University of Kentucky Leveraging SAP HANA to Lead the Way in Use of Analytics in Higher Education

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1 IDC ExpertROI SPOTLIGHT University of Kentucky Leveraging SAP HANA to Lead the Way in Use of Analytics in Higher Education Sponsored by: SAP Matthew Marden April 2014 Randy Perry Overview Founded in 1865 as a land-grant institution, the University of Kentucky today encompasses 16 colleges and a hospital on a single campus in Lexington, Kentucky, serving over 28,000 undergraduate and graduate students. It faces challenges similar to those faced by most public universities, including declining funding from state and federal sources, pressure to avoid tuition increases, and the need to increase the efficiency of operations and staff. Several years ago, the university began considering how it could better use data about its student body, staff, and facilities. At about the same time, the university also embarked on an effort to increase its graduation rate from 60% to 70% over 10 years. To accomplish these goals, the university needed to develop "better and approachable insight" into its operations and the behavior of its students. The university deployed SAP HANA to drive these efforts. SAP HANA's value to the university is driven by the platform's powerful in-memory data analysis capabilities; it has increased data reporting speeds by as much as 420 times, making granular data available in minutes rather than days. Likewise, query times have been reduced from minutes to seconds. Further, because the university chose an object-oriented approach with SAP HANA, it can now reuse code and other model components, thereby cutting the cycle time for model creation and enabling real-time modeling and data analysis. Business Value Highlights Organization: University of Kentucky Location: Lexington, Kentucky Challenge: Use data and analytics to improve graduation rate and achieve operational efficiencies Solution: SAP HANA Cumulative Benefits: $6.17 million in benefits (discounted) over five years ROI of 509% Payback in 9.5 months Technology Benefits: The power of SAP HANA as a big data analytical and modeling solution stems from its in-memory platform, which combines several database architectural features to offer real-time analytic capabilities. It uses parallel, in-memory relational query techniques, which significantly speed up data processing, as well as columnar data storage, which allows for faster data assembly. Because SAP HANA employs compression methods, it has a smaller footprint than traditional designs, which allows Up to 420 times faster data reporting than legacy system Up to 15 times improvement in query load times Average data compression improvement of 77% Up to 87% reduction in extract, transform, and load (ETL) times Up to 80% of data updated in real time April 2014, IDC #247694

2 Data Services it to provide efficiencies for switching and storage. Also, SAP HANA's embedded text analytics capabilities allow unstructured nontextual data to be converted into structured, usable information (see Figure 1). FIGURE 1 SAP HANA Business Intelligence Environment SAP HANA Analytics Environment SAP ProSAM Blackboard Student Alerts Mobile Surveys Interactions SLT SAP BW SAP HANA R e p o r t i n g SAP BusinessObjects Tableau Other Query Tools Source: University of Kentucky, 2014 The University of Kentucky is performing robust data analyses and models in near real time with SAP HANA. It can now distill huge quantities of data, including nontextual data such as audio files and presentations, in much less time and with greater efficiency. The university uses outputs from SAP HANA to achieve a number of benefits. In fact, analytics enabled by SAP HANA are at the center of the school's efforts to adapt to the new reality facing universities requiring greater operational efficiencies and a deeper focus on supporting students. Dr. Vince Kellen, the university's Senior Vice Provost and CIO, explains that the school is using SAP HANA to create "actionable information" with much faster data replication and model building delivered through business intelligence tools. At the same time, his team is using SAP HANA to put "information into action," which means applying analytics to personalization services and workflow applications. This "information into action" is then leveraged to drive interaction with stakeholders across the university through intelligent workflows, which the team believes will change the perception, acceptance, and use of data analytics. The university is leveraging SAP HANA to distill huge quantities of data at its disposal, including significant amounts of nontextual data such as audio files and presentations, in less time and more efficiently than ever before IDC #

3 The university is leveraging SAP HANA to achieve organizational priorities, including improving its graduation rate. The university's six-year graduation rate has hovered around 60% for some years, but the school found it challenging to improve student retention without real-time access to information suggesting that a particular student was struggling. The University of Kentucky is now employing SAP HANA to pull together student information and use advanced analytics to calculate risk score coefficients for students and identify students who require additional support. For the university, this is a bold new step based on personalization of student services. By providing timely support, the university believes it can reduce student attrition and improve its graduation rate. If successful, the university can collect more tuition and achieve its mission of educating as many students as possible. The university is also using SAP HANA to identify efficiencies in staffing and facility use. In particular, it believes that it can develop a comprehensive understanding of classroom use patterns with SAP HANA. This will help it improve its classroom utilization rate and obviate the need for some classroom construction. Savings on construction will be sporadic and challenging to predict, but the scale of potential savings is large, which makes it a significant potential value to the university. In total, IDC projects that the University of Kentucky will realize nondiscounted benefits of $1.85 million annually from 2012 to 2016 because of SAP HANA's real-time analytics capabilities, resulting in a five-year ROI of 509% and a payback period of 9.5 months. Implementation The University of Kentucky has long understood the potential value of the large amounts of data it has about its students, staff, and facilities. However, it has struggled to create actionable insights from this data, limiting the practical impact on its operations. When the university began considering SAP HANA, it was seeking a data analytics solution that would enable it to integrate analytics into as many of its processes as possible. The university concluded that SAP HANA offered the right combination of power and speed of analytical processes with integration with its information systems. Prior to migrating to SAP HANA, the University of Kentucky employed a data warehouse as the repository for the 5TB of data it maintains about students and operations. Fulfilling data requests or creating models required this data to be extracted from various sources and loaded into the data warehouse. This slowed down the data analysis process and made it more challenging for the university's Business Intelligence and Institutional Research teams to reuse code or models. As a result, team members had less time to perform data analyses, and they often needed weeks to present model results to university decision makers. The time lag in presenting analytical outcomes also made it more challenging for these teams to convey the full value of advanced analytics to such decision makers. After selecting SAP HANA, the university deployed it quickly, although it waited longer to put it into operation. According to Dr. Kellen, "We installed the hardware, configured it, and began replicating data within two-and-a-half days in January 2012." The platform went live in March 2012, was piloted over the summer of 2012, and was operational in time for the fall term in The SAP product suite also includes SAP Data Services software, SAP Landscape Transformation software, and SAP BusinessObjects business intelligence solutions, running on Dell hardware in a Dell hosted environment IDC #

4 The university used the time after SAP HANA's hardware build to establish institutional support for the solution. Dr. Kellen explained, "We concluded that SAP HANA would be a disruptive solution and could have a major impact on university staff, faculty, and students." To position SAP HANA to succeed upon launch, his team took steps to prepare the university community for SAP HANA, including going through several iterations of the platform and creating stakeholder-specific analytical models to highlight the power of SAP HANA and win over end users. Benefits Dr. Kellen explained that the university is realizing benefits because SAP HANA enables faster data provisioning and robust analytical capabilities. He identified SAP HANA's "super-fast computational environment, with easy and real-time integration with our core information systems and, potentially, with any other data source" as the source of these benefits. Data reporting speeds have improved by up to 420 times, and query load times are up to 15 times faster. As a result, SAP HANA has transformed the ability of the university to conduct real-time data analysis and modeling, which the school is leveraging to adapt to the new reality for universities, improve student experiences and retention, and realize efficiencies in operational and capital expenses. At base, the University of Kentucky is using SAP HANA to better manage its student body, staff, and facilities. Dr. Kellen explained that "when you manage the data around assets you manage the assets better." He continued, "SAP HANA helps us manage all of our assets and improves how we handle expenses. With declining state and federal funds, effective financial management is critical. That's why the university of the future will be doing data analytics for revenue enhancement and cost control." For example, the university is using SAP HANA to assign classrooms more "SAP HANA helps us manage all of our assets and improves how we handle expenses. With declining state and federal funds, effective financial management is critical. That's why the university of the future will be doing data analytics for revenue enhancement and cost control." efficiently by identifying bottlenecks and needs of particular classes rather than just assigning faculty to particular classrooms. The University of Kentucky is realizing a number of quantifiable benefits through its use of SAP HANA. As an initial matter, the school is avoiding costs associated with its legacy data warehousing solution. Further, deployment of SAP HANA contributed to its decision to merge the Business Intelligence and Institutional Research teams, which has saved money and improved staff productivity. The university views SAP HANA as a driver of its efforts to achieve several organizational objectives, including increasing its graduation rate, which would allow it to better fulfill its mission and collect more in tuition. The university also expects to save money by avoiding construction of new buildings by making more productive use of existing facilities. Down the line, the university believes that SAP HANA will help it realize other benefits, such as improved staff utilization rates, efficiencies in budgeting, and even revenue-producing mobile applications, although this study has not quantified these potential benefits because they are less near term in nature IDC #

5 Quantifying the Benefits To quantify the benefits of SAP HANA to the University of Kentucky, IDC interviewed Dr. Kellen and his team, and asked a series of questions on the investment and benefits achieved from cost reductions, increased staff productivity, and business benefits. IDC then projected the results over five years to determine the ROI. Figure 2 shows the breakdown of nondiscounted benefits to the University of Kentucky, which averaged $1.85 million annually over the five-year period. FIGURE 2 Average Annual Benefits ($) Business benefits $1,018,000 Infrastructure savings $201,000 Staff productivity $629,000 Total: $1,848,000 per year Source: IDC, 2014 Infrastructure Cost Reduction By deploying the SAP HANA solution, the university was able to retire its legacy data warehouse system, along with its extract, transform, and load (ETL) tool and other software. When projected over five years, the savings on software maintenance averaged $186,900 per year. Annual hardware savings amounted to an average of $14,100 per year, resulting in an average total savings in infrastructure costs for the University of Kentucky of just over $201,000 annually over the five years. Staff Productivity Increase To fully leverage SAP HANA's real-time analytics capabilities and simplify operations, the university consolidated its Business Intelligence and Institutional Research groups into a single 15-member Advanced Analytics team. In the process, the group added three data scientists and still ended up with a lower total staff count because of the efficiencies enabled by SAP HANA. The annual savings from the reduction in personnel amounts to an average of $179,700 over five years IDC #

6 The Advanced Analytics team now has a sharper focus on strategic activities, such as developing new applications and model creation. These shifts should help its efforts to use data to shape and improve the student experience and manage the rising costs of education. Dr. Kellen explained how SAP HANA has changed his team's center of gravity and helped enable a "tidal wave" of functionality from his team, which is driving much improved productivity. By accomplishing more with fewer total employees, including having a more significant statistical and analytical focus, the university is realizing productivity gains from SAP HANA of $449,200 annually over the five years. SAP HANA has changed the team's center of gravity and helped enable a "tidal wave" of functionality. Thus, IDC projects that the University of Kentucky will realize total gains from savings and increased productivity of about $628,900 annually over five years. Business Benefits The University of Kentucky is also leveraging SAP HANA to achieve institutional objectives, such as improving its graduation rate and making more efficient use of facilities. The university has set an ambitious goal of increasing its six-year graduation rate from 60% to 70% in 10 years. Robust analytics enabled by SAP HANA are central to this effort by helping the university identify students who are struggling and are at risk of leaving. With early identification, the university can take steps to provide personalized services to such students and reduce the likelihood that they will leave. By reducing attrition and increasing the graduation rate, the university would bring in more tuition. Like most public universities, the University of Kentucky faces significant pressure to avoid or limit tuition hikes. This means that capturing more tuition revenue through higher graduation rates is beneficial not only in terms of revenue but also in terms of public relations. The university will refine and improve its student retention efforts in the coming years, but IDC estimates that the school will achieve an average of $210,800 per year in increased tuition over five years by beginning to improve its graduation rate in part through analytics enabled by SAP HANA. The SAP HANA solution is providing university decision makers with deeper insights into their work and operations by enabling the creation of workbooks and visualizations of operational data. For example, the university can now create accurate visual depictions of classroom utilization in near real time. As Dr. Kellen explained, "The real-time data and faster reporting speeds are a game changer. Data modeling is impractical if it takes 20 minutes each time you want to see the impact of changing a single element. However, if it takes less than a second, you have a powerful business tool." Dr. Kellen explained that "a little bit of analytics can go a long way" in impacting costs and use patterns. "For instance, a 10% improvement in classroom utilization can help accommodate hundreds more students without the need for new buildings." Visualizations enabled by SAP HANA are helping identify where classroom utilization is low or uneven so that use patterns can "The real-time data and faster reporting speeds are a game changer. Data modeling is impractical if it takes 20 minutes each time you want to see the impact of changing a single element. However, if it takes less than a second, you have a powerful business tool." be adjusted accordingly. The university believes that this understanding of classroom use will help it avoid construction costs. Avoiding construction of even one new classroom in the next 20 years would 2014 IDC #

7 be a significant capital cost reduction. IDC assumes that the University of Kentucky will begin to realize efficiencies in classroom utilization and building costs only in the next five years and therefore forecasts that the university will save an average of $807,500 annually over five years. Return on Investment From interviews with the University of Kentucky, IDC was able to quantify the benefits and investment associated with the school's deployment of SAP HANA's real-time data analytical capabilities and to develop an ROI analysis. In total, IDC projects that the University of Kentucky will realize a discounted total benefit of $6.17 million in cost savings, productivity gains, and business benefits from its use of SAP HANA over five years compared with a discounted investment of $1.01 million. This results in a five-year ROI of 509% with payback on the investment occurring in 9.5 months (see Table 1). TABLE 1 Five-Year ROI Analysis Benefit (discounted) Investment (discounted) Net present value (NPV) $6.17 million $1.01 million $5.16 million Return on investment (ROI) 509% Payback period 9.5 months Discount rate 12% Source: IDC, 2014 IDC conducted several interviews with the University of Kentucky to quantify the benefits and investment associated with its use of SAP HANA and created a ROI analysis from the results. IDC calculates the ROI and payback period in a three-step process: 1. Measure the benefits from increased IT staff and user productivity and other cost savings since deployment. 2. Ascertain the total investment. 3. Project the investment and benefit over five years and calculate the ROI and payback period. The ROI is the five-year net present value (NPV) of the benefit divided by the discounted investment. To account for the time value of money, IDC bases the ROI and payback period calculations on a 12% discounted cash flow IDC #

8 About IDC International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make factbased decisions on technology purchases and business strategy. More than 1,100 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries worldwide. For 50 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. Global Headquarters 5 Speen Street Framingham, MA USA idc-insights-community.com Copyright Notice External Publication of IDC Information and Data Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason. Copyright 2014 IDC. Reproduction without written permission is completely forbidden.

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