Evaluating On-Demand
APM
A Cost-Benefit Analysis
February, 2011Executive Summary
As web applications have grown increasingly vital to building a healthy business and achieving competitive advantages, application performance management (APM) has become a well-established discipline. Yet several factors are driving the need for a new approach to APM. Major innovations in the IT landscape, mounting pressure for more rapid, iterative development
processes, and significant economic factors have all contributed to making traditional methods of APM increasingly obsolete. Next-generation APM solutions are needed to ensure the health and availability of web applications now and in the future. The on-demand, SaaS delivery model meets the requirements of todayʼs businesses for reliable, high-performance applications deployed in modern environments, while also providing significant economic advantages.
New Challenges Require New Solutions
The traditional means of monitoring online application performance are no longer viable as a result of technological advancements and market trends that have set a new standard for infrastructures and development environments.
Cloud computing is leading the push for new management tools. Cloud-based architectures allow businesses to build and deploy applications faster and easier than ever before, but on-premise APM solutions were not designed to handle such a constant stream of dynamically occurring application instances. Additionally, the ongoing transition toward Agile development practices has also made traditional APM software untenable. Built for long development cycles and phased feature enhancements, it lacks the implementation capabilities to get up and running on new applications quickly or respond to frequent iteration.
The current polyglot nature of many application environments presents new challenges as well. Itʼs now common for organizations to employ multiple web applications written in several different languages (Ruby, PHP, Java, .NET) — something earlier-generation APM solutions canʼt support — certainly not in the same console, using the same core product and technology.
Important economic factors are also driving the need to cut costs and optimize resources with scaled-out infrastructures comprising hundreds or thousands of commodity servers, and management tools that involve far less maintenance and support. So when applications can be deployed rapidly on premise, in the cloud, or in hybrid environments, how do you choose an effective solution that bridges the gap between established, traditional APM and these new business requirements?
SaaS Brings Business Up to Speed
While the first generation of APM solutions was adequate for simpler architectures and largely homogenous environments, the demands of todayʼs more sophisticated models have sparked the evolution of advanced APM solutions. Specifically, SaaS-based technologies that install in
minutes with no configuration, support composite applications with robust functionality, and are equally effective in dedicated datacenters, public and/or private clouds, and hybrid environments. These on-demand solutions provide all the benefits of traditional on-premise tools without many of the drawbacks.
Fig. 1 – Comparing capabilities of traditional on-premise vs. advanced on-demand APM solutions.
On-Premise APM On-Demand APM
End-to-end visibility of transactions
Proactive 24x7 application monitoring
Ability to pinpoint and diagnose performance
issues
Optimize resource allocation and accelerate
transactions
Improve service delivery and user experience
Monitor application availability to avoiddowntime
Supports applications in hybrid
environments, including public clouds
Immediate implementation with no
configuration required
Simple service-based delivery model
Single interface for managing composite
applications
Instant, automatic management of
application updates
Figure 1 illustrates the disadvantages of traditional APM software when applied to current environments. The last item is especially troubling. With pressure to speed the release of new features, particularly for burgeoning social media and SaaS-based applications, IT organizations must meet this faster pace with monthly, weekly, and sometimes even daily updates. New frameworks, new libraries, and new features are constantly being utilized or added. On-premise solutions simply canʼt keep up. Still, functional limitations are only part of the whole story.
Without a doubt, one of the biggest flaws in the traditional APM model is its prohibitive cost. It prevents many companies from implementing an APM solution in the first place, or restricts their use to only a small subset of their applications because very few are able to justify the high cost. On-demand APM, on the other hand, eliminates this obstacle.
Calculating Total Cost of Ownership
Thus, a principle benefit of SaaS-based on-demand APM is enterprise-level functionality without enterprise pricing. A point-by-point cost comparison of the two models illustrates just how great the budgetary implications can be.
Cost of Acquisition
Traditional on-premise APM software is sold by direct sales reps who receive large salaries, lucrative bonuses and perks (think Hawaii). These costs are, of course, passed on to customers. After manually counting users, agents, and applications for license compliance, the software must then be configured for the environment – which requires several weeks of professional services at up to $400/hour. An on-demand solution allows unlimited users, knows automatically how many applications to monitor, and its Web-based delivery makes acquisition quick and easy without ever having to talk to a sales person.
Maintenance and Support Costs
Because on-demand APM is delivered using the SaaS model, all back-end components are hosted on the providerʼs side. Upgrades are included in the base cost, and no infrastructure or employee resources are needed to maintain the solution. Thatʼs not the case with traditional APM software, which typically requires an 18-20% annual fee for upgrading to the newest version – not to mention additional hardware and manpower. Extra servers are needed to run the business logic and collect the metrics, and one or more full-time employees may have to be hired to administer the solution.
Time to Value = Opportunity Cost
On-premise APM software can take months to implement for each application, plus more time to reconfigure for updates. In Agile operations, frequent releases can get expensive and produce an opportunity cost. Each performance issue or failed transaction during this lengthy process wastes resources and sacrifices revenue. Then, every 12-18 months, upgrades to the APM software itself require taking down and restarting each application. In a huge datacenter with 100 applications or more, thatʼs a nightmare. On-demand APM installs in minutes with no
configuration, even for subsequent updates. New features arrive automatically every week, while applications stay running. The result: immediate time to value, zero opportunity cost.
Education Costs
The complexity of on-premise APM extends beyond its implementation. Poor usability in the solutionsʼ designs can lead employees to avoid them altogether. So after all the expense of acquiring the software, it oftentimes remains largely unused. That is, unless the company pays even more money for the vendorʼs education services. Training is unnecessary with an on-demand model, where ease-of-use and an intuitive interface are key benefits common to SaaS offerings.
Infrastructure Costs
Designed for virtualized and distributed environments, hosted by the provider and delivered over the Web, SaaS-deployed APM solutions incur no extra costs related to scaling up the IT
infrastructure. Conversely, traditional software options are hosted on the enterprise network – setup generally requires the purchase of additional servers and other equipment.
Fig. 2 – Total cost of ownership breakdown of traditional on-premise vs. advanced on-demand APM solutions.
On-Premise APM On-Demand APM
Annual cost (base) $7,500/CPU license fee + 10% ($750)/CPU initial setup
$175/month
Maintenance and support costs 18% ($1,350)/year $0
Admin/Feature Upgrades $150,000/year for full-time admin
$0
Fig. 3 – Total cost of ownership breakdown of traditional on-premise vs. advanced on-demand APM solutions calculated for 20 hosts.
On-Premise APM On-Demand APM
Annual cost (base) $165,000 $42,000
Maintenance and support costs $29,700 $0
Admin/Feature Upgrades $150,000 $0
Infrastructure costs $10,000 $0
Total $354,700 $42,000
Case Study: The ROI of On-Demand APM
In a head-to-head comparison, itʼs clear which APM model provides the most cost-effective solution. The expense of SaaS-deployed solutions is a tiny fraction of the TCO for on-premise alternatives. But how do the benefits of on-demand APM play out in the real world? Hereʼs just one example from a THINKstrategies report on its Best of SaaS Showplace Awards, which highlights the methodʼs measurable benefits. A retail client of the industryʼs leading on-demand APM provider achieved the following results:
Within one month
• Average site response time reduced by 66% • 300% increase in application speed
• Visitor traffic went up 53%
Within ten months
• 500% boost in application speed • Conversion rate jumped 18%
Results like these are not unusual. And when you evaluate the scope of cost savings previously discussed alongside the kind of benefits that truly move a business forward, a significant ROI can be expected, especially over the long run. For the company in the example above, the ROI of on-demand APM in the first six months alone was enough to pay for the solution for more than 18 years (with the original infrastructure).
Conclusion
With the IT landscape evolving and organizations increasing their focus on optimizing the user experience, employing effective APM tools is paramount to reliable world-class business applications. The trends toward platform diversification, cloud-based architectures, and Agile development are on the rise. The tools for managing business-critical applications in such environments must keep pace. Yet the growing need to cut costs and accelerate the speed of development requires solutions that are also economical and deliver rapid returns — without sacrificing important capabilities. Only on-demand APM solutions delivered via a SaaS model can offer this advantage of enterprise-level functionality without enterprise software prices. Thus, their value in particular will continue climbing in league with these technology and market forces as SaaS-deployed APM becomes the standard for businesses of all sizes.
