Windows 2000 Advantage - Tech Edge - Introducing: The interactive ROI calculator

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Introducing: The interactive ROI calculator

You can bolster your case for or against a migration—once you know the right factors to consider

By Shari L. Jones

Your ability to make the right Windows NT 4.0 migration decisions and recommendations depends on the formula you use. The critical components of the formula, as mentioned in the first half of this series, must include your primary investments and the returns from those investments. This article steps you through an interactive calculation to help you realize a quick ROI analysis. Since part of determining the ROI is estimating returns and investments, you'll be required to list estimated figures for various returns and investments.

Calculation for ROI
The basic ROI formula is:
ROI = Returns / Investments

The steps required to calculate ROI are as follows:

Add Returns to get the sum for the Total Returns.
Add Investments and Costs—to get the sum for the Total Investments or Total Costs.
Divide Total Returns by Total Investments.

If the ROI is equal to 1.0, your total return equals your total investment. You won't lose or gain any money for investing in the new IT technology. If your ROI estimate is less than 1.0, your investment costs for implementing the new technology exceed your estimated returns or profits. A number greater than 1.0 indicates your returns for your IT investment exceed your investment costs, which is usually the most desirable outcome.

Before calculating your investment and returns, you'll have to determine the number of users you will be migrating to Windows NT 4.0, based on the version of Windows they're currently using. Here's how to calculate the total number of users:

Enter the number of users migrating from Windows 3.1 in the Users Migrating from Windows 3.1 box.
Enter the number of users migrating from Windows 95 or Windows 98 in the Users Migrating from Windows 95/98 box.
The Total Number of Users to Migrate box populates automatically.

		Users Migrating from Windows 3.1
		Users Migrating from Windows 95/98
		Total Number of Users to Migrate

Calculating the primary returns

The first step in calculating return on investment is to consider financial gains and/or cost savings. Returns include reduced total cost of ownership (TCO), increased productivity, and improved operations efficiency.

Reduced total cost of ownership (TCO)

According to a Gartner Group study, migrating from Windows 3.1, Windows 95, or Windows 98 to Windows NT 4.0 can reduce the total cost of ownership (TCO) by up to $3,514 per user per year.

Minimizing TCO often means minimizing complexity or implementing standards, such as standard software, hardware, and directory structures. Your organization can realize greater cost savings by implementing a tightly managed Windows NT Workstation migration. In other words, you can limit your end users' configuration rights on their desktop machines. This minimizes configuration problems that may arise when end users have the equivalent of administrative privileges on their computers. A tightly managed network allows administrators to handle the majority of configuration for end users, thus minimizing the possibility of errors and providing consistency within the desktop environment.

Here's how to calculate total cost of ownership using the calculator:

Check the Tightly Managed Windows NT Workstation checkbox if you plan to restrict end user administration privileges. The calculator automatically generates the TCO based on the number of end users migrating to Windows NT 4.0 and multiplies that by $3,514 per user per year (based on the Gartner Group study).

Tightly Managed Windows NT Workstation
Estimated Reduction in TCO	$ / year

Increased performance/productivity

A Microsoft study ("Windows NT Workstation: The Business Case for Windows NT Workstation 4.0 Today") indicates that Windows NT 4.0 increases productivity by up to $2,133 per year through better performance.

Here's how to calculate increased performance and productivity using the calculator:

In the Typical Type of User list box, select the typical user whose system you're migrating. The Median Wage, Estimated PC Hours/Day, and Estimated Savings from Increased Productivity boxes populate automatically based on your selection.
If you want to customize the Median Wage, Estimated PC Hours/Day, and Estimated Savings from Increased Productivity boxes, place your cursor in the appropriate box and edit the default figure.

Typical Type of User
Median Wage	$/Hour
Estimated PC Use	Hours/Day
Estimated Savings from Increased Productivity	$/Year

Improved reliability

The Microsoft study also indicates that Windows NT 4.0 reduces end user downtime costs by as much as $73 per user per year in terms of improved reliability.

The Estimated Savings Due to Reduced Downtime box will populate based on previous figures. You may manually adjust this figure by clicking into the box and entering a new number.

Estimated Savings Due to Reduced Downtime

$/Year

Fewer help desk calls

Windows NT 4.0, according to a study by Technology Business Research Inc. (TBR), also is shown to reduce help desk costs by up to $483 per user per year. Windows NT 4.0 can reduce the number of help desk calls by 15 to 29 percent. The study was based on approximately 9,600 PCs, with a reduced call volume of approximately 1,200 calls per month.

In the Calls Avoided Per Month box, enter the estimated number of calls you expect your organization will avoid due to the implementation of Windows NT 4.0.

The Average Cost Per Call box defaults to $20 per call, but you can edit this field based on your organization's per-call cost.

In the Visits Avoided Per Month box, enter the number of onsite visits from technical staff you expect to avoid by using Windows NT 4.0. The TBR study indicates that onsite technical service can be reduced by an average of 67 percent.

In the Average Cost Per Visit box, enter the amount usually absorbed by your organization for onsite technical assistance, or accept the default value.

The calculator automatically populates the Estimated Savings in Reduced Help Desk Calls box based on the figures you input in the previous fields. If you do not enter any numbers in the Calls Avoided Per Month, Average Cost Per Call, Visits Avoided Per Month, or Average Cost Per Visit boxes, the figure in the Estimated Savings in Reduced Help Desk Calls box will be $483 per user multiplied by the number of users.

You can manually change the figure in the Estimated Savings in Reduced Help Desk Calls box.

Calls Avoided	/Month
Average Cost of a Call	$/Call
Visits Avoided	/Month
Average Cost of a Visit	$/Visit
Estimated Savings in Reduced Help Desk Calls	$/ Year

Primary investment/costs

Step two in the formula for calculating ROI is to estimate the primary investments and costs associated with implementing Windows NT 4.0. The process should be the same regardless of whether you're migrating from Windows 3.1, Windows 95, Windows 98, or Windows NT 3.5, though the cost of the migration will more than likely vary.

In calculating investment/costs, you should consider hardware acquisition costs, software acquisition costs, deployment costs, and other miscellaneous costs, such as training of both end users and support desk personnel.

Determining hardware, software and deployment costs

Another potential obstacle to migrating to Windows NT 4.0 that you must consider is the compatibility of legacy software and hardware. By moving to Windows NT Workstation 4.0 today as opposed to waiting for Windows 2000, you give your technical staff the opportunity to identify conflicts and devise effective workarounds.

When it comes to issues of hardware support, an early migration to NT 4.0 provides additional time to resolve any conflicts. More time equals less risk.

Specific hardware issues must be considered. For example, although many organizations may wish to make the move to Windows NT 4.0 today, their existing PC infrastructure may not be able to handle the demands of the operating system.

A key recommendation when purchasing hardware and software for Windows NT 4.0 is to purchase it with Windows NT Workstation 4.0 preinstalled. This ensures the systems are optimized and preconfigured for Windows NT Workstation 4.0. According to Microsoft, systems with Windows NT Workstation 4.0 also will be easier to upgrade to Windows 2000 Professional.

Microsoft provides the following minimum system recommendations to help you make wise decisions when purchasing new hardware and software for a Windows NT 4.0 migration:

Windows NT Workstation 4.0 preinstalled; Pentium II-class CPU; 64 MB RAM
Advanced Configuration and Power Interface (ACPI)
AGP graphics (a new bus that provides faster graphics performance for business applications)
Year 2000 compliant
Universal Serial Bus (USB)

Here's how to calculate deployment costs:

In the Software Acquisition box, enter the average amount per user you expect to spend on new hardware when migrating to Windows NT 4.0.
In the Hardware Acquisition box, enter the average amount per user you expect to spend on new hardware.
The Deployment Costs box populates automatically based on the number of users multiplied by $300 per user.

Software Acquisition	$/User
Hardware Acquisition	$/User
Deployment	$/User

Determining training costs

Making the move to Windows NT 4.0 now allows your organization to better manage its platform training costs. The user interface for Windows 95 and Windows 98 is so similar to that of Windows NT 4.0 that little training for end users is necessary. However, Windows 2000 Professional is expected to implement an updated version of the Internet Explorer 4.0 shell-integration interface. This new interface is expected to be somewhat different from both Windows 95 and, particularly, Windows 3.1, and it may require additional end user training.

Administrators

During a migration to Windows NT 4.0, your organization's network administrators will be managing a mixed Windows environment, which means they'll be managing multiple Windows desktop operating systems with similar applications and a similar user interface.

Your IT staff's knowledge of previous Windows operating systems is applicable to supporting Windows NT 4.0. This preserves your investments in technical training for support staff for the migration to Windows NT 4.0. Basic administrative tasks, such as setting up a printer or changing display properties, require the use of the control panel and are nearly identical tasks with Windows NT Workstation 4.0 and Windows 95 and Windows 98. IT staff with experience and training on Windows 95, Windows 98, and Windows NT 3.5.1 should find that many of the same concepts apply to Windows NT 4.0, which should make knowledge transfer for installing, supporting, and troubleshooting Windows NT 4.0 easier.

Windows NT 4.0 also provides an enhanced suite of remote administration tools to help further reduce your support costs. For example, desktop PCs allow for remote administration, and a network administrator can control the PC and configure it from a remote site.

End users

End users that are familiar with Windows 95 or Windows 98 should find they already know how to use Windows NT 4.0, because the applications they used on Windows 95 and Windows 98 also run on Windows NT Workstation 4.0. This means that end users should be able to migrate easily from Windows 95 or Windows 98 to Windows NT 4.0 with little or no additional training.

However, end users migrating from Windows 3.1 or Windows NT 3.5 to Windows NT 4.0 may require some training, since the interfaces are significantly different.

Technical support

With Windows NT 4.0 and Windows 95 and Windows 98 having common applications and user interfaces, technical support questions would be resolved by your technical support staff with minimal or no additional training. However, the introduction of Windows 2000 may require some additional training.

Calculating additional costs

If your organization expects to incur additional costs, such as training expenses, when migrating to Windows NT 4.0, enter the figure in the Other Costs box. Other costs include training, software license charges, system downtime, and the associated loss in user productivity.

Other Costs

Quantifying returns

Since ROI calculations are usually performed before making a large investment decision, the return is an estimate of future returns. And the investment also is an estimate that may appear more concrete or definite at first. However, the final cost of any hardware or software purchase often is different than the original estimate.

If you've completed the boxes in the previous sections, the interactive calculator will determine your return on investment using the Total Return (Savings) and Total Investment (Costs) boxes. To manually calculate the ROI, divide your total returns by your total investments.

Total Return (Savings)	$
Total Investment (Costs)	$
Return on Investment

As mentioned before, the ROI can be expressed as a percentage. Multiply the number you calculated in the Return on Investment box by 100, and the ROI is represented as a percentage. For example, if your ROI was 2.0, multiply that by 100, equaling 200 percent. In short, that means your organization realized a 100 percent return for its IT investment.

Beyond ROI

While an ROI analysis is a useful tool for estimating your organization's return on investment in Windows NT 4.0, it shouldn't be your only gauge when making an IT investment. You need to make sure the IT investment and the benefits it brings are aligned with your organization's IT goals and strategies. You also need to consider the risks involved and whether or not the IT investment's benefits outweigh the risks. Additionally, what are the chances the project will be cancelled?

Consider your end users as well, and anticipate their responses to a changed working environment. Determine how quickly the technology will be adopted by end users and how much it will used.

An ROI provides IT executives with numbers, although only estimates, that help to justify an IT migration such as the migration to Windows NT 4.0 or Windows 2000 Professional. Implementing a methodology that includes some of the considerations mentioned above helps determine the bottom-line impact of adopting new IT technology. While an ROI analysis may be a part of that methodology, other measurements specific to your business and environment are necessary to help you confirm you are making wise IT investment decisions.

JavaScript for the interactive calculator written by Steven Gould.

About the author:
Shari Jones is a consultant for a large international consulting company. She is a technical writer and freelance journalist covering all areas of the high-tech industry.

Resources

"A quick ROI analysis can help you make key NT migration decisions," Shari Jones (Windows NT Advantage, July 1999). Before doing the math, do the footwork: Understand the business reasons for doing an ROI analysis—then choose a technical path:
http://www.windows2000advantage.com/momentum/07-01-99_quickroi.asp

Feedback: stefanie_mccann@computerworld.com
Technical difficulties: win2000advantage@millersystems.com