Building the Business Case for App Modernization

©2020 VMware, Inc.
Building the Business
Case for App
Modernization
The Value of Getting Code Into
Production
September 2, 2020
Dormain Drewitz, VMware
@DormainDrewitz

©2020 VMware, Inc. 2
Agenda
1. Business Case Basics
2. The Revenue Case
3. The Cost Savings Case
4. The Security Case

Holy Trinity of IT
Increase Revenue
Decrease RiskReduce Cost
Virgin of the Rocks by Leonardo Da Vinci
@DormainDrewitz

Business Case Basics: Holy Trinity of IT
Increase Revenue
@DormainDrewitz

Keep Track of Your
Assumptions

Reasonable > Accurate

Keep it understandable

8©2020 VMware, Inc.
The Revenue Case

Increase
Revenue
Gaining Market Share
Entering
New Markets
@DormainDrewitz
The Revenue Case

Is the revenue opportunity greater than the cost to modernize?
Start with the simplest possible business case
Revenue
opportunity
Cost to
modernize

Photo by Alexander Hafemann on Unsplash

Simple present value calculation
Future Value
(1+Rate of Return)^(# of years out)

Project out 3 years max, don’t get wrapped around the axel on discount rate
Playing the long game
Discount rate: 5.00% Rev Growth: 8.00%
Year 1 2 3 Total
Rev Opp $1,000,000 $1,080,000 $1,166,400
Cost to Modernize -$1,000,000 $0 $0 -$1,000,000
Net Revenue $0 $1,080,000 $1,166,400
Time Discount $0 $100,408 $158,820
Present value $0 $979,592 $1,007,580 $1,987,172

Shields Healthcare
4X
CHALLENGE: Needed to automate admin tasks to
accommodate business growth and increased patient
enrollment at scale
SOLUTION:
● VMware Pivotal Labs to create a custom
software platform for hospital specialty
pharmacy
● Tanzu Application Service
$150K+
83% 46% Increase
Sources: https://tanzu.vmware.com/customers/shields-health
“The parallel tracks of
building and enablement
allowed us to achieve
both our primary
goals of launching
impactful software
that drives real user
value and becoming a
SaaS company ourselves.”
-Brandon Zaharoff, Director of
TelementryRX,
Shields Healthcare
in patient
enrollment rates
Improvement in User
Efficiency
Additional revenue
per month on avg
for Sheilds’ hospital
partners
The amount of time
available to interact with
patients

“Before, we would have to wait for these long cycles,
especially for the non-eCommerce-related teams
where they have maybe a release per quarter or
maybe a few years. Now we are driving value to our
customers sooner.”
Organizations can release updates and bug patches
faster, increasing their availability to customers and
driving additional revenue
This is a benefit of almost $6.2 million present value
over three years
Faster release cycles generate incremental revenue
Source: The Total Economic Impact Of VMware Tanzu Application Service, Forrester Consulting, December 2019
Calculation
variables
Year 1 - 3
Number of revenue
generating apps on the
TAS
6 - 8
Estimated revenue per
week
$3 million per app
Additional weeks of
additional revenue
2 weeks
Operating margin 7%

Merrill Corp
Releases, versus five
week releases
To release a fix for a
bug or issue
Revenue
Double-digit y/y revenue
growth, thanks to new
SaaS product on TAS
BEFORE: Unexpected consequences from making
changes slowed development teams using waterfall
methodologies.
SOLUTION:
● Tanzu Application Service with Spring Boot and
Spring Cloud Services
● Microsoft Azure, Azure Key Vault and Azure
Active Directory
New Markets
Hits the ground running,
with all security needs,
instead of months to
build a new datacenter
Daily Hours
“We’ve seen a massive increase
in our business. Our year over
year revenue growth is very
significant, in the double digits,
thanks to this new platform.”
—Thomas Fredell,
Chief Product Officer
Merrill Corporation
Sources: https://customers.microsoft.com/en-US/story/merrill-corporation
https://tanzu.vmware.com/content/videos/merrill-corp-pivotal-thomas-fredell

17©2020 VMware, Inc.
The Cost Savings Case
The Forrester Total Economic Impact Study of
Tanzu Application Service

Increase
Revenue
@DormainDrewitz
The Savings Case
● Reduced licensing cost
● Reduction in downtime
cost
● Reduction in
infrastructure cost

Is the operating cost BENEFIT opportunity greater than the cost to modernize?
Operating
Cost Benefit
Cost to
modernize

Photo by Alexander Hafemann on Unsplash

The long view: Model out before and after costs
Discount rate 5.00% Cost growth: 8.00%
Year 1 2 3 Total
BEFORE: Extended support licensing cost $1,000,000 $1,080,000 $1,166,400
AFTER: Reduced licensing cost $150,000 $162,000 $174,960
Net Operating Cost benefit $850,000 $918,000 $991,440
Cost to Modernize -$1,000,000 $0 $0 -$1,000,000
Net Cost Benefit -$150,000 $918,000 $991,440
Time Discount -$7,143 $85,347 $134,997
Present value -$142,857 $832,653 $856,443 $1,546,239

DIUX and USAF partnered with VMware to
revolutionize the applications used on the battlefield.
About
• Took an average of 8 years to deliver software to
warfighters
• Risk management framework had 400–800
controls to navigate for an Authority to Operate
(ATO)
Challenges
• Engagements with VMware Pivotal Labs for
agile/XP methodologies
• VMware Tanzu on AWS
• Re-engineering procurement process
Solutions
• $428k/day fuel cost savings for one application
• 120 days to deliver MVP into production
• 30/month production deployments
• First DoD team to continuously deliver to SIPRNET
Impact
“We’re now saving literally hundreds
of thousands of gallons of fuel per day
because we’re more efficient in how
we plan.”
Lieutenant Colonel Enrique Oti
U.S. Air Force
Location: Washington, D.C.
U.S. Air Force
Industry: Government
Products
VMware Pivotal Labs
VMware Tanzu on AWS
Lauren Knausenberger & Bryon Kroger, US Air Force—SpringOne Platform 2018. (2018) & Lieutenant Colonel Enrique Oti at SpringOne Platform 2017. (2017)
Source: https://tanzu.vmware.com/content/videos/day-2-keynote-lauren-knausenberger-and-bryon-kroger
https://tanzu.vmware.com/content/videos/lieutenant-colonel-enrique-oti

“Our eCommerce applications are probably the best
example. We would perform updates every two
weeks. We were probably introducing as many bugs
as we were in features. It took another two weeks to
remediate the issues we introduced.”
Automated patching, reducing the number of bugs in
production, and reducing the mean-time-to-remediate
those bugs lead to fewer and less impactful
instances of downtime
This is a benefit of $5.4 million present value over
three years
Reduced downtime saves effort and avoids costly business impact
Calculation
variables
Year 1 - 3
Downtime incidents
avoided
19 - 23
MTTR 16 hours
Staff required per incident 15
Business impact per
downtime event
$100,000

AutoZone BEFORE
Deployment and provisioning was a long, tedious, accident-prone
process with unrealistic timelines. Process resulted in a poor
experience for developers, operators, and managers.
SOLUTION
● Adopted VMware Tanzu to decouple infrastructure from
application delivery
● Purpose-built tools and in-house training
99.998% Uptime
in Production
100.4 to 1 Ratio
Developers to Operators
10+ Dev Hours
Saved
per features
<30 Day
average for minor patch to
Production
“We care about people, we care
about people actually enjoying
their job. We want them to
enjoy working with us.”
Daniel Church, Product Manager, PlatformOps &
Customer Satisfaction, AutoZone
Source: https://tanzu.vmware.com/content/videos/daniel-church-autozone-and-the-road-to-cloud-native

The Risk Case

Increase
Revenue
@DormainDrewitz
The Risk Case
● Reduction in CVE
exposure time

Image credit: Event Horizon Telescope, via Wikipedia

What is it worth to you to be able to apply a CVE patch within 24 hours of it being available?
https://tanzu.vmware.com/content/blog/1-factor-app-kubernetes-modernization

“I don’t even know when the patch cycles happen
now, whereas I knew exactly when they were
scheduled, and I knew the impact before.”
The patching process no longer requires a full team
to monitor and deploy the patches
Organizations eliminate planned downtime as
security updates occur behind the scenes
This is a benefit of $1.8 million present value over
three years
Automated patching creates efficiency
Calculation
variables
Year 1 - 3
FTEs before 8
FTEs after 3 – 1.5
Engineer compensation $135,200

For the purposes of building *some* kind of business case
Translating a Security Cost into an Operating Cost
Discount rate 5.00% Cost growth: 8.00%
Year 1 2 3 Total
BEFORE: Dedicated patching team $1,081,600 $1,168,128 $1,261,578
AFTER: Dedicated patching team $405,600 $292,032 $155,480
Net Operating Cost benefit $676,000 $876,096 $1,106,098
Cost to Modernize -$600,000 $0 $0 -$600,000
Net Cost Benefit $76,000 $876,096 $1,106,098
Time Discount $3,619 $81,451 $150,609
Present value $72,381 $794,645 $955,489 $1,822,515

Nasdaq is an American multinational financial
services firm that owns and operates the Nasdaq
stock market and eight European Stock Exchanges.
About
• Improve time to market and take advantage of
hybrid/multi-cloud value, spee, ,and versatility
without compromising security
Challenges
• VMware Pivotal Labs engagement for agile
methodology
• VMware Tanzu running on-premises and AWS
• Utilizing VMware Tanzu Application Service for
Windows to run legacy .NET applications
Solutions
• Number of days to stand up a full-fledged
environment decreased from 33 to 2
• 96% from productivity improvement with automated
patching
• 577% increase in release frequency
Impact
“When we select a vendor we don't
want a tool, we want a solution… What
we wanted solved was the process
change, the culture change, and the
ability to replicate and grow at scale.
That is what we have gotten from
[VMware Tanzu].”
Bhavani Yellapragada
Assistant Vice President DevOps at Nasdaq
Location: New York, NY
Nasdaq
Industry: Financial Services
Products
VMware Pivotal Labs
VMware Tanzu
VMware Tanzu Application Service Source: A New Way of Deploying .Net Applications at Nasdaq. (2019)
Source: https://youtu.be/TvtxNmJZ7ac

Yahoo! Japan Corporation is a Japanese internet
company originally formed as a joint venture between
the American internet company Yahoo! and the
Japanese company SoftBank.
About
• Scaling to meet the demands of nearly 40 million
subscribers and 76 billion page views per month
• Needed to reduce time spent on installing media
and increase developer productivity
Challenges
• Deployed VMware Tanzu and automated path to
production with Concourse for VMware Tanzu
• BOSH for logging components
Solutions
• 75% decrease in time to deploy
• Auto scaling in seconds on the platform and
supporting over 600,000 transactions per second
• 0 downtime; reduced VM recovery from 2 hours to
2 minutes
• 3,800 apps and 11,000 AIs in production after 18
months
• 5x patch frequency, with time to patch reduced
from 1 day to 4 hours
• 85% less work on manual install and updates
Impact
“[VMware Tanzu] helps our
developers to spend more time just
focusing on coding and not worry
about installing media, etc.”
Gensho Hirata
Commerce Division at Yahoo! JAPAN
Location: Japan
Yahoo! Japan
Industry: Technology
Products
VMware Tanzu
Concourse for VMware Tanzu
Automation and Culture Changes for 40M Subscriber Platform Operation. (2018)
Source: https://tanzu.vmware.com/content/videos/automation-and-culture-changes-for-40m-subscriber-platform-operation

The Total Economic Impact Of VMware Tanzu Application Service, Forrester Consulting,
December 2019: https://tanzu.vmware.com/content/analyst-reports/the-total-economic-impact-of-vmware-tanzu-application-
service
Webinar: Prod or it Didn’t Happen: The Value of Getting Code Into Production (March 2020)
https://tanzu.vmware.com/content/webinars/march-19-prod-or-it-didnt-happen-the-value-of-getting-code-into-production-webinar
Blog on 1-factor app (June 2020): https://tanzu.vmware.com/content/blog/1-factor-app-kubernetes-modernization
App modernization 101 guide (March 2020): https://tanzu.vmware.com/content/intersect/app-modernization-101
End-user sessions from past SpringOne conferences (and other events): links on slides
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Building the Business Case for App Modernization

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