The financial perspective on IT labor in a new technological era.

1. Rethinking People Costs in
Enterprise IT
A Financial Perspective

2. Goals of Enterprise IT Organizations
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1990 2012
McKinsey, “Perspectives on Digital Technology,” January 2012
IT Spending as a Percentage of Total U.S. Corporate Capital Investment
35% 47%

3. • Companies are becoming customer-centric
• Businesses are building mobile systems of
engagement
• The new way of thinking requires a fresh
look at IT spending, particularly IT staffing
3
IT is Changing Interactions
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4. 78% of developers today are saying the
“pressure to deliver faster” has made
their work harder.
- Forrester Research, 2013
Forrester ALM Survey, Q1 2013
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5. • A business’ need to generate more output
faster at the same – or even lower budget
levels – requires intelligent reallocation of IT
spending
• The same money, spent strategically in the
right areas, can increase the speed of
innovation
5
The Impact of Customer-Facing Technology
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6. Goals of Enterprise IT Organizations
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New Model
Infrastructure Outsourcing as a Competitive Advantage
• Infrastructure outsourcing helps financial
managers realize the goal of better customer
experience with the same IT dollars
• Outsourcing makes this happen on two levels:
– Reduction in CapEx on equipment, infrastructure
upgrades and data center facilities
– Potential reallocation of IT personnel from routine
“keep the lights on” work to the development and
deployment of agile, customer-facing systems
Old Model
IT as a Cost Center
• IT in a traditional cost center model
of finance (IT staff/payroll = line item)

7. Understanding IT Labor Costs – An Example
Total annual payroll cost and person-hours for the five administrators required to run on-premises system
with complex database and storage requirements
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Systems Administration Staff
Number
of Staff
(FTEs)
Average
Annual
Salary
Fully-Burdened
Cost Per Item
Total Annual
Costs
Person Hours Per
Year
Server Administrators 2.00 $83,385 $110,485 $220,970 3,600
Network and Security Administrators 0.40 $83,385 $110,485 $44,194 720
Database Administrators 2.00 $93,195 $123,483 $246,967 3,600
Storage Administrators 0.50 $79,800 $105,735 $52,868 900
Backup Administrators 0.10 $67,000 $88,775 $8,878 180
Total 5.00 $560,644 $114,775 $573,876 9,000
The salary data is industry standard, based on Rackspace total cost of ownership (TCO) modeling process, which is derived from the Alinean® methodology.

8. A Closer Look
Is it the best use of those staff dollars and
hours?
Administration of a core system like this is a
good example of IT “keeping the lights on”
Businesses can’t run without them, but they
don’t advance strategic interests
What else could these administrators be doing
with their time?
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Total staff cost for this system:
$625,268*
The staff spends9,000
person-hours per year running it
*The total staff cost includes the total annual payroll cost, plus $34,650 for training and $16,742 for turnover, according to the Alinean TCO process, as detailed in the Appendix of the
whitepaper referenced at the end of this document.

9. Outsourcing infrastructure enables businesses to
reallocate IT staffing resources to projects that
serve the strategic mission of the business
9
Releasing the Potential Energy of Innovation
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10. The work schedule of a Server Administrator is filled with tasks that span the life cycle of a server
Procure hardware,
including time
spent working with
finance
department, legal,
etc.
10
On-Premises Systems Need Continuous Support
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Physical
installation
Configuration of
the server BIOS,
firmware, and other
settings
Provisioning of
network
connectivity with
involvement from
the network team
Basic provisioning
of the OS
(Sysprep, OS
configuration, initial
security component
install, etc.)
Changes during the
life of the server,
including routine
and exception
security updates,
BIOS, firmware,
and OS updates
Storage
provisioning,
possibly in
conjunction with a
dedicated storage
team
OS CHANGES STORAGE
PROVISION
NETWORK
PROCURE INSTALL CONFIGURE

11. 11
Outsourcing Enables Reallocation
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• Outsourcing removes work tasks from an administrator’s schedule
• Administrator hours per server, per year, drop from 355 to 72
On-Premises Outsourced
Procurement 10 0
Physical installation 20 0
Configuration of BIOS, firmware, etc. 20 0
Provisioning of network connectivity 5 0
Basic OS configuration 15 0
Changes to server configuration 100 10
Storage provisioning 10 2
Server monitoring 100 10
Application configuration 35 15
Application change management 40 35
Total hours 355 72

12. • Migrate entire system to a public cloud on virtual
machines with connections to public storage
• Transfer system to a hosted private cloud
• Port system to an outsourced hosting provider, but
maintain control using a service such as Rackspace’s
Dedicated VMware® vCenter Server™ offering
12
Infrastructure Outsourcing Options
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13. Outsourcing Reduces Administration
Total annual payroll cost and person-hours for the five administrators required to run on-premises system
with complex database and storage requirements
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Systems Administration Staff
Number
of Staff
(FTEs)
Average
Annual
Salary
Fully-Burdened
Cost Per Item
Total Annual
Costs
Person Hours Per
Year
Server Administrators 0.1 $83,385 $110,485 $11,049 180
Network and Security Administrators 0.1 $83,385 $110,485 $11,049 180
Database Administrators 1 $93,195 $123,483 $123,483 1,800
Storage Administrators 0 $79,800 $105,735 $ - -
Backup Administrators 0 $67,000 $88,775 $ - -
Total 1.2 $91,560 $121,317 $145,580 2,160

14. Company can reallocate
6,840 hours
of IT staff time to new projects
to increase revenue growth!
14
Result
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15. The Financial Impact of IT Reallocation
Improvement in business agility from outsourcing infrastructure and staff reallocation can result in increased
revenue growth
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Systems Administration Staff
Self-Managed
Environment
Proposed Hosted
Solution
Expected benefits with
Proposed Solution
New application projects per year 10 10
Average system provision time per application (days) 30 2 $110,485
Average annual revenue value per application $5,000,000 $5,000,000
Average lost revenue per system provisioning $410,959 $27,397 $383,562
Annual value of potential revenue losses due to system provisioning $4,109,589 $273,973 $3,835,616
Net incremental contribution 25% 25% 25%
Annual incremental margin contribution $1,027,397 $68,493 $958,904

16. A Closer Look at the Financial Payback
The five-person team liberated from “keeping-the-lights-
on” duties can easily handle the hours required to
provision new applications under the outsourcing scenario
– It would take 12,000 person-hours to provision 10
applications on-premises
– It takes 800 hours with outsourcing (10 apps X 8
hours a day X 5 staff X 30 days = 12,000 hours)
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17. A Closer Look at the Financial Payback
Bringing each new system online 28 days earlier than
previously possible on-premises, puts the company into
positive revenue territory faster
– Faster deployment brings $3.8 million in extra
revenue, which translates into $958,904 in additional
gross margin
– Faster time-to-market is a strategic benefit that usually
translates into greater revenue, earnings, and
sustained competitive advantage
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18. A Closer Look at the Financial Payback
Estimated ROI for the reallocated IT staff time is
substantial
– The time is worth $475,203 (76% of $625,268)
– The ROI is 117% on the outlay for staff hour—hours
that were already being paid to “keep lights on”
– Outsourcing cut expenses required to provision new,
revenue-generating applications
– Average fully allocated administrator cost is $63.76
per person-hour
– Shaving 28 days off of deployment with a five-person
team translates to a cost savings of $71,411 per
application provisioned
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19. Now is the Time to Rethink the People Costs of IT
Liberate talented IT staff from routine
“keeping-the-lights-on” tasks
Focus IT teams on new customer-facing,
revenue-generating applications
Discover the most profitable way to
invest your IT budget
Achieve the best financial return on
human capital
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Explore new ways
to manage your IT
spend
Infrastructure
outsourcing can
help your business
Go beyond the
Traditional cost-center
model
Look at the value
of the IT staff
resources

20. Need help relieving the burdens associated with
handling “lights on” IT responsibilities, so you
can focus on growing your business?
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21. Next Steps
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Rackspace has over 15 years of expertise in
managing IT environments for over 200,000 businesses
worldwide. Let our specialists do the “lights on” IT work
for you, so you can focus on growing your business.
Contact Rackspace or read more at
Rethinking People Costs in Enterprise IT – White Paper
Call Rackspace at 800-961-2888 to get started today.

22. We Serve FORTUNE®
60%OF100
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About Rackspace
Global Footprint
Customers in
120+ Countries
9 Worldwide
Data Centers
$1.7B Annualized Revenue
THE
Nearly 6,000 Rackers
200,000+ Customers
90,000+ Servers
26,000+ VM
≅70 PB Stored
Portfolio of
Hosted Solutions
Dedicated - Cloud - Hybrid
OVER

23. www.rackspace.com 23
About Rackspace
Founder
OpenStack®
Open source software for building private and public clouds
A Leader in the Magic
Quadrant for Cloud-Enabled
Managed Hosting, 2014
North America & Europe
Named a Top Performer for Hosted
Private Cloud by Forrester Research Inc.
in “The Forrester Wave™: Q1 2013

24. THANK YOU
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