Return on Investment ROI

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Return on InvestmentROI

• Methodology and Case Studies

Bill Fallis Versata Professional Services
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Agenda - ROI

• Versata Overview
• Definition of Terms
• Why Calculate an ROI
• When to Perform
• Benefits of Using Versata
• Technology Ramp Up Costs
• Efficiency Gains with Versata
• Case Studies
• ROI Estimation Methodology

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Versata OverviewService Oriented Architecture
(SOA)
Web Container
Supports multiple, simultaneous interfaces
presentation layer
Business Logic Container
process layer
Maps systems to the processes of your business
J2EE App Server
service layer
Delivers reusable business transactions
data logic layer
Applies business logic to your corporate data
Data Container
integration layer
Integrates with the rest of your enterprise
back office value chain
Leverages the back office enterprise systems
By 2006, the service-oriented architecture (SOA)
Web and non-Web will be the mainstream
practice for enterprise software engineering (0.7
probability).Source Gartner
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Versata Overview Low Productivity of
Implementing an SOA
Java IDEs, HTML Java Editors, JSP Wizards, Web
Service tooling Dreamweaver, JBuilder, VA Java,
Vignette, BEA WorkShop, Visual Cafe
presentation layer
process layer
50 Automated / 50 Manual
Workflow Servers FileNet, InConcert, Home-grown
approaches
service layer
20 Automated / 80 Manual
Java IDEs,Wizards, Frameworks JBuilder, VA
Java, Visual Cafe
data logic layer
20 Automated / 80 Manual
integration layer
Integration EAI Vendors WebMethods, Mercator,
Vitria, Tibco, BEA WebLogic Integration,
back office value chain
Enterprise Application SAP, PeopleSoft, Siebel,
home-grown solutions
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Versata Overview Versata Fills the Business
Logic Gap
presentation layer
HTML, Java, JSP Wizards Dreamweaver, JBuilder,
VA Java, Vignette, Visual Cafe
process layer
Process Design, Management, Execution
Versata Logic Server
97 Declared / 3 Hand coded
service layer
Automation of Business Transactions Versata
Logic Server
97 Declared / 3 Hand coded
data logic layer
Enforcement of Business Logic Across Data
Sources Versata Logic Server
97 Declared / 3 Hand coded
Integration EAI Vendors WebMethods, Mercator,
Vitria, Tibco, BEA
integration layer
Enterprise Application SAP, PeopleSoft, Siebel,
home-grown solutions
back office value chain
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Versata Overview Why We Do It

• So our customers can
• Get to Market Faster
• Change Applications Faster
• Dramatically reduce Complexity Risk
• So architects can
• Deliver J2EE Scalability and Reuse
• Leverage automation to enforce J2EE Patterns

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Requirements Business Level
Activity (Process)
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The Technology Pit
Business Requirements
What if the BUSINESS spec were executable..
X
Pages of Hand-Coded J2EE Server Objects
Time, Cost Risk
DesignSpecs

• Architecture (experts!)
• Session or Entity EJB?
• JSP?? (80 put logic here ouch!)
• Design
• Reuse (not in JSP...)
• Logic Ordering (dependencies)
• Performance J2EE Patterns...
• Code, test, debug
• Maintenance redo it all!

50X
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Declarative Business LogicThe Business
Specification is Executable
Versata Logic Server
JSP, Servlet, Beans
EJBs
Versata Logic Studio
Process Logic Engine
? Process Logic ? Service Data Logic
Graphical Logic Designers
IDE
Transaction Logic Engine
Connectors
Logic Repository (XML)
Database
Applications
Middleware
This means Fast (deploy, change) 50X (a
declaration replaces 1 page of Java) 98
automation Simple - Leverages Existing Skills,
Reduce Risk
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Definition of Terms - ROI

• Return on Investment (ROI) is the return that the
  customer should see by investing in the Versata
  solution
• Example
• if 1 million is invested (Versata Costs)
• and as a result, 3 million are earned back
  (Total Gain)
• then there is a net gain of 2 million (Total Net
  Gain)
• from the investment in the Versata solution
• 200 return (Return on Investment or ROI)

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Definition of Terms - NPV

• Net Present Value (NPV) of an investment is the
  actual value of that investment, represented in
  today's dollars
• NPV is based on a discount rate (Cost of Capital)
  and a series of future income streams (Total Net
  Gain)
• Enterprises should base AD decisions on
  development and maintenance expenses, rather than
  capital costs, as the latter represents usually
  less than 20 percent of the overall cost of new
  technology. - Gartner Group

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Why Calculate ROI

• Demonstrates Quantifies project benefits
• Compares Versata vs. typical alternatives
• Determines the delivery options to reduce time to
  market
• Mentor Model
• Some Versata PS Staff Augmentation
• Versata Managed

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When to Perform

• Product Decision
• Project Start
• Update during Project Lifecycle
• Project Completion

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Key Factors that Versata Impacts

• Business Factors
• Revenue Increase
• Expense Decrease (per month)
• IT Factors
• Development Effort (headcount / duration)
• Technology Ramp up Costs
• Project Risk Factor
• Maintenance Estimates
• Software Costs

Increased Time to Market
Reduced
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Technology Ramp Costs (Gartner)
Bottom Line It costs less and reduces the risk
of failure to train programmers to deliver
enterprise Java applications with Versata
Note Versata training costs include some
training on Java Object Oriented Programming
Concepts
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Effort by Process Phase
Phases
Inception
Elaboration
Transition
Construction
Maint
Business Modeling
Requirements
Analysis Design
Process Disciplines
Implementation
Test
Deployment
Maintenance
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Efficiency Gains with Versata by Process
Reduction in effort with Versata
Process Disciplines
5 20 18 40 15 2
Inception
Elaboration
Transition
Construction
Typical
0 0 50 90 75 50 2-10x
Business Modeling
Requirements
Analysis Design
Implementation
Test
Deployment
Maintenance
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Case Study - National Retail Company

• Project Size
• Transaction Logic Business Rules 209
• User Screens 37
• Lines of Generated Java Code 38K
• Project Duration
• With Versata 3.5 months
• Without Versata 8.5 months (hand coded)
• Versata technical project mgmt mentoring only
• Stage In production 2Q 2001
• Maintenance Productivity 10x
• Customers estimate based on its experience in
  adding functionality to already completed system
  modules
• Also, these changes were made by Business Analysts

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Case Study - Real Estate Relocation

• Project Size
• Transaction Logic Business Rules 300
• User Screens 130
• Lines of Generated Java Code 120K
• Process Logic Activities 400
• The Business Case for Building the Application
• - Headcount reduction of 64 FTE across various
  areas of company
• - Added savings of 500,000 from retirement of
  legacy systems, office space, storage, paper,
  etc.
• Expected annual revenue increase of 3M with
  enhanced customer service

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Case Study - Real Estate Relocation Service
(contd)

• Project Duration
• With Versata 11 months w/8 developers
• Without Versata 18 months w/18 developers
• Stage Completing System Requirements
• Versata developing application for Customer
• Total net gain over three years is 5.9M (NPV)
• Benefits from achieving Business Case earlier
• Development cost reduction
• Enhancement and Maintenance Gain
• ROI 980 (NPV/Versata Costs)

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Case Study ResultsReal Estate Relocation
Services
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ROI Estimation Methodology

• Reuse of Versata completed projects database
• Estimated Java LOC based on function points
• User Screens _at_266 LOC
• Business Objects (tables)_at_ 366 LOC
• Process Logic Activities
• Estimated client/server side LOC generated by
  Repository _at_ 90
• Estimated hand coding productivity (15-100 LOC
  per day of bug free code)
• Estimate project length cost savings based on
  developer team size

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Versata ROI - Summary

• So our customers can
• Get to Market Faster
• Change Applications Faster
• Dramatically reduce Complexity Risk
• So architects can
• Deliver J2EE Scalability and Reuse
• Leverage automation to enforce J2EE Patterns