Commonwealth procurement procedures Submission 29 - Attachment 1 THREE YEAR TCO COMPARISON HOSTED EXCHANGE
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1 THREE YEAR TCO COMPARISON HOSTED EXCHANGE
2 1 MARCH 2012 This whitepaper compares the three year total cost of ownership of a high availability Microsoft Exchange 2010 mailbox between an Australian specialist-provider hosted model and the traditional on-premise installation model. The analysis is presented in a realistic Australian context, in Australian dollars, and is applicable to corporate or government organizations with high levels of governance requirement and security classification. The analysis is performed for three theoretical but representative organizations of 100, 1,000 and 5,000 users.
3 IS A CRITICAL ELEMENT OF MODERN BUSINESS Global IT analysts consistently rate today as the top or near-top IT application in terms of business criticality. Organizations who get wrong will suffer competitively in terms of timeliness of information, leakage of data, loss of worker coordination and increased cost of working. is also of major concern from an audit and risk perspective because failure can not only compromise corporate integrity but also business continuity itself. A modern organization must have an system which is fundamentally resilient, secure, reliable, 24/7 supportable and easy to use. An enterprise-grade system is one that increasingly considers the platform as the centrepiece of a broad messaging and collaboration capability, converging many types of communication and productivity needs across the entire organization. Designing, implementing and operating enterprise-grade in today s internet environment is a specialist technical field. WHAT IS MICROSOFT EXCHANGE? Microsoft Exchange is a world leading enterprise-grade system used by over three hundred million business workers. It was originally introduced in June 1996 and has been upgraded several times since to include additional and enhanced features. The current version at the time of writing is Exchange It meets an system s fundamental needs, and adds Microsoft Office familiarity and a number of other productivity features such as the following: intranet/extranet integration workflow automation Blackberry and other mobile device integration mobile fleet management capability legally-compliant archiving and query solutions high end filtering, border protection smart message routing based on presence Fax, SMS and Social Media integration CRM and other platform integration voice access to server voice to/from text forensic logging ON-PREMISE DEPLOYMENT On-premise deployment refers to the model whereby the user organisation buys the infrastructure, facilities, licences and skills and takes upon itself the responsibility of managing the platform on premise. Consultant s may be involved in the design and
4 implementation phase, but the user organisation essentially runs the platform itself using a mixture of capital and operating expense. Such a deployment at high level involves an element of management oversight, and risks and costs sometimes volatile, that an organisation may not want to invest in a non-corebusiness activity such as a utility service. HOSTED DEPLOYMENT An alternative methodology to on-premise deployment is the use of a hosted service. In this model, a specialist third-party provider is responsible to own, operate and manage all aspects of the service, usually for a flat monthly per user fee. Emantra is such a specialist third-party provider based in Australia. (as provided by Emantra) uses exactly the same software as would be deployed on-premise: it contains all native enterprise functionality and is not an abridged version as offered by some offshore services. It runs on very-high-availability servers in top tier data centres. It can be delivered as a multi-tenant service, where different customers share the same hardware and instance of the licence but have complete logical discretion of their own data, or as a dedicated instance running on physical or virtual hardware. The essence of the service is that it is fully managed and paid for by the month based on usage. All aspects of infrastructure ownership and secure housing, 24/7 operation, monitoring, maintenance and support, patching, reporting and daily remote back-up are provided by the service provider. The service is delivered to an agreed SLA which specifies minimal downtime tolerance. Financial penalties apply against the service provider if guaranteed uptime is not achieved. THREE YEAR COST COMPARISON The analysis compares the Three Year Total Cost of Ownership of versus On-Premise Exchange. The data used was derived from a range of real-life scenarios drawn from enterprise clients of Emantra and other industry case studies, and was validated against supplier cost lists and independent reports published by global IT analysts. Three typical scenarios were studied: organizations of 100, 1,000 and 5,000 users. The organizations were assumed to have levels of risk and security requirements compatible with Australian public company governance or Australian government security classification at the ISM-defined Protected level. The costing comparisons are shown in detail for each scenario in Appendices A, B and C. Conclusions are shown in the table below:
5 MICROSOFT EXCHANGE 2010 ENTERPRISE GRADE 5GB MAILBOXES 99.9% UPTIME SLA Protected Level Secure Internet Gateway 100 User Organization 1,000 User Organization 5,000 User Organization THREE YEAR TCO: $178,616 $1,262,269 $5,033,080 On-premise Exchange $420,244 $1,873,960 $5,486,688 Savings $ $241,628 $612,691 $453,608 Savings % 57.5% 32.7% 8.3% MONTHLY TCO PER USER: $49.62 $35.04 $27.96 On-premise Exchange $ $52.05 $30.48 Savings $ $67.12 $17.01 $2.52 Savings % 57.5% 32.7% 8.3% COMPARISON CONCLUSIONS The table and the chart on the next page indicate that in the On-Premise scenario, the fully absorbed cost of an enterprise-grade mailbox per user per month falls from $ in a 100 user organization to $30.48 in a 5,000 user organization. This reflects the expected economies of scale which modern virtualization can bring. However a mid-sized organization of 1,000 users can still expect to spend about $600,000 per year on an On- Premise enterprise-grade system. In all cases considered, however, the cost of compares favourably against the On-Premise alternative. In terms of percentage savings this is most evident in the smaller organization where the costs are more than halved by using. In terms of absolute dollar savings the 1,000 user organization shows the greatest difference: annual savings of more than $200,000 or about one-third.
6 Monthly TCO per User $120 $100 $80 $60 $40 $20 $0 100 User 1,000 User 5,000 User On-Premise Exchange For organizations between the sizes considered, we think that linear extrapolation of these results would be roughly accurate. The savings predominantly come from the scale and leverage the hosting provider can deliver. These results bear up against anecdotal reports where organizations consistently indicate effective savings of over one-third versus their former On-Premise implementation, with no diminution (often a substantial improvement) in other qualitative factors such as border control, support quality, SLA adherence and reporting. Conventional wisdom had it that was suitable only for small businesses, while On-Premise Exchange was a better value proposition for mid-sized and large organizations. Over the last five years, many changes have aligned to provide a different outcome today: Availability of third-party hosted Exchange professionals who are building scale in themselves and can pass on these economies Flexibility of service provider licence regimes Vastly improved bandwidth availability The predominance of web services software which has been built from the ground up to be securely and robustly multi-tenantable Improvements in control panel technology which simplify administration Service provider buying power on hardware, bandwidth, rackspace, etc There is possibly a cross-over point between 5,000 and 10,000 users per organization where the On-Premise economics may be superior, although that would depend on the depth of discount which the Hosted service provider could deliver at such volume. It is notable that
7 there are organizations in the United States of over 100,000 users in size which have successfully and economically migrated to. OTHER FINANCIAL BENEFITS There are other financial benefits of which are more difficult to model, and are typically not indicated in the table above: Predictability of cost and scalability The best hosting providers will quote an all-up unit cost whereby future bills will only vary by user number or some other reported and manageable parameter. Thus future costs are more visible and easier to budget. If properly designed in the first place, the hosting provider s infrastructure should scale for things like processors, RAM, storage, bandwidth etc in a manner which does not bother the customer either in a service disruption or in a billing sense. This can eliminate the significant cost risk of On-Premise deployments which may be affected by scale limitations or office moves etc. Opex not capex Hosted services involve minimal capital outlay on the part of the customer. There may be a fee for migration for example, or for dedicated instance set-up, but capital, licencing and infrastructure costs are amortised monthly. Thus the risk of stranded capital or the need and time for a capital budget approval process can be alleviated. Burstability Because of their own buying volumes, a good hosting provider will be able to pass on the savings of burstability which means that as long as a defined minimum of a resource, say storage or bandwidth, is used most of the time, it won t cost any more to burst beyond that for short periods. This means the customer does not have to buy resources to always allow for their short-term peak need. Switch on switch off The ability to almost instantly switch on and switch off services, users, features etc for project work, test and development sites, staging, machinery of government changes etc is also of great value. Again, the customer pays only for what is used. Reduced opportunity costs The use of can also realize opportunity cost benefits where for example, back-of-house technical labour can be reassigned to higher level or more customer-facing duties, or where valuable office space can be released from the need to house internal servers.
8 Potential to use a hybrid solution Some organizations have a large number of employees not classified as information workers but for whom they wish to provide a rudimentary facility. To minimise the cost, this could utilise a lower-end service such as Hosted Outlook WebApp only, a POP3 mailbox, or a public cloud service if data sovereignty was not a concern. In most instances, an advanced hosting provider will be able to provide some level of integration for access and identity management purposes between such solutions and the service used by the information workers, and thus provide a best of both worlds solution. Less Management distraction As a fully managed service with an assured outcome, will also allow the customer s management more time to focus on the business itself and less on the nonincome producing tasks which need to happen behind the scene. SUMMARY This whitepaper shows that may deliver both measurable and intangible savings to many organizations. Savings can be substantial, even for large organizations, and are such that that it is essentially not economically viable in today s IT market for organizations of a hundred or a few hundred users with enterprise-grade needs to attempt to build On-Premise facilities for . The key to realizing the value of a service is to pick the right service provider and be aware of the limitations that might exist. This is the subject of another whitepaper in this series. Please contact Emantra for more details. MORE INFORMATION If you would like more information about this analysis or Emantra s other services or whitepapers, please contact us on or info@emantra.com.au. This whitepaper is Copyright 2012 Emantra Pty Ltd. Neither it nor any part of it may be copied, duplicated or presented in any other context without the written permission of Emantra Pty Ltd. Head Office Level Upper Edward Street BRISBANE QLD 4000 Level 1 Realm Precinct 18 National Circuit BARTON ACT 2600 Tel info@emantra.com.au Web
9 APPENDIX A Three Year Total Cost of Ownership Hosted and On-Premise Microsoft Exchange users, 5GB mailboxes, 99.9% Service Uptime AUD exgst HARDWARE and AD server/s including redundancy $0 $16,250 Border Gateway/Firewall appliance/s $0 $0 SAN/NAS storage - production $0 $5,000 WORM Appliance/archive storage $0 $6,000 Three year 24/7 support, four hour response $0 $8,175 AV/AS appliance/s $0 $0 SOFTWARE Windows Server including Active Directory $0 $14,000 Microsoft Exchange CALs, x 1000 (apportionment of Core CAL licence) $0 $13,800 Software premium support fees (apportionment for Exchange) $0 $0 AV/AS software $0 $5,400 Enterprise back-up software licences (apportionment) $0 $6,250 Compliant archive software licences $36,000 LABOUR FTE IT Tech/Admins ($100,000 gross avg salary growing at 5% per yr) IT Admin cost (Year 1) $20,000 $50,000 IT Admin cost (Year 2) $21,000 $52,500 IT Admin cost (Year 3) $22,050 $55,125 Training, certification, recruitment at 15% salary $7,566 $23,644 FACILITY Rack space, Tier 3+ DC incl power, 15RU $0 $58,500 Server to Internet Connectivity, committed Mbps $0 $36,000 SERVICES 24x7 Help Desk $0 $10,800 Remote Monitoring $0 $3,600 OFFSITE BACK-UP Back-up server/s $0 $6,000 Back-up storage $0 $9,000 Back-up media (tapes or portable HDD) $0 $4,200 Offsite facility/contractor $0 $0 HOSTING FEES $72,000 $0 Hosted Compliant Archive add-on $36,000 $0 TOTAL THREE YEAR TCO $178,616 $420,244 SAVING $ THREE YEAR TCO $241,628 SAVING % THREE YEAR TCO 57.5% TOTAL THREE YEAR TCO PER USER $1,786 $4,202 ANNUAL TCO PER USER $ $1, MONTHLY TCO PER USER $49.62 $ SAVING $ MONTHLY PER USER $67.12 SAVING % MONTHLY PER USER 57.5%
10 APPENDIX B Three Year Total Cost of Ownership Hosted and On-Premise Microsoft Exchange users, 5GB mailboxes, 99.9% Service Uptime AUD exgst HARDWARE and AD server/s including redundancy $0 $49,000 Border Gateway/Firewall appliance/s $0 $60,000 SAN/NAS storage - production $0 $35,000 WORM Appliance/archive storage $0 $60,000 Three year 24/7 support, four hour response $0 $61,200 AV/AS appliance/s $0 $30,000 SOFTWARE Windows Server including Active Directory $0 $27,000 Microsoft Exchange CALs, x 1000 (apportionment of Core CAL licence) $0 $138,000 Software premium support fees (apportionment for Exchange) $0 $72,000 AV/AS software $0 $32,400 Enterprise back-up software licences (apportionment) $0 $50,000 Compliant archive software licences $0 $180,000 LABOUR FTE IT Tech/Admins ($100,000 gross avg salary growing at 5% per yr) IT Admin cost (Year 1) $50,000 $200,000 IT Admin cost (Year 2) $52,500 $210,000 IT Admin cost (Year 3) $55,125 $220,500 Training, certification, recruitment at 15% salary $23,644 $75,660 FACILITY Rack space, Tier 3+ DC incl power, 15RU $0 $117,000 Server to Internet Connectivity, committed Mbps $0 $144,000 SERVICES 24x7 Help Desk $0 $36,000 Remote Monitoring $0 $3,600 OFFSITE BACK-UP Back-up server/s $0 $6,000 Back-up storage $0 $30,000 Back-up media (tapes or portable HDD) $0 $12,600 Offsite facility/contractor $0 $24,000 HOSTING FEES $720,000 $0 Hosted Compliant Archive add-on $360,000 $0 TOTAL THREE YEAR TCO $1,261,269 $ 1,873,960 SAVING $ THREE YEAR TCO $612,691 SAVING % THREE YEAR TCO 32.7% TOTAL THREE YEAR TCO PER USER $1, $1, ANNUAL TCO PER USER $ $ MONTHLY TCO PER USER $35.04 $52.05 SAVING $ MONTHLY PER USER $17.02 SAVING % MONTHLY PER USER 32.7%
11 APPENDIX C Three Year Total Cost of Ownership Hosted and On-Premise Microsoft Exchange users, 5GB mailboxes, 99.9% Service Uptime AUD exgst HARDWARE and AD server/s including redundancy $0 $69,000 Border Gateway/Firewall appliance/s $0 $60,000 SAN/NAS storage - production $0 $175,000 WORM Appliance/archive storage $0 $240,000 Three year 24/7 support, four hour response $0 $163,200 AV/AS appliance/s $0 $50,000 SOFTWARE Windows Server including Active Directory $0 $36,000 Microsoft Exchange CALs, x 1000 (apportionment of Core CAL licence) $0 $690,000 Software premium support fees (apportionment for Exchange) $0 $96,000 AV/AS software $0 $162,000 Enterprise back-up software licences (apportionment) $0 $184,000 Compliant archive software licences $0 $900,000 LABOUR FTE IT Tech/Admins ($100,000 gross avg salary growing at 5% per Yr) IT Admin cost (Year 1) $100,000 $500,000 IT Admin cost (Year 2) $105,000 $525,000 IT Admin cost (Year 3) $110,250 $551,250 Training, certification, recruitment at 15% salary $37,830 $236,438 FACILITY Rack space, Tier 3+ DC incl power, 15RU $0 $148,000 Server to Internet Connectivity, committed Mbps $0 $288,000 SERVICES 24x7 Help Desk $0 $180,000 Remote Monitoring $0 $3,600 OFFSITE BACK-UP Back-up server/s $0 $12,000 Back-up storage $0 $150,000 Back-up media (tapes or portable HDD) $0 $25,200 Offsite facility/contractor $0 $42,000 HOSTING FEES $2,880,000 $0 Hosted Compliant Archive add-on $1,800,000 $0 TOTAL THREE YEAR TCO $5,033,080 $ 5,486,688 SAVING $ THREE YEAR TCO $453,608 SAVING % THREE YEAR TCO 8.3% TOTAL THREE YEAR TCO PER USER $1,007 $1,097 ANNUAL TCO PER USER $ $ MONTHLY TCO PER USER $27.96 $30.48 SAVING $ MONTHLY PER USER $2.52 SAVING % MONTHLY PER USER 8.3%
THREE YEAR TCO COMPARISON HOSTED EXCHANGE
THREE YEAR TCO COMPARISON HOSTED EXCHANGE 1 MARCH 2012 This whitepaper compares the three year total cost of ownership of a high availability Microsoft Exchange 2010 mailbox between an Australian specialist-provider
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