The Top-line and the Bottom-line

Impact of Application Performance

Challenges
A Guide for Line of Business Executives
An ENTERPRISE MANAGEMENT ASSOCIATES (EMA) White Paper
Prepared for CA Technologies
November 2012

IT & DATA MANAGEMENT RESEARCH,

INDUSTRY ANALYSIS & CONSULTING

The Top-line and the Bottom-line Impact of Application

Performance Challenges
Table of Contents
Overview........................................................................................................................................... 1
The Business Impact of Application Performance.............................................................................. 1
Why APM Tools are Critical to Managing Modern Application Environments................................ 2
APM, BSM, and Line of Business..................................................................................................... 3
Summary........................................................................................................................................... 5

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The Top-line and the Bottom-line Impact of Application

Performance Challenges
Overview

For todays enterprise-sized companies, applications are the lifeblood of the business. Increasingly,
economic health is tied to application quality, and IT and Line of Business alike are far more concerned
with application performance than in the past.
While many companies are seeking ways to do more with less, less is seldom more when it comes
to IT investments. Todays leaders in a variety of industry verticals continued to invest in technology
as a priority during the economic recession, understanding that in doing so they would likely make
quantum leaps ahead of competitors in terms of agility, earning power, and cost savings. Many of these
investments were in Business Service Management (BSM) and Application Performance Management
(APM) tools, both of which strengthen links between IT and business by optimizing application
delivery and business strategy. As economic times get better, EMA research substantiates the fact that
they were wise in their foresight.
Enterprise Management Associates (EMA) defines BSM as follows:
Optimization of IT processes and technologies to more effectively manage, monitor, measure, and govern IT
from a holistic business contribution perspective in terms of costs, value, and competitiveness.
BSM answers the challenges of managing business priorities in the
context of budget constraints and increasingly sophisticated technology
ecosystems. It leverages enterprise management capabilities such as
analytics-driven APM to tie technology-based metrics to overall business
value. EMA sees APM as one, and arguably the single most important,
key technology supporting BSM.

EMA sees APM as one, and

arguably the single most
important, key technology
supporting BSM.

Modern APM solutions provide a foundation for BSM by gathering

and analyzing performance data from multiple sources across the application execution system. While
a primary goal of APM is to monitor and report performance in real time, this same information
can be stored and re-used for BSM-focused initiatives. Strategic activities such as trending, capacity
management, user performance monitoring, and change management all rely on APM metrics as well.
This combination of solutions can yield significant business value for companies deploying modern
applications. For example, EMA research reveals that companies combining APM, BSM, and analytics
in support of an Integrated Service Dashboard find that their Cloud deployments are:
1.4 times more likely to reduce capital costs
1.7 times more likely to free up resources for strategic projects
1.9 times more likely to improve service resilience
1.4 times more likely to increase infrastructure flexibility and agility
1.8 times more likely to expand revenue channels
Twice as likely to deliver business model enhancements.

The Business Impact of Application Performance

Without Customer Relationship Management (CRM), sales cycles become chaotic. Without Enterprise
Resource Planning (ERP), the CFO cant manage and report revenue. Without Manufacturing and
Distribution systems, companies cant manufacture and deliver products to customers. In short,

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The Top-line and the Bottom-line Impact of Application

Performance Challenges
without applications the business comes to a halt. However, all too often
application issues are impacting the business. Application performance
and availability problems disrupt day to day operations and diminish
customer satisfaction, employee productivity, brand equityand revenue.

Application performance
and availability problems
disrupt day to day
operations and diminish
customer satisfaction,
employee productivity, brand
equityand revenue.

The impact of application performance varies according to the stakeholder.

For IT executives, performance problems impact relationships with line
of business executives, who experience first-hand the impact of poor
performance on their personnel. For IT staffers, performance issues impact
workload, which in turn impacts quality of life, job satisfaction, and time
spent with family. For end users within the company, performance issues
impact productivity, job satisfaction and, potentially, personnel ratings and subsequent raises. For sales
and marketing stakeholders, application performance can mean the difference between making and
losing a sale or hitting versus missing earnings targets.
EMAs most recent research finds that, for 25% of companies surveyed, an hour of downtime costs the
business between $100,000 and $500,000. Another 29% report the cost of downtime to be between
$75,000 and $100,000. One technology company estimated its cost per downtime incident at
between $750,000 and $1,500,000and this company was experiencing between ten and fifteen such
incidents per year. Clearly, application performance has gone beyond being a quality issueit has
become a revenue-impacting issue as well.

EMA recently interviewed a company that illustrates the importance of applications, even to smaller
companies. A small electronics firm provides each customer with a separate online site, enabling
employees of that company to order phones, wireless, hardware, etc. Since the firm has 1000+ customers,
the IT department manages more than 1,000 separate websites. They were monitoring application
performance with homegrown tools originally designed for single-site monitoring.
Customers werent happy. There were significant performance problems at many worldwide locations,
making ordering more time-consuming than it needed to be. Poor response time was generating user
frustration and adversely impacting employee productivity. With inadequate tools, IT personnel were
unable to determine the root cause of most problems. Many of the issues customers experienced were
longstanding, ongoing problems and were generating increasing levels of frustration.
Eventually, the problems became so acute that the VP of Client Relations requested budget to purchase
his own APM tools. A newly-hired CIO (who had inherited these problems from his predecessor)
eventually stepped in. His APM investments saved this small company approximately $300,000
annuallyalmost 10% of overall revenue.
APM-related cost efficiencies are equally impressive for enterprise-sized companies. EMA has
documented annual cost savings for such firms as high as $15,000,000 per year, with savings resulting
from factors such as improved productivity, a timely and responsive sales process, improved customer
support--- and overall customer satisfaction.

Why APM Tools are Critical to Managing Modern

Application Environments

While applications are the lifeblood of the business, managing business applications becomes

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The Top-line and the Bottom-line Impact of Application

Performance Challenges
increasingly complicated with every passing year. Application complexity has become an industry
buzzword, but few outside of IT grasp the full scope of what this complexity actually means.
Complex distributed applications are supported by literally thousands of separate technology elements,
both on- and off-premise. Physical and virtual servers, Cloud tiers, databases, load balancers, mainframes,
networks, and storage have all become key elements supporting end to end
execution. As application connectivity spans customers, partners, Cloud,
While applications are the
and third party application systems, integrations add potential points of
lifeblood of the business,
failure that are often not well understood by IT Operations personnel.

managing business
applications becomes
increasingly complicated
with every passing year.

Despite the complexity of these systems, many companiesapproximately

one-halfare still trying to manage applications with silo tools alone.
Each technology group has separate, diverse tools supporting their own
technology, with no analytics tying all the information together.

APM and BSM tools leverage metrics collected from technology silos,
but add monitoring and analytics to pull together a full, end-to-end picture of application execution.
Combining visibility to applications, silo monitoring tools, and in some cases business processes,
APM products rely on sophisticated analytics to fill in the visibility gaps of silo tools alone.

APM, BSM, and Line of Business

Applications have become so important that both IT and Line of Business executives are frequently
involved in setting APM and BSM strategy and driving product acquisitions. Unlike acquisitions of
silo tools, which are almost exclusively decided at the departmental level, APM and BSM products are
viewed as strategic differentiators versus tactical aids.
As Figure 1 shows, IT Directors, Managers, or C level executives are shaping application management
strategies at 53% of companies. Line of Business Directors, Managers, or C level executives are driving
1 of companies.
strategy at moreFigure
than 10%
Which of the following is the primary driver shaping your overall
application management strategy?
28%

IT Director and/or manager

25%

CIO/CTO

14%

IT Operations

9%

IT Architecture Group
IT Center of Excellence/Enterprise Management
Group

8%
7%

Line of business Director and/or manager

IT Infrastructure Services/R&D
Line of business C level

5%
4%

Figure 1: High Level Executives from both IT and Line of Business shaping Application Management strategy
Slide 2

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2012 Enterprise Management Associates, Inc.

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The Top-line and the Bottom-line Impact of Application

Performance Challenges
Figure 2 reveals that CIO/CTOs or Directors are directly involved in Application Management planning
or implementation at more than 70% of companies surveyed. VPs, CEOs, or CFOs are leading these
initiatives at nearly
20%2 of companies.
Figure
What is the highest level position directly involved with planning,
implementing and/or promoting IT application management?
42%

CIO/CTO
29%

Director
10%

Manager

10%

VP
5%

CEO

4%

CFO
Other (Please specify)

1%

Figure 2: Both IT and Line of Business Executives promoting Application Management

Finally, as Figure 3 shows, Line of Business funds application Management acquisitions at approximately
Figure 3
15% of companies.
Slide 3
2012 Enterprise Management Associates, Inc.
Whose budget pays for application management acquisitions?
27%

IT Operations

20%

CIO/CTO

18%

IT Director and/or manager

9%

Line of business Director and/or manager

6%

IT Infrastructure Services/R&D
IT Center of Excellence/Enterprise
Management Group

6%

Line of business C level

6%

IT Architecture Group
Other (Please specify)
Development manager

4%
3%
2%

Figure 3: Line of Business Funding APM in 15% of cases

There are several

reasons why both IT and Line of Business executives view
class
of products
Slide 1
2012this
Enterprise
Management
Associates, Inc. as
being important enough to require their oversight:
Fast resolution of application-related problems: APM tools correlate massive volumes of metrics from
hundreds or thousands of sources across the technology ecosystem. Because of their ability to analyze
data at high speed, they are far more efficient than humans at detecting problems and their sources.

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The Top-line and the Bottom-line Impact of Application

Performance Challenges
By knitting together metrics from diverse sources into a holistic view of application execution,
they can minimize or eliminate adverse business impacts caused by application anomalies.
Prevention of impending problems: Many APM tools are capable of predictive analysis. They are
aware of their environments to the extent that they can automatically detect deviations from
normal. Such proactive management capabilities give IT specialists the ability to remediate
problem conditions BEFORE they impact users.
Application prioritization aligns IT with Line of Business: Every company has limited resources
and BSM and APM tools help maximize resources by allocating them to high priority initiatives.
When the two types of capabilities are combined, tools understand the business value of each
application (or user, or department) and prioritize application support activities accordingly. BSM
capabilities also provide a host of additional capabilities that support executive prioritization and
decision-making.

Summary

There are a wide variety of APM tools available in the marketplace; all deliver a holistic, end-to-end
view of the application versus silo-focused infrastructure alone.
Full-featured APM suites monitor the application from multiple vantage points and are often
described as top down solutions, versus the verticalized, silo-based (bottom up) functionality of
point solutions. They may include synthetic transaction technology,
specialized components such as mainframe application monitoring, and
Regardless of where a
products that gather application-specific insight at the network level.
customer
chooses to start,
Each additional vantage point delivers visibility to additional aspects
APM tools are excellent
of application execution and more features benefiting both IT and the
investments for any
business. Most vendors also offer options to purchase tools incrementally
and this can be a good option if the tools themselves are well integrated.
company running enterprise-

grade business applications.

In short, APM tools are now widely available in almost every price range.
At the low end, synthetic transaction technology can serve as an excellent
entry point. At the high end, complex, analytics-based BSM and
APM solutions deliver an extremely powerful foundation for both IT support and Business-focused
performance and availability dashboards. Regardless of where a customer chooses to start, APM tools
are excellent investments for any company running enterprise-grade business applications.

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About Enterprise Management Associates, Inc.

Founded in 1996, Enterprise Management Associates (EMA) is a leading industry analyst firm that provides deep insight across the full spectrum
of IT and data management technologies. EMA analysts leverage a unique combination of practical experience, insight into industry best
practices, and in-depth knowledge of current and planned vendor solutions to help its clients achieve their goals. Learn more about EMA research,
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