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TELEWORK RETURN ON INVESTMENT STUDY

TELEWORK RETURN ON INVESTMENT STUDY. May 8, 2009. Table Of Contents. Introduction Methodology Value Calculations Cost Calculations Risk Calculations Findings and Conclusions. OBJECTIVES. This study has two primary objectives:.

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TELEWORK RETURN ON INVESTMENT STUDY

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  1. TELEWORK RETURN ON INVESTMENT STUDY May 8, 2009

  2. Table Of Contents Introduction Methodology Value Calculations Cost Calculations Risk Calculations Findings and Conclusions

  3. 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

  4. 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

  5. Table Of Contents • Introduction • Methodology • Value Calculations • Cost Calculations • Risk Calculations • Findings and Conclusions

  6. 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.

  7. SELECT the best investment EVALUATE the delivered benefits CONTROL the benefits that are delivered 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.

  8. VALUE RESULTS RISK COST VALUE MEASURING METHODOLOGY Value Measuring Methodology • Step 1. Develop a Decision-Framework • 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 • 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 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

  9. VALUE FACTORS

  10. COST FACTORS

  11. RISK FACTORS 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

  12. Table Of Contents • Introduction • Methodology • Value Calculations • Cost Calculations • Risk Calculations • Findings and Conclusions

  13. 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. TELEWORKER PRODUCTIVITY CALCULATION

  14. 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). EMPLOYEE RETENTION CALCULATION

  15. 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. REAL ESTATE CALCULATION

  16. 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). EMPLOYEE TRAVEL AND TDY CALCULATION

  17. RESILIENCY AND FLEXIBILITY CALCULATION 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.”

  18. 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 VEHICLE MILES SAVINGS CALCULATION

  19. 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 EMPLOYEE VALUE CALCULATION

  20. TRANSIT SUBSIDY REDUCTION CALCULATION 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.

  21. COMPOSITE GENERAL SCHEDULE PROFILE • 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.

  22. VALUE ANALYSIS – ORGANIZATION BENEFITS

  23. Table Of Contents • Introduction • Methodology • Value Calculations • Cost Calculations • Risk Calculations • Findings and Conclusions

  24. EQUIPMENT COSTS 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.

  25. COLLABORATION TECHNOLOGY COSTS

  26. 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

  27. 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

  28. COST OF SERVICES

  29. COST ANALYSIS

  30. Table Of Contents • Introduction • Methodology • Value Calculations • Cost Calculations • Risk Calculations • Findings and Conclusions

  31. RISK ANALYSIS • 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

  32. Table Of Contents • Introduction • Methodology • Value Calculations • Cost Calculations • Risk Calculations • Findings and Conclusions

  33. ANALYSIS SUMMARY

  34. RETURN ON INVESTMENT SUMMARY • 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

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