to large organizations that had deployed an HP Networking infrastructure to determine the return on investment (ROI) associated with their Document # IDC. Page 1

2 implementation. These customers told IDC of improved operations as a result of streamlined network visibility and the interoperability and maintenance efficiencies inherent in a unified portfolio solution. IDC estimates that the businesses in the study reduced their total cost of networking by 35% and achieved an ROI of 489%. This amounted to a five-year discounted benefit of $101,186 per 100 users and a payback period of 8.3 months. Given the momentum behind migration to unified wired and wireless networking and the demonstrated ROI of HP s end-to-end solution for our study respondents, IDC recommends that companies consider HP networking equipment for their next network refresh. Unified management capabilities, in addition to the demonstrated ROI, make HP Networking a smart investment for unified networking infrastructure in midsize and large organizations. Situation Overview The 3rd Platform is enabled by mobile broadband, social media, Big Data, and cloud services. Innovative Industry Solutions LAN/Internet Mainframe Client/Server Terminal In the 3rd Platform era, users are accessing apps and services across a wide variety of enterprise IT assets, resources, and networks. The consumerization of IT, along with the power of the smart mobile device, has changed user expectations in the workplace in many ways. With the emerging Internet of Things (IoT) and the number of connected devices forecast to reach 30 billion by 2020, users expect and require IT to be responsive in meeting the needs of the access anytime, anywhere paradigm. This, along with other factors, increases the importance of enterprise networks. Enterprise IT managers must ensure that their network infrastructure is up to date and able to handle the demands of the modern connected enterprise (see Figure 1). Simplifying Networks and Improving Application Services While Reducing Operating Costs It is no longer advisable for different parts of the network to be managed disparately or as add-ons; employees demand a seamless end-to-end experience and IT managers desire a simplified management platform that unifies wired and wireless with the same levels of security, management, and control. Organizations now have the ability to take more holistic architectural approaches to their network, enabling them to address the challenges of megatrends such as mobility, BYOD, and cloud services. The challenge becomes balancing new capabilities and investments with the cost-cutting mindset prevailing in many enterprises. For IT organizations, this means finding ways to do more with less and extend the value of existing capital investments. For network administrators, this means finding new ways to squeeze out even greater levels of management efficiency. Document # IDC. Page 2

3 FIGURE 1 The Enterprise IT Manager Handling the Demands of the Modern Connected Enterprise Handling modern demands of the connected enterprise. CONVERGENCE AND THE ENABLING ROLE OF THE NETWORK If the network goes down, it is no longer a minor inconvenience but a serious blow to business processes and company revenue. GROWTH OF NETWORK ENDPOINTS The emerging Internet of Things (IoT) paradigm appears to ensure an onslaught of network-connected noncompute devices. EMERGENCE OF SOCIAL NETWORKING Enterprises are using social media as a new means to foster communications with external audiences, including customers, partners, and suppliers. CLOUD COMPUTING, DESKTOP VIRTUALIZATION, AND SOFTWARE AS A SERVICE Cloud computing and SaaS, key components of the 3rd Platform, are bringing new capabilities, efficiencies, and cost savings to the enterprise. EXPLOSION OF MOBILITY WITH BYOD With the explosion of BYOD and cloud services, more devices are vying for network bandwidth than ever before. SUPPORTING NEW APPLICATIONS AND SERVICES Increasingly, with the proliferation of WLAN, critical enterprise applications such as voice and video are supported over IP. MIGRATION OF VOICE AND VIDEO TO IP Over one-third of enterprises use some type of video, such as desktop conferencing or telepresence. Document # IDC. Page 3

4 Overview of HP Networking Solutions FlexNetwork Architecture HP FlexNetwork is a converged networking architecture that extends from the datacenter to the workplace, providing cloud, multimedia, and mobility support with integrated security. FlexFabric is used at the datacenter/network core, with FlexCampus and FlexBranch at the network edge (see Figure 2). HP FlexNetwork Architecture is supported by HP FlexManagement network management software. This architecture enables the construction of unified networks that support both desktops and mobile devices, wired and wireless access points, and a unified wired-wlan switch infrastructure. The FlexNetwork Architecture supports open, scalable, secure, and agile networking with a common operating experience. With an open, standards-based solution, enterprises can choose the best-in-class solution for their business needs. The FlexNetwork Architecture supports open, scalable, secure, and agile networking with a common operating experience. With an open, standards-based solution, enterprises can choose the best-inclass solution for their business needs. FIGURE 2 HP FlexNetwork Architecture Source: HP, 2014 FlexFabric HP FlexFabric offers a new architectural approach that provides simplified, scalable, and automated connectivity for virtualized compute, storage, and cloud through a common datacenter fabric, delivering end-to-end software-defined network services in the datacenter. Document # IDC. Page 4

5 FlexCampus HP FlexCampus, an end-to-end campus LAN solution, is a complete, secure network infrastructure that connects users to job-critical services across multibuilding campuses. By seamlessly connecting servers, storage, applications, and end users across a high-performance network with a single-pane-of-glass management platform, this solution provides simplified architecture, improved security, agile service delivery, and reduced IT costs. FlexBranch HP FlexBranch is a networking solution that converges infrastructure and network applications to improve performance, simplify deployments, centralize management, and reduce IT costs for enterprise branch offices. FlexManagement HP FlexManagement is based on the HP Intelligent Management Center (IMC), which is a single-pane-of-glass management platform for HP-only and multivendor devices. HP FlexManagement allows for the efficient management of the converged network, addressing the needs of the network from the virtualized and cloud-enabled datacenter to the branch edge. HP FlexManagement is based on the HP Intelligent Management Center (IMC), which is a single-pane-of-glass management platform for HP-only and multivendor devices. IMC provides complete visibility across entire networks, enabling complete management of resources, services, and users. Unifying wired, wireless, and management often leads to increased performance, enhanced security, and reduced infrastructure complexity and costs. Software Defined Networking HP Software-defined Networking (SDN) provides an end-to-end solution to automate the network from datacenter to campus and branch. Expanding the innovations with SDN, the HP SDN open ecosystem including HP SDN Developer Kit (SDK), SDN App Store, and Virtual Application Network (VAN) SDN Controller delivers the resources to develop and create a marketplace for SDN applications. HP has expanded the number of OpenFlow-enabled switches continuously over the past couple of years and now has 50 switches and 10 routers, representing 25 million installed ports. Document # IDC. Page 5

6 The Business Value of HP Networking Solutions To assess the benefits of implementing an HP Networking solution for enterprise customers, IDC interviewed eight businesses that have deployed and are using HP Networking products in production environments. All customers had been running HP networking solutions for a sufficient period of time to provide perspective on how the solutions have made an impact on their bottom line. All elements of the ROI analysis, including the benefits and investments, are based solely on these interviews. The interviews explored the companies business initiatives and assessed the benefits and costs associated with implementing HP Networking platforms. These interviews were supplemented by information from the IDC Business Value database with information collected from over 3,000 companies in 43 countries and over 25 industries. The information from the IDC Business Value database was used to validate these interviews and to extrapolate the business value drivers to a general business audience. The organizations interviewed are located in Asia/Pacific, Europe, and North America and are classified by IDC as medium-sized to large organizations (see the Appendix). Overview: Benefits Derived From HP Networking Deployments Companies were able to reduce their total cost of networking by 35% and at the same time improve the quality of networking services. The net result of deploying an HP Networking solution was found to be the ability to optimize the networking environment. Companies were able to reduce their total cost of networking by 35% and at the same time improve the quality of networking services in support of business operations. The ROI drivers identified for HP Networking fell into four primary areas (see Figure 3):» Infrastructure cost reduction asset optimization for a scalable enterprise» IT staff productivity reallocating resources to support innovation» User productivity enhanced reliability and operations quality» Business productivity revenue increase and enhanced business operations Document # IDC. Page 6

7 FIGURE 3 Average Annual Benefits (per 100 Users) $12,404 Total: $28,833 $6,293 $5,787 $4,349 Business productivity User productivity Infrastructure cost reduction IT Staff productivity Infrastructure Cost Reduction On average, the organizations saved 34% on router costs and 23% on switching costs through consolidation. All of the organizations in the study purchased HP networking solutions with the goal of reducing their infrastructure costs (see Figure 4). Overall, organizations were able to reduce their annual infrastructure costs by 24%, saving $5,787 per 100 users. These benefits came from multiple related factors, including the following:» Networking equipment savings from standardization and consolidation. By standardizing on HP Networking throughout the network at the core, distribution, and access layers each company was able to reduce its networking equipment. On average, the organizations saved 34% on router costs and 23% on switching costs through consolidation.» Licenses, bandwidth, facilities, and power consumption benefits. Reductions in routers, switches, and servers led to reductions in related infrastructure.» Reduction in other related equipment. Some organizations were able to reduce their servers and desktops and hardwired ports as a result of implementing consolidated networking solutions. One respondent noted, There s a many-to-one correlation.» Advantage in initial purchase cost of the equipment. Seven of eight organizations expressed initial cost advantages of 15% to 65%.» Lifetime warranty benefit. Seven of eight organizations described the benefits of HP s zero-cost lifetime warranty that comes with a range of HP Networking equipment. As one U.S. college explained, The switches are now 4.5 years old and they have a lifetime warranty. And that lifetime warranty is still in effect. If it breaks down, I m going to get another one. I might add in some additional switches in five years, [but that equates to] 10% per year savings [in the interim]. Document # IDC. Page 7

8 FIGURE 4 Average Annual Infrastructure Cost Reduction 66% 10% 18% 22% 27% 43% 50% 50% 53% Lifetime warranty Server hardware Initial investment Networking hardware Facilities Software licenses Power Desktop and hardwired ports and access points Bandwidth IT Staff Productivity In our study, the organizations were able to see significant improvements in their ability to deliver IT services as evidenced in multiple IT service management key performance indicators (KPIs). HP Networking equipment took less time to deploy and required less ongoing time spent keeping the lights on. Through the IMC platform, rollout of new services and deployment of new equipment pieces also took substantially less time (see Table 1). TABLE 1 IT Service Management KPIs Pre-Deployment Post-Deployment of HP Networking of HP Networking Change (%) Mean time to install, configure, test, and deploy new networking equipment (hours) Percent of environment managed centrally Mean time to deploy new services (weeks) Percent of time spent keeping the lights on Document # IDC. Page 8

9 The standardized converged HP networking environment enabled the IT staff to reduce network downtime by 64% and speed up deployment by 25%. By standardizing on a core-to-edge HP network, the organizations in the study were able to reduce the time their IT staff spent managing their networking environment by 38%, saving $4,349 per 100 users. In addition, a more streamlined networking environment supported server virtualization, which lowered server management costs by 34%. The standardized converged HP networking environment enabled the IT staff to reduce network downtime by 64% and speed up deployment by 25%. Key items mentioned by respondents included:» Streamlined ongoing network management. The standardized HP environment significantly reduced IT staff time spent on a number of activities: capacity/network planning (49%); moves, adds, changes (46%); provisioning users (23%); and installing networking equipment (10%). Time savings related to managing security was cited by those organizations that had also deployed HP TippingPoint intrusion prevention solutions. One college estimated that it saved hundreds of hours per year by reducing security incidents related to students use of questionable Web sites.» Streamlined ongoing server management. Some of the organizations credited their deployment of HP networking with optimizing bandwidth and supporting server virtualization. Server virtualization reduced server management load by as much as 50% overall. Of this reduction, companies credited HP Networking with saving 1,000 hours a year.» Reduction in downtime. Organizations reduced networking downtime by 64%, saving roughly 175 hours per year.» Less spending on implementation and rollout. Standardizing on HP networking created a common environment, which reduced the time and effort associated with system rollout by 25%, saving 382 hours per year. As one manager whose company had migrated to HP WLAN explained, If we had selected another wireless vendor, I would have to hire people with the special skills in order to be able to maintain and operate it... because we didn t have any staff with those skills. We already used HP networking equipment... and so we had those skills [in-house]. The combined annual average cost savings of these four IT staff productivity components amounted to $4,349 per 100 users (see Figure 5). Document # IDC. Page 9

10 FIGURE 5 Average Annual IT Staff Productivity Benefits (per 100 Users) $5,000 Total: $4,349 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $57 $160 $925 $3,207 Initial deployment Responding to downtime Server management Network management User Productivity Respondents described a dramatic decrease in network downtime after implementing HP Networking. The increase in user productivity generated an average annual benefit of $6,293 per 100 users and accounted for 22% of the total benefit value from deploying HP Networking. Enterprises that rely on the network for mission-critical or revenue-generating operations also cited reduced risk of failure as a key benefit. On average, organizations in this study were able to reduce downtime by 64%, saving 11.9 hours per year per network end user. Optimizing the Networking Environment with HP The net result of deploying an HP Networking solution was found to be the ability to optimize the networking environment. Companies were able to reduce their total cost of networking by 35% and at the same time improve the quality of networking services. IDC estimates that the companies in this study would have had average annual networking costs of $470 per user without HP. With an HP Networking solution, they averaged $307 in annual networking costs per user (see Figure 6). Document # IDC. Page 10

11 FIGURE 6 Annual Networking Costs per User $500 $470 $450 $99 $400 $350 $300 $250 $200 $150 $71 $174 $307 $36 $48 $140 $100 $50 $0 $126 Other Vendor (Pre-HP Deployment) $83 HP Networking Downtime Power and space Infrastructure IT staff Business Operations Productivity Benefits Through this study, IDC was able to measure the benefit of HP Networking s solution as it relates to the most pressing issues for the modern network (see Table 2). Operational productivity benefits ranked as the most significant impact of a unified HP Networking deployment for the enterprises surveyed and are categorized as follows:» Cost of BYOD. While BYOD is revolutionizing the enterprise, its implementation can come at a steep cost, especially for IT. BYOD requires extra effort in device provisioning, policy setting, and security enforcement while challenging bandwidth and affecting traffic flows. The BYOD management capabilities present in IMC led to an annual average cost savings of $1,111 per 100 users.» Productivity from 100% coverage. Given the proliferation of mission-critical cloud applications and connected devices in every corner of the enterprise, network coverage must encompass the business from end to end. Whether in a production or customerfacing environment, network applications are directly tied to enterprise success. Seamless wired and wireless network coverage is critical. In this study, the end-to-end coverage capabilities of HP Networking resulted in an annual average cost savings of $8,763 per 100 users. Document # IDC. Page 11

12 » Productivity increase from higher bandwidth. Even with the increased numbers of devices and applications on the network, end users still expect fast connections without latency or jitter. With network applications often directly tied to revenue-generating activities, slow networks can literally cost the organization more than faster networks. Survey respondents reported an annual average cost benefit of $2,191 per 100 users as a result of productivity improvements from higher bandwidth. TABLE 2 Business Productivity Annual Savings Operations (per 100 Users) Reduce costs for BYOD $1,111 Productivity from 100% coverage $8,763 Productivity increase from higher bandwidth $2,191 Total $12,065 Respondents described productivity benefits that translated to revenue opportunities. On average, the business revenue increase amounted to $138,135 per year. Business Productivity: Increased Revenue The other benefit that comes from enhanced business productivity in revenue-related processes is increased revenue. In the past, organizations were usually unable to attribute revenue gains to networking initiatives. However, over the past year, this has changed as organizations are becoming more reliant on their networks in all aspects of their businesses. Some of the respondents described productivity benefits that translated to revenue opportunities. On average, the business revenue increase amounted to $138,135 per year. IDC also asked respondents what goals they achieved by moving to HP Networking (seven of eight organizations answered this question). Key findings are as follows:» All organizations responded that they had improved business agility.» Six organizations (75%) indicated that they were able to expand service offerings.» Two organizations (25%) responded that they had entered new markets.» Two organizations (25% not the same two noted in the previous bullet) indicated that they had generated new revenue opportunities. The new revenue opportunities were tied to their ability to add wireless to their networking portfolio. This ability looms large in segments where BYOD is a significant part of operations. One college estimated that by being able to support four devices per student, it was increasing enrollment by 2 5%. Document # IDC. Page 12

13 To combine revenue a top-line benefit with cost savings, we have to eliminate the costs associated with that revenue by applying an operating margin (20%), which leaves a realized revenue benefit of $27,627, or $339 per 100 users (see Table 3). TABLE 3 Revenue Benefit Annual revenue increase $138,135 Operating margin 20% Realized revenue benefit $27,627 Benefit per 100 users $339 IDC found that customers that implemented HP networking solutions were able to realize a 489% return on their initial investment. ROI Analysis The bottom-line analysis that all companies should perform when considering changing or upgrading their network infrastructure is whether the economic benefits of the investment will outweigh the costs associated with implementing the new infrastructure. In this white paper, IDC found that customers that implemented HP networking solutions were able to realize a 489% return on their initial investment, achieving a five-year (discounted) benefit of $101,186 per 100 users and payback in 8.3 months (see Table 4). TABLE 4 Five-Year ROI Analysis (per 100 Users) Discounted benefits $101,186 Investment $17,167 Net present value (NPV) $84,019 ROI = NPV/investment 489% Payback period 8.34 months Discount factor 12% Document # IDC. Page 13

14 Figure 7 illustrates the costs and benefits of the HP unified networking solution over the fiveyear period. Note that the cumulative net benefit is positive beginning in year 1. FIGURE 7 Cost Benefit Analysis (per 100 Users) $140,000 $120,000 $125,408 $100,000 $80,000 $60,000 $40,000 $20,000 $0 - $20,000 -$10,463 $35,890 $30,833 $33,132 $28,917 $16,539 -$1,412 -$2,007 -$2,007 -$2,007 -$2,007 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Benefits Investment Cumulative net benefit Challenges/Opportunities IDC sees a number of opportunities and challenges for HP as it continues to raise awareness of its unified networking portfolio. Opportunities include:» Articulate the value of single-pane-of-glass management with HP IMC. Using multiple tools, often from multiple vendors, to manage all the aspects of a wired and wireless network is a major pain point for network administrators. With IMC, HP offers a solution that provides integrated wireless and wired management through a single pane of glass, which can be used not only in HP-only networks but also where other vendors equipment may be part of the infrastructure.» Emphasize the value of automation to the enterprise network. As IT is being asked to do more with less, it must look to solutions that leverage existing infrastructure and allow it to bring new levels of automation into integration, provisioning, and management tasks especially as enterprises look to integrate more of their wired and wireless infrastructure. HP should position its unified portfolio as a way to help businesses (existing HP customers and/or customers that do not currently have HP networking) meet that requirement. Document # IDC. Page 14

15 Challenges include:» Add unified networking customers by gaining mindshare in wireless networking. There is continued opportunity for HP to raise market awareness of its wireless capabilities, relative to its long-standing strength in wired products. As HP makes a play to sell more enterprises on its unified networking solutions, HP will need to communicate its wireless value proposition to all market segments.» Deal with cultural change. A cultural change across the networking industry will be necessary to bring together the traditionally disparate wired and wireless networks operating with distinct IT teams. Ethernet- and IP-savvy network managers must learn the nuances of RF and security policy, while RF and security policy managers must learn the nuances of Ethernet and IP. This ability to adapt will result in an IT organization that is seen not as a bottleneck or a department that says no but as a partner that is fully invested in the success of the business. Conclusion As enterprises continue to attempt to do more with less and to streamline all aspects of IT in the production environment, unified networking will gain traction and emerge as a table stakes offering for the largest enterprise networking vendors. The exponential increase of BYOD in parallel with record numbers of overall endpoint devices and business-critical applications accessing the network has created new challenges for IT organizations. Given constrained resources and unyielding demand, IT must identify new ways to provide a holistic, unified wireless and wired networking experience while incorporating new levels of automation and control to reduce its management burden. This solution will need to be future oriented, offering the ability to make easy modular adjustments and providing a foundation for flexible scalability. HP s complete line of wireless and wired networking solutions is designed to provide a seamless end-to-end user experience and simplify network administration with single-paneof-glass management. In a study of eight midsize to large enterprises, IDC determined that the ROI was 489% over a five-year period. Including HP in the consideration set for the next network refresh would be a prudent idea for midsize to large enterprises. Document # IDC. Page 15

16 Appendix IDC s ROI Methodology For this ROI project, IDC worked with HP to determine the interview process and guide. HP provided the names of the companies to interview. The organizations interviewed are located in Asia/Pacific, Europe, and North America and are classified by IDC as medium-sized to large organizations ranging in size from 500 to 3,000 employees. They have an average of 1,383 employees, 960 internal users, and 8,160 external users (see Table 5). They have an average of 843 wireless network access points and have grown that environment by 676%. TABLE 5 Demographics of 8 Organizations Interviewed Average number of employees 1,383 Average number of internal users 960 Average number of external users 8,160 Average number of wireless access points 843 Average access point growth with HP 676% Average length of deployment 2 years Industry Animation, education, service provider, hotel Region Asia/Pacific, Europe, North America IDC uses a three-step methodology for conducting ROI analysis:» Measure the benefits from the following areas:» IT infrastructure cost reduction: Direct costs that include IT staff labor reduction, hardware cost reductions (for purchase and deployment of incremental network infrastructure components), and reduction in service and support licensing costs Document # IDC. Page 16

17 » IT productivity increases: Time savings from more efficient IT operations, which enable the reallocation of IT staff time from support tasks (network troubleshooting and maintenance) to higher-value activities such as supporting new business applications or technology initiatives» End-user productivity increases: Increases resulting from the decrease in network downtime because of fewer downtime incidents and improved mean time to resolution (MTTR)» Ascertain the investment profile made in the purchase and implementation of the solution and the associated training and maintenance costs. To get an accurate assessment of the investment in deploying HP WLAN solutions, IDC asked for the deployment, setup, upgrade, and maintenance costs, as well as the total cost of the services and training. This investment included the loaded costs of any incremental staff required.» Calculate the payback period and ROI for the deployed solution by conducting a depreciated cash flow analysis of the benefits and investments over a five-year period. From the results of the interviews, IDC was able to calculate the average payback period and rate of return from investing in the HP WLAN solution, as well as the net present value of the savings. IDC bases the calculations on a number of assumptions:» IDC uses a 12% discount rate in the ROI analysis to account for risk and to ensure a conservative analysis.» 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. Note: All numbers in this document may not be exact due to rounding. Note on exchange rates: The organizations interviewed for this study came from different regions of the world. All investments and benefits were gathered in the organizations local currency and then changed into U.S. dollars at current exchange rates. All figures used in this document are provided in U.S. dollars. Document # IDC. Page 17

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