Mainframe Migration Case Studies:
A Total Cost of Ownership Comparison
Lowering Cost and Improving Flexibility by
Migrating to Open Systems
An Alinean White Paper
Published by:
Alinean, Inc. • 201 S. Orange Ave • Suite 1210 • Orlando, FL 32801-12565
Tel: 407.382.0005 • Fax: 407.382.0906 • Email: [email protected] • Web: www.alinean.com
July, 2010
© Copyright 2001-2010, Alinean, Inc. All rights reserved.
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Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
ii
EXECUTIVE SUMMARY ............................................................. 2
Results Summary – Financial Services Case Study .............................. 3
Results Summary – Government Case Study ..................................... 4
FINANCIAL SERVICES CASE STUDY................................................ 5
Server Hardware Comparison ........................................................ 5
Software License and Annual Support and Maintenance Costs .............. 6
Migration / Change Costs............................................................. 7
Server Administration Labor Savings .............................................. 7
Facilities Expense Reductions ....................................................... 7
Annual Cost Comparison .............................................................. 8
Return on Investment Analysis ..................................................... 9
GOVERNMENT CASE STUDY....................................................... 10
Original Mainframe Environment ................................................. 10
Open Systems Solution ............................................................. 10
Software Licensing and Support Costs .......................................... 10
Application Reengineering and Migration Costs .............................. 11
Systems Administration Labor Savings ......................................... 11
Power Consumption and Facilities Expenses ................................... 11
Annual Cost Comparison ............................................................ 12
Return on Investment Analysis ................................................... 13
CONCLUSION ..................................................................... 14
ABOUT ALINEAN ................................................................. 14
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
iii
EXECUTIVE SUMMARY
As Open Systems grew in scale, reliability and popularity throughout the 1990s IBM and other vendors of
proprietary mainframe solutions braced for the assault on their dominance of the corporate datacenter.
Mainframe vendors developed innovative partitioning strategies and software and hardware pricing
practices to compete with the less expensive RISC and Intel based platforms. The combination of these
defensive strategies and the explosive growth in computing requirements in the late 1990s and 2000s were
so successful that they actually contributed to a significant growth in mainframe installations during this
time. IBM even cheerfully adopted the T-Rex as the mascot for its mainframe business in proud defiance to
speculation on the extinction of the mainframe platform.
Despite the best efforts of mainframe vendors, though, the platform remains much less flexible and more
expensive than open systems alternatives. Although mainframes have not gone extinct overnight as some
anticipated in the early 1990s, organizations are continually reviewing their options, and replacing these
platforms one by one. As the scalability and reliability of open systems increases to rival that of mainframe
systems the pace of mainframe migrations has started to accelerate in recent years.
There are three major factors driving businesses to consider migrating application workloads off mainframe
environments in favor of open systems solutions.
Agility - Although there are many ways to integrate new applications with existing mainframe based
applications, organizations struggle with achieving the level of flexibility and time to market they desire
in today’s rapidly changing business environment.
Cost – As the price performance ratio has steadily decreased in the fiercely competitive open systems
market, mainframe vendors have been struggling to reduce prices enough to stay competitive with
open systems, while not eroding the huge profit margins of their propriety solutions. This balancing
act is not intended to achieve cost parody with open system. Rather, it is designed to maintain
mainframe revenue streams and profits for as long as possible.
Skills - The available skill base of mainframe expertise is shrinking. Organizations are having an
increasingly difficult time replacing critical mainframe skills, which are rapidly retiring from the work
force.
This paper examines two representative case studies to investigate the economic factors for migrating
application work loads off of mainframe platforms in favor of open systems alternatives. The first case is
based on a financial services company which retired its mainframe system by re-hosting an SAP
implementation onto an Intel Itanium processor based HP Integrity solution running HP-UX 11i. The
second case examines the advantages of replacing a mainframe installation by reviewing a municipal
government, which moved several applications to HP ProLiant servers with Intel Xeon processors running
Microsoft Windows Server.
Although both organizations carefully reviewed all costs associated with the alternative platforms, this
paper only compares the hard dollar costs for IT operations. In both cases soft costs for availability were
viewed as roughly equivalent, while the open systems solutions offered significantly improved time to
market for new services. From an IT cost perspective the organizations were able to greatly reduce
ongoing operating costs and achieve very rapid paybacks even while factoring in substantial investments of
time and expense in the migration processes. The financial services company was able to reduce annual
operating expenses by an impressive 86% saving $5,507,000 per year. The project paid for itself in less
than one year with an initial investment of $1,821,860 and a migration time of six months and yielded a
return on investment (ROI) of 712% over a four year period. The migration project for the government
organization took nine months and requiring a total initial investment of $1,033,224. This case also yielded
very strong results by lowering annual operating costs 96% and delivering an ROI of 511% over four years
with a payback period of just under a year.
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
2
Results Summary – Financial Services Case Study
In our first case a financial services company migrated their SAP application suite off an IBM zSeries 2094
Model 728 mainframe to a cluster of two HP Integrity SuperDome 2 servers running HP-UX 11i. The total
investment for the new configuration came to $2,357,300 over four years, including initial acquisition costs,
annual support for new equipment and software, and one time migration labor expenses. Over this same
four year period, the company was able to reduce operating expenses by $19,147,676, yielding an
impressive 712% return on investment. Table 1 below shows the investment and savings summary for this
project.
Four Year ROI Analysis
Open Systems
Investment
Server Hardware Costs
Server Software Costs
$677,440
$12,551,000
$1,203,360
$5,777,240
Server Administration Labor Costs
$750,000
Facilities Costs
$69,436
Migration / Project Change Costs
Total
Total Savings
Over 4 Years
$476,500
$2,357,300
$19,147,676
Table 1: Four Year Investment and Savings Summary for Financial Services Case
From a Total Cost of Ownership (TCO) perspective the company was able to reduce annualized operating
costs by 82.2%. Table 2 shows the four year comparison of the total costs for maintaining the original
mainframe environment versus the acquisition, migration and ongoing operations costs for the open
systems alternative.
Four Year TCO Comparison
Mainframe
Server
Open Systems
Solution
Difference
Server Hardware Costs
$14,344,000
$677,440
$13,666,560
95.3%
Server Software Costs
$6,602,560
$1,203,360
$5,399,200
81.8%
Server Administration Labor Costs
$2,880,000
$1,880,000
$1,000,000
34.7%
$110,120
$26,919
$83,201
75.6%
$0
$476,500
($476,500)
$23,936,680
$4,264,219
$18,671,176
Facilities Costs
Migration / Project Change Costs
Total
82.2%
Table 2: Four Year TCO Comparison for Financial Services Case
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
3
Results Summary – Government Case Study
In our second case a municipal government reengineered their core retail banking applications to run in a
distributed environment on a combination of two HP ProLiant DL580 G7 servers with Intel Xeon 7550
processors running Windows Server. The total investment for the new configuration came to $851,762
over four years, including initial acquisition costs, annual support for new equipment and software, and one
time migration labor expenses. Over this same four year period, the company was able to reduce operating
expenses by $6,313,975, yielding an ROI of 641%. Table 3 below shows the investment and savings
summary for this project.
Four Year ROI Analysis
Open Systems
Investment
Server Hardware Costs
$61,920
Trade-in Value of Mainframe
Server Software Costs
Total Savings
Over 4 Years
$994,000
($420,000)
$396,742
Server Administration Labor Costs
$4,648,800
$660,000
Facilities Costs
$11,175
Migration / Project Change Costs
Total
$813,100
$851,762
$6,313,975
Table 3: Four Year Investment and Savings Summary for Government Case
From a Total Cost of Ownership (TCO) perspective the company was able to reduce annualized operating
costs by 84%. Table 4 shows the four year comparison of the total costs for maintaining the original
mainframe environment versus the acquisition, migration and ongoing operations costs for the open
systems alternative.
Four Year TCO Comparison
Server Hardware Costs
Mainframe
Server
Open Systems
Solution
$1,108,000
Trade-in Value of Mainframe
Total Savings
$61,920
$1,046,080
($420,000)
$420,000
Difference
94.4%
Server Software Costs
$5,721,600
$396,742
$5,324,858
93.1%
Server Administration Labor Costs
$1,320,000
$440,000
$880,000
66.7%
$36,400
$18,400
$18,000
49.5%
$0
$813,100
($813,100)
$8,186,000
$1,310,162
$6,875,838
Facilities Costs
Migration / Project Change Costs
Total
84.0%
Table 4: Four Year TCO Comparison for Government Case
Four Year TCO Comparison Government Case
Server Hardw are Costs
Millions
Trade-in Value of Mainframe
$10
$8
$6
$4
$2
$0
Server Softw are Costs
Server Administration Labor Costs
Facilities Costs
Migration / Project Change Costs
Mainframe Server
Open Syst ems
Solution
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
4
FINANCIAL SERVICES CASE STUDY
Our first case involved a $4.8 billion international financial services company, which was running SAP for
financial and customer management systems. The organization was interested in implementing Unicode
capabilities in the SAP application suite to enable multi-language support and improve the efficiency of
printing in multiple languages. The Unicode support was expected to increase processing requirements by
approximately 25%. The organization considered two options for increasing server capacity; adding
additional processors to their existing z9 EC 2094 mainframe, or replace the mainframe with a cluster of
two new HP Integrity SuperDome 2 servers.
The organization was pleased with the rich functionality and integration of business processes provided by
the SAP solution, but they found customization and integration of new capabilities difficult. Over the years
the organization had developed several open systems applications taking advantage of technologies such as
Services Oriented Architecture (SOA) for simplified integration of systems. The organization was also
impressed with the high availability capabilities of the latest version of HP-UX 11i they were running on
customer facing web applications. They believed that migrating to the newly released HP Integrity
SuperDome 2 servers with the latest Intel Integrity 9300 series processors could improve application
integration and provide similar levels of availability and reliability they had required of the mainframe
environment.
In performing the financial analysis for their SAP upgrade the organization found that by migrating to HP
Integrity servers they could not only reduce annual operating costs by over $5.5 million per year, but they
could quickly recover their investment in the new servers with these significant cost savings.
Server Hardware Comparison
The organization was currently running five instances of SAP on an IBM z9 EC 2094/728 mainframe. In
order to accommodate the added processing capacity required for the SAP Unicode support the
organization would need to install three more general purpose processors and one additional zIIP processor
for DB2. The additional processors had a purchase price of $500,000. The organization had a four year
lease on the current z9 EC mainframe for $2,710,000 per year. Rather than purchasing the additional
processors, the organization would add them to the current lease and extend the term of the agreement.
The additional processors would increase the annual lease by $160,000 for a total of $2,870,000 per year.
In addition to the hardware lease the z9 mainframe also required a separate annual hardware maintenance
contract of $687,000 per year. The new processors would increase this annual maintenance by $29,000 for
a total annual maintenance cost of $716,000 per year.
For the open systems configuration the organization would need two HP Integrity SuperDome 2 servers
with six quad-core Intel Itanium 9300 series processors and 128GB of memory for the production servers.
The organization would also need two HP Integrity rx6600 servers with two quad-core Intel Itanium 9300
series processors for test and development. The purchase price for the new production SuperDome 2
servers was $210,000 each, while the rx6600 servers were priced at $52,000 a piece. Overall the
organization would be able to purchase the new Integrity servers for less than a quarter of the annual lease
and maintenance costs of the existing mainframe server.
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
5
Table 5 shows the capital investment for the new purchase, and the difference in annual operating costs.
Mainframe System
Annual
Costs
z9 2094/728 Annual Lease
$2,710,000
z9 2094/728 Annual Lease
$687,000
zSeries Processor Upgrade
$160,000
zSeries Upgrade Additional
Support
$29,000
Annual Costs
Open Systems Servers
Investment
Price per
Server
Annual
Support
HP Integrity SuperDome 2
(2 servers) Production servers
$210,000
$14,500
HP Integrity rx7640 (2 servers)
Test and Development
$52,000
$4,680
$524,000
$38,360
Total Costs
$3,586,000
Table 5: Server Hardware Cost Comparison for Financial Services Case
Software License and Annual Support and Maintenance Costs
In addition to reducing annual mainframe hardware costs, the organization also expected to cut annual
software costs. Unlike open systems environments where software packages are generally purchased as
perpetual licenses with modest annual support costs, mainframe software has traditionally been licensed on
a monthly basis. The total monthly license charge (MLC) for software on the current mainframe
environment was running $118,500 for a total annual cost of $1,422,000. The processor upgrades for the
Unicode enhancement would increase this amount by $228,640 per year. Table 6 shows the annual
software costs for the mainframe environment including the processor upgrades.
The IBM z/VM software was used to provide virtualization support for running multiple host operating
systems on the mainframe server. The IBM DB2 database ran on the IBM z/OS operating system, while the
SAP application functions ran in Linux partitions. IBM NetView was used for systems and network
management.
The HP Integrity open systems servers would be configured in a high availability cluster with virtualization
supported by the HP-UX 11i operating system. The organization would replace the DB2 database on the
mainframe with Oracle 11g Enterprise Edition. The Oracle database was licensed for one fourth of the total
cores (16) on the HP Integrity servers.
Open Systems Software Investment
Mainframe Software Savings
Software Package
Annual
Savings
Software Package
Initial License
Annual
Support
IBM z/OS
$468,000
HP-UX 11i
$230,880
$57,720
IBM z/VM
$180,000
Oracle Database 11g
$380,000
$76,000
Red Hat Linux
$360,000
HP OpenView
$32,000
$6,400
$642,880
$140,120
IBM DB2
$92,640
IBM NetView
$300,000
Additional Mainframe Utilities
$250,000
Total
Total
$1,650,640
Table 6: Server Software Cost Comparison for Financial Services Case
The savings from eliminating the mainframe software charges more than compensated for the initial
purchase of the HP-UX and Oracle software in a single year. On an annual basis, the organization was able
to reduce on-going software costs by over $1,500,000 per year.
The additional software license fees and annual support for the SAP application software have not been
included in the financial analysis, since these costs were identical for the two platform choices.
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
6
Migration / Change Costs
Moving applications off of a mainframe environment often raises significant concerns over the costs and
risks of the migration effort. In addition to the application reengineering and system verification costs that
are planned, unanticipated issues often arise that can significantly increase project costs and jeopardize the
stability of mission critical applications. In this case the costs and risks associated with re-hosting a
packaged application were much lower than porting custom applications. The organization was able to set
up the new servers, install the SAP application, port their data and application customizations and verify the
new configuration in less than six months.
The organization used a combination of external professional services and internal staff to perform the
application migration and verification. External consultants were used primarily for setting up the new
servers and assisting with system configuration and tuning. Internal staff performed the majority of the
effort required for porting data and system verification. External professional services fees for the project
totaled $180,000. The internal migration effort took a total of 4,200 hours at an average fully burdened
rate of $62.50 for a project cost of $262,500. Additionally, the organization sent three systems
administrators to training for two weeks for a total cost of $34,000. Overall the migration and change costs
for the project came to $476,500.
Server Administration Labor Savings
The mainframe environment was supported by four systems administrators and two database
administrators. The four systems administrators were needed to support the three distinct operating
systems on the mainframe. Each of the operating systems was rather complex and required deep
knowledge to properly support the environment and insure high availability. The fully burdened salary for
these six staff, including benefits, taxes, paid time off and other overhead averaged $120,000 per year for
a total annual server administration cost of $720,000.
By moving to the HP Integrity SuperDome configuration with a single operating system the organization
expected that it could cut its systems administration requirements down to two full time staff. They would
still need two database administrators for a total server administration staff of four. Eliminating the need
for senior mainframe skills would also reduce the average annual salary for the administration staff slightly
to $117,500 for a total annual cost of $470,000, resulting in a savings of $250,000 per year.
Facilities Expense Reductions
With increased focus on global warming and heightened social consciousness, organizations are
aggressively seeking ways to reduce energy and resource consumption in promotion of green practices.
Mainframe systems traditionally have required significant power and cooling resources. In this case the
organization was able to reduce energy consumption by 46%. Although the financial impact of the energy
and space saving were minimal compared to other areas of savings, many IT organizations are reaching
either the physical or energy capacity of their data centers. Consolidating systems can free up valuable
floor space and power and cooling capacity, which can help postpone very costly data center expansions.
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
7
Annual Cost Comparison
Tables 7 and 8 below show the four year annual total cost comparisons for the Mainframe and Open
Systems environments.
Mainframe Four Year TCO
Year 1
Year 2
Year 3
Year 4
Mainframe Hardware Costs
$3,586,000
$3,586,000
$3,586,000
$3,586,000
$14,344,000
Software Costs
$1,650,640
$1,650,640
$1,650,640
$1,650,640
$6,602,560
$720,000
$720,000
$720,000
$720,000
$2,880,000
$27,530
$27,530
$27,530
$27,530
$110,120
$5,984,170
$5,984,170
$5,984,170
$5,984,170
$23,936,680
Administration Labor Costs
Facilities Costs
Total
Total
Table 7: Mainframe Four Year TCO Summary
Open Systems 4 Year TCO
Year 1
Year 2
Year 3
Year 4
Total
Server Hardware Costs
$562,360
$38,360
$38,360
$38,360
$677,440
Software Costs
$783,000
$140,120
$140,120
$140,120
$1,203,360
Administration Labor Costs
$470,000
$470,000
$470,000
$470,000
$1,880,000
$6,730
$6,730
$6,730
$6,730
$26,919
$476,500
$0
$0
$0
$476,500
$2,298,590
$655,210
$655,210
$655,210
$4,264,219
Facilities Costs
Migration Costs
Total
Table 8: Open Systems Four Year TCO Summary
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
8
Return on Investment Analysis
Since the migration and validation process took six months, the mainframe remained in place during that
time. As a result none of the mainframe costs, other than the avoidance of the hardware upgrade, were
able to be reduced during those first six months. Table 9 below shows the four year investment and
savings for this migration project. Comparing the four year total investment of $2,357,300 with the net
benefit of $16,790,376 yields an impressive 712% ROI.
Four Year ROI Analysis
Year 1
Year 2
Year 3
Year 4
Total
Investment
Server Hardware Costs
$562,360
$38,360
$38,360
$38,360
$677,440
Software Costs
$783,000
$140,120
$140,120
$140,120
$1,203,360
Migration Costs
$476,500
$0
$0
$0
$476,500
$1,821,860
$178,480
$178,480
$178,480
$2,357,300
$1,793,000
$3,586,000
$3,586,000
$3,586,000
$12,551,000
$825,320
$1,650,640
$1,650,640
$1,650,640
$5,777,240
$0
$250,000
$250,000
$250,000
$750,000
($7,035)
$20,800
$20,800
$20,800
$69,436
Total Savings
$2,625,355
$5,507,440
$5,507,440
$5,507,440
$19,147,676
Cumulative Benefit
($803,495)
$6,132,456
$11,461,416
$16,790,376
$16,790,376
Total Investment
Savings
Mainframe Hardware
Software
Administration Labor
Facilities
Table 9: Four Year ROI Analysis
By reducing annual operating expenses by over $5.5 million per year, the migration project paid for itself in
less than one year.
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
9
GOVERNMENT CASE STUDY
In our second case study a municipal government was interested reengineering several of their applications
to provide greater public access to information and self service. For years the organization had been
developing public facing Web applications leveraging Microsoft .Net technology. However, several key
systems, including water and garbage services, criminal records and real estate records had been
developed in COBOL and were still hosted on a mainframe z9 BC server. The government was especially
interested in retiring the mainframe system now because the city had been growing rapidly and the system
was beginning to run into capacity issues. The city would need to either upgrade to a more powerful z10
BC mainframe, or off-load existing applications.
Original Mainframe Environment
The city currently had a z9 BC 2096 mainframe with 4 processors and 24 GB of memory. To accommodate
additional processing capacity the organization would need to upgrade to a z10 BC 2098 with 4 processors.
This upgrade would increase the available system capacity from 1000 MIPS to just over 1500 MIPS, and
would provide flexibility to add another 1400 MIPS if needed. The organization was currently spending
$12,500 per month or $150,000 a year just on hardware maintenance for the mainframe server. The
upgrade to the z10 BC server would cost the organization a one time fee of $500,000, but would not
increase the annual hardware support costs. Alternatively, the residual value on the city’s mainframe was
estimated at $420,000, if they could retire the system and sell it to a refurbishing dealer.
Open Systems Solution
To replace the mainframe system the city was planning on purchasing two HP ProLiant DL580 G7 servers,
each with two eight-core Intel Xeon 7550 processors and 64GB of memory. These new servers would
provide several times the processing power of the existing mainframe at a fraction of the cost. The DL580
servers were priced at $21,500 a piece. Table 10 shows the cost comparison for the two server hardware
options.
Mainframe System
Savings
Cost
Avoidance
Open Systems Servers
z9 BC 2096 Residual Value
$385,000
z10 BC 2098 Upgrade
$500,000
HP ProLiant DL580 G7 (2 servers)
z9 BC 2096 Annual Support
$150,000
Total Costs
One Time Savings
$885,000
Annual Savings
$150,000
Purchase
Price
Annual
Support
$43,000
$4,730
$43,000
$4,730
Table 10: Server Hardware Cost Comparison for Government Case
Software Licensing and Support Costs
The biggest area of savings for the city came from reducing annual software costs. The current z9
mainframe system was rated at 170 MSUs (million service units). The monthly license fee for the
mainframe software stack came to $119,200 or $1,430,400 per year.
Going forward the city would port the existing COBOL applications to a Microsoft Windows Server
environment with a Microsoft SQL Server database using MicroFocus COBOL. The initial purchase costs for
the open systems software were just under a third of the annual software costs for the mainframe, and
going forward the annual software support costs for the new servers would be 94% lower than the current
costs for the mainframe software.
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
10
Table 11 below shows a comparison of the initial purchase prices, and annual costs for the software in both
the mainframe and open systems environments.
Open Systems Software
Mainframe Software
Software Package
Annual
Savings
Software Package
Initial License
Annual
Support
IBM z/OS
$720,000
Windows Server DE
$11,980
$2,995
IBM DB2
$180,000
SQL Server EE
$54,990
$13,750
IBM CICS
$264,000
MicroFocus Cobol
$140,000
$28,000
$6,000
$1,200
$196,000
$39,200
$408,970
$85,145
IBM NetView
$86,400
Additional Mainframe Utilities
Total
$180,000
$1,430,400
System Center
Additional Application
Development, Migration and
Testing Tools
Total
Table 11: Server Software Cost Comparison for Government Case
Application Reengineering and Migration Costs
The reengineering effort for this project required six months of design and application porting, and another
three months for testing and system verification for a total of nine months. The city brought in a systems
integration company to perform the majority of the migration work. In addition, internal staff was also
assigned to the project to help with knowledge transfer on the applications and systems verification.
Overall the city allocated 1900 hours of internal staff for the project at an average rate of $43.00 per hour
for a total of $245,100 for the internal migration effort. The external migration services costs were
$540,000 for the nine month project. In addition, the organization sent four staff members to two weeks
of training at an average cost of $3,500 per week per student for course fees and travel expenses.
Including the training costs of $28,000 the total application migration costs for the project came to
$813,100.
Systems Administration Labor Savings
In addition to lowering annual hardware and software expenses, the migration would also enable the city to
reduce systems administration and systems programming costs. In order to maintain the mainframe
system, and support application integration efforts the city had three full time mainframe systems
programmers. They also had six .Net application developers and two Windows systems administrators. By
replacing the mainframe with additional Windows Servers the organization would be able to leverage their
existing Windows skills and eliminate the need for mainframe expertise. The city planned on retraining one
of the mainframe systems programmers to support the Windows environment. One of the mainframe
systems programmers was retiring, and the final programmer found another opportunity, resulting in a net
reduction of two headcount for an annual savings of $220,000.
Power Consumption and Facilities Expenses
Another benefit of replacing the mainframe system was freeing up needed space in the datacenter and
reducing power and cooling requirements. The datacenter was over 30 years old and was reaching its
maximum capacity for both floor space and cooling ability. The z9 BC 2096 mainframe took up the space
required for two full rack systems. The city would regain almost all of this space by placing the new HP
DL580 G7 servers in existing racks. The new DL580 G7 servers only required four Us each in a standard 42
U rack.
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
11
Replacing the mainframe would also reduce energy consumption in the datacenter by 45%. The
mainframe system required nearly 5000 Watts of electricity and generated almost 18,000 BTUs of heat.
The DL580s each required 1400 Watts of electricity and generated 4,900 BTUs.
Annual Cost Comparison
Tables 12 and 13 below show the four year annual total cost comparisons for the Mainframe and Open
Systems environments.
Mainframe Four Year TCO
Year 1
Mainframe Hardware Costs
Software Costs
Year 3
Year 4
Total
$652,000
$152,000
$152,000
$152,000
$1,108,000
$1,430,400
$1,430,400
$1,430,400
$1,430,400
$5,721,600
$330,000
$330,000
$330,000
$330,000
$1,320,000
$9,100
$9,100
$9,100
$9,100
$36,400
$2,421,500
$1,921,500
$1,921,500
$1,921,500
$8,186,000
Administration Labor Costs
Facilities Costs
Total
Year 2
Table 12: Mainframe Four Year TCO Summary
Open Systems 4 Year TCO
Year 1
Server Hardware Costs
Year 2
Year 3
Year 4
Total
$47,730
$4,730
$4,730
$4,730
$61,920
($420,000)
$0
$0
$0
($420,000)
Software Costs
$258,913
$45,943
$45,943
$45,943
$396,742
Administration Labor Costs
$110,000
$110,000
$110,000
$110,000
$440,000
$4,600
$4,600
$4,600
$4,600
$18,400
$813,100
$0
$0
$0
$813,100
$814,343
$165,273
$165,273
$165,273
$1,310,162
Trade-in Value of Mainframe
Facilities Costs
Migration Costs
Total
Table 13: Open Systems Four Year TCO Summary
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
12
Return on Investment Analysis
Since the reengineering effort took nine months to complete, none of the mainframe cost reductions were
achieved during this time. Table 9 below shows the four year investment and savings for this migration
project. Comparing the four year total investment of $851,762 with the cumulative benefit of $5,462,213
yields an ROI of 641%.
Four Year ROI Analysis
Year 1
Year 2
Year 3
Year 4
Total
Investment
Server Hardware Costs
$47,730
$4,730
$4,730
$4,730
$61,920
($420,000)
$0
$0
$0
($420,000)
Software Costs
$258,913
$45,943
$45,943
$45,943
$396,742
Migration Costs
$813,100
$0
$0
$0
$813,100
$699,743
$50,673
$50,673
$50,673
$851,762
Mainframe Hardware
$538,000
$152,000
$152,000
$152,000
$994,000
Software
$357,600
$1,430,400
$1,430,400
$1,430,400
$4,648,800
$0
$220,000
$220,000
$220,000
$660,000
($2,325)
$4,500
$4,500
$4,500
$11,175
Total Savings
$893,275
$1,806,900
$1,806,900
$1,806,900
$6,313,975
Cumulative Benefit
$193,532
$1,949,759
$3,705,986
$5,462,213
$5,462,213
Trade-in Value of Mainframe
Total Investment
Savings
Administration Labor
Facilities
Table 9: Four Year ROI Analysis
Including the resale value of the retired mainframe system the migration project paid for itself in just under
one year.
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
13
CONCLUSION
As the scalability and reliability of open systems continue to increase the motivation for moving off
proprietary mainframe platforms is becoming stronger. The decision often can be viewed as a fulcrum with
the cost and risk of migration on one side and ongoing operational costs and lack of flexibility on the other.
The shift in balance may not be apparent overnight, so organizations should continually monitor the cost
differential and improved agility of alternative platforms.
As seen in the case studies examined in this paper, the potential savings in ongoing software and hardware
support costs are huge in moving to open systems solutions running on industry standard Intel Itanium or
Xeon-based platforms. These savings can often more than pay for the new open systems infrastructure in
a single year.
Moving to an open systems environment can also free up valuable datacenter capacity and improve a
company’s Green factor by lowering overall power and cooling consumption.
Perhaps one of the biggest advantages of moving to open systems platforms comes from increased
application agility. Modern application development approaches such as SOA enable organizations to
deliver new capabilities faster and with lower cost than legacy programming environments.
Since the migration costs can be significant, and risk of porting or reengineering legacy applications can be
great, organizations need to carefully weigh these business risks against the potential savings for their
unique environments. As seen in this paper these savings can be tremendous, freeing up valuable
resources for greater innovation leading to competitive advantage. Organizations should look for turning
points in their environments, such as impending upgrades, as logical times for making changes. They
should also consider evolutionary strategies, which can lower risk by gradually decreasing the dependence
on proprietary mainframe systems by moving a few applications at a time.
ABOUT ALINEAN
Since 1994, the Alinean team has been the pioneering builder of tools to help quantify and improve the ROI
and TCO of IT investments. Alinean was named for the Spanish word for “Align”, matching the Alinean
mission as the leading developer of analytical tools to help IT vendors, consultants and IT executives align
IT investments with business strategies.
The Alinean team has over a decade of experience in the practical development and application of ROI and
TCO methodologies, models and tools to optimizing IT investment decision making. In 1994, the Alinean
team formed Interpose, the original pioneers of ROI tools, developing analytical software for over 50 major
IT vendors and consulting companies worldwide, and creating the industry standard TCO Manager and TCO
Analyst software. Interpose was sold to Gartner in 1998, where the team continued their developments and
marketing of ROI and TCO software tools. The original team reunited to form Alinean in 2001, once again
becoming the leading pioneers and developers of ROI sales and analytical tools. Current customers include
leading IT solution providers such as HP, IBM, Dell, Intel, Symantec, NetIQ, EMC, SAP, Oracle, SBC, and
Microsoft, as well as leading consultancies and Global 1000 companies.
Additional information about Alinean and helpful ROI educational resources can be found at
http://www.alinean.com.
Mainframe Migration Case Studies: A Total Cost Comparison
Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
14