The Total Economic Impact Of Raytheon Trusted Computer Solutions High Speed Guard

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1 A Forrester Total Economic Impact Study Commissioned By Raytheon Trusted Computer Solutions Project Director: Shaheen Parks October 2013 The Total Economic Impact Of Raytheon Trusted Computer Solutions High Speed Guard Single Company Analysis

2 Table Of Contents Executive Summary... 3 Disclosures... 4 TEI Framework And Methodology... 5 Analysis... 5 Financial Summary RTCS High Speed Guard: Overview Appendix A: Framework Assumptions Appendix B: Total Economic Impact Overview Appendix C: Glossary Appendix D: Endnotes ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. 2013, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to

3 3 Executive Summary In March 2013, Raytheon Trusted Computer Solutions (RTCS) commissioned Forrester Consulting to conduct a Total Economic Impact (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying High Speed Guard (HSG). The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of HSG on their organizations. To better understand the benefits, costs, and risks associated with a HSG implementation, Forrester interviewed an existing customer with multiple years of experience using HSG. HSG provides technology for sharing data between security domains. The solution allows for the review and rapid, automated, and controlled transfer of data across networks at different sensitivity levels. An example would include declassifying a large pool of documents and transferring them from a network with a secret classification level to a public network. Prior to HSG, this law enforcement agency had a highly manual file transfer process. Due to security restrictions, this process involved physical transfer of data from a private industry to the agency. This required utilizing staff members across the agency, taking those resources away from more strategic efforts. With leadership open to investment in a new approach, the agency began to look for a solution to integrate people, process, and technology, leading them to evaluate HSG. With HSG, the customer was able to streamline and automate processes across key functions and stakeholders, enabling them to meet their objectives while increasing productivity and significantly reducing costs. In particular, HSG s technical capabilities made it a good fit in a service-oriented infrastructure. As described by the project leader, The automation of manual processes and reduction of administrative burden improves the capability to expedite information sharing. Information sharing increases communication and collaboration. The automation of manual processes and reduction of administrative burden improves the capability to expedite information sharing. Increased productivity led to savings of approximately $7.3 million in the first year (growing to an annual savings of $14 million). Eliminating manual administrative tasks presented the opportunity to redirect staff into higher-value work. AUTOMATING SECURE DATA TRANSFER WITH HSG DRAMATICALLY INCREASES PRODUCTIVITY Our interviews with a law enforcement agency customer and subsequent financial analysis found the organization experienced the risk-adjusted ROI, costs, and benefits shown in Table 1. 1 The risk-adjusted financial analysis points to present value (PV) benefits of $7,355,189 in the first year versus implementation costs of $1,503,709, adding up to a net present value (NPV) of $5,851,480. With HSG, approximately 70 internal and external resources were able to redirect their efforts from administrative tasks associated with file transfer to strategic value-add tasks in line with their primary job requirements. TABLE 1 One-Year Risk-Adjusted ROI ROI Payback period Total benefits (PV) Total costs (PV) NPV 389% 2 months $7,355,189 ($1,503,709) $5,851,480

4 4 Benefits. The organization we interviewed experienced the following benefits: Improved productivity leading to cost reduction. The law enforcement agency was able to redirect the efforts of internal staff and reduce the reliance on contractors, leading to a total productivity gain of more than $14 million annually. We have included two-thirds of this benefit in the first year of the analysis, taking into account the time for implementation. Forrester estimates that this accounts for 35 internal and 35 external (contractor) full-time equivalents (FTEs). Reduced backlog. The agency was able to significantly reduce the backlog of manual transfer approvals. Costs. The organization we interviewed experienced the following costs: External fees for RTCS products and services as well as third-party implementation. These are initial fees for software, hardware, maintenance, and third-party implementation assistance, totaling $1.2 million. Internal costs for planning and implementation. The cost captures the value of the time spent by the internal team to work with RTCS in planning for and deploying the solution. This required 500 hours, or a total cost of approximately $22,000. Disclosures The reader should be aware of the following: The study is commissioned by RTCS and delivered by Forrester Consulting. Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the report to determine the appropriateness of an investment in HSG. RTCS reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester's findings or obscure the meaning of the study. The customer names for the interviews were provided by RTCS.

5 5 TEI Framework And Methodology INTRODUCTION From the information provided in the interviews, Forrester has constructed a Total Economic Impact (TEI) framework for those organizations considering implementing RTCS s HSG. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. APPROACH AND METHODOLOGY Forrester took a multistep approach to evaluate the impact that RTCS s HSG can have on an organization (see Figure 2). Specifically, we: Interviewed RTCS marketing, sales, and services personnel, along with Forrester analysts, to gather data relative to HSG and the marketplace for HSG. Interviewed a law enforcement agency currently using HSG to obtain data with respect to costs, benefits, and risks. Constructed a financial model representative of the interviews using the TEI methodology. The financial model is populated with the cost and benefit data obtained from the interviews. Flexibility. Risk. Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester s TEI methodology serves the purpose of providing a complete picture of the total economic impact of purchase decisions. Please see Appendix B for additional information on the TEI methodology. Analysis Based on the interviews, Forrester constructed a TEI framework and an ROI analysis that illustrate the areas financially affected for the interviewed organization, a US governmental law enforcement agency. INTERVIEW HIGHLIGHTS Prior to the interviewee s use of HSG, the organization used a highly manual process to manage data transfer between classified and unclassified environments. This was an inefficient process in both time and effort, as there was a great deal of latency involved in obtaining manual approval and waiting for manual transfer, which decreased staff productivity as well as delayed projects and initiatives requiring that data. Forrester employed four fundamental elements of TEI in modeling the impact of RTCS s HSG: Costs. Benefits to the entire organization. FIGURE 1 TEI Approach

6 6 The capability to transfer unclassified data from classified systems to unclassified systems by utilizing [an] industry web services model was the key factor in choosing RTCS s High Speed Guard. ~ Cross domain unit chief The composite organization selected HSG for its ability to provide a configurable out-of-the-box solution that minimized the amount of customization required, its proven success in the industry, and its ability to automate the data transfer and approval process. Implementation took approximately four months (120 days). Part of the implementation process included a week of onsite professional services provided by RTCS; this week focused on training so that the organization could develop product expertise and control configuration going forward. The following figure shows the process flow at the organization, as information moves between sensitive environments. Our most important assets, the personnel, have more time to focus on critical success tasks and objectives. ~ Cross domain unit chief After an extensive RFP and business case process evaluating multiple vendors, the law enforcement agency chose HSG and began deployment. FIGURE 2 General Process Design

7 7 BENEFITS The composite organization experienced a single quantified benefit in this case study, with additional implications for operational effectiveness: Increased productivity due to the automation of formerly manual processes. The ability to redeploy staff into more strategic work by reducing the administrative burden on them. While Forrester has not quantified the financial impact of this benefit beyond the increase in productivity and the associated cost savings, the interviewed organization stressed that the ability to move staff away from tasks associated with data transfer into higher-value work was extremely important, and in some ways eclipsed even the dramatic savings associated with the productivity gain. Increased Productivity The interviewed organization indicated that the primary benefit from the HSG implementation was a reduction in time and effort associated with the manual transfer of critical sensitive data between classified and unclassified environments. Prior to HSG, the agency had a number of manual processes associated with file transfer, including administrative tasks and manual transfer approval as well as physical transfer of media that contained the necessary data. Following the HSG implementation, the interviewed organization was able to automate a number of tasks associated with the transfer of data between classified and unclassified environments, leading to a huge productivity gain. While the interviewee estimated that this benefit yielded $14 million in cost savings on an annual basis, in the first year, we delay the benefit to take into account the four months required initially to implement the solution. Therefore, this productivity benefit is only applicable for the last eight months of the year. To capture this total, Forrester has included two-thirds (66%) of the average annual benefit, leading to a total benefit in the analysis of more than $8 million. Redeployed Staff For the agency, freeing up resources for more strategic work was a high priority. Once the organization removed staff members from these administrative tasks, they were available to focus on their primary job requirements. Although we have not quantified the value of this benefit outside of the productivity benefit described in the previous section, this was an important part of the decision to use HSG. TABLE 2 Increased Productivity: Significant Savings Associated With The Automation Of Data Transfer Ref. Metric Calculation Year 1 A1 Internal resource fully loaded salary $95,040 A2 Number of internal resources repurposed A3 Contracted resources 34.5 A4 Contractor hours (annual) A3*2,080 71,760 A5 Hourly rate (contractor) 150 A6 Length of year applicable (due to implementation time) A7 Labor savings A6*([A1*A2]+[A4*A5]) $9,299, %

8 8 Total Benefits Table 3 (below) shows the total of all benefits across the five areas listed above as well as PVs discounted at 10%. COSTS The composite organization experienced two major cost categories associated with the HSG solution: Direct costs associated with RTCS as well as third-party implementation assistance. Internal costs due to time spent on planning, implementation, and administration. These represent the mix of internal and external costs experienced by the interviewed organization for initial planning, implementation, and ongoing maintenance associated with the solution. RTCS And Third-Party Costs The external costs in this category fall into multiple types: software, servers, maintenance, RTCS professional services, routers, firewalls, and third-party implementation services. The breakdown of these costs is shown in Table 4. Although the maintenance charges span three years, this analysis is only over the first year. Forrester notes that when the interviewed customer purchased HSG, the product was sold as a Government-Off-The-Shelf (GOTS) solution. Today, HSG is sold as a Commercial-Off-The-Shelf (COTS) solution in line with RTCS s other cross domain products. While the GOTS price structure has no cost for software and higher services costs, with COTS, customers can expect these to be reversed. It should be noted that this agency identified additional costs pertaining to routers, firewalls, and third-party integration that are not necessarily required for the implementation of HSG. Table 4 RTCS HSG Costs Ref. Metric Initial B1 Software 0 B2 Servers (HSG servers and HSG admin console servers) 87,762 B3 Maintenance 214,870 B4 RTCS professional services 418,522 B5 Additional costs (routers, firewalls, third-party integration) 478,846 Bt RTCS HSG costs $1,200,000 Internal Administration Cost From the customer s side, a number of resources participated in the planning and implementation process to get the system configured and up and running. The interviewed organization estimates this internal effort at approximately 500 hours. With an average hourly rate of $45.69 (based on an annual average fully loaded resource cost of $95,040), this leads to a total cost of $22,846 in the initial period. Additionally, we include the costs associated with two FTEs to account for the time spent across the team TABLE 3 Total Benefits (Non-Risk-Adjusted) Benefit Year 1 Total PV Labor savings $9,299,664 $9,299,664 $8,454,240 Total benefits $9,299,664 $9,299,664 $8,454,240

9 9 in configuring and maintaining the system on an ongoing basis, at an annual cost of $186,425. Total Costs Table 5 shows the total of all costs, which were a combination of upfront and ongoing costs. Over the analysis, the composite organization expects total costs to come to approximately $1.22 million. Table 5 Total Costs Cost category Initial Ongoing RTCS HSG costs ($1,200,000) Internal administration costs ($22,846) ($186,425) Total costs (original) ($1,222,846) ($186,425) FLEXIBILITY Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business benefit for some future additional investment. This provides an organization with the right or the ability to engage in future initiatives but not the obligation to do so. There are multiple scenarios in which a customer might choose to implement HSG and later realize additional uses and business opportunities. Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix B). For the purposes of this financial analysis, Forrester has not quantified the impact of the strategic flexibility provided by the RTCS HSG solution. However, the interviewed customer did identify several areas in which flexibility played a key role: According to the interviewed agency, HSG enables a trained administrator to maintain the solution and create new data flows without the use of RTCS professional services. This was a key benefit because it afforded the agency the opportunity to maintain control over its environment and adapt to changes as needed. As stated by the interviewee, The agency is now more agile and able to add data flows on demand. RISK TABLE 6 Cost And Benefit Risk Adjustments Costs Low Most likely High Mean RTCS HSG costs 100% 100% 125% 108% Internal administration costs Benefits Increased productivity 100% 100% 125% 108% Low Most likely High Mean 50% 100% 110% 87% Forrester defines two types of risk associated with this analysis: implementation risk and impact risk. Implementation risk is the risk that a proposed investment in HSG may deviate from the original or expected requirements, resulting in higher costs than anticipated. Impact risk refers to the risk that the business or technology needs of the organization may not be met by the investment in HSG, resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates. Quantitatively capturing investment and impact risk by directly adjusting the financial estimates results in more meaningful and accurate estimates and a more accurate projection of the ROI. In general, risks affect costs by raising the original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers should be taken as realistic expectations since they represent the expected values considering risk. The following implementation risks that affect costs are identified as part of this analysis: As the pricing structure has changed (COTS versus GOTS) for current customers and therefore may differ

10 10 from the costs paid by the interviewed agency, we have applied a medium level of risk adjustment for the RTCS costs. The following impact risks that affect benefits are identified as part of the analysis: The benefit included in this analysis was highly dependent on the particular use case for the interviewee. While Forrester expects that productivity gains are likely for most environments moving from manual to automated tasks, we have applied a high risk adjustment to this category to account for the variability in this benefit. Table 6 shows the values used to adjust for risk and uncertainty in the cost and benefit estimates. The TEI model uses a triangular distribution method to calculate riskadjusted values. To construct the distribution, it is necessary to first estimate the low, most likely, and high values that could occur within the current environment. The riskadjusted value is the mean of the distribution of those points. Readers are urged to apply their own risk ranges based on their own degree of confidence in the cost and benefit estimates.

11 11 Financial Summary applying the risk-adjustment values from Table 6 in the Risk section to the cost and benefits numbers in Tables 3 and 5. The financial results calculated in the Costs and Benefits sections can be used to determine the ROI, NPV, and payback period for the organization s investment in HSG. These are shown in Table 7 below. Table 8 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by TABLE 7 Cash Flow: Non-Risk-Adjusted Cash flow: original estimates Initial Year 1 Total PV Costs ($1,222,846) ($186,425) ($1,409,271) ($1,392,323) Benefits $0 $9,299,664 $9,299,664 $8,454,240 Net benefits ($1,222,846) $9,113,239 $7,890,393 $7,061,917 ROI 507% Payback period 1.6 months TABLE 8 Cash Flow: Risk-Adjusted Cash flow: risk-adjusted estimates Initial Year 1 Total PV Costs ($1,320,674) ($201,339) ($1,522,012) ($1,503,709) Benefits $0 $8,090,708 $8,090,708 $7,355,189 Net benefits ($1,320,674) $7,889,369 $6,568,695 $5,851,480 ROI 389% Payback period 2 months

12 12 RTCS High Speed Guard: Overview THE NEED FOR SECURE INFORMATION SHARING As governments, agencies, and the private sector focus on the need to collaborate and share critical information, protecting and improving how that information is transferred between various networks becomes paramount. The most sensitive intelligence must often be sanitized and made accessible to various services, agencies, forces, and coalitions as quickly as possible. At the same time, data from a wide variety of sources must be transferred to protected enclaves for processing and analysis. The sharing and movement of this data are essential to the rapid, accurate, and precise execution of government and organizational missions. The persistent threat of cyber attack, penetration, and data loss requires that only the most secure methods are utilized to allow the sharing and transfer of classified or sensitive data. HIGH SPEED GUARD HSG is an accredited software solution that enables highly complex bi-directional automated data transfers between multiple domains or networks. HSG supports large enterprise systems with comparatively low administration costs, making it the ideal choice for large-scale deployments that require rapid automated data transfer. HSG has demonstrated the fastest bi-directional transfer rates of any guard technology. A typical HSG deployment is able to sustain transfer rates of more than 9 gigabits per second (Gb/s) on dual processor commodity servers, running a hardened Red Hat Enterprise Linux operating system with a strict Security Enhanced Linux policy. HSG is included in the Unified Cross Domain Management Office (UCDMO) Cross Domain Baseline list as an accredited and operational cross domain transfer solution. Because HSG is an operationally accredited system, the certification and accreditation process is streamlined for individual installations. FEATURES AND BENEFITS HSG has a number of features and benefits that make it the most widely used transfer guard in the industry. These include: Sustaining the industry s fastest transfer rates of more than 9 Gb/s on a 2 CPU platform. Being included on the UCDMO Cross Domain Baseline list. Being customer configurable for simplified management and maintenance. Enabling real-time video streaming while providing unparalleled control and auditing. Supporting multiple application protocols and adaptability for custom interfaces. Providing highly customizable data validation rules for maximum flexibility. Supporting complex web services. CONCLUSION With hundreds of customers and more than a decade and a half of success, RTCS is an industry leader in cross domain solutions. The company s products have a proven track record of proactively preventing government and commercial organizations from being compromised, while fostering the secure access and transfer of information. This allows the RTCS cross domain products to strike the right balance between information protection and information sharing a vital component to national security. HSG is a secure transfer solution that solves the difficult problem of satisfying security needs while enhancing information sharing.

13 13 Appendix A: Framework Assumptions FRAMEWORK ASSUMPTIONS Table 9 provides the model assumptions that Forrester used in this analysis. The discount rate used in the PV and NPV calculations is 10%, and the time horizon used for the financial modeling is one year. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult with their respective company s finance department to determine the most appropriate discount rate to use within their own organizations. TABLE 9 Model Assumptions Ref. Metric Calculation Value C1 Average fully loaded internal resource salary $95,040 C2 Average internal resource hourly rate C1/2,080 $46 C3 Average contractor hourly rate $150

14 14 Appendix B: Total Economic Impact Overview Total Economic Impact is a methodology developed by Forrester Research that enhances a company s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders. The TEI methodology consists of four components to evaluate investment value: benefits, costs, risks, and flexibility. BENEFITS Benefits represent the value delivered to the user organization IT and/or business units by the proposed product or project. Often product or project justification exercises focus just on IT cost and cost reduction, leaving little room to analyze the effect of the technology on the entire organization. The TEI methodology and the resulting financial model place equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization. Calculation of benefit estimates involves a clear dialogue with the user organization to understand the specific value that is created. In addition, Forrester also requires that there be a clear line of accountability established between the measurement and justification of benefit estimates after the project has been completed. This ensures that benefit estimates tie back directly to the bottom line. RISK Risk measures the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in two ways: 1) the likelihood that the cost and benefit estimates will meet the original projections, and 2) the likelihood that the estimates will be measured and tracked over time. TEI applies a probability density function known as triangular distribution to the values entered. At 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 enterprisewide upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration feature may translate to greater worker productivity if activated. The collaboration can only be used with additional investment in training at some future point in time. However, having the ability to capture that benefit has a PV that can be estimated. The flexibility component of TEI captures that value. COSTS Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business units may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the investments and expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures any incremental costs over the existing environment for ongoing costs associated with the solution. All costs must be tied to the benefits that are created.

15 15 Appendix C: Glossary Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Although the Federal Reserve Bank sets a discount rate, companies often set a discount rate based on their business and investment environment. Forrester assumes a yearly discount rate of 10% for this analysis. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult their respective organization to determine the most appropriate discount rate to use in their own environment. the discount rate (shown in the Framework Assumptions section) at the end of the year. PV calculations are calculated for each total cost and benefit estimate. 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. 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 NPV of cash flows. Payback period: The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs) equal initial investment or cost. Return on investment (ROI): A measure of a project s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits minus costs) by costs. A NOTE ON CASH FLOW TABLES The following is a note on the cash flow tables used in this study (see the example table below). The initial investment column contains costs incurred at time 0 or at the beginning of Year 1. Those costs are not discounted. All other cash flows in Years 1 through 3 are discounted using TABLE [EXAMPLE] Example Table Ref. Category Calculation Initial cost Year 1 Year 2 Year 3 Total

16 16 Appendix D: Endnotes 1 Forrester risk-adjusts the summary financial metrics to take into account the potential uncertainty of the cost and benefit estimates. For more information on Risk, please see page 9.