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TABLE OF CONTENTS

Executive Summary .............................................................................................................................................................. 2

TEI Framework And Methodology ...................................................................................................................................... 9

Interview Highlights ............................................................................................................................................................ 10

Dell Compellent Analysis ................................................................................................................................................... 13

Dell Compellent Expenses ............................................................................................................................................. 13

Dell Compellent Revenue And Margin ......................................................................................................................... 16

Dell Compellent Financial Summary ............................................................................................................................ 21

Dell EqualLogic Analysis ................................................................................................................................................... 23

Dell EqualLogic Expenses ............................................................................................................................................. 23

Dell EqualLogic Revenue And Margin ......................................................................................................................... 25

Dell EqualLogic Financial Summary ............................................................................................................................ 29

Flexibility ............................................................................................................................................................................. 31

Risk ...................................................................................................................................................................................... 32

Dell Intelligent Data Management Overview ..................................................................................................................... 34

Appendix A: Total Economic Impact™ Overview ............................................................................................................ 35

Appendix B: Additional Margin Opportunities From Dell Rebates .................................................................................. 36

Appendix C: Glossary ......................................................................................................................................................... 37

© 2011, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources.

Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total

Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional

information, go to www.forrester.com.

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In May 2011, Dell commissioned Forrester Consulting to examine the total economic impact and business case for

partners to build a Compellent and EqualLogic storage business. The purpose of this study is to provide systems

integrators (SIs) with a framework to evaluate the potential financial impact of Compellent and EqualLogic on their

businesses. The following executive summary provides an overview of the business opportunity for SIs for investing in

Compellent and EqualLogic.

Forrester recognizes that not all SIs will earn revenue from all of the categories of services shown in this analysis. We

therefore encourage readers to use this case study as a framework for determining the potential revenues and margins

that they might generate from investment in Compellent and EqualLogic.

Eight Dell SI partners were interviewed for this study. Based on the data gathered from the SIs, a framework was

constructed for evaluating the potential revenues, margins, and expenses associated with Compellent and EqualLogic

implementations.

Through the interviews, it was identified that SIs are investing in Compellent for the following reasons:

The technological differentiation that Compellent provides in competitive solutions.

The good fit with server virtualization solutions in which storage is an element of the larger project.

The professional services (such as design, implementation, support, and disaster recovery) that can be wrapped

around the technology.

Some of the reasons stated for working with EqualLogic include:

The ability to easily fit EqualLogic into a broader solution sell due to the simplicity of the implementation and of

management.

The renewable business from existing customers expanding their storage requirements.

The interviews with the existing Dell SI partners and subsequent financial analysis found that the organizations we

interviewed, based on a 10 TB storage requirement, experienced one-time revenues of €32,100 for EqualLogic with a

total gross margin of €6,267, including hardware, maintenance, and professional services. Compellent SIs interviewed

experienced one-time revenues of €91,600 with total gross margins of €17,545, also including hardware, maintenance,

software, and professional services (see Table 1 and Table 2).

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Compellent revenues. The potential revenues associated with a 10 TB Compellent deal that includes the hardware,

three years of Dell maintenance and support, design, and implementation professional services include:

Hardware and software licenses revenue of €65,500. This includes revenue for the hardware and one-year Dell

maintenance and support.

Maintenance and support services revenue of €20,000. This includes two years of additional support on the 10

TB unit sold by the partner but delivered by Dell.

Storage infrastructure design services of €2,100. Technical consultants are charged out at €125 per hour to

complete a technical design of Compellent in the customer‟s infrastructure.

Implementation services revenue of €4,000. The full implementation takes a technical consultant, on average,

four days to complete.

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EqualLogic revenues. The potential revenues associated with a 10 TB EqualLogic deal that includes the hardware,

three years of Dell maintenance and support, design, and implementation professional services include:

Hardware and software licenses and three years of maintenance revenue of €29,200. This includes revenue

for the hardware and three years of Dell maintenance and support.

Storage infrastructure design services of €900. Technical consultants are charged out at €125 per hour to

complete a technical design of EqualLogic in the customer‟s infrastructure. It takes consultants on average 1.5

days to complete a technical design for EqualLogic.

Implementation services revenue of €2,000. The full EqualLogic implementation takes a technical consultant,

on average, two days to complete.

For this analysis, the initial costs incurred by an SI to establish a Compellent business are €48,435 (see Table 3) and

€25,000 for EqualLogic (see Table 4). The ongoing expenses for marketing and training will vary with business

growth. This study assumes a ramp-up in Compellent and EqualLogic business volume described in the „Three-Year

Contribution Analysis‟ section.

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Based on the revenue analysis and expenses, a three-year contribution analysis was created for Compellent and

EqualLogic. The Compellent analysis assumes three deals in Year 1, eight deals in Year 2, and 13 deals in Year 3. The

EqualLogic analysis assumes four deals in Year 1, 36 deals in Year 2, and 44 deals in Year 3.

The three-year total business contribution (i.e., revenue - expenses) of Compellent is €2,101,941, with an ROI of 280%

and breakeven period of 13.1 months.

The three-year total business contribution of EqualLogic is €2,624,900, with an ROI of 568% and breakeven period of

12.6 months.

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The SIs interviewed for this study described various additional categories of revenue and margin opportunities from

Dell Compellent and EqualLogic. To ascribe financial benefit for this study, Forrester included only the categories of

benefit that: a) are applicable to all the SIs that were interviewed, and b) were most certain to be realized by the

interviewed Dell SIs. Forrester has identified more benefit areas that many prospective Dell partners may recognize and

realize.

The additional benefit categories not included in the financial analysis are (please refer to Appendix B for a financial

analysis of the additional revenue opportunities from Dell rebates.):

Dell quarterly rebates based on sales volumes.

Data migration professional services.

Disaster recovery professional services.

Post-implementation support services (help desk, outsourced management of storage infrastructure).

The following factors were identified that may affect the financial results that an SI may experience:

The conversation rates from POC to full deployments may vary both in time and number.

The size and complexity of the customer‟s storage infrastructure may affect the time and revenues associated

with design and implementation.

The amount of time spent on design and implementation services may also vary considerably depending on the

SI‟s internal capabilities.

SIs that do not already have well-defined professional service offerings and the support systems/processes may

not be able to fully participate in support services revenue opportunities. SIs may not be considered for

Compellent or EqualLogic engagements without being able to offer support services.

Investments in training are necessary to minimize design, implementation, and deployment risk. The training

expense will vary according the level of expertise required and the number of people trained.

Competitive pressure from leading hardware vendors or other SIs may lead to significant price reductions and

margin erosion.

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The reader should be aware of the following:

The study is commissioned by Dell and delivered by the Forrester Consulting group.

Forrester makes no assumptions as to the potential revenues and expenses that SIs will experience. Forrester

strongly advises that readers should use their own estimates within the framework provided in the report to

determine the appropriateness of an investment in Dell Compellent and EqualLogic.

Dell reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its

findings and does not accept changes to the study that contradict Forrester‟s findings or obscure the meaning of

the study.

The partner names for the interviews were provided by Dell.

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From the information provided in the interviews, Forrester constructed a Total Economic Impact™ (TEI) framework

for SIs considering selling Dell Compellent and EqualLogic to customers. The objective of the framework is to identify

the expense, revenue, margin, and risk factors that affect the investment decision.

Forrester took a multistep approach to evaluate the business case for the storage solutions (see Figure 1). Specifically,

we:

Interviewed Dell marketing and sales personnel as well as Forrester analysts to gather data relative to EqualLogic

and Compellent and the marketplace for both products.

Interviewed eight SIs currently selling Dell Compellent and EqualLogic to obtain data with respect to expenses,

revenue, margin, and risks.

Designed a typical Compellent and EqualLogic deal based on characteristics of the deals described to Forrester

by the interviewed SI representatives.

Constructed a financial model representative of the interviews using the TEI methodology. The financial model

is populated with the expenses, revenue and margin data obtained from the interviews.

Forrester employed three fundamental elements of TEI in modeling the Dell storage products:

1. Expenses.

2. Revenues and margins.

3. Flexibility and risk.

Please see Appendix A for additional information on the TEI methodology.

Construct financial model using TEI

framework

Write case study

Perform due diligence

Conduct partner

interviews

Formulate typical deal

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A total of four SI partner interviews were conducted for the Compellent study and another four for the EqualLogic

analysis. The SIs interviewed were located in three different countries in Europe; the Netherlands, Germany, and in the

UK.

In order to assure candid responses to Forrester‟s questions, and in exchange for their assistance in building the

financial framework herein, the representatives and their companies remain anonymous. Yet a general description of

these companies would include the following:

Storage forms only a part of their product portfolios. All the SIs interviewed have significant businesses in other

technology areas such as servers, networking, or virtualization.

All the SIs interviewed have businesses focused on a single country. None of the SIs interviewed are global or

regional SIs. As such, they are able to build strong locally based, trusted advisor relationships with their

customers.

The Compellent SIs interviewed achieved, on average, annual full company revenues of €14.6 million. The

EqualLogic SIs achieved €8.2 million.

Most of the SIs (with the exception of one) had started their relationships with Compellent and EqualLogic

before their acquisitions by Dell. However, the analysis in this case study assesses the investments a partner

would have to make in Compellent and EqualLogic under the current Dell engagement model.

Variations begin to appear within the vendor portfolios of the SIs. A number of the SIs interviewed have made the

strategic decision to only work with Dell as their storage provider of choice, enabling deeper understand and tighter

integration with solutions provided. Others have made the decision to work with several vendors, giving the customer

more flexibility in choice.

We uncovered these common reasons among the interviewed SIs for pursuing Compellent opportunities:

Technology differentiation. By far the biggest motivator, the SIs we interviewed stated the storage tiering

technology capabilities of Compellent have allowed them to differentiate in competitive situations. Compellent is

still considered as a best-of-breed product by the SIs we interviewed.

Fit with virtualization implementations. A number of the SIs interviewed made a conscious decision to select

Compellent as the only storage vendor they would work with for virtualization implementations. They viewed

Compellent as a solution at that time that successfully and easily integrated with virtualization software and

implementations without any hiccups.

Professional service opportunities. For the SIs interviewed, Compellent offers significant opportunities beyond

product resell. They are able to wrap around their own professional services to the Compellent hardware.

Services such as design, deployment, support, data migration, and disaster recovery as additional revenue

opportunities for SIs .

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We uncovered these common reasons among the interviewed SIs for pursuing EqualLogic opportunities:

Solution selling. EqualLogic was an addition to a portfolio of other vendor technologies in the SIs interviewed.

They already had relationships with server, networking, client, and virtualization vendors as well as other storage

vendors in some cases (in some cases, Dell was the vendor across the portfolio). By adding EqualLogic to their

portfolios, SIs are now able to offer full end-to-end solution packages to customers.

Simplicity of the technology. The simplicity of the EqualLogic technology proved compelling for the SIs

interviewed for this study. Easy to install and easy for the customer to manage, EqualLogic allows SIs to

successfully integrate EqualLogic into a fuller solution sell. A number of SIs also stated the appeal of EqualLogic

was its ability to help them gain entry into the virtualization market. All virtualization implementations need

storage attached to be successful. EqualLogic‟s simplicity in the broader virtualization implementation makes it

attractive to customers.

Renewable business. The ability to continually renew or grow business with EqualLogic was attractive to the

channel partners we interviewed. Storage requirements are never static, and with the ever-growing need for data

storage, channel partners expect to continue to attain business from new but, more importantly, existing

customers.

For this TEI study, Forrester has created a typical Compellent and EqualLogic deal to illustrate the quantifiable

revenues associated with a Compellent and EqualLogic customer engagement. The deal is based on characteristics of

the deals described by the SIs that were interviewed for this study.

The SIs interviewed had completed Compellent deployments with storage capacity ranging from 5 TB to 120 TB. The

typical Compellent deal used in this analysis has the following characteristics and revenue opportunity categories:

10 TB storage requirement.

Three years of maintenance.

Included in a broader virtualization or consolidation project.

Data tiering and scalability requirement.

Presales planning included as a cost of sale.

Professional services such as technical design and implementation services are included in the deal.

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The SIs interviewed had completed EqualLogic deployments with storage capacity ranging from 5 TB to 50 TB. The

typical EqualLogic deal used in this analysis has the following characteristics and revenue opportunity categories:

10 TB storage requirement.

Three years of maintenance.

Part of a storage expansion project.

Simplicity of implementation and device management as a selection criterion.

Presales planning included as a cost of sale.

Professional services such as technical design and implementation services are included in the deal.

Table 7 provides the model assumptions that Forrester used in this analysis.

The discount rate used in the present value (PV) and net present value (NPV) calculations is 10%, and time horizon

used for the financial modeling is three years. Organizations typically use discount rates between 8% and 16% based on

their current environment. Readers are urged to consult with their respective company‟s finance department to

determine the most appropriate discount rate to use within their own organizations.

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The SIs interviewed incurred expenses in the following primary areas:

Technical installation training.

Unbillable consultant and presales hours for training.

Demo unit.

Marketing.

Additional expenses associated with business development and cost-of-sale of Compellent are not included as separate

items in this analysis because they either do not relate directly to Compellent only or would have been incurred

anyway.

To become a Dell Preferred Partner and to gain Compellent certification, the SIs had to undergo a number of sales and

technical training courses. A minimum of two technical employees and two sales employees are required to complete

an online training series. All online training is free of charge to partners. However, due to the complexity involved in

Compellent installations, SIs also had to undergo face-to-face technical installation training at the Dell headquarters in

the UK. Only certified partners that have completed this training can install Compellent at a customer‟s site.

Only one technical consultant was required to complete this course in the startup year at an initial cost of €835 ($1,200)

per consultant. Annual one-day refreshers cost €208 ($300) per consultant. With travel and accommodation costs to the

UK at €1,600 for the four-day course and €800 for the annual one-day refresher, the total training expense for SIs

investing in Compellent is €5,459 over a three-year period.

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One presales technical consultant is required to attend a technical online training course for three days initially and a

one-day annual refresher. One technical consultant attends an installation course for four days initially and a one-day

annual refresher. The installation course requires half-day travel to the UK.

SIs will have unbillable deployment hours with technical consultants out on training. The actual amount of unbillable

hours will vary depending on how quickly presales consultants can complete online training. For this analysis, we

assume the two technical consultants will be unbillable for 60 hours in the startup year and 20 hours thereafter.

Assuming SIs charge out consultants on average at €125 per hour, the total unbillable expense is €30,000 over a three-

year period.

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To certify, the SIs interviewed purchased one demo Compellent unit from Dell at a discount of 65% and a cost of

€21,000. This 10 TB unit includes a year‟s maintenance support from Dell.

The SIs interviewed conducted marketing activities to build awareness and generate business for Compellent. The

activities included client and prospect lunch demo sessions, telemarketing campaigns, and a presence at industry

events. For this analysis, we assume a marketing expense of €10,000 per annum for Compellent.

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Based on the interviews with Compellent SIs, the total costs of establishing a Compellent business and for gaining

certification are €96,459 (see Table 12).

The interviews with Dell‟s SI partners identified several revenue opportunities around Compellent beyond hardware

and maintenance resell. Partners have the opportunity to deliver their own professional services to customers as part of

a Compellent project. Based on the interviews with current Dell SIs , the revenue opportunities from Compellent

typically arise from:

Hardware and software licenses resell.

Maintenance and support services resell.

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Storage infrastructure design services.

Implementation services.

This analysis assumes a typical deal as described in the Typical Compellent And EqualLogic Deals section and that a

Compellent partner will sell on average three deals in Year 1, eight deals in Year 2, and 13 deals in Year 3.

The largest revenue opportunity for a typical Compellent partner is around product resell. The sale of Compellent

devices is typically included in a broader virtualization or consolidation projects involving several other technology

elements (such as servers, virtualization software, and networking). This analysis only takes into consideration the

Compellent storage element of any given project. The SIs interviewed identified a typical Compellent deal including 10

TB of storage and one-year Dell maintenance.

Costing the end customer €65,500, the margins earned on Compellent vary from between 8% and 30% depending on

the competitive situation, the location, or the size of the project. On average, SIs realized a gross margin of 18% from

the resell of the 10 TB unit. Based on the typical deal described earlier, the Compellent deals in Year 1 yielded gross

margin of €35,370. Year 2 saw margins of €94,320, and Year 3 saw €153,270. The hardware gross margin for one

Compellent deal was, on average, €11,790.

Besides the hardware device, customers also have to purchase an additional two years of maintenance and support. End

customers of Compellent typically prefer to pay for maintenance from opex budgets, therefore leading to SIs charging

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for the additional two years as a separate line item. The SIs interviewed sold two years of maintenance for €20,000 at a

margin of 12%.

As well as selling Compellent products and services, the SIs interviewed shared that they have the opportunity to make

additional revenue and margin by delivering their own professional services to customers. A typical deal will include a

half-day presales planning session, which is not usually charged for.

Once the project has been approved and signed off, SIs complete a detailed technical schematic design of how

Compellent will be implemented into the customer‟s infrastructure. This is vital (certainly for more complex

implementations) to ensure that Compellent implementations will work successfully in the customer‟s existing and

future environment. The SIs interviewed generally offer design services free for smaller, less complicated storage

implementations but charge for larger, more complex implementations.

Storage I/O design for larger projects (about 60% of all deals) takes the interviewed SIs 3.5 days on average to

complete. At a consultant charge-out rate of €125 per hour, SIs make €2,100 per deal at a gross margin of €1,155 (see

Table 15 for details). Variations in design service revenues were typically as a result of increased (or decreased)

complexity in the customer‟s infrastructure.

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SIs interviewed revealed that implementation services generate gross margins of 55% on average. For the typical deal,

we assume that it take the SIs four days to complete the implementation of Compellent into the customer‟s

infrastructure. With a consultant charge-out rate of €125 per hour, the total revenue realized from the implementation is

€12,000 with a margin of €6,600.

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Based on the revenue and margin opportunities that the typical deal offers, and assuming three Compellent deals in

Year 1, eight in Year 2, and 13 in Year 3, the three-year total gross margins are €405,360 (see Table 18).

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The total expenses, revenues, and margins experienced by the interviewed SIs are shown in Table 19. To attain

“Preferred Partner” status, Dell requires partners to generate €139,000 ($200,000) per annum on enterprise solutions

(storage, servers, networking and security, and systems management). Based on the analysis for Compellent, partners

meet the required revenue threshold in their first year of business on Compellent alone (i.e., €196,500), thus attaining

the Preferred Partner status in Year 1. Those that choose to complement Compellent with other enterprise solutions will

exceed the revenue requirements considerably.

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The SIs interviewed incurred expenses in the following primary areas:

Unbillable hours for technical presales training.

Demo unit.

Marketing.

As with Compellent, SIs wishing to become Dell Preferred Partners and attain a storage certification must undergo

technical and presales training on EqualLogic. The SIs interviewed had to undergo online sales and technical training to

become certified in EqualLogic. A minimum of two sales employees and two technical employees have to undertake

training for a partner to retain their “Preferred Partner” status. All online training is free of charge to SIs . The two sales

employees spent an average of one day on online training each.

The two technical consultants spent an average of two days on online training. With the time spent on training, the

business was unable to utilize technical consultants in client projects.

For this analysis, we assume the two technical consultants will be unbillable for 16 hours each year due to training.

Assuming SIs charge out consultants on average at €125 per hour, the total unbillable expense is €16,000 over a three-

year period.

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To certify, the SIs interviewed purchased one 10 TB EqualLogic demo unit from Dell at a discount of 65% and a cost

of €15,000. The unit includes one year‟s maintenance from Dell. The SIs interviewed purchased additional

maintenance for the unit, for €1,500 at 10% discount, in the second year. Year 3 saw the purchase of a new unit to keep

up with EqualLogic product refreshes and to keep customer demonstrations current and relevant. As such, the full

demo unit expense over a three-year period is €31,500.

As with Compellent, the EqualLogic SIs interviewed conducted marketing activities to generate business. The activities

such as client and prospect lunch demo sessions typically included a solution message and weren‟t solely focused on

EqualLogic. However, for the activities focused on EqualLogic, SIs spent €6,000 per annum on average.

Based on the interviews with EqualLogic SIs, the total costs of establishing an EqualLogic business and for gaining

certification are €71,500 (see Table 22).

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The interviews with Dell‟s SI partners identified the following revenue opportunities around EqualLogic:

Hardware and software licenses and maintenance resell.

Storage infrastructure design services.

Implementation services.

This analysis assumes a typical deal as described in the Typical Compellent And EqualLogic Deals section and that an

EqualLogic SIs will sell, on average, four deals in Year 1, 36 deals in Year 2, and 44 deals in Year 3.

All EqualLogic projects involve hardware, software, and maintenance resell. This represents the largest revenue and

margin opportunity for SIs. Unlike Compellent sales, which are usually bundled into larger virtualization projects,

EqualLogic deals are typically generated from product or vendor refreshes or storage infrastructure expansion projects.

The SIs interviewed identified a typical EqualLogic deal including 10 TB of storage and three years of Dell

maintenance on the device.

At a cost of €29,200 for the EqualLogic hardware and software licenses and maintenance, SIs make, on average, 16%

margin (€4,672) per unit. Based on the typical deal, SIs yielded gross margins of €18,688 in Year 1, €168,192 in Year

2, and €205,568 in Year 3.

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SIs have the ability to make extra margin through their own internally delivered professional services. As with

Compellent, the presales design element of all projects is typically a cost of sale of any given projects. However, the

technical design of an implementation is charged for.

EqualLogic devices were reported by SIs to be easy to implement and manage. They require limited expertise to

integrate into a customer‟s infrastructure due to the simplicity of the solution. As such, SIs reported spending, on

average, only about one and a half days to create a full technical design for EqualLogic. At a charge-out rate of €125

per hour, the SIs interviewed realized revenues of €3,600 in Year 1 from design services. Year 2 saw revenues jump to

€32,400 for the 36 deals and €39,600 in Year 3.

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As EqualLogic is a fairly straightforward device, it doesn‟t take the interviewed SIs long to implement the solution into

a customer‟s infrastructure. Where Compellent typically takes four days for implementation, SIs stated that EqualLogic

only takes half that time for implementation. A typical EqualLogic project will be implemented into a customer‟s

infrastructure in two days.

For the typical EqualLogic deal, we assume that deployment generates revenues of €8,000 in Year 1, €72,000 in Year

2, and €88,000 in Year 3, with gross margins of 55% (€1,100 for one deal).

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Based on the revenue and margin opportunities that the typical EqualLogic deal offers, and assuming four EqualLogic

deals in Year 1, 36 deals in Year 2, and 44 deals in Year 3, the three-year total revenue is €2.7 million, and the gross

margin amount is €477,372, as shown in Tables 26 and 27 below.

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The total expenses, revenues, and margins experienced by the interviewed SIs are shown in Table 28. As with

Compellent, SIs are required to generate €139,000 ($200,000) per annum on enterprise solutions. Based on the analysis

provided for EqualLogic, partners far exceed the required revenue threshold in the second year of EqualLogic business.

The first year of EqualLogic business helps SIs reach 84% of the Preferred Partner revenue target. SIs that choose to

sell Compellent and EqualLogic will have more choice and flexibility of solution offering based on the customer need.

They will also be able to take advantage of all the revenue opportunities analyzed.

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Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into

business benefit for some future additional investment. This provides an organization with the “right” or the ability to

engage in future initiatives but not the obligation to do so.

The SIs interviewed had made human resources and marketing investments to establish their Compellent and

EqualLogic businesses. In particular, their investments in professional service capabilities were sufficient for building

their businesses over the next 12 to 24 months. Forrester assumes that the SIs will continue to invest in sales, delivery,

and support capacity commensurate with their anticipated business growth. The three-year analysis shown here reflects

these investments and the associated revenues and margins that are generated from these investments.

The SIs interviewed also have the ability to build new revenue opportunities by expanding on investments made in

professional services to potentially deliver managed storage services to customers. By developing in-house data centers

with units provided by Dell at a discount, the partners will be able to deliver managed services such as disaster

recovery, partner-delivered support services, and resilience and replication services on a per-GB basis. Finally, SIs have

the ability to build on their storage investments (especially EqualLogic) to deliver full end-to-end solutions to

customers that incorporate servers, client devices, and software solutions.

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Forrester defines two types of risk associated with this analysis: external or business risk and internal or execution risk.

“External or business risk” arise from forces or circumstances that are external to the business over which the SI has

limited control. “Internal or execution risks” refer to the risks that can occur within the business over which the SI has

some control. Both business and execution risk can affect the potential expenses and revenues that an SI may

experience. Risk also accounts for the variance or uncertainty in data that we gather during the interview process. The

greater the variance or uncertainty, the wider the potential range of outcomes for expense and revenue estimates.

Quantitatively capturing business risk, execution risk, and variance and directly adjusting the financial estimates result

in more meaningful and “pressure-tested” estimates for a more accurate projection of the financial results. In general,

risks affect expense by raising the original estimates, and they affect revenues by reducing the original estimates. The

risk-adjusted numbers should be taken as “realistic” expectations, as they represent the expected values considering

risk.

Very few business risks were identified that could be applied specifically to Compellent or EqualLogic projects. At the

time of writing this analysis, the following business risks were identified:

There is no average customer size for Compellent or EqualLogic, and there is overlap of product lines. Both

Compellent and EqualLogic portfolios have strongly different capabilities, despite running the same workloads

and being used from SMBs to large enterprises. EqualLogic thrives in virtualized iSCSI environments and

delivers a high level of simplicity in an innovative package. Compellent fits well into environments with

requirements for high scalability, Unix support, and very high levels of data protection. SIs need to assess the

storage capacity need, the infrastructure complexity, and any other related business drivers in order to position

the correct technology.

The conversion rates from POC to full implementation may vary both in time and number.

The following execution risks that affect revenues were identified:

The amount of time spent on design and implementation services may vary considerably depending on the SI‟s

internal capabilities but also depending on the complexity of the customer infrastructure.

SIs that do not already have well-defined professional service offerings and the support systems/processes may

not be able to fully participate in the revenue opportunities. SIs may not be considered for Compellent or

EqualLogic engagements without being able to offer these services. The investments in training and certification

are justified by the ROI of 280% for Compellent and 568% for EqualLogic. By missing out on training, SIs may

not fully realize the ROI and business contribution discussed earlier.

Investments in training are necessary to minimize design, implementation, and deployment risk. It is also a

critical enabler to the business benefits analyzed.

Table 29 shows the values used to adjust for risk and uncertainty in the cost and benefit estimates. The TEI model uses

a triangular distribution method to calculate risk-adjusted values. To construct the distribution, it is necessary to first

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estimate the low, most likely, and high values that could occur within the current environment. The risk-adjusted value

is the mean of the distribution of those points.

Readers are urged to apply their own risk ranges based on their own degree of confidence in the cost and benefit

estimates.

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Business leaders today recognize that information technology (IT) provides capabilities that are essential for defining

and executing winning strategies. In a business climate characterized by rapid change and global competition, IT

leadership must build an organization and infrastructure that can harness technology to create an Efficient Enterprise —

an agile business that responds to changing needs by investing more in innovation than in sustaining the status quo.

Maximizing the efficiency of data storage is crucial for creating an Efficient Enterprise in a data-driven world.

The Dell Intelligent Data Management (IDM) strategy is being delivered through Dell Fluid Data solutions to help

businesses automate, optimize, scale, and protect storage to create an increasingly agile, increasingly Efficient

Enterprise. Dell Fluid Data solutions are architected to give its customers the power to optimize their storage

infrastructure by helping them put the right data in the right place at the right time for the right cost.

Once primarily a storage reseller, Dell today is a major supplier of core storage infrastructure products based on in-

house engineering and development. The acquisitions of EqualLogic, Perot Systems, Exanet, Ocarina Networks, and

Compellent have brought innovative technologies and deep expertise to Dell, further propelling the expansion of Dell

storage offerings.

The Dell Fluid Data solution portfolio encompasses a broad range of systems, software, and services. Dell Fluid Data

solutions help organizations realize the vision of the Efficient Enterprise by providing functionality for automating

tasks, optimizing resources, achieving seamless scalability, and protecting critical assets simply. The Dell IDM strategy

can help organizations manage growth, increase the value of data, enhance information accessibility, reduce risk, and

control costs.

To learn more about the Dell IDM strategy, visit http://www.dell.com/datamanagement.

To explore the broad portfolio of Dell storage solutions, visit http://www.dellstorage.com.

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Total Economic Impact is a methodology developed by Forrester Research that enhances a company‟s technology

decision-making processes and assists vendors in communicating the value proposition of their products and services to

clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to

both senior management and other key business stakeholders.

The TEI methodology consists of four components to evaluate investment value: benefits, costs, risks, and flexibility.

Benefits represent the value delivered to the user organization — IT and/or business units — by the proposed product

or project. Often product or project justification exercises focus just on IT cost and cost reduction, leaving little room to

analyze the effect of the technology on the entire organization. The TEI methodology and the resulting financial model

place equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of

the technology on the entire organization. Calculation of benefit estimates involves a clear dialogue with the user

organization to understand the specific value that is created. In addition, Forrester also requires that there be a clear line

of accountability established between the measurement and justification of benefit estimates after the project has been

completed. This ensures that benefit estimates tie back directly to the bottom line.

Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business

units may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the

investments and expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures

any incremental costs over the existing environment for ongoing costs associated with the solution. All costs must be

tied to the benefits that are created.

Risk measures the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in

two ways: 1) the likelihood that the cost and benefit estimates will meet the original projections, and 2) the likelihood

that the estimates will be measured and tracked over time. TEI applies a probability density function known as

“triangular distribution” to the values entered. At minimum, three values are calculated to estimate the underlying range

around each cost and benefit.

Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can

typically be the primary way to justify a project, Forrester believes that organizations should be able to measure the

strategic value of an investment. Flexibility represents the value that can be obtained for some future additional

investment building on top of the initial investment already made. For instance, an investment in an enterprise wide

upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce

licensing costs. However, an embedded collaboration feature may translate to greater worker productivity if activated.

The collaboration can only be used with additional investment in training at some future point in time. However,

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having the ability to capture that benefit has a present value that can be estimated. The flexibility component of TEI

captures that value.

Dell Preferred Partners get access to 5% rebates on all revenue beyond a $50,000 threshold. The analysis in this case

study shows that SIs meet and exceed the threshold in Years 1, 2, and 3. As such, the partners gain additional bottom-

line margins from rebates provided by Dell. Tables 30 and 31 show the additional margins that can be gained from Dell

rebates for the typical Compellent and EqualLogic deals. These rebates contribute significantly to the ROI numbers

with the ROI of investing in Compellent becoming 372%, up from 280%. EqualLogic‟s investment ROI becomes

723%, up from 568%.

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Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Although the

Federal Reserve Bank sets a discount rate, companies often set a discount rate based on their business and investment

environment. Forrester assumes a yearly discount rate of 10% for this analysis. Organizations typically use discount

rates between 8% and 16% based on their current environment. Readers are urged to consult their respective

organization to determine the most appropriate discount rate to use in their own environment.

Net present value (NPV): The present or current value of (discounted) future net cash flows given an interest rate (the

discount rate). A positive project NPV normally indicates that the investment should be made, unless other projects

have higher NPVs.

Present value (PV): The present or current value of (discounted) cost and benefit estimates given at an interest rate

(the discount rate). The PV of costs and benefits feed into the total net present value of cash flows.

Payback period: The breakeven point for an investment. The point in time at which net benefits (benefits minus costs)

equal initial investment or cost.

Return on investment (ROI): A measure of a project‟s expected return in percentage terms. ROI is calculated by

dividing net benefits (benefits minus costs) by costs.

The following is a note on the cash flow tables used in this study (see the example table below). The initial investment

column contains costs incurred at “time 0” or at the beginning of Year 1. Those costs are not discounted. All other cash

flows in Years 1 through 3 are discounted using the discount rate (shown in Framework Assumptions section) at the

end of the year. Present value (PV) calculations are calculated for each total cost and benefit estimate. Net present value

(NPV) calculations are not calculated until the summary tables and are the sum of the initial investment and the

discounted cash flows in each year.

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