POINT OF VIEW
This POV helps business leaders to review the financial benefits of the Responsiv Cloud Automation Platform
The Case for Digital Transformation
This point of view provides information and an example framework for creating a cost-benefit analysis for the Responsiv Cloud Automation Platform (RCAP). It allows you to consider various categories of cost and benefit that might be impacted by the platform and use them to derive a comparison between the status-quo and Responsiv Cloud Automation Platform.
As with all IT projects, measures may be significantly affected by availability of skilled IT professionals to configure the platform, and your management focus to deliver to deadline.
Strategic advantage is difficult to predict in different markets, however illustrative sources of value are listed here to properly show how measurement regimes can be developed.
Business leaders must determine when to consider information and coordination to be critical capabilities.
In the early days, a growing administrative team, a few errors in invoicing, or losing a few customers can be early indications that a more strategic approach to information and coordination is required.
Business leaders must determine the point at which the company should begin to consider information and coordination to be critical capabilities.
Business Scenarios
This cost-benefit analysis assumes that your business has been operating for long enough to have accumulated a varied and complex technology landscape. Typically, companies acquire capabilities as they are needed and operate them as separate functions, along with manual operators.
As the volume of manual work exceeds the capacity, delays creep into the operation, and systems become out of step with one another, error rates increase, and people become under pressure.
The Value of Information and Coordination
Unfortunately, the benefit of coordination (process automation, case management, orchestration) become most attractive when the existing IT landscape has already become complex, and the teams are under pressure to deliver beyond their capacity.
Automation promises consistency, reduced manual effort, reduced error rates, and improved customer satisfaction. Immediate cost reduction may be available through the avoidance of recruitment. Businesses that can efficiently access the right information at the right time and in the right format have a significant advantage in terms of the cost of information, and in the quality and timeliness of their decisions.
Immediate Benefits of Responsiv Cloud Automation Platform
Responsiv Cloud Automation Platform reduces the cost, improves quality, reduces time spent building, and avoids many tasks and activities normally associated with these types of environments.
For example:
Symptom
Cause
Lack of transactional integration
Lack of automated controls for process
Detection may be difficult if reconciliation is not included in the integration layer
Security in stores and warehouses
Inaccurate stock entry or untimely replication of entries
Inability to consolidate stock or manage status of items
Complex integration with many cross dependencies and sources of failure
Lack of architectural isolation leading to contagion from failures and changes
Testing and change scope not limited due to lack of separation of concerns
Software that is not capable of adapting to new requirements
Poor implementation that restricts change by lack of control
Software or applications developed without regard for future compatibility demands
Difficulty in test and multiple dependencies that are difficult to identify or manage
Products that are not designed to support multiple development teams
Resolution
Timeliness/Completeness/Accuracy
Move to a real-time from batch and polling
Remove stability issues and cost to the business – by having the data in the right place at the right time.
Enable event triggered data exchanges.
Provide up to date, accurate information for better business decision making.
Ensure accuracy, quality, and timeliness of data across all of our systems i.e., the right data in the right format in the right place at the right time.
Enable event triggered data exchanges.
Have the capability to connect to new channels & applications at pace.
Ensure the team have knowledge to support/add/update interfaces and deliver new integrations.
Providing the right data at the right time to business applications and partners.
Having a single up to date version of the truth for key data sets e.g., stock, product, Price, orders, customers, finance. The increasing desire to connect the channels and offer the customer multiple fulfilment options equally demands a new approach to integration.
Be clear about the role of the software regardless of its capabilities
Build architectures with good and complete isolation and separation
Ensure that changes can be made that do not require complete or big-bang change
Speed - quickly and cost-effectively integrate processes and solutions and reduce project risk and complexity
Choice - Integrate the best-in-class applications that support your business and IT strategy.
Flexibility - Establish a flexible IT infrastructure to control costs and to integrate new technologies with legacy systems
Integrate channels and re-orchestrate processes in support of business change.
Responsiv Integration
Real-time integration across multiple protocols.
Transactional integrity for once-only delivery of data
Ability to asynchronously request stock information from across the supply chain
Assured once-only delivery
Transactional support
Clear interfaces that support introspection
Clean integration between public APIs and internal interfaces
Separation of public facing interfaces and internal integration logic.
Maintain complex location and data dependent details outside of the DMZ
Integrated industry software platforms
Pre-built solution accelerators
Open standards
Ecosystem of partner content
Financial Benefits
Consideration
Description
Cost of the software and its support over the expected lifetime of the product.
This includes the cost of the platform; products that are not efficient will require more power and more compute capacity to operate, they may also increase maintenance costs by requiring several instances without the benefits of clustering that are inherent in the Responsiv solution.
Technology projects must often develop functionality that clearly delivers business benefit as well as functions like error handling and parsers to read messages, that are supporting components that are not directly adding value.
The measure of the development efficiency of a product is the amount of supporting code needed to deliver a business result. The same metric is a key indicator for the cost of maintenance and TCO
Responsiv Cloud Automation Platform
Responsiv Unity Automation Node
Responsiv Unity Integration Node
Understanding Total Cost of Ownership (TCO)
Total cost of ownership (TCO) looks at the whole life costs of a solution, while total cost of acquisition (TCA) considers just the start-up costs.
TCO is the sum of all direct and indirect costs associated with purchasing, maintaining, operating, and decommissioning an asset.
Total cost of ownership (TCO) is the sum of all economic costs for the lifetime of a product. It should be discounted to a Net Present Value (NPV) to account for differences in timing of cost and profit flows[1].
Responsiv Cloud Automation Platform is a cloud platform provided on a subscription basis. This means that costs normally associated with software purchase and installation, hardware procurement, acquisition of skills to install and operate the platform, and ongoing patching and incident response are all included in the annual fee.
Responsiv Cloud Automation Platform must be configured to your specific needs to deliver any business value. This is done in a series of short-medium projects, each focused on delivering a specific capability, and timed to match the business demand.
Elements of TCO are listed in the table below.
Cost
Description
Key Drivers and Mitigation
• Efficiency of code
• Removal of duplicated effort
• Separation of concerns leading to independent scaling of capability
• Choice of hardware and software products
• Removal of ineffective workload – unnecessary tasks
• Choice of hardware and software products
• Support teams and facilities to maintain the system
• Number and diversity of problems
• Consistency/inconsistency of the architecture
• Level of self-protection and architectural isolation
• Reduce scope of impact analysis
• Reduce scope of testing required
• Reduce complexity and separation of responsibilities
• Provide test facilities and strong release controls
• Reduce the scope of impact of change
• Mediate (isolate) components
• Design for obsolescence
• Force communications through mediation that can gather data and provide oversight in a consistent and demonstrable manner
• Isolation and horizontal scaling of components
• Separation of data custodianship from UI
• Strong security and self-protection ethos
• Strategies to contain the effects of change and failure
Calculating Total Cost of Acquisition (TCA)
Tendering process
Our experience suggests that a typical enterprise software procurement lasts 9 months from first engagement with vendors to decision and purchase. Assuming that the company takes a further 3 months to prepare for the tender the total delay for tendering once a need has been identified is 12 months.
This TCO calculation uses the concept of an FTE or full time equivalent to represent 12 months of effort from one or more individuals. In this example we assume two FTEs are needed to run the process and complete all of the required activities, for example reading proposals, providing technical input, collecting and documenting requirements.
| Activity | Duration | People | Salary/Month | Activity Cost |
|---|---|---|---|---|
| Preparation for Tender | 3 | 2 | £6,000.00 | £36,000.00 |
| Request for Information | 3 | 2 | £6,000.00 | £36,000.00 |
| Request for Proposal | 3 | 2 | £6,000.00 | £36,000.00 |
| Tendering Process | 3 | 2 | £6,000.00 | £36,000.00 |
| £144,000.00 |
Responsiv Cloud Automation Platform acquisition and first year costs
The average cost of purchase for a platform to perform integration, process automation, and includes system monitoring is between £200,000 and £500,000 (2020 pricing). This investment is expected to deliver a platform that can support around 30 users with high availability and perhaps 1,000,000 transactions per day. In this case, a transaction is one communication between two parties, and there are often many more of these than expected.
Production hosting will require approx. 10 cores across multiple machines with virtualisation. The average ongoing cost of hardware and virtualisation is £1,000/core/year, assuming a five-year life expectancy. You will need around 30 cores to provide production, test, and development environments. The figures below assume a 5% annual inflationary uplift.
| | Capital | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Total |
|---|---|---|---|---|---|---|---|
| Responsiv Cloud Automation Platform | |||||||
| Requirements | £150,000 | £150,000.00 | |||||
| Onboarding Project | £15,00 | £15,000.00 | |||||
| Software and Hosting | 0 | £90,000 | £94,500 | £99,225 | £104,186 | £109,395 | £497,306.00 |
| Software Support (S&S) | 0 | 0 | |||||
| Management | 0 | 0 | |||||
| | 0 | £105,000.00 | £94,500.00 | £99,225.00 | £104,186.00 | £109,395.00 | £662,306.00 |
| Alternative | |||||||
| Requirements | £150,000 | £150,000.00 | |||||
| Software | £300,000 | £300,000.00 | |||||
| Onboarding Project | £120,000 | £120,000.00 | |||||
| Software Support (S&S) | 0 | £60,000 | £63,000 | £66,150 | £69,457 | £72,930 | £331,537.00 |
| Hosting (Rental) | 0 | £31,500 | £33,075 | £34,728 | £36,465 | £38,288 | £174,056.00 |
| Management/Admin | 0 | £72,000 | £72,000 | £72,000 | £72,000 | £72,000 | £360,000.00 |
| | 0 | £283,500.00 | £168,075.00 | £172,878.00 | £177,922.00 | £183,218.00 | £1,435,593.00 |
Total Cost of Acquisition and Operation
The cost of operation assumes that there are no significant outages, and that the platform is in a steady state until the need for a refresh.
A feature of TCO that is often missing is the knowledge of cost-per-transaction and information that informs decisions about retiring applications that are used but not paying their way. The structure and basic rules embodied in the Responsiv Cloud approach include the opportunity to collect and analyse this data and to identify candidates for retirement as well as simplifying the retirement activity.
Total Cost of Development
| | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Total |
|---|---|---|---|---|---|---|
| Project 1: (5 systems) System Integration | £200,000 | - | - | - | - | £200,000.00 |
| Project 2: (5 processes) Key Process Deployment | - | £200,000 | - | - | - | £200,000.00 |
| Project 3: Refine Processes | - | - | £200,000 | - | - | £200,000.00 |
| Project 4: (5 processes) Secondary Processes | - | - | - | £200,000 | - | £200,000.00 |
| Project 5: Ad-hoc Small Processes | £80,000 | £80,000 | £80,000 | £80,000 | £80,000 | £400,000.00 |
| . | . | . | . | . | . | £1,200,000.00 |
Conclusion
Adopting a foundational technology to support cooperation and to share information across the enterprise is cost effective and reduces the rate of generation of technical debt. The immediate returns are significant, but the strategic benefits are more impressive.
Platform
Cost
Platform deployment
Maintenance
Refresh
Benefit
Time to platform availability
Simple support / Deployment
Reduced complexity
Projects
Cost
Project development
Design, Build, Test, Operate
Refresh, extension
Benefit
Foster reuse of assets
Consistent deployment model
Developer support
Business
Cost
Changes to working practice
Disruption/distraction
New skills required
Benefit
New business opportunities
Time to Market and Value
Fixed/known cost structure
Speak to Responsiv
Responsiv Consulting can support your journey towards having a coordinated and informed business. We provide experienced consultants who can discuss the art of the possible, support business reviews and gap analysis, and be there throughout your digital transformation journey.
Our developers and managers are highly experienced in the subtle arts of integration and automation solutions. They will encourage, mentor, and deliver.
Our cloud platforms, on-premises platform, and remote support offerings assure that your solution has the longevity critical to business success.
Responsiv offer flexible and innovative contacts that can help align your costs and benefits and reduce the financial impact of moving to our cloud platforms.
We offer:
- Responsiv Cloud Custom Platform: We fix the cost of moving to Responsiv Cloud, including development of the first integration and automation application for a maximum committed term of 5 years.This protects you against inflation and includes all connectors, up to a defined capacity. Development costs are spread across the agreed term up to 4 years.
- Time and materials: We provide skilled resources to develop applications and the Cloud or On-premises platform is paid annually. You can terminate at any time.
- Shared Risk: We provide the cloud platform and develop the applications. You pay for development and commit to a minimum annual spend with transactional costs incrementing to a capped price for a defined maximum capacity. This means that we deploy a maximum capacity, and you pay 30% for 30% of that capacity. Incremental charges are levied as your demand and business grows, until you reach the defined capacity, at which time the charge remains constant.
- Spread Cost: We provide the cloudplatform and develop the applications. You pay a fixed annual fee and commit to a minimum additional annual project spend. The cost of development is spread across the 4-year term and the annual fee is fixed at the start with a known annual increment.
[1] A project that costs £100 today and returns value in 12 months is not as compelling as one that costs half as much but returns the value in one month.
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Richard Whyte has been building enterprise IT solutions for over 20 years. He is known for creating innovative practical solutions that provide a strong foundation for future development, whilst solving immediate problems. Previously the European CTO and Principal Architect for IBM Systems Middleware at IBM, he has an MBA, a degree in Statistics and Computing, is a Chartered Engineer, a Chartered IT Professional, and Fellow of both the Institute of Technology and the British Computer Society.
