Solution Enhancement
Support Program
Business Value Analysis
Honeywell Process Solutions
1250 West Sam Houston Parkway South
Houston, TX 77042
Lovelace Road, Southern Industrial Estate
Bracknell, Berkshire, England RG12 8WD
Shanghai City Centre, 100 Junyi Road
Shanghai, China 20051
www.honeywellprocess.com
Solution Enhancement Support Program
Business Value Analysis
INTRODUCTION:
Table of Contents
SECTION 1:
Overview and Overall Financial Results
APPENDIX 1:
1
SECTION 2:
Benefits Summary
7
APPENDIX 2:
2
SECTION 3:
Benefit Breakdown
Glossary of Financial Terms
Inputs Used to Calculate Solution Value
8
APPENDIX 3:
3
Benefit Assumptions Used to Calculate Solution
Value
4
APPENDIX 4:
9
SECTION 4:
Strategic Benefits
Adjustment Factors
SECTION 5:
About Honeywell
5
SECTION 6:
Terms of Use
6
SECTION 7:
Confidentiality
Copyright ©2012 Honeywell International, Inc.
6
10
Solution Enhancement Support Program
Business Value Analysis
SECTION 1:
Overview and Overall Financial Results
The Solution Enhancement Support Program (SESP) provides a variety of service program alternatives and
value-added options that are best suited for your site. SESP helps you maximize the investment in your
automation and control system and allows you complete flexibility in how you manage, support and fund your
automation technology.
The following tables and graphics present a summary of the financial results:
You chose the following solutions:
Support Flex
Software Flex
Value Plus
Value Plus Connected
Value Remote Plus
Honeywell Training Match
Hardware Refresh
Present Value (PV)
Cost to Delay Per Month
$7,010,721
$116,845
Cumulative Benefits and Break Even
Copyright ©2012 Honeywell International, Inc.
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Solution Enhancement Support Program
Business Value Analysis
SECTION 2:
Benefits Summary
Cost Reducing Benefits
Year 1
Year 2
Year 3
Year 4
Year 5
Reduced Maintenance Labor Costs
$28,080
$32,136
$33,100
$34,093
$35,116
Reduced Project Engineering Labor Costs
$34,992
$40,046
$41,248
$42,485
$43,760
$713,286
$800,465
$808,470
$816,555
$824,720
$22,400
$22,400
$160,000
$22,400
$22,400
Reduced Cost Of Poor Quality
Reduced Software Costs
Reduced Hardware Costs
$0
$0
$50,000
$0
$0
Reduced Training Costs
$17,500
$17,500
$17,500
$17,500
$17,500
Reduced On Demand Support Costs
$22,050
$22,050
$22,050
$22,050
$22,050
$0
$0
$0
$0
$0
$838,308
$934,598
$1,132,368
$955,083
$965,546
Increased Revenue From Higher Production
$336,700
$412,939
$466,135
$495,575
$500,531
Increased Revenue From Optimized Processes
$194,250
$274,670
$336,863
$380,258
$404,275
Total Revenue Enhancing Benefits
$530,950
$687,608
$802,997
$875,833
$904,805
$1,369,258
$1,622,206
$1,935,365
$1,830,916
$1,870,351
Reduced Custom Cost
Total Cost Reducing Benefits
Revenue Enhancing Benefits
Total Benefits
Confidence Adjustment Factor
Total Gross Confidence-Adjusted Benefits
Copyright ©2012 Honeywell International, Inc.
100%
100%
100%
100%
100%
$1,369,258
$1,622,206
$1,935,365
$1,830,916
$1,870,351
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Solution Enhancement Support Program
Business Value Analysis
SECTION 3:
Benefit Breakdown
Cumulative Benefits
Annual Benefit
Copyright ©2012 Honeywell International, Inc.
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Solution Enhancement Support Program
Business Value Analysis
SECTION 4:
Strategic Benefits
Aside from the tangible benefits that can be quantified, a customer can expect to receive several strategic benefits
as well. Strategic benefits can be just as important to an organization, but are either more challenging to quantify
or vary widely from customer to customer. Honeywell contributes to the following strategic benefits:
1. Risk Mitigation
Lower risk of performance degradation over time
2. Obsolescence Protection
Extends the useful life of the automation control system
3. Financial Flexibility
Plan and implement automation control system migrations over multiple years
4. Greater Cost Predictability
Plan software, hardware, replacement parts and training expenses within one fixed budget
5. Engineering Peace of Mind
Confidence that the engineering team is doing everything it can to keep the automation control system performing
at an optimal level
6. Greater Institutionalization of Automation Control System Knowledge
SESP customer newsletters, users guides and documentation updates help keep procedures in the plant even as
employees leave or retire
Copyright ©2012 Honeywell International, Inc.
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Business Value Analysis
SECTION 5:
About Honeywell
Honeywell Process Solutions delivers leading-edge automation and control solutions, equipment and services
designed to improve customers' business performance. Honeywell helps customers: increase return on assets by
reducing costs and improving uptime; manage depleting workforces and the loss of domain expertise; overcome
increasing business volatility; meet the needs for increased safety and security; reduce the impact of incidents
and make people more effective; and make better, faster decisions with an enterprise-level view of results, from
the field to the boardroom.
Copyright ©2012 Honeywell International, Inc.
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Business Value Analysis
SECTION 6:
Terms of Use
Honeywell scenario modeling tools are designed to present economic decision makers a top-level summary and
detailed report with solid, quantified benefits and supporting analysis. However, there are many factors that can
significantly influence the actual results. Time to deploy, cost overruns, competitive developments, and changes in
business management or strategy can all dramatically influence the attractiveness of any investment.
Consequently, Honeywell can offer no guarantees, whether explicit or implicit, regarding the actual financial
results of your investment.
Notice: disclaimer of warranties and limitation of liability. This business value platform is provided by Honeywell on
an "as is" and "as available" basis. Honeywell makes no representations or warranties of any kind, express or
implied, as to the operation of this business value platform or the information, content, or materials included on
this business value platform. You expressly agree that your use of this business value platform is at your sole risk.
To the full extent permissible by applicable law, Honeywell disclaims all warranties, express or implied, including,
but not limited to, implied warranties of merchantability and fitness for a particular purpose. Honeywell does not
warrant that this business value platform, its servers, or e-mail sent from Honeywell are free of viruses or other
harmful components. Honeywell will not be liable for any damages of any kind arising from the use of this
business value platform, including, but not limited to direct, indirect, incidental, punitive, and consequential
damages. Certain state laws do not allow limitations on implied warranties or the exclusion or limitation of certain
damages. If these laws apply to you, some or all of the above disclaimers, exclusions, or limitations may not apply
to you, and you might have additional rights.
SECTION 7:
Confidentiality
This report contains confidential information about both "Customer Company" and Honeywell Process Solutions.
This report and its contents are designated to be Customer Company and Honeywell Process Solutions
Confidential and are provided exclusively for evaluation and consideration by the recipient and Honeywell Process
Solutions. This report may not be duplicated and/or transmitted to any party outside Customer Company without
the express, written authorization of Honeywell Process Solutions. Unless otherwise specified in a mutual
non-disclosure agreement between Customer Company and Honeywell Process Solutions, Honeywell Process
Solutions will regard the information specific to Customer Company as strictly confidential.
Copyright ©2012 Honeywell International, Inc.
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Solution Enhancement Support Program
Business Value Analysis
APPENDIX 1:
Glossary of Financial Terms
Present Value:
Present Value (PV) is the value in today's dollars of all cash benefits received at a future date given a
discount rate (cost of capital). CFOs want to see all of the future cash flows associated with the
investment, discounted by an appropriate interest rate, in order to determine the present value of future
cash flows, and compare this with other potential investments.
Cost to Delay per Month:
Cost to Delay per Month is the net present value divided by the number of months in the analysis. This
shows the opportunity cost (amount forfeited) of waiting to make an investment decision.
Cost of Capital:
Cost of Capital is the rate of return that could be earned at the same risk level as the investment that
has been selected. It is used as the interest (discount) rate to determine the present value of future
cash flows.
Copyright ©2012 Honeywell International, Inc.
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Business Value Analysis
APPENDIX 2:
Inputs Used to Calculate Solution Value
Input
Honeywell automation and control system nodes at the site(s)
Anticipated year of planned major software and hardware upgrade
Year 1 Value
140
3
Planned expenditures for major software upgrade
$200,000
Planned expenditures for major hardware upgrade
$200,000
Automation and control maintenance engineers/technicians
Average fully loaded compensation per maintenance engineer/technician
Maintenance engineer/technician time spent to analyze and resolve performance issues and make minor
3
$100,000
40%
improvements (%)
Productivity adjustment factor (%)
Automation and control plant/project engineers
Average fully loaded compensation per plant/project engineer
Plant/project engineer time spent to plan and execute automation and control projects (%)
Revenue
Gross margin (%)
Materials produced that are not in compliance (%)
Planned software updates, upgrades and functionality additions
Planned hardware upgrades (i.e., kits and enhancements)
50%
3
$120,000
80%
$740,000,000
25%
7%
$28,000
$0
Planned training tuition
$35,000
On demand support costs
$24,500
Lower operating or capital cost from a custom benefit
$0
Lower operating or capital cost from a custom benefit
$0
Lower operating or capital cost from a custom benefit
$0
Foregone revenue from unplanned downtime and production slowdowns (%)
2.0%
Cost of Capital
8.0%
Copyright ©2012 Honeywell International, Inc.
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Solution Enhancement Support Program
Business Value Analysis
APPENDIX 3:
Benefit Assumptions Used to Calculate Solution Value
Benefit Assumption
Year 1 Value
Decrease in labor costs to analyze and resolve performance issues and make minor improvements (%)
52%
Decrease in labor costs to plan and execute automation and control projects (%)
27%
Decrease in cost of poor quality (%)
2.04%
Decrease in cost of software updates, upgrades and functionality additions (%)
80%
Decrease in cost of planned hardware upgrades such as kits and enhancements (%)
25%
Decrease in cost of planned training tuition (%)
50%
Decrease in on demand support costs (%)
90%
Decrease in revenue lost from unplanned downtime and production slowdowns (%)
13%
Increase in revenue from optimized production processes (%)
Copyright ©2012 Honeywell International, Inc.
0.21%
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Business Value Analysis
APPENDIX 4:
Adjustment Factors
Adjustment Factor
Year 1
Year 2
Year 3
Year 4
Year 5
Adjustment factor for Reduced Maintenance Labor Costs
90%
100%
100%
100%
100%
Adjustment factor for Reduced Project Engineering Labor Costs
90%
100%
100%
100%
100%
Adjustment factor for Reduced Cost Of Poor Quality
90%
100%
100%
100%
100%
Adjustment factor for Reduced Software Costs
100%
100%
100%
100%
100%
Adjustment factor for Reduced Hardware Costs
100%
100%
100%
100%
100%
Adjustment factor for Reduced Training Costs
100%
100%
100%
100%
100%
Adjustment factor for Reduced On Demand Support Costs
100%
100%
100%
100%
100%
Adjustment factor for Reduced Custom Cost
100%
100%
100%
100%
100%
Adjustment factor for Increased Revenue From Higher Production
70%
85%
95%
100%
100%
Adjustment factor for Increased Revenue From Optimized Processes
50%
70%
85%
95%
100%
Copyright ©2012 Honeywell International, Inc.
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Business Value Analysis
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©2012 Honeywell International, Inc.