Total Cost of IT Ownership

+ Full Text

UNDERSTANDING & CALCULATING

Total Cost of IT Ownership Knowing your organization’s total cost of IT is incredibly valuable. With this powerful information in hand, you’ll be better equipped to make recommendations for investments, hiring and overall growth.

Table of Contents Introduction.................................................................................................1 How do you compare in healthcare IT?.....................................................2 Calculating your IT cost..............................................................................3 IT cost drivers..............................................................................................6 Refresh - how much and how often?!........................................................7 The opportunity cost - what’s at stake?.....................................................10 Right-sizing your environment....................................................................11 Cloud as an alternative to the refresh cycle..............................................12 Evaluating your next steps.........................................................................14 About Netgain.............................................................................................15

Total Cost of IT Ownership | Contents

Introduction Gartner estimates that IT spending in just the healthcare space will increase by nearly 7 percent from 2017 to 2018. The two primary drivers of the increase are expected to be hardware and outsourcing/ third-party IT services. Once viewed as a necessary and unpredictable capital expense, the perception of IT has shifted. Evolutions in technology like population health, cloud computing and data analytics are causing business leaders to see IT as a strategic enabler of business and growth. Knowing your organization’s total cost of IT and how it compares to the industry is incredibly valuable. With this powerful information in-hand, you’ll be better equipped to make recommendations for investments, hiring and overall growth. When aligned with business goals, your IT roadmap can play a real role in taking your organization to the next level.

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How do you compare in healthcare IT? Technology’s role in healthcare delivery has grown significantly since HITECH pushed the rapid adoption of electronic health records (EHR). Healthcare providers around the country dreaded the capital investment of EHR and pushed back on EHR adoption, though it promised increased efficiencies and financial incentives. Now, almost eight years later, nearly 90 percent of healthcare organizations have implemented an EHR and many are realizing the promised benefits. The new trend is integrating the entire care delivery system into a seamless patient and provider experience. This drive to integration means healthcare IT has never been as prevalent in the practice as it is today. Gartner reports the average healthcare organization spends 4.3 percent of their total revenue on ITrelated investments. The largest percentage of the IT budget is typically spent on application support, according to Gartner, followed by data center and networking costs. Additionally, on average, about three percent of the total employee base is typically dedicated to IT. In a practice of 10 providers and 50 staff, that’s almost 2 full-time IT employees.

IT spending by IT functional area1 APPLICATION SUPPORT

32%

DATA CENTER

20% 13%

NETWORK IT MANAGEMENT, FINANCE & ADMINISTRATION

11%

END-USER COMPUTING

10%

APPLICATION DEVELOPMENT IT SERVICE DESK

9% 5%

  1. Gartner ITBUdget: Enterprise Comparison Tool, http://www.gartner.com/downloads/public/explore/metricsAndTools/ITBudget_Sample_2012.pdf

Spread across the user base, Gartner reports that healthcare organizations spend $6,820 per year, per user, which calculates to about $570 per month, per user. Considering your total revenue, IT spend and staff allocation, how does your practice compare to the industry averages? Wondering how to accurately calculate your total IT cost? Read on.

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Calculating your IT cost Some IT costs are obvious and easily identified while other costs are hidden and not typically attributed to IT. Gartner states “for IT, total cost of ownership includes hardware and software acquisition, management and support, communications, end-user expenses and the opportunity cost of downtime, training and other productivity losses.” Using Gartner’s recommendations as our baseline, we’ve outlined categories along with common expenses associated with each. This should help you calculate your total cost of IT.

Hardware Hardware costs can add up quickly and require a great deal of maintenance, monitoring and management. Depending on your number of users, complexity of applications and data storage requirements, practices and firms are required to invest hundreds of thousands of dollars in hardware. This cost is almost always a capital expense, putting a financial burden on the organization, limiting their ability to invest in other areas of the business. When calculating your hardware costs, be sure to incorporate: • • • •

Servers – physical and/or plans for virtualization Storage – physical and/or plans for virtualization or tiered storage to help control storage costs Workstations – all costs involved with user workstations Security hardware

Software One of the most commonly overlooked expenses in IT is software. This also happens to be the opportunity for the greatest cost savings with private cloud, especially if your cloud partner is a Microsoft Partner. Microsoft partners often have access to pricing models that are not available to end consumers. This allows the partner greater flexibility in maintaining costs over time, even as tech changes, whereas a standard enterprise would require frequent re-purchase of licenses and software, which substantially increases the cost of IT. As you calculate your organization’s software costs, consider these line items: • • • •

Business productivity software – Microsoft Office, QuickBooks or other applications necessary for your business office users Specialty applications and software – new, replacement or major upgrades to your applications Security software – this may include anti-virus, encryption, white-listing or internet security software Upgrades and maintenance – new versions of software and software patches are released all the time, plan for the staff to apply these upgrades and the hardware to support the maintenance

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Calculating your IT cost Support As organizations grow, implement more technologies and open new office locations, their need for Help Desk support increases. Additional users and locations means a greater need for workstation and device support, while new technologies like server and storage virtualization also calls for an expert in those technologies. These experts can be hard to find and expensive to retain, especially in smaller or more remote communities or highly competitive markets. Support costs should also factor in: • • •

Specialty application – specific support personnel Workstation support – general Help Desk technicians for your users’ day-to-day problems Server and infrastructure support – technologists who specialize in implementing, optimizing and maintaining these technologies

Equipment and utilities Building your IT environment internally not only takes real estate, but also costly equipment like racks, cooling hardware and HVAC, monitoring controls and the commonly overlooked expense of power consumption. Safeguards like waterless fire suppression, biometric fingerprint access readers and hot-aisle/coldaisle layouts are highly recommended and common in enterprise data centers, but are not always economically practical within in-house data centers. Whether your organization is using public or private telecom, this fee should also be factored into the total cost of IT ownership. Private telecom offers security, reliability and availability benefits that public telecom cannot offer. If you’re currently using public telecom, a private route should be considered in your IT roadmap.

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In-House

Calculating your IT cost

Support (annual): IT Help Desk

Opportunity cost

SQL / Application / Server Specialist

As Gartner suggests, there are also opportunity costs to factor in when calculating your total cost of IT. If your organization is using dated resources that are not reliable or perhaps is using a scaled-down infrastructure to keep costs low, consider the opportunity costs of downtime for your staff. Similarly, if your organization is not using security best practices in your current IT environment, consider the opportunity costs of a data breach and how that could affect your organization.

Outsourced Network Engineer

Data breaches in the United States as a result of negligent security practices are a costly business, totaling $6.2 billion annually. And, the effects of a data breach go far deeper than fines paid out to government agencies. The real costs of a data breach is in lost revenue, lost brand value, patient lawsuits, compliance personnel, auditors and more. After these costs are considered, the average cost of a single data breach across all industries is $4 million, according to a 2016 study from IBM and Ponemon Institute. When calculating your current total cost of IT, it’s not enough to simply look at your current expenses. You need to look at the optimal infrastructure setup that your organization should have in place to effectively support your business goals. This concept is often referred to as rightsizing, which is discussed in the cloud section later in this guide. You can also use the spreadsheet to the right to enter your own expenses to help calculate your IT total cost of ownership.

Storage, Backup & Recovery Tech Equipment and Utilities: Racks Physical Security Server Monitoring / 24/7 response ($149 per server) Cooling Hardware Utility Consumption ($15/Server/Month) Back Up Power - diesel generator and maintenance Software: Windows 2016 Std. OS Windows Server 2016 Client License Microsoft Office ProPlus (Office365) Exchange 2016 Server Standard Exchange 2016 User Client License Remote Desktop Client License SQL Ent 2016 Core License Backup Software Hardware (new / refreshed): Terminal Servers Domain Controllers EHR SQL Server Exchange and File Server Secure Tape Storage Storage Area Network (SAN) UPS Router/telecom equipment Telecom Telecom Connection Telecom Security Services/Software Support Total Equipment and Utilities Total Software Total Hardware Total Telecom Total Total 1 Year Projected Cost

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Cost

IT cost drivers Your organization’s total cost of IT can be affected by several factors. Some of these factors are incremental and based on consumption while others are fixed and become more cost efficient when spread across more users. As you calculate your organization’s total cost of IT, consider how these factors come into play. Also consider these factors as you prepare your IT roadmap for the future. • Number of locations Office locations will drive IT costs as they require additional workstations, telecommunications, remote connectivity options and support. • Number of users More users typically means more data, workstations and support. While some investments become less expensive with additional users, most resources like storage, equipment and support are increased with each user. • Amount and type of data Especially with the increased reliance on technology and data, storage has become a significant IT cost driver. Consider how much data you need and what type of data it is. For instance, archival data can be stored in a lower-cost storage solution than data that needs to be more readily available. • Applications Software applications require additional server, storage and compute resources in addition to application-support and user training. As you add new applications, your IT costs will most likely increase. In the long-run, applications will also consume IT spend with updates, maintenance, patches and other requirements to keep the software current before it’s replaced. • Telecom design Telecom is a large part of your user’s experience. It also plays a role in your IT costs. Public, shared or dedicated telecom have varying benefits at different cost points. Dedicated telecom will almost always provide the best user experience and the greatest level of security versus public telecom. • Future growth Considering the cost of IT doesn’t only mean right now, but also for the future. The effects of acquiring a new company, adding a new location or hiring nine new users next year will guide your IT strategy and purchasing decisions.

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Refresh - how much and how often?! Technology has a relatively short lifespan and refresh cycles tend to have a disruptive impact on human and financial resources. Delaying a refresh, though, can impact performance, security and user experience. Here are three considerations that will affect your organization’s technology refresh:

  1. Technology interactions In healthcare, providers are trained to recognize the potential for adverse reactions with certain medications. When improperly mixed, medications can wreak havoc on the human body, causing a host of new issues that need to be treated.

INTEGRATION EXAMPLE

Similarly, changing technology without evaluating its interactions with the rest of the network can cause unnecessary chaos in your IT environment.

PACS SYSTEM IMPLEMENTATION A Netgain client recently experienced the deep effects of technology interactions. The client implemented a new PACS system, which also required them to add virtualized hosts, but their network did not have enough ports. So, they needed to add switches. However, the model of switch they had purchased at the time of installation was no longer available, so they had to purchase new switches to replace the current ones. Further, because of the additional data being created and stored, they had to reconsider their cloud backup strategy, which was not designed to accommodate the scale at which their storage was growing. This required them to replace their backup solution to accommodate. The new backup solution required greater internet bandwidth due to the extra data being transmitted, so they upgraded their bandwidth. Unfortunately, their internet routers were not capable of handling the extra bandwidth so they had to replace those with something appropriate to handle backups to the internet. Because of the complex interactions between technology, a seemingly simple PACS integration required the addition of compute, replacement of switches, backup software, routers, telecom links, internet links replacing gear and contracts that had only been purchased a year or two before.

  1. IT roadmap Too often IT decisions are reactive instead of proactive. Equipment is replaced only after it breaks or quits working. When we’re reactive, we’re never able to reap the full benefits of a strategic IT environment. When you’re planning your technology upgrades, consider how it plays into your 18-36 month IT roadmap. Your roadmap should guide your decisions well before they become reactive. For instance, if you’re in need of a server refresh but one of your goals is to move to virtualized servers within the next 12 months, that might change how you go about updating your servers. Total Cost of IT Ownership | Page 7

Refresh - how much and how often?!

  1. Capex vs opex Physician practices and financial services firms are being forced to reevaluate their expenses by heightened regulations and decreased reimbursements and fees. This often means that organizations delay their hardware and software upgrades for as long as they can. This creates vulnerabilities and risks. Thanks to technology solutions like cloud computing and Software-as-a-Service (SaaS), companies can consume IT as an operating expense rather than a capital cost. When your organization is considering server upgrades, new software implementations or technology updates, evaluate if a cloud-based solution may be beneficial. The cloud can alleviate some pains caused by large capital investments in servers, storage or software. A transition from capital to operating expenses can free up budget to grow your organization and focus on driving new revenue. Comprehensively planning for your refresh is critical. Technology interactions, future initiatives and cash flow can all play into your technology refresh. Below is a table of recommended refresh cycles for on-premises and cloud-based technology assets. Asset Servers
  2. Traditional
  3. Virtual Network Equipment
  4. Routers
  5. Switches Storage
  6. Primary storage
  7. Backup storage

Recommended Refresh On-Premises 4 years

5 years

Recommended Refresh Cloud Environment Cloud provider maintains servers, removing burden from organization to refresh. Cloud provider maintains network equipment, removing burden from organization to refresh.

3-5 years

Cloud provider manages storage, removing burden from organization.

Tape/backup hardware

5 years

Cloud provider maintains tape/ backup hardware, removing burden from organization to refresh.

Workstation devices

  • Desktop computers
  • Kiosks

3 years

4-7 years*

Mobile Devices

  • Tablets
  • Laptops
  • Mobile phones

2 years

2 years

  • Workstation devices have a longer lifespan when using cloud services because no data is left on the local machine.

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Refresh - how much and how often?! These lifespan recommendations assume everything else remains constant, but we know that doesn’t always happen. As your organization changes, grows and adapts to market forces, the refresh cycles of these assets can be affected by: • • •

Organizational growth through acquisitions, hiring new employees or adding new locations New service or product offering Implementations of new applications

Your IT roadmap will help you anticipate and plan for these changes so your organization isn’t faced with unexpected projects or expenses.

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The opportunity cost - what’s at stake? Organizations tend to push their luck with regards to hardware and software upgrades, prolonging the inevitable for as long as possible. The investments in time and money makes upgrading unattractive and undesirable. But, pushing these upgrades out may be costing your business hundreds if not thousands of dollars a day in opportunity costs.

TIP

For instance, assume a provider in an exam room clicks through 10 different screens during an exam. In this example, the desktop computer she’s using is dated and performs slower than it should, taking 4 seconds between every screen click. If she sees 25 patients per day, she’s spending almost 17 minutes waiting for the screen to load because the computer is outdated and slow. This is time she could be spending seeing an additional patient. Now multiply that across all your providers and your patient potential could be much greater. Netgain recommends implementing a hardware refresh strategy that looks to retire PCs after three years of service. If your organization is using cloud services, workstation devices have a longer lifespan of 4-7 years because no data is left on the local machine. In addition to missed productivity due to performance issues, prolonging your hardware updates can have more drastic, noticeable repercussions like security vulnerabilities caused by outdated software versions or hardware upgrades that were never done. If exposed, these vulnerabilities could wreak havoc on your organization’s sensitive patient or client data. In a recent case, for instance, Anthem paid a record $115 million to settle a class-action lawsuit stemming from a 2015 data breach in which the personal information of nearly 80 million members and employees was stolen. The original cause of the breach is believed to be a negligent employee clicking a link in a phishing email. The benefits of a timely refresh and upgrade schedule far outweigh the risks when user productivity, data security and user satisfaction are on the line.

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Right-sizing your environment As you define your IT initiatives and goals through your IT roadmap, right-sizing your IT environment should play a big role.

INFRASTRUCTURE COSTS

In the image below, you’ll see the actual IT demand of a growing organization is typically fluid and unpredictable, which in a capex environment requires the organization to over-invest in infrastructure to anticipate several years of variability. This requires a large upfront capital investment followed by years of inflexible maintenance, then another large capital expense. This model is not optimal for the everchanging needs of growing organizations. Contrast that to an opex model that allows the organization a flexible and fluid environment that only consumes (and pays for) just the right amount of IT that is needed at that time.

Unable to Serve Customers

Large Capital Expenditure

Opportunity Cost Predicted IT Demand Traditional Capex Structure Actual IT Demand Automated Opex Structure

TIME Under-provisioning your IT environment means you’re not adequately planning for your future needs. If you under-provision your IT environment, you’ll likely run into unexpected expenses because of reactionbased issues, system slowness due to over-used resources and delayed IT initiatives because of lack of resources. On the contrary, though, over-provisioning your resources comes with its own issues. Infrastructure is expensive and managing resources that you’re not yet using is economically inefficient. Right-sizing your IT environment means you have the necessary resources for your current needs and also the ability to size up or down as your organization changes. This will optimize not only your investments, but also your user experience and ultimately, your bottom-line.

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Cloud as an alternative to the refresh cycle In the past, on-premises solutions have been the only way for companies to have a secure, reliable and available IT environment. The cloud has changed everything.

80%

Over 80 percent of healthcare providers are using some form of cloud services within their practice, according to HIMSS Analytics’ Cloud Survey.

The cloud has also changed the way total cost of IT is calculated, transforming IT into an operational expense instead of a capital expense, providing resources that are right-sized for your company’s needs, eliminating the need for refresh cycles and often saving your organization money each year. The next page shows a cost-analysis of a 100-user multi-specialty medical practice running an EHR, located in the Midwest with 3 clinic sites. The analysis assumes a right-sized, physical, non-virtualized seven-server environment with two domain controllers, a SQL database server, File and Exchange mail server and Remote Desktop Service servers. The costs are assuming a three-year server refresh period. The analysis shows a 32 percent cost savings in the first three years with cloud computing. Using only hard costs, the analysis doesn’t factor in the intangible benefits of the private cloud. For instance, when your IT environment is solely configured and managed internally, your organization has no backup resource for integral members of your team. What if your help desk tech quit or your server administrator had an unexpected medical leave – how would you cover their workload? Working with a private cloud provider offers a seamless experience without the risk of turnover or unexpected staff absences. Additionally, these calculations don’t factor in the value of decreased cyber attack risk by leveraging a cloud provider.

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Software

Equipment and Utilities

Support

In-House

Cost

Netgain Private Cloud

IT Help Desk

$47,500

HelpDesk Specialists

SQL / Application / Server Specialist

$75,000

Infrastructure Team

Storage, Backup & Recovery Tech

$75,000

Service Delivery and Project Management

Outsourced Network Engineer (@40 hour/year)

$9,000

Other Teams (Security, Networking Operations, Storage, Dedicated Account Manager)

Racks

$630

Physical Security

$0

Racks Physical Security

Server Monitoring / 24x7 response ($149 per server)

$12,516

Server Monitoring / 24x7 response ($149 per server)

Cooling Hardware

$1,200

Cooling Hardware

Utility Consumption ($15/Server/Month)

$6,300

Utility Consumption ($15/Server/Month)

Back Up Power - diesel generator and maintenance

$16,100

Back Up Power - diesel generator and maintenance

Windows 2016 Std. OS

$6,600

Windows 2016 Std. OS

Windows Server 2016 Client License - Qty 100

$3,874

Windows Server 2016 Client License - Qty 100

Microsoft Office ProPlus (Office365) - Qty 100

$1,200

Microsoft Office ProPlus (Office365) - Qty 100

Exchange 2016 Server Standard

$722

Exchange 2016 Server Standard

Exchange 2016 User Client License - Qty 100

$8,952

Exchange 2016 User Client License - Qty 100

Remote Desktop Client License - Qty 100

$13,435

Remote Desktop Client License - Qty 100

SQL Ent 2016 Core License - Qty 4

$27,660

SQL Ent 2016 Core License - Qty 4 Backup Software (8 servers 2TB protected)

Terminal Servers (Qty 3)

UPS

$6,710

UPS

Router/Telecom Equipment, each site

$1,250

Router/Telecom Equipment, each site

1 yr cost of 50Mbps connection, 2 sites

$2,159

1 yr cost of 50Mbps connection, 2 sites

1 yr cost of 100Mbps connection, main site

$1,559

Network Security Services (included)

1 yr Telecom Security Services/Software

$5,995

Totals

Hardware (new / refreshed)

$219

Telecom

Backup Software (8 servers 2TB protected)

$12,375

Terminal Servers (Qty 3)

Domain Controllers (Qty 2)

$6,210

Domain Controllers (Qty 2)

EHR SQL Server (Qty 1)

$9,758

EHR SQL Server (Qty 1)

Exchange and File Server (Qty 1)

$5,789

Exchange and File Server (Qty 1)

Secure Tape Storage

$1,242

Secure Tape Storage

Storage Area Network (SAN)

$0

Cost

Storage Area Network (SAN) $650 $3,238 $0

Support Total (annual)

$197,500

Simple Hosting Investment*

$14,438

Equipment and Utilities Total

$36,746

One-Time Deployment Investment

$20,000

Software Total

$61,461

Telecom Total (annual)

$3,238

Hardware Total

$42,084

Telecom Total (annual)

$9,713

Total 1 Year Projected Cost

$361,454 Total 1 Year Projected Investment

$197,144

Total 3 Year Projected Cost

$812,652 Total 3 Year Projected Investment

$551,433

Savings Over First 3 Years: $261,219 (32%)

  • Monthly investment will vary based on specific needs. Support costs are based on yearly 3% increases.

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Evaluating your next steps The first step to determining what IT strategy is best for your organization is to understand your costs. Then, use the included tools and worksheets in this guide to determine how to best optimize your IT environment for your organization’s unique needs. If the cloud is right for your organization, download our Cloud Guide to understand the different types of clouds and which one may be the best fit for your organization. For more information on our services, please visit Netgain.

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About Netgain There are several companies that can host applications, or deliver Desktop-as-a-Service (DaaS) or IT-as-a-Service (ITaaS), but what makes us unique is The Netgain Standard. It’s a set of eight features that truly differentiate us from anyone in the market. This is what our clients have come to expect over the past 17+ years. It’s why they remain our clients and—with an incredibly high frequency— recommend us to their peers in the market.

The Netgain Standard is included with every solution. Every time. Performance and Availability

Awesome User Experience

Client Care Team

Cost Predictability

Cybersecurity

Top-Tier Talent

Complete Compliance

Flexibility to Scale

Keep my IT up and available, day and night, with redundancy safeguards and a 99.95% uptime guarantee.

Give me a 24/7/365 dedicated client care team that knows me, my business and my specialty applications.

Safeguard my sensitive data from tomorrow’s threats with DoD-grade, ultra-secure protection.

Give me HIPAA and SSAE 18 certification so I know we will be meet– and exceed–compliance standards.

Give my users an exceptional support experience at every touchpoint so they come away elated and relieved.

Show me simple and straightforward per-user pricing that allows me to payas-we-go and pay-as-we-grow.

Provide me access to a deep bench of IT professionals, who know my business, to call upon when needed.

Let me pay only for the IT that I need today, and allow my IT to easily scale as my company grows.

Contact us Corporate Headquarters 720 West Saint Germain Street | St. Cloud, MN 56301 | 877.797.4700 | 320.251.5030 Fax www.NetgainCloud.com Chicago Operations 350 South Northwest Hwy Suite 200 Park Ridge, IL 60068

San Diego Operations 7535 Metropolitan Drive San Diego, CA 92108

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