Mobile ROI: What Value Will You Realize?

The economy is forcing many companies to narrow the scope of their existing and proposed projects, but they continue to forge ahead with targeted mobile initiatives that promise long-term business-process improvements.

Consider this: Michelin, the international tire company, snapped up more than 500 Palm Tungsten handhelds for its commercial fleet salesforce. Sales consultants will use the handhelds to collect data when they perform tire inspections at customer locations. Information such as tire wear, age, and mileage will be recorded, analyzed, and sent to commercial customers in order to provide them with current, reliable knowledge on Michelin tire performance.

The business value for Michelin: paperless tire-inspection processes and a product development team that is better informed on tire performance. The electronic data gathered by the roving salesforce can be centrally stored and shared within the Michelin extended enterprise, i.e., commercial tire dealers and the Michelin and fleet service departments [1].

The dilemma: While the qualitative benefits of the solution are pretty clear (paperless inspection processes and better R&D), how does Michelin quantify (in hard dollar savings) the actual return on investment (ROI)?

ROI is really about assessing the ongoing costs and benefits of a project. The accurate measurement of the expected costs and tangible benefits is becoming a key part of mobile solution assessment. Mobile ROI calculations are tricky and depend on the scale and scope of the mobile implementation. But in the cost-conscious economy, CFOs increasingly are forcing IT departments to carefully develop quantitative ROI models as part of their mobile business case.

ROI Categories: Buckets of Value
In studying the mobile market, we have found that value is being created in terms of:

• Revenue Generation. Increasing revenues by selling the right product to the right customer at the right time for the right price.
• Productivity Improvement. Boosting productivity and efficiency by leveraging existing enterprise applications for mobile workers.
• Cost Savings. Reducing costs by providing less expensive means to interact with both employees and customers.
• Customer Acquisition. Acquiring customers by reaching a wider audience unconstrained by time and space.
• Customer Retention. Retaining customers by providing service on their terms.
• Competitive Advantage. Increasing market share by heightening product awareness and enabling customer choice.

Similar to any emerging technology, it is often difficult to pinpoint the total cost of mobile application ownership and the expected ROI from m-business investments. Many Fortune 1000 companies such as McKesson and Bell Canada are claiming impressive returns on wireless investments, but calculating the exact ROI from mobile solutions is often complex as it is both an enhancement to existing solutions, as well as a brand new channel.

Quantitative ROI Example
The mobile ROI approach asks one fundamental question: How soon will the investments in this new technology start making money for me? The figure below illustrates the ROI estimates from a mobile field service deployment for a large firm. The assumptions behind the model are rather simple: the ROI results from just the on-site resolution time saved per visit. Assuming a savings of 15 minutes per visit (eight visits per day), the total ROI is substantial. The investment pays for itself in less than a month. This is the expected ROI and a best-case ROI. What do you think will be the worst-case ROI for this scenario?

Points to Ponder
In the current economic downturn, it makes sense for companies to justify the business results of IT investments through well-defined ROI metrics. Companies adopting or selling mobile applications should create a clear quantitative ROI model. The questions that need to be addressed include:

• Is your business case for mobile based on intangible or tangible benefits?
• Are you calculating ROI using qualitative metrics (anticipated/expected values) or actual quantitative metrics (e.g., data based on real prototype/experience)?
• How long is your company prepared to wait before seeing a positive ROI on a mobile solution?
• What is the opportunity cost of not implementing the mobile solution? Will it lead to a competitive disadvantage downstream?

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References:
[1] PR Newswire, "Palm Tungsten T Handhelds Used as Data Collection and Reporting Tools," March 3, 2003.