Currently, 15%-20% of organizations have some mobile projects underway. We expect this number to rise to 65% by 2005. During 2003/04, we believe pressure from business users will drive IT organizations to migrate these applications to wireless connectivity - with a concomitant increase in cost and complexity. Initially, applications will focus on high-transaction-value business-to-employee (B2E) activities, migrating to business-to-business (B2B) in 2003 and to business-to-consumer (B2C) in 2004, as the cost of deployment lessens.
Technical constraints to mobile application development include slow networks, lack of coverage, immature devices, and a confusing and largely undifferentiated market for mobile application servers. Software tools and mobile application servers from top-tier Web application vendors will likely catch up to niche vendor offerings in 2002/03, providing simpler and more seamless integration of mobile devices to existing applications, and at lower overall cost. By 2005/06, we expect enterprise application vendors (e.g., SAP, PeopleSoft, Oracle) to have fully mature mobile options, which will limit the market for small mobile middleware vendors. Through 2003/04, given the technology risk and rapid rate of technological change, IT organizations will need to look for rapid ROI from mobile investments (i.e., over 12-18 months).
IT groups should segment mobile application investments into five key categories:
- Core/Operational Expenses: "Keeping the lights on." Few mobile applications are truly a core expense except for those in industries such as services, logistics, and delivery, where highly mobile personnel must stay connected in real time or near real time. However, some investments in mobile applications that replace existing business-critical systems could be considered core (e.g., e-mail for mobile professionals). Replacing custom or specialized wireless devices with off-the-shelf, rugged products during normal replacement cycles should be considered a core expense. Key metrics for core/operational expenses are cost savings over more traditional technology and a better strategic fit with future plans.
- Non-Discretionary Enhancements: Supporting organic growth. A non-discretionary project focuses on enhancing core "run the business" processes and productivity. Mobile projects that replace paper forms improve information accuracy, reduce latency, and eliminate duplicate processes (e.g., customer site insurance applications). Metrics for non-discretionary enhancements include an increased number of tasks completed per day (more sales/service calls per day); reduced information latency (i.e., information gets into the system immediately versus not being available for days); reduced inventory (better real-time sales and delivery information); increased accuracy (e.g., elimination of double-entry keying); and reduced age of accounts receivable (e.g., faster billing information). E-mail access could be considered a non-discretionary enhancement in certain industries (e.g., mobile sales/field force), though for most organizations it is a discretionary investment.
- Discretionary Enhancements: Supporting basic business growth. Beyond the expenses for basic "keep the lights on" functions, businesses must also invest in enhancements that facilitate business growth. Mobile applications that provide enhancement of customer self-service, line-busting (e.g., roaming check-in at airports), telemetry for remote diagnostics, and real-time dispatch of jobs could be considered discretionary enhancements. Metrics for ROI in this category might include the displacement of people (e.g., fewer call center customer service representatives), an increase in productivity, faster response to customer requests, elimination of duplicate process, greater customer loyalty, and a merger of job tasks. In some cases, these expenditures might be driven as a competitive response to market pressure. Mobile business intelligence applications to support field-oriented management typically fall into the discretionary category. Potential payback due to expense savings should occur over 12-18 months.
- Growth: Supporting competitive differentiation to deepen market penetration. Growth/investment and venture projects typically have longer term payoff (three to five years). Typical metrics for investment-type projects include customer acquisition and increased customer wallet share (the share of a customer's business within the market) as well as increased customer intimacy, switching costs, and market share. Payback for investment spending is often through revenue or market share versus cost savings, and should take place within 18-36 months. These projects typically involve customers in either a B2B or a B2C environment.
- Venture: Supporting major innovation to broaden reach into new markets. Implementations of telematics in the automotive industry (i.e., wireless services, often location-based, delivered to vehicles to provide improved comfort, safety, productivity, or mobility) have the potential for significant revenue (by 2005/06). Wireless identification systems already in use in some gasoline stations are also examples of venture applications (e.g., Mobile/Exxon SpeedPass radio frequency identification tags). These types of investments are aimed at expanding revenue opportunities beyond their traditional markets. Pioneers in these wireless technologies have the potential for significant rewards, but only if they control the risk inherent in exploration. Venture projects must constrain risk by implementing disciplined project management and by testing extensively and at regular intervals. Metrics for venture ROI include market share in new markets, incremental revenue, improved customer attainment/loyalty, and reduced customer churn. ROI will generally be measured over three or more years. Companies must view such projects as ventures that are similar to a new company startup and should manage these efforts according to a business plan established upfront. Many of these programs are started as pilots with a select group of users (e.g., regional, specific business unit, top 10% of customers), with the programs then being expanded once the bugs are out and the business or market plan is fine-tuned.
After segmenting wireless projects (including proposed projects) into the above categories, IT organizations must adjust the overall portfolio to fit the business strategy. For example, a struggling company in a poor economy may choose to severely limit or eliminate all but core and non-discretionary projects. On the other hand, a company in a fast-growing industry must have some growth/investment and venture projects, regardless of economic conditions, if it is to meet future growth targets.
Business Impact: Organizations must adapt project portfolios to business strategy and fund discretionary, investment/growth, and venture projects based on growth expectation.
Bottom Line: Most Global 2000 companies should focus on core and non-discretionary mobile projects with rapid payback (over 12-18 months). Venture and growth/investment projects (if any) should be viewed and managed as part of a strategic effort to target company growth.