A Forrester Total Economic Impact™
Study Commissioned By IBM
July 2019

The Total Economic
Impact Of IBM® Power
Systems™ For SAP HANA®
Cost Savings And Business Benefits Enabled
By IBM Power Systems For SAP HANATable Of Contents
Executive Summary
Key Findings

1
1

TEI Framework And Methodology

3

The IBM Power Systems For SAP HANA Customer Journey
Interviewed Organizations

4
4

Key Challenges

4

Key Results

5

Composite Organization

5

Analysis Of Benefits
Avoided Cost Of Alternate Server Architecture

Project Team:
Dean Davison
Corey McNair

6
6

Avoided Cost Of System Downtime

7

Reduced Cost Of Managing And Maintaining Infrastructure

8

Reduced Cost Of Power And Cooling

8

Unquantified Benefits

9

Analysis Of Costs
Cost Of IBM Power Systems Devices

10
10

Financial Summary
IBM Power Systems for SAP HANA: Overview
Appendix A: Total Economic Impact
Appendix B: Supplemental Material
Appendix C: Endnotes

11
12
13
14
14

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Executive Summary
Benefits And Costs

Reduced cost of alternate server
architecture:$1,472,727

Reduced cost of downtime:$1,074,320

As businesses adopt SAP HANA to run their core applications, the server
environment needs to scale on demand with high reliability. IBM Power
Systems scale large HANA environments with flexibility to easily
accommodate changes in business needs while increasing application
availability and systems admin productivity. Customers told Forrester thatmoving to IBM Power Systems reduced the cost to purchase, manage,and maintain systems to deploy SAP HANA.
IBM commissioned Forrester Consulting to conduct a Total Economic
Impact™ (TEI) study and examine the potential return on investment (ROI)
enterprises may realize by deploying Power Systems for SAP HANA.
The purpose of this study is to provide readers with a framework toevaluate the potential financial impact of the IBM Power Systems for SAP
HANA on their organizations. To better understand the benefits, costs, andrisks associated with this investment, Forrester interviewed several
customers with experience using IBM Power Systems for SAP HANA.
Prior to using IBM Power Systems, the customers all used a complex
array of systems to manage application environments such as SAP ERPCentral Component (ECC) and SAP Business Warehouse (BW). Whenmigrating to SAP HANA, the organizations worried about the system
capacity to handle large HANA databases, often in excess of 10TBs.
One interviewee indicated: “With requirements for systems that included
production, disaster recovery, development, and testing, we had about 50
physical computers. On top of that, we couldn’t layer virtualization on topof our previous environment. That’s when we acknowledged that we could
rebuild this environment on IBM Power Systems and build out theenvironment on just four physical computers.”

Reduced cost of managing
infrastructure (including powerand cooling):$441,794

Key Findings
Quantified benefits. The following risk-adjusted present value (PV)quantified benefits are representative of those experienced by thecompanies interviewed:› Avoided cost of alternate server architecture saving $1,472,727. In
lieu of an IBM Power Systems solution, the organization would haverequired an alternate server architecture. While the exact technicalarchitecture could vary, Forrester’s model assumes a total server cost of$1,800,000.

Cost for IBM Power Systems:$1.3 million› Avoided cost of system downtime valued at $1,074,320. Customers
reported that the IBM Power Systems provided increased reliability
compared to their previous server architectures. The average reductionin planned and unplanned downtime averaged 4 hours per month or 48
hours per year. The interviewed companies experienced a wide range in
the average cost per hour of downtime; Forrester used a midpoint valueof $10,000 per hour.
› Reduced cost of managing and maintaining infrastructure of$323,415. The consolidated architecture also required less effort tomanage and maintain. Among the customers interviewed, the savings
averaged about 60% for system admins. Organization could focus these
individuals on higher-value activities.

1 | The Total Economic Impact™ Of IBM Power Systems For SAP HANA› Reduced cost of power and cooling worth $118,379. The cost of
power and cooling is increasingly important for infrastructure purchases.
While the IBM servers do consume a higher rate of power, the systemarchitecture allowed customers to dramatically reduce the number ofservers and thus the kWhs required.

ROI
137%

Unquantified benefits. The interviewed organizations experienced thefollowing benefits, which are not quantified for this study:

Benefits PV$3 million› Using built-in virtualization to enable faster SAP HANA
provisioning. Integrated virtualization capabilities allowed customers tomore easily do things such as provision new SAP HANA instances more
rapidly. Customers used the phrase “at the push of a button” whendescribing the value of built-in virtualization.

NPV$1.7 million› Leveraging IBM’s Live Partition Mobility (LPM). Customers reported
that IBM’s LPM capabilities allowed them to move a live database fromone computer to another, which significantly reduced the need for
downtime for critical databases during planned maintenance activities.

Payback
7 months

Costs. The interviewed organizations experienced the following riskadjusted PV costs:› Cost of IBM Power Systems devices of $1,260,000. This is the list
price for three E950 servers that includes a three-year warranty alongwith SUSE Linux for SAP and PowerVM (hypervisor) licenses.
Forrester’s interviews with three existing customers and subsequent
financial analysis found that an organization based on these interviewed
organizations experienced benefits of $3 million over three years versus
costs of $1.3 million, adding up to a net present value (NPV) of $1.7 and
an ROI of 137%.

Financial Summary

Payback period:
7 months

Total benefits
PV, $3.0M
Total costs PV,$1.3M
InitialYear 1

2 | The Total Economic Impact™ Of IBM Power Systems For SAP HANA

Year 2

Year 3

TEI Framework And Methodology
From the information provided in the interviews, Forrester has constructeda Total Economic Impact™ (TEI) framework for those organizations
considering implementing IBM Power Systems for SAP HANA.
The objective of the framework is to identify the cost, benefit, and risk
factors that affect the investment decision. Forrester took a multistep
approach to evaluate the impact that IBM Power Systems can have on anorganization deploying HANA environments:

The TEI methodology
helps companies
demonstrate, justify,
and realize thetangible value of IT
initiatives to bothsenior management
and other key
businessstakeholders.

DUE DILIGENCE
Interviewed IBM stakeholders and Forrester analysts to gather data
relative to Power Systems.
CUSTOMER INTERVIEWSInterviewed three organizations using Power Systems for SAP HANA toobtain data with respect to costs, benefits, and risks.
COMPOSITE ORGANIZATION
Designed a composite organization based on characteristics of theinterviewed organizations.
FINANCIAL MODEL FRAMEWORK
Constructed a financial model representative of the interviews using the
TEI methodology and risk-adjusted the financial model based on issues
and concerns of the interviewed organizations.
CASE STUDY
Employed four fundamental elements of TEI in modeling IBM Power
Systems’ impact: benefits, costs, and risks. Given the increasing
sophistication that enterprises have regarding ROI analyses related to IT
investments, Forrester’s TEI methodology serves to provide a complete
picture of the total economic impact of purchase decisions. Please see
Appendix A for additional information on the TEI methodology.

DISCLOSURES
Readers should be aware of the following:This study is commissioned by IBM and delivered by Forrester Consulting. It is
not meant to be used as a competitive analysis.
Forrester makes no assumptions as to the potential ROI that otherorganizations will receive. Forrester strongly advises that readers use their own
estimates within the framework provided in the report to determine theappropriateness of an investment in IBM Power Systems for SAP HANA.
IBM reviewed and provided feedback to Forrester, but Forrester maintains
editorial control over the study and its findings and does not accept changes tothe study that contradict Forrester’s findings or obscure the meaning of thestudy.
IBM provided the customer names for the interviews but did not participate in
the interviews.

3 | The Total Economic Impact™ Of IBM Power Systems For SAP HANAThe IBM Power Systems For SAP HANA
Customer Journey
BEFORE AND AFTER THE IBM POWER SYSTEMS INVESTMENT

Interviewed Organizations
For this study, Forrester conducted three interviews with IBM Power
Systems customers with SAP HANA deployed. Interviewed customers
include the following:
INDUSTRYREGION

Manufacturing andlogistics

Global operations
headquartered in Europe

Pharmaceutical

Global operations
headquartered in North
America

International IT
services provider

Headquartered in North
America with operations
in Europe

INTERVIEWEEBACKGROUNDManager, SAP Basis

Migrated to IBM Power Systems to support
the company’s migration to SAP HANA. The
company realized increased reliability andimproved scalability for HANA’s in-memory
database requirements.

Head of ERP
architecture

Deployed an enterprisewide SAP HANA
solution based on IBM Power Systems. The
company stores everything from recipes tomanufacturing drugs to enterprise financial
data on a 10TB database.

Global SAP architect

Created services offering for small- andmedium-sized customers. Using IBM Power
Systems allowed the company to increase
reliability and the ability to deploy offerings
to its customers more rapidly.

Key Challenges
The interviewees shared key challenges or problems that drove theirneed for an alternate solution. Those issues included:› Relying on systems to run every aspect of business. The
pharmaceutical exec indicated: “Reliability is paramount when
deploying a 10TB database. If the system is down, our business iscrippled. We can’t even produce product because our drug recipes arein the system.”› Recovering from disasters. The same executive continued:“Obviously, disaster recovery is also critical to our business. We
amended a very aggressive recovery scenario with a recovery point
objective (RPO) of less than 1 minute and a recovery time objective(RTO) of less than 4 hours.”› Managing an unwieldy number of devices, each requiring patches
and updates. The manager from the manufacturing and logistics
company mentioned: “We had a total of 16 servers, eight per data
center, and we needed two weeks to take care of all the patches,
upgrades, and security patches on the servers. We basically ran fromserver to server.”› Running an SAP HANA database 24x7. The manager continued:“We are a global company and need our database to be available
around the clock. While it’s daytime on one side of the world andpeople are actively working, the nighttime running of reports on the
opposite side of the world must run concurrently.”
4 | The Total Economic Impact™ Of IBM Power Systems For SAP HANA

“We are a global company andneed our database to beavailable around the clock.
While it’s daytime on one sideof the world and people are
actively working, the nighttime
running of reports on the
opposite side of the worldmust run concurrently.”
Manager, SAP Basis,
manufacturing and logistics

Key Results
The interviews revealed that key results from the Power Systems for
SAP HANA investment include:› Reduced downtime for planned and unplanned outages. The headof ERP architecture told Forrester during the interview: “We run ourcompany on a 10 terabyte (TB) SAP HANA database. It runs
everything from manufacturing to financial systems. On the rareoccasion that the system goes down, it stops the company, and it cantake hours to recover because the database is so large.” The executive
continued describing how system downtime on IBM Power Systems
has literally been zero hours for 18 months.

“We run our company on a 10
terabyte (TB) SAP HANA
database. It runs everythingfrom manufacturing to financial
systems. On the rare occasion
that the system goes down, it
stops the company, and it cantake hours to recover because
the database is so large.”
Head of ERP architecture,pharmaceutical› Increased productivity of system admins. Interviewees indicatedthat the reduced number of physical servers also impacted the
productivity of system admins. One interviewee specifically mentioned:“We have still the same administrators, but they can do additional
work, more important work, and more sophisticated work rather thanmerely updating systems.”› Providing capacity on demand. The pharmaceutical executive said:“We use the capacity on demand model. It allows us to scale a virtualcomputer to be bigger and bigger on the fly because each frame has
32TBs of addressable memory.” Another interviewee explained: “WithIBM Power Systems and PowerVM virtualization, we can provisionresources much more efficiently. If we needed to provide new large
SAP HANA production systems in the past, we would have to buy,
install, and configure new physical appliances. Today, we can simply
set up new logical partitions as and when needed, making the processof provisioning new large SAP HANA systems up to 20 times faster —a huge improvement. Being able to make resources available more
quickly in this way enables us to react faster to changing customer
requirements and business demands.”“We have still the sameadministrators, but they can doadditional work, more
important work, and moresophisticated work rather thanmerely updating systems.”
Global SAP architect, international
IT services provider

Composite Organization
Based on the interviews, Forrester constructed a TEI framework, acomposite company, and an associated ROI analysis that illustrates theareas financially affected. The composite organization is representativeof the three companies that Forrester interviewed and is used to present
the aggregate financial analysis in the next section. The composite
organization that Forrester synthesized from the customer interviews has
the following characteristics:

Previous architecture:
20 systems› Managed an 8TB database in production running on SAP HANA withfour SAP HANA instances of 2TB each.
› Averaged planned and unplanned downtime of 4 hours per month.
› Valued downtime at a cost of $10,000 per hour.
› Maintained an environment consisting of 20 servers across production,
disaster recovery, development, and testing.
› Employed three system admins to manage and maintain the systems
at both primary and disaster recovery locations.

5 | The Total Economic Impact™ Of IBM Power Systems For SAP HANAIBM Power Systems
architecture: 3 systems

Analysis Of Benefits
QUANTIFIED BENEFIT DATA AS APPLIED TO THE COMPOSITE

Total Benefits
Ref.

BenefitYear 1

Year 2

Year 3

Total

Present
Value

Atr

Avoided cost of alternate server architecture$1,620,000$0$0$1,620,000$1,472,727

Btr

Avoided cost of system downtime$432,000$432,000$432,000$1,296,000$1,074,320

Ctr

Reduced cost of managing and maintaining
infrastructure$130,050$130,050$130,050$390,150$323,415

Dtr

Reduced cost of power and cooling$47,602$47,602$47,602$142,806$118,379

Total benefits (risk-adjusted)$2,229,652$609,652$609,652$3,448,956$2,988,841

Avoided Cost Of Alternate Server Architecture
Deploying a scale-up architecture with virtualization reduced the numberof servers and complexity of the environment. Customers using IBM
Power Systems significantly reduced the number of systems (and related
rack units) required. The three E950 systems in this study compared tothe previous architecture of:

The table above shows the total of all
benefits across the areas listed below,
as well as present values (PVs)discounted at 10%. Over three years,
the composite organization expects
risk-adjusted total benefits to be a PVof more than $3 million.

› Four production systems.
› Four systems for disaster recovery.
› Four preproduction systems.
› Four development systems› Four systems for testing and QA.

$1.5 million

While Forrester assumes a 20-server alternate architecture; in practice,other architectures could take a number of forms. For example, thedevelopment and QA environments might be managed with fewer
servers. Similarly, companies can sometimes satisfy their DR
requirements without duplicating the exact production environment.

three-year
benefit PV

To account for these variations, Forrester based the pricing of thealternate environment using aggressively priced, commodity, racksystems and used the lowest of possible pricing alternatives. Whenconsidering alternate costs, remember that Forrester’s model is basedon a company with an 8TB SAP HANA database in production with four
HANA instances of 2TB each. Forrester risk-adjusted this benefit
downward by 10%, yielding a three-year risk-adjusted total PV of$1,472,727.

6 | The Total Economic Impact™ Of IBM Power Systems For SAP HANA

49%

Avoided cost of alternate
server architecture: 49%of total benefits

Avoided Cost Of Alternate Server Architecture: Calculation Table
Ref.

MetricCalculation

A1

Original CAPEX of previous architecture

At

Avoided cost of previous technology architecture=A1

Risk adjustment

↓10%

Atr

Year 1

Year 2

Year 3$1,800,000$1,800,000

Avoided cost of previous technology architecture (risk-adjusted)$0$1,620,000$0$0Avoided Cost Of System Downtime
The interviewed organizations experienced both planned and unplanned
downtime averaging 4 hours per month using their previous systems,
often for activities such as maintenance, updates, or patches. Because
the SAP HANA database is a large, in-memory system, merely the taskof reloading a multi-terabyte database into memory required an extended
period of time.

$1.1 million
three-year
benefit PV

In the financial model, Forrester calculates:

36%› Four hours of planned or unplanned downtime per month. Readers
should adjust the value to represent the total downtime that theyexperience in their current environments.
› An average cost per hour of $10,000 of downtime. Interviewees
expressed costs that ranged from a couple thousand dollars tohundreds of thousands of dollars per hour.
The risk inherent in Forrester’s calculation is the wide range of
responses in the interviews. To account for this risk, Forrester adjusted
this benefit downward by 10%, yielding a three-year risk-adjusted total
PV of nearly $1,074,320.

Avoided cost of system
downtime: 36% of total
benefits

Avoided Cost Of System Downtime: Calculation Table
Ref.

MetricCalculation

Year 1

Year 2

Year 3

B1

Avoided an average four hours of downtime per month(planned and unplanned)

Frominterviews

48

48

48

B2

Cost to organization per hourFrominterviews$10,000$10,000$10,000

Bt

Avoided cost of system downtime

B1*B2$480,000$480,000$480,000

Risk adjustment↓10%$432,000$432,000$432,000

Btr

Avoided cost of system downtime (risk-adjusted)

7 | The Total Economic Impact™ Of IBM Power Systems For SAP HANA

Reduced Cost Of Managing And Maintaining
Infrastructure
In addition to reducing the cost of downtime, customers freed up thework of system admins to focus on other, higher-value tasks within theorganization. While the number of staff managing the systems varied
widely among interviewees, they consistently indicated that improved
productivity of system admins was around 60% (responses ranges from
50% to 75%).
In the financial model, Forrester calculates this benefit using threesystem admins who realize a 60% reduction in the work required to carefor IBM Power Systems compared to the previous architecture. Using an
average burdened salary of $85,000, that results in an annual
productivity benefit of $153,000.
As with previous benefits, readers are likely to realize a range of value
for the benefit depending on the current organization of system admins,
other systems in the data centers, the efficiency of their current
environments, and the average salaries in a specific geography. To
account for these risks, Forrester adjusted this benefit downward by
15%, yielding a three-year risk-adjusted total PV of $323,415.

11%$323,415
three-year
benefit PV

Reduced cost of
managing andmaintaining infrastructure:
11% of total benefits

Reduced Cost Of Managing And Maintaining Infrastructure: Calculation Table
Ref.

MetricCalculation

Year 1

Year 2

Year 3

C1

Number of system admins focused on servers before IBM

Frominterviews

3

3

3

C2

Improved productivity of system adminsFrominterviews

60%

60%

60%

C3

Average burdened salaryFrominterviews$85,000$85,000$85,000

Ct

Reduced cost of managing and maintaining infrastructure

C1*C2*C3$153,000$153,000$153,000$130,050$130,050$130,050

Risk adjustment
Ctr

↓15%

Reduced cost of managing and maintaining infrastructure(risk-adjusted)

Reduced Cost Of Power And Cooling
The cost to both power and cool systems is an increasingly relevant costfor system purchase due to the increased density of both compute andstorage resources. In fact, the US Chamber of Commerce indicates thatthe average number of kWh consumed per system in a data center
ranges from 15 to 25 kWh and an annual consumption of 8,760 kWh peryear per RU.1
The impact for the composite organization was a reduction of 20 systems
that averaged 2.5 kWhs for a total consumption of 438,000 per year.
IBM’s Power architecture average for 3 systems consumed a total of 12
kWhs. Using an average cost per kWh of $0.13 from the US Departmentof Energy, the savings reach $47,602 per year.2 Readers should replace
both the value for RU savings and the local cost per kWh for electricity
with local data to calculate the benefit for their organizations.
To account the variation that readers will experience, Forrester adjusted
this benefit downward by 5%, yielding a three-year risk-adjusted total PV
of $118,379.

8 | The Total Economic Impact™ Of IBM Power Systems For SAP HANA

Implementation risk is the risk that a
proposed investment may deviate fromthe original or expected requirements,
resulting in higher costs than
anticipated. The greater theuncertainty, the wider the potential
range of outcomes for cost estimates.

Reduced Cost Of Power And Cooling: Calculation Table
Ref.

MetricCalculation

Year 1

Year 2

Year 320 systems *2.5 kWhs

50

50

50

D1

Number of kWhs consumed with alternatearchitecture

D3

Total kWH required per year

D1*24 hours*365 days

438,000

438,000

438,000

D4

Number of kWhs consumed by IBM Powerarchitecture

From IBM

12

12

12

D6

Total kWHs required per yearD4*24 hours*365 days

52,56052,56052,560D7

Price per kWh

US Department ofEnergy data

$0.13

$0.13

$0.13

Dt

Reduced cost of power and cooling(D3-D6)*D7$50,107$50,107$50,107$47,602$47,602$47,602

Risk adjustment
Dtr

↓5%

Reduced cost of power and cooling (risk-adjusted)

Unquantified Benefits
In addition to the benefits outlined above, the interviewed executives
shared other benefits that did not have specific financial implications.
Specifically, the companies benefited in the following ways:› Using built-in virtualization to enable faster SAP HANA
provisioning. One interviewee indicated: “One thing about Power isthat the virtualization is built right into it, which is a significant
advantage for us. Because it’s virtualized, we are able to do all theother things that come with virtualization (e.g., easily provision new
HANA instances or change capacity allocation at the push of abutton).” Another interviewee added: “We can flexibly scale up, if
needed, by pushing a button, and within minutes. This is thanks to
Capacity on Demand capabilities that enable us to activate additional
processors and memory as needed. Having fewer servers reduced ourphysical footprint by 50%, saving us a great deal of floor space andhalving energy costs.”› Leveraging IBM’s Live Partition Mobility (LPM). An architectindicated: “IBM has functionality called Live Partition Mobility thatallows us to move a live database from one computer to anotherwithout impacting the business. It allows us to do maintenance on a
hardware frame because we can move the database and vacate an
entire frame by moving the workload.”

9 | The Total Economic Impact™ Of IBM Power Systems For SAP HANA

Impact risk is the risk that the businessor technology needs of theorganization may not be met by theinvestment, resulting in lower overall
total benefits. The greater theuncertainty, the wider the potential
range of outcomes for benefit
estimates.

Analysis Of Costs
QUANTIFIED COST DATA AS APPLIED TO THE COMPOSITE

Total Costs
Ref.

Cost

InitialYear 1

Year 2

Year 3

Total

Present Value

Etr

Cost of IBM Power Systems devices$1,260,000

$0

$0

$0

$1,260,000$1,260,000

Total costs (risk-adjusted)$1,260,000

$0

$0

$0

$1,260,000$1,260,000

Cost Of IBM Power Systems Devices
The price for three IBM E950 Power Systems totaled $1.26 million. The
list price for these systems includes a three-year warranty, which
eliminates the typical annual maintenance costs. It also includes SUSE
Linux for SAP and PowerVM (hypervisor) license and support for three
years. Because the cost is based on list price, Forrester did not riskadjusted this cost, yielding a three-year risk-adjusted total PV of $1.26
million.

10 | The Total Economic Impact™ Of IBM Power Systems For SAP HANAThe table above shows the total of all
costs across the areas listed below, as
well as present values (PVs)discounted at 10%. Over three years,
the composite organization expects
risk-adjusted total costs to be a PV ofnearly $1.3 million.

Financial Summary
CONSOLIDATED THREE-YEAR RISK-ADJUSTED METRICS

Cash Flow Chart (Risk-Adjusted)

The financial results calculated in the
Benefits and Costs sections can beused to determine the ROI, NPV, andpayback period for the composite
organization’s investment. Forrester
assumes a yearly discount rate of 10%
for this analysis.

Total costs
Total benefits
Cumulative net benefits
Cash
flows

$2.5 M$2.0 M$1.5 M$1.0 M

These risk-adjusted ROI,
NPV, and payback period
values are determined byapplying risk-adjustment
factors to the unadjusted
results in each Benefit andCost section.

$0.5 M-$0.5 M-$1.0 M-$1.5 M
InitialYear 1

Year 2

Year 3

Cash Flow Analysis (risk-adjusted estimates)
InitialYear 1

Year 2

Year 3

Total

Present
Value

Total costs($1,260,000)

$0

$0

$0

($1,260,000)($1,260,000)

Total benefits$0$2,229,652$609,652$609,652$3,448,956$2,988,841

Net benefits($1,260,000)$2,229,652$609,652$609,652$2,188,956$1,728,841

ROI
Payback period

11 | The Total Economic Impact™ Of IBM Power Systems For SAP HANA

137%
7.0 months

IBM Power Systems for SAP HANA: Overview
The following information is provided by IBM. Forrester has not validated any claims and does not endorse IBMor its offerings.
Discovering and exploiting real-time insights from SAP HANA® places massive scalability, availability, andperformance demands on an organization’s infrastructure. Just as important, that infrastructure must meet thosedemands in an environment with flat to declining IT budgets. SAP HANA running on IBM® POWER® hardware
helps you meet these needs.
The HANA on POWER solution runs the same SUSE or RedHat Linux distributions as x86 servers, with theflexibility, scalability, resiliency, and performance advantages of POWER servers that help you:› Accelerate SAP HANA deployments with:• Flexibility of built-in virtualization that allows faster provisioning of HANA instances and allocating capacitywith granularity as little as 0.01 cores and 1 GB.
› Minimize infrastructure and simplify management with:• Virtualization scalability of up to 24TB in scale up.
• The ability to deploy up to 16 SAP HANA modules in a single server.
• Shared processor pools that optimizes CPU cycles across HANA VMs in a server.
› Maximize uptime with:• Zero-impact planned downtime leveraging Live Partition Mobility.
• Highest availability non-mainframe Linux platform for over a decade.iii

12 | The Total Economic Impact™ Of IBM Power Systems For SAP HANA

Appendix A: Total Economic Impact
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 propositionof 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 businessstakeholders.

Total Economic Impact Approach
Benefits represent the value delivered to the business by the
product. The TEI methodology places equal weight on themeasure of benefits and the measure of costs, allowing for a
full examination of the effect of the technology on the entire
organization.

Costs consider all expenses necessary to deliver the
proposed value, or benefits, of the product. The cost category
within TEI captures incremental costs over the existing
environment for ongoing costs associated with the solution.

Flexibility represents the strategic value that can beobtained for some future additional investment building on
top of the initial investment already made. Having the ability
to capture that benefit has a PV that can be estimated.

Present value (PV)The present or current
value of (discounted) cost andbenefit estimates given at aninterest rate (the discount rate).
The PV of costs and benefits feed
into the total NPV of cash flows.

Net present
value (NPV)The present or current value of(discounted) future net cash flows
given an interest rate (the discountrate). A positive project NPV
normally indicates that theinvestment should be made, unlessother projects have higher NPVs.

Return on
investment (ROI)
A project’s expected return inpercentage terms. ROI is
calculated by dividing net benefits(benefits less costs) by costs.

Discountrate

Risks measure the uncertainty of benefit and cost estimates
given: 1) the likelihood that estimates will meet original
projections and 2) the likelihood that estimates will be
tracked over time. TEI risk factors are based on “triangular
distribution.”

The initial investment column contains costs incurred at “time 0” or at the
beginning of Year 1 that are not discounted. All other cash flows are discounted
using the discount rate at the end of the year. PV calculations are calculated foreach total cost and benefit estimate. NPV calculations in the summary tables are
the sum of the initial investment and the discounted cash flows in each year.
Sums and present value calculations of the Total Benefits, Total Costs, andCash Flow tables may not exactly add up, as some rounding may occur.

13 | The Total Economic Impact™ Of IBM Power Systems For SAP HANAThe interest rate used in cash flow
analysis to take into account thetime value of money. Organizations
typically use discount rates
between 8% and 16%.

Payback
periodThe breakeven point for aninvestment. This is the point in timeat which net benefits (benefits
minus costs) equal initialinvestment or cost.

Appendix B: Supplemental Material
Online Resources
Source: U.S. Chamber of Commerce, Data Centers, Jobs and Opportunities in Communities Nationwide, 2017.
(https://www.uschamber.com/sites/default/files/ctec_datacenterrpt_lowres.pdf).
Source: U.S. Energy Information Administration, (https://www.eia.gov/electricity/state/).

Appendix C: Endnotes
1 Source: “Data Centers: Jobs and Opportunities in Communities Nationwide,” US Chamber of Commerce(https://www.uschamber.com/report/data-centers-jobs-opportunities-communities-nationwide).
2 Source: “Electricity, State Electricity Profiles,” US Energy Information Administration, January 8, 2019(https://www.eia.gov/electricity/state/).
iii Source: ITIC 2019 Global Server Hardware, Server OS Reliability Survey(https://www.ibm.com/downloads/cas/DV0XZV6R)

14 | The Total Economic Impact™ Of IBM Power Systems For SAP HANA