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 Wireless and
mobile solutions have moved up in priority for CIOs, who see financial benefit
and opportunity to gain a competitive edge.
Over the last 20 years of the wireless industry,
little attention has been paid to the return on investment (ROI) offered by
wireless and mobile solutions. Justifying wireless voice, messaging or data
services has not been a priority for a variety of reasons: the employee was
responsible for procuring the services and expensed the cost back to the
company; the employee traveled extensively and wireless communications were
considered a basic necessity; or the assumption was made that the wireless
solution would provide a competitive advantage and was therefore justified.
In the last couple of years, wireless and mobile solutions
have moved nearer to the top of the CIO’s “to do” list. Naturally, more
attention is being given to cost issues that have become complicated in direct
proportion to the variety and number of products, services, devices, and
software offered to support efforts within enterprises to provide wireless
access to corporate data and applications. CIOs are now starting to ask more
difficult questions and they want more detailed information before signing off
on a wireless project. The recent global economic slowdown has intensified this
situation.
Throughout late summer and fall of 2001, iGillottResearch prepared 35 case studies
of major companies and corporations that were using wireless and mobile
applications as part of their business. Using data from these studies, we then
prepared a detailed ROI model to show the financial costs and benefits of
various mobile applications. This research has continued into 2002 with
additional case studies. The results show that given the right circumstances,
wireless and mobile applications can be very productive and efficient, even
today when the market is in an early stage.
While skeptics may say that implementing a wireless and mobile application is
not worthwhile, the results show that there are some very real financial
benefits, and that many companies are realizing increased competitive advantage
through the use of mobile applications.
Many companies today are making use of wireless and mobile solutions — they are
just not talking about it. Given the very real financial benefits, with the
resulting competitive advantage, many companies we approached were reluctant to
talk about their solutions and the benefits they were seeing. They simply did
not want their competitors to see what they were doing, call up the same
vendors, and say “Do for me what you did for them!” For this reason, some
companies we profiled wished to remain anonymous.
All of the 35 companies we interviewed deployed wireless with a clear vision of
the benefits. All of the companies have incorporated wireless into the total
business planning process whether the implementation is for SFA, CRM or work
force automation. Not all companies know exactly where their wireless strategy
will take them, but the need to get wireless and mobile capabilities into the
business processes and to be ahead of the technology curve is judged critical
to future planning. This is an important point — for these companies, their
mobile solutions have become as indispensable as their LAN or PCs, and for this
reason they have made wireless a part of their everyday planning session.
Wireless is not an adjunct or an extra to these companies — wireless is part of
the solution from the start.
Benefits Are Being Defined
The naysayers will say there are no real quantifiable benefits to wireless and
mobile applications — they are wrong. One hundred percent wrong. All of the
companies interviewed for the study identified some benefits with their
solution and the majority had quantified the benefits, either in terms of
payback period, dollars saved, or increased revenues.
Benefits can be divided into direct (or hard), where the benefits can be
identified and quantified, and indirect (or soft), where the benefits are more
tangential or harder to quantify.
Direct benefits we identified included
- Wireless LAN installation:
$6,000 per doctor. Expected return: $90,000 per doctor.
- Two to three percent cost savings
on first-fill prescriptions.
- Increased sales 10 to 20
percent
- 32 percent increase in
service calls per day
- Service call responsiveness
increased from 88 to 95 percent.
It is important to understand that these companies had moved
beyond the trial phase and had “production” systems. Thus these benefits were
real, not just those that were imagined or anticipated for a future
application.
Indirect or soft benefits were also identified — these varied widely, from
“improved corporate brand image” to “increased customer credibility” and
“spending less time to close deals, means more time for new deals.”
Payback Periods
The longest payback period was 30 months. Most, especially for e-mail and
calendaring, were in just a few months — payback periods between four and six
months were typical. Sales force application implementations expected
additional revenue from the sales force — several companies commented that a
single additional sale would justify the implementation. Thus, in general, the
payback periods are more attractive when additional revenues can be
incorporated into the analysis.
Factors that affect the payback period, in addition to the obvious costs and
benefits, are:
- If users are able to use
their existing mobile device without change or just by adding a wireless
modem.
- If the application can be
effectively used with a mobile handset compared to the need for a PDA.
- If the mobile system is an
extension of an existing corporate or enterprise application.
It was specifically stated by several companies,
particularly large ones with a high number of transactions, high value
transactions, or time critical services, that any system that can increase the
flow of information and reduce costs, even by a few cents or minutes per
transaction, makes a large difference in the bottom line.
Multiple Vendors in a Single Solution
Excluding mentions of mobile operators and devices, a total of 48 vendors were
mentioned that are being used to implement wireless initiatives — just for the
35 companies in the study. It is evident that successful wireless
implementations require a significant amount of research to select the
technologies that are most appropriate to the business and consumer
environments in which they will be used. And multiple vendors are usually required
to complete the task — few companies can do it all.
Likewise, the most suitable vendors must also be selected. Given that each
implementation involves multiple vendors, it is important that the vendors are
able to effectively work together, sometimes through a systems integrator. Our
research therefore supports the premise that the strength of a single vendor is
assessed by the strength of its partnerships.
Wireless and mobile solutions are made more complex by the fact that a service
provider and device manufacturer must be involved. For companies that chose to
be their own systems integrator, they had to deal with at least three vendors
(service provider, device manufacturer, and application/solution provider),
usually more. Some vendors offer turnkey solutions but may not have
relationships with service providers — this simplifies the task for the
enterprise somewhat.
Trials and Testing
Testing of new systems and applications is necessary and time consuming but it
has to be done. Some of the IT professionals interviewed felt that more
resources could have been used in testing the wireless and mobile
implementation. For the most part, the process was completed with only a few,
overextended IT professionals.
Several month-long user trials of the mobile application were also a common
tactic. Some companies chose to trial among a small segment of users. Several
companies, particularly those with national sales force automation and
e-commerce strategies, have chosen to effect a geographic rollout of the
application to track effectiveness, demands on the system, content relevance,
and costs.
Many companies also realized that wireless and mobile applications required
more, or different, testing. For example, if the enterprise were deploying a
wireless solution in a warehouse with a metal roof, it would be a good idea to
test inside and outside — everywhere the application would be used. Radio
frequency signals do not like metal buildings!
Devices should also be tested with a full, partial and low battery charge. Does
the modem actually work when the battery charge is very low? Or does it require
a certain charge to connect? All of these eventualities should be tested.
IP and Internet Strategies
Major corporations have invested heavily in IP, Internet and intranet
technologies in the last five years — the rise of companies like BEA, Sun
Microsystems, Oracle, and many others demonstrates the power of this spending.
The wireless industry is now benefiting from that investment. From the case
studies we completed, it was clear that companies had less difficulty and lower
initial costs when successful, existing Internet-based strategies were
leveraged into the mobile solution.
Several companies commented that they expected the wireless and mobile
application to use industry open standards and not use proprietary interfaces
or protocols. In the past, the wireless data industry has relied on closed,
proprietary systems, but this no longer needs to be the case. By using open
standards for networking and programming, the ROI of the solutions is increased
since the implementation and ongoing maintenance costs for IT will be lower —
the corporation will by and large be able to use its own IT department to
maintain the application.
Wireless Services and Devices
Bad news for fans of the Palm OS — the evidence from the case studies is that
the Pocket PC platform is becoming a more popular platform. Older
implementations supported Palm but most new applications support Pocket PC —
companies commented on the processing power, display and browser as strengths
of the platform. This does not mean that Palm devices are not used extensively
in the business environment (they are of course) but rather that many of the
new wireless and mobile applications being deployed require more horsepower and
the Pocket PC platform provides this.
The most common mobile operators mentioned were Sprint PCS and Palm.net (for
the Palm VII). But many companies also made the comment that the wireless
networks are disjointed, with multiple standards and operators needed to cover
a region.
Many implementations used wireless LANs — this is likely to grow in interest in
the next few years, especially for applications that can use synchronization
throughout the day, rather than a real-time connection. With the growth of
wireless LAN deployments in “hotspots,” such as hotels, conference centers and
airports, we can expect that many more examples of enterprise wireless LAN
implementations will emerge in the next couple of years.
Mobile
Versus Wireless
One final point worth noting: mobile does not necessarily mean “wireless
connection” as well. Some good examples used simple desktop synchronization to
take information into the field, reference the information throughout the day,
and then resynchronize in the evening. These types of solutions can be very
simple and very powerful — the question then becomes how much better can these
solutions be when wirelessly enabled?
The ability to work off-line, when not connected to the wireless network is
critical. Several companies commented that their choice of vendor was dependent
on this capability.
Implementation Issues
Each of the profiles includes some details of problems faced during the
wireless and mobile implementation. While some good points were raised, it
should be remembered that these companies were successful with their
implementations — we did not profile companies who had failed. These issues
need to be addressed by the vendors or wireless industry — while they did not
prevent implementation in these cases, no doubt concerns of this type have
contributed to other projects being delayed or cancelled.
Business Drivers: Before the physical
implementation actually starts, it is important that the technologies be
carefully researched and that there is a good answer to the questions: “Why are
we doing this? Does it benefit the customer, the business or both?” If those
responsible for the implementation are unable to answer these questions, then
the implementation is unlikely to be a success. The project must have a clear
business goal and benefits — if the implementation is just to test new
technology or to prove a concept, then it will not be successful commercially.
Another issue raised was to ensure that the project requirements are completely
fulfilled so the benefits can be made available to the whole organization,
rather than just a few select users. This, of course, applies to any
large-scale IT implementation.
Wireless Services: There were several
comments made by the profiled companies about the need for better wireless data
services, both for bandwidth and for coverage. This point addresses the very
real need to set realistic expectations for the application. Education by the
industry for the decision-makers and users should therefore be a priority.
Comments were also made about the need to control wireless communications
costs. If the company is using rate plans with a usage component, then this
could be an issue.
One company mentioned the need for common interfaces into all of the operators’
networks — it seems that some operators have non-standard interfaces, which
caused problems.
Devices: While there were few
comments on the devices being supported, there were a couple of key points:
- The need to support mobile
applications from any mobile device is very real.
- To get the best returns out
of some mobile applications, some companies realized that they would have
to deploy PDAs with additional features and processing power. This would
raise the cost of the implementation but may be required to realize some
of the additional benefits.
Architecture: Most
of the issues raised during implementation were around the architecture. Since
the mobile architecture must interface with the enterprise IT systems, it is a
critical element (at least until wireless and mobile capabilities are built
into the core of every IT system). Issues raised include:
- The need to control the
volume of mobile transactions, so as not to overload the mobile system.
- The need for open standards
was stressed several times, so that the enterprise can leverage existing
investments in e-business and e-CRM.
- The need to focus on systems
that can provide much of the applications in the form of canned or
software-based tools to reduce the need for custom programming and
maintenance.
- The need to implement core
infrastructure that can be easily, centrally administrated by the IT
operations group or outsourced.
Usability:
Application usability is a critical issue for successful mobile
implementations. In addition to ensuring the applications are easy to use, the
data presented and required must be critical to the user and not cluttered by
“nice to have” information. The sensitivity to this last issue is dependent on
the size of the mobile device’s screen.
Security: Concerns were raised by a
couple of the companies profiled. The specific concerns raised were with
wireless access to e-mail and the need to provide secure access to multiple
applications from a variety of mobile devices. Balancing the need for security
while maintaining an environment built on open standards that is easily
maintained was also noted.
Recommendations
Based on the profiles conducted for this project, iGillottResearch prepared a
set of recommendations for vendors offering wireless and mobile application
solutions. While some of these recommendations may seem obvious, the profiles
show that some vendors in the industry are not addressing these points:
Value Propositions: Many of the case
studies indicate payback periods on the initial investment of just a few months.
These short payback periods suggest that the industry is leaving some money on
the table when working with enterprises. Of course, having said that, we
recognize that closing deals in late 2001 and early 2002 has been difficult.
However, adopting a fire-sale pricing strategy will be damaging to vendors’
long-term profitability.
For those vendors in a position to play for the long term, the answer is to
restructure the pricing models to reduce the upfront license payment and add an
ongoing enterprise or per seat payment. This will spread the investment
required over the length of the contract, lower the upfront investment
required, but also, of course, commit the enterprise to frequent payments.
Pricing should also be based on the number of users and, where possible, the
value of the transactions or application. For example, if possible, tying the
price to increased sales revenues would be highly desirable. While determining
the sales benefit that can be attributed to the mobile application can be difficult,
including bonus payments for the vendor that are tied to increased sales should
be possible.
Of course, this is an ideal situation. But the fact remains that more of the
value of the wireless and mobile solution can be realized through a pricing
scheme that includes frequent payments over a longer period.
For the vendor, the balance must be between an ongoing revenue stream and
getting payment upfront. This is a balance — we are not suggesting that an
initial payment be forfeited entirely in lieu of an ongoing pricing scheme.
This would then mean that the enterprise has little invested in the project —
they need some skin in the game as well!
Ability to Partner: It is clear that
mobile vendors must demonstrate a proven ability to partner with other
companies to provide the total solution. No one, and we mean no one, can
provide a complete solution alone — everyone needs somebody else. The strength
of a vendor is therefore measured not only by their solution, but also by the
abilities of their partners.
A wide range of partners is not required — what enterprises require is a
complete solution. It is therefore important that the partners contribute to
the complete solution, while minimizing overlap.
Wireless Devices: Vendor solutions
should support as wide a range of mobile devices as possible — several
companies commented that they needed to support the existing devices that
employees used, both to reduce implementation costs and to improve usability.
Microsoft’s Pocket PC platform is also becoming more popular and was mentioned
by several enterprises as being the mobile computing platform of choice (it
should be noted that Microsoft was not a sponsor of this project — in any way).
Browsers: Applications that allow the
use of a standard browser on the mobile device were also popular — vendor
solutions should therefore be browser-based wherever possible. As well as
reducing costs, using the browser also allows the use of multiple mobile
devices.
Working While Disconnected: The
ability to work off-line, when not connected to the wireless network is
critical — this should be a capability of most applications, if it is not
already. Having said that, it is harder to implement this type of solution.
This is an area where some vendors may need to partner with companies that
provide synchronization capabilities.
Open Standards: The use of open
standards by vendor solutions is a critical requirement. Several companies
noted the use of open standards throughout the solution. Open standards
contribute to improved scalability, portability, maintainability,
manageability, and operability, as well as a potentially reduced total cost of
ownership. If the vendor solution makes extensive use of open standards,
promote it. If proprietary standards are used, rearchitect the solution
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