Transcript Presentation on the ROI model

TELEWORK RETURN
ON INVESTMENT
STUDY
May 8, 2009
0
Table Of Contents
Introduction
Methodology
Value Calculations
Cost Calculations
Risk Calculations
Findings and Conclusions
1
OBJECTIVES
This study has two primary objectives:
To provide a strategic framework and methodology for identifying
the value of telework investments, cost justifications, and risk
analyses in order to calculate the return on investment
To assist HAF/IM develop business case analyses that consider the
multiple benefits of telework when making investment decisions
2
BUSINESS CASE ANALYSIS
For this report, a sample business case analysis was developed with
detailed costs, benefits, and risks. It includes a return on investment (ROI)
analysis
The Capital Planning and Investment Control (CPIC) process and Value
Measuring Methodology (VMM) value factors were used to outline and
develop the BCA
Additionally, this report provides resources that project managers can use to
develop their own telework-related business cases
3
Table Of Contents
Introduction
Methodology
Value Calculations
Cost Calculations
Risk Calculations
Findings and Conclusions
4
DATA SYNTHESIS
• Collected information about costs, benefits and risks associated with
telework investments.
• Used frameworks of the Capital Planning and Investment Control
process and Value Measuring Methodology value factors to organize and
develop sample business cases analysis.
• Estimated costs and benefits associated in a sample telework scheme
involving an organization of 200 people, with 20 teleworkers, 15 working
one day per week, and 5 working five days per week.
• Developed business case that incorporates cost estimates, return on
investment, and risk analysis.
5
CAPITAL PLANNING AND INVESTMENT CONTROL (CPIC)
The CPIC process is the primary
process for making investment
decisions, assessing investment
process effectiveness, and refining
investment related policies and
procedures. CPIC is mandated by the
Clinger-Cohen Act which requires
agencies to use a disciplined process
to acquire, use, maintain and dispose
of information technology (IT). CPIC
accomplishes these requirements
through three phases: Select Phase,
Control Phase, and Evaluate Phase.
SELECT the
best
investment
EVALUATE
the
delivered
benefits
CONTROL
the benefits
that are
delivered
6
VALUE MEASURING METHODOLOGY
This section provides an overview of the four
steps that form the value measuring
methodology framework. The terminology
used to describe the steps are common to
developing, selecting, justifying, and
managing IT investments
Step 1. Develop a DecisionFramework
– Identify & Define Value Structure
– Identify & Define Risk Structure
– Identify & Define Cost Structure
Step 2. Perform Analysis (estimate
value, cost, & risk)
– Estimate Value and Cost
– Conduct a Risk Analysis
VALUE
RESULTS
COST
Value Measuring Methodology
RISK
Step 3: Pull Together the Information
– Aggregate the Cost Estimate
– Calculate Value Score
– Calculate Cost Score
– Calculate Risk Score
– Compare Value, Risk and Cost
– Calculate Return-on-Investment
Step 4: Communicate and Document
7
VALUE FACTORS
Value Factor
Productivity
Benefit To
Organization
Retention
Real Estate
Travel and TDY
Resilience and
Flexibility
Vehicle Miles Savings
Organization
Organization
Organization
Organization
Employee Personal
Savings
Transit Subsidy
Reductions
Employee
Organization, Society
Organization, Society
Benefit By
 Increased productivity of workers
 Reduced employee absence
 Retention of skilled workers
 Reduction in office space
 Reduction in travel and TDY budgets
 Reduced effects of disruptions in
service or productivity
 Reduced road use costs and pollution
clean-up costs
 Reduced costs for auto, personal
care items, insurance, etc
 Reduced commuter transit subsidy
expenditures
8
COST FACTORS
Cost Factor
Equipment
Collaboration
Technology
Services
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•
•
•
•
•
•
•
•
•
•
•
Description
Laptop with software
Printer
Copier
Fax
Broadband Router
VPN/Firewall
Instant messaging
Document sharing technology
Virtual meeting applications
PDA
Broadband service
Training
Tele-center fees
9
RISK FACTORS
Risk Factors
Causes



Technical

Financial
Cost creep
Poor resource estimates
Connectivity, applications, training
Vulnerabilities (intrusion, misuse)
Operational  Loss of information
Organizational
 Cultural resistance
 Inadequate performance measures
Potential Mitigation Strategies
Senior management leadership and support for telework program
Comprehensive security planning
Telework-specific training
Assignment of a telework advisory group or program management office
Comprehensive telework agreements
Regularly re-evaluating and modifying the program to meet changing circumstances
Designating a competent telework coordinator
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Table Of Contents
Introduction
Methodology
Value Calculations
Cost Calculations
Risk Calculations
Findings and Conclusions
11
TELEWORKER PRODUCTIVITY CALCULATION
1
100
$51.73
$5,173.00
20
$103,460.00
3
24
$51.73
$1,241.52
5
$6,207.60
$109,667.60
Number additional hours worked on telework days
Average number of telework days per person per year
Composite teleworker hourly rate or actual weighted average
Average annual value added per teleworker
Number of teleworkers
Total annual value for additional hours worked
Number of sick days / snow days saved (national average = 3)
Number of hours saved per full time teleworker
Composite teleworker hourly rate or actual weighted average
Per person annual savings per full time worker
Number of full time teleworkers
Total annual value for sick / snow days
Annual telework-specific productivity value added
Employee
Additional
Hours
Value
Added
Reduced
Employee
Absence
Value
Added
Teleworkers work one additional productive hour in each workday spent at home
(about a 12.5% increase). Source: Lessons Learned From The Network-Centric
Organization: 2004 AT&T Employee Telework Results. This calculation assumes
that 15 teleworkers who work one day per week annually, and 5 teleworkers who
work 238 days per year (one day a month in the office).
Teleworkers average 3 fewer sick days / snow days annually per teleworker.
Source: International Telework Association and Council (ITAC),1999.
12
EMPLOYEE RETENTION CALCULATION
$7,000
200
1.1%
2
54%
1.08
$7,560.00
Cost to recruit one employee
Number of employees in the workforce
Rate of turn-over per year
Expected number of people leaving the organization
% drop in annual turn-over due to telework
Number of employees retained due to telework
Annual telework-specific savings
The total cost of recruiting one employee for a typical government agency is $7000.
Source: OIG-01-13-AMR Assessment of Reducing Infrastructure Costs Through
Increased Use of Telework, Equal Employment Opportunity Commission (EEOC),
2003.
The Federal Government turnover rate is 1.1% as of February 2009. Source:
Department of Labor, Bureau of Labor Statistics JOLTS report, http://www.bis.gov/.
Typical reductions in turnover rates for organizations offering telework averages 54%
of the government workforce per year. Source: Santa Barbara County Association of
Governments (http://www.flexworksb.com) and The Teleworker, Jan 2009 edition,
“Virginia, Leading by Example” (http://www.teleworkexchange.com).
13
REAL ESTATE CALCULATION
Cost per square foot
GSA suggested square feet per person
Ratio of teleworkers per hotel space
Number of full time teleworkers
Number of full time teleworkers less total number of hotel spaces
Reduction in space required in square feet (# teleworkers - # hotel spaces)
920
x GSA sq ft per person
$9816.40 Annual telework-specific savings
$10.67
230
5:1
5
4
Office of Property Management (OPM), Performance Accountability Report, FY 2008
shows that leased spaces in the Washington DC area average 250 square feet per
employee at a cost of $34.91 per square foot. Total per employee per year: $8727.50.
Owned spaces in the Washington DC area average $10.67 per square foot. Total per
employee per year: $2667.50. If using office hoteling where only one space is needed
for each ten teleworkers, the average cost per employee drops by a factor of 10. GSA
Office of Government-wide Policy: "Office Space Use“ recommends 230 square feet of
space per person.
When hoteling space is used, one space for every ten teleworkers, then rentable square
feet per person is reduced by 10 percent.
14
EMPLOYEE TRAVEL AND TDY CALCULATION
$11,100.00
$31,710.00
$5,500.00
$15,855.00
$5,500.00
$15,855.00
$21,455.00
Average cost of domestic travel per year before telework
Average cost of international travel per year before telework
Average cost of domestic travel per year after telework
Average cost of international travel per year after telework
Difference between before and after (domestic)
Difference between before and after (international)
Total annual telework-specific savings
The average cost of domestic business trips in 2008 = $1,110.00; the average cost
of international travel in 2008 = $3171.00. Source: American Express Global
Business Travel (USA Today, Dan Reed, 4 Dec 2007).
Median US trips taken by Government employees is broken down as follows
(Source: PayScale, Inc; The PayScale Report, 23 April 2009):
– 2-5 trips per week, average salary of $58,000, 8% of workforce
– 1 trip per week, average salary of $95,000, 6% of workforce
– 1-3 trips per month, average salary of $75,000, 19% of workforce
– 1 trip per quarter, average salary of $60,000, 16% of workforce
– No trips or rarely, average salary of $44,000, .51% of workforce
Number of trips reduced by the use of telework collaborative processes – 50%
(constructive).
15
RESILIENCY AND FLEXIBILITY CALCULATION
30
$2,454.10
$51.73
2
320
Annual real estate savings due to teleworkers
Saved relocation costs (25% of real estate savings)
Composite General Schedule profile
Number of days of interrupted work due to disaster (all on full time)
Number of teleworker hours worked during disaster
$16,553.60
Uninterrupted work value per teleworker
$2,454.00
Saved relocation costs (25% of real estate savings)
$19,007.70
Subtotal
4%
$ 760.31
Probability of a man-made or natural disaster striking
Annual telework-specific savings
Real estate annual telework savings already calculated in this section is used to
assign cost savings in re-acquiring office real estate. Composite General Schedule
profile from this Appendix is used to calculate value of uninterrupted work for the
month following the disaster. 25% of real estate savings is used as the saved cost
of relocation.
Probability of a disaster (flood, fire, tornado, severe storm) = .04 (Source: US
Geological Survey, Dr. Christopher Barton and Dr. Stuart Nishenko, “Natural
Disaster Forcasting.”
16
VEHICLE MILES SAVINGS CALCULATION
30
Average round trip miles per person (GSA)
20
Number of teleworkers
100
2,000
Average number of teleworking days and round trips per teleworker
Total number of trips avoided
60,000
Total number of miles avoided each year
$720.00 Annual benefit from reduced road, law enforcement, safety, and admin costs
$3,720.00 Annual benefit in air pollution costs avoided
$4,400.00 Annual telework-specific benefit
Roadway service costs, law enforcement, safety and administration costs = .012 per
mile (California Energy Comission); maintenance, gas, and oil = .48 per mile
(American Automobile Association)
Non Green House Gas Air Pollution Cost (average car, urban peak travel) = $.062
per mile. Source: Transportation Cost and Benefit Analysis II – Air Pollution Costs;
Victoria Transport Policy Institute (www.vtpi.org) and U.S. Environmental Protection
Agency, National Vehicle and Fuel Emissions Laboratory, Nov. 29, 2007
17
EMPLOYEE VALUE CALCULATION
$103.60
Value of hours of commuting time now available for personal affairs and family
$84.46
Value of reduced exposure to commuting vehicle accidents
$317.00
$49.86
Value of reduced exposure to workplace illnesses
Annual benefit from reduced grooming purchases (hair, nails, makeup)
$90.40
$109.14
Annual benefit from reduced clothing purchases and cleaning services
Annual benefit from reduced vehicle insurance costs due to less commuting
$720.00
Annual benefit in maintenance, gas, and oil costs avoided
$1,474.46 Annual telework-specific benefits accrued to employee
Bureau of Labor Statistics – Average Consumer Expenditures Per Year (2007)
– Personal care products and services = $364 per person
– Apparel, services, and footwear - Men = $452 and Women = $685 per person
– Medical services, supplies, and medicines = $797
– .5% chance of occupational illness or injury with 9 days of missed work
Fairfax County Statistics – Auto Accidents with Injuries
– 1.03% chance of being involved in an accident at an average cost of $8200
Journal of American Psychiatry
– Depression sufferers average 27.2 lost workdays annually, medical costs = $4,426
Vehicle maintenance, gas, and oil = .48 per mile (American Automobile Association)
Consumer Federation of America: save 5-18% on auto insurance by not commuting
18
TRANSIT SUBSIDY REDUCTION CALCULATION
9
Number of teleworkers previously receiving transit benefits
$16,008.00 Total amount of transit benefits previously collected per year
1450
Total number of telework days
161.1
Average number of telework days per teleworker
64.4%
Percentage reduction in regular workdays
$1778.67 Average amount of benefit reduction
$16,008.00 Annual telework-specific savings
The Washington area Transit Subsidy pays a maximum of $230.00 a month, or
$2,346.00 a year to supplement federal worker commuting costs. Teleworking one
day a week reduces the need for 20% of the maximum benefit. Teleworking five
days a week eliminates the transit benefit altogether.
19
COMPOSITE GENERAL SCHEDULE PROFILE
%
DC Hourly
Level Weight
Rate
GS-7
5.00%
$22.38
GS-9
20.00%
$27.37
GS-11
30.00%
$33.12
GS-12
40.00%
$39.70
GS-13
5.00%
$47.21
Total
100.00%
N/A
Plus
Fringe
$7.35
$8.99
$10.87
$13.04
$15.48
N/A
Fringe Benefits
Overhead
32.85%
12.00%
Plus
Loaded Hourly Composite
Overhead
Rate
Rate
$3.57
$33.30
$1.66
$4.36
$40.72
$8.14
$5.28
$49.27
$14.78
$6.33
$59.07
$23.63
$7.52
$70.21
$3.51
N/A
N/A
$51.73
OMB Circular A-76 Attch C (B.f.1.)
OMB Circular A-76
Step 5 is assumed for all GS levels
The % breakouts are based in part on the real GS distribution across government
and in part on the survey data collected in the course of this study which indicates
that very senior and junior employees are less likely to telework.
20
VALUE ANALYSIS – ORGANIZATION BENEFITS
Benefit
Productivity Gains
Value
$109,667.60
Employee Retention Savings
$7,560.00
Real Estate Footprint Savings
$9,816.40
Travel Savings
$21,455.00
Resilience and Flexibility Savings
Employee Savings
$760.31
$6,543.86
Vehicle Miles Savings
$4,440.00
Transit Benefit Savings
$16,008.00
Total
$176,251.17
21
Table Of Contents
Introduction
Methodology
Value Calculations
Cost Calculations
Risk Calculations
Findings and Conclusions
22
EQUIPMENT COSTS
Components
Description
Cost
Laptop PC & Docking Station - Provides basic computer
capabilities, including mobility and access to enterprise
software; Assumes use of same PC for office and home
PC
PC Software - Applications and security software (e.g.,
Windows XP, MS Office Suite, Anti-virus, Spyware, etc.);
Assumes new user license and 3 year refresh cycle
Printer / Copier / Fax - Provides common office functionality
Peripherals
away from office (assumes “All-in-One” device)
Network
Broadband Router - Provides connectivity interface for
Interface
broadband Internet access
TOTAL per teleworker
$2,115.00
$628.00
$252.00
$68.00
$2,811.00
TOTAL $56,220.00
The acquisition cost of a laptop can be offset by the current cost of acquiring a desktop. The approximate
annualized cost of a desktop, including maintenance, is $327.00 The laptop and printer / copier / fax unit
costs are annualized and include refresh and annual maintenance expense. Recurring (i.e., maintenance)
annual costs are assumed to total 15% of the acquisition cost of hardware and 20% of the acquisition cost of
software. Refresh costs are calculated by dividing the acquisition cost of each element by its respective
product lifecycle. On-line printer and fax service, plus electronic copying, could reduce this cost to zero.
23
COLLABORATION TECHNOLOGY COSTS
Components
Description
Cost
VPN / Firewall Solution – Infrastructure (hardware /
software) provides secure remote access for
Secure Network
teleworker connectivity to enterprise network (includes
Access
enterprise network interface and software for
teleworker clients)
Instant Messaging, Document Sharing, And Virtual
Collaboration
Meeting Tools - Centrally managed and secured
Resources
resources.
PDA Devices - Messaging devices (e.g., Blackberry,
Voice
Treo) allowing mobile voice and data communication
Communications
with co-workers and customers (optional)
TOTAL per teleworker
$416.67
$79.83
$288.00
$784.50
TOTAL $15,689.90
24
COST OF VPN
 Standard VPN Solution: Total Cost of $25,000
– 3 yr Lifecycle
– Annualized Cost of $8300 ($25,000 / 3)
– Includes licenses
– Supports 1500 concurrent teleworkers, which is scaleable to 37,500 teleworkers
– Per teleworker: ($8,300.00  total 20 teleworkers) = $415.00
 Clientless SSL VPN Solution: Total Cost of $350,000
– 3 yr Lifecycle
– Annualized Cost of $117,000 ($350,000 / 3)
– includes hardware and software and maintenance)
– supports 5000 concurrent teleworkers, which is scaleable to a teleworker base of
125,000 teleworkers
– Per teleworker: ($117,000.00  20 teleworkers) = $17,500.00
25
COST OF COLLABORATION RESOURCES
 This includes centrally managed and secured resources such as instant managing,
document sharing, and virtual meeting tools
 Microsoft Live Communication Server (LCS) 2005: Cost of $251,000
– This sample solution assumes a teleworker base of 20
– 3.5 yr lifecycle
– Annualized cost of ($251,000 / 3.5)  $72,000
– 2 load balancers (for redundancy) at $25,000  $50,000 subtotal
– Array of 4 servers at $30,000 each  $120,000 subtotal
– $3150 LCS licensing cost per server  $12,600
– Annual 15% hardware maintenance  $28,000; Annual 20% software maintenance
 $37,000
– Supports 4000 concurrent workers, which is scaleable to 20,000 workers
– Total cost = $319,600.00
– Per worker cost of $79.83
26
COST OF SERVICES
Components
Technical
Training
Broadband
Service
Tele-Center
Services
Description
Technical Training - Information such as telework
technology policies, IT troubleshooting techniques, and
technical capabilities of home office provided to
teleworkers and managers of teleworkers
Broadband Service – Commercial provider such as a
DSL line from Verizon
DC Area Tele-Centers – There are fourteen Government
Tele-Centers available in Maryland, Northern Virginia, and
West Virginia, at an average cost of $46.57 per day. Cost
is based on a one time a week use of a tele-center in order
to access the SIPRNet.
TOTAL per teleworker
Costs
$100.00
$384.00
$2,325.50
$2,809.50
TOTAL $56,190.00
27
COST ANALYSIS
Description
Cost
Equipment Costs
$56,220.00
Collaboration Technology Costs
$15,689.90
Service Costs
$56,190.00
Total
$128,099.90
28
Table Of Contents
Introduction
Methodology
Value Calculations
Cost Calculations
Risk Calculations
Findings and Conclusions
29
RISK ANALYSIS
Risk Factor
Financial
Technical
Operational
Organizational
Probability
Low
Low
Medium
High
Totals
Impact on Cost Impact on Value
$650.50
$650.50
$960.75
$1,281.00
$3,522.75
($881.26)
($881.26)
($1,321.88)
($1,762.51)
($4,846.91)
The probability and impact of each risk factor is examined for both cost and
value. This provides information on the interaction between impact and
probability, and allows predictions about how that interaction will change the
value and cost of the investment.
The impact of risk on cost and value is assumed at the following rates:
– Low Probability = .5% increase in cost and 5.%decrease in value
– Medium Probability = .75% increase in cost and .75% decrease in value
– High Probability = 1% increase in cost and 1% decrease in value
30
Table Of Contents
Introduction
Methodology
Value Calculations
Cost Calculations
Risk Calculations
Findings and Conclusions
31
ANALYSIS SUMMARY
Productivity Gains
VALUE
Employee Retention Savings
Real Estate Savings
$176,251.17
Travel and TDY Savings
Resilience and Flexibility Savings
COST
Equipment
Collaboration Technology
$128,099.00
Services
Financial
RISK
Technical
Operational
$4,846.91 value decrease
$3,522.75 cost increase
Organizational
32
RETURN ON INVESTMENT SUMMARY
Total
Investment
Total Benefits
Return on
Investment
Payback
Period
$128,099.90
$176,251.17
138%
< 1 year
Telework benefits:
– Improved contingency support
– Increased organizational flexibility and ability to adapt
– Improved communication between staff and other organizations
– Ease of using applications with a common interface
– Automation of administrative processes
Other non-financial benefits
– Compliance with federal mandates (COOP, Pandemic)
– Increased job opportunities for those with disabilities
– Reduced traffic and pollution costs
33