META Trend: Worldwide cellular networks will migrate from circuit to packet switched (TCP/IP), providing "always on" service, simultaneous voice and data, improved encryption, and increased bandwidth (20-100 Kbps in 2001/02; 80-200 Kbps by 2006/07). UMTS standard W-CDMA will become the predominant third-generation standard in Japan (2001), Europe (2002/03), and the Americas (2006/07). WAP will remain the predominant wireless data standard, but will evolve to TCP/IP in 2002 and a converged WML/cHTML markup language (X-HTML) in 2003. Traditional application server vendors will absorb nascent wireless middleware/gateway functionality during 2001-03.
Extending applications to mobile devices will consume considerable IT resources during the next three to five years, similar to the rush to "Webify" applications during the past five years, though at a less frantic pace. Our research indicates the primary challenge for Global 2000 (G2000) companies implementing mobile applications is establishing the business value (e.g., increased revenue/profits/market share), justifying the cost, and providing an adequate ROI. Indeed, technical immaturity and lack of unified stable standards increase the initial cost of mobile solutions and force tactical compromises that condense the acceptable return period to 12 to 18 months. In a tightening budgetary environment, G2000 IT organizations must prioritize projects based on an overall portfolio management approach to maximize overall spending (see Figures 1 and 2).
Currently, 15%-20% of organizations have mobile projects underway. We expect this number to rise to 65% by 2005. Initially, applications will focus on business-to-employee (B2E) activities, migrating to business-to-business (B2B) in 2003 and business-to-consumer (B2C) in 2004 as the popularity of the mobile Web increases. Technical constraints to mobile application development include slow networks, immature devices, and the lack of standard development environments and tools. By 2003, we expect mobile networks from cellular providers to become more useful for data applications due to additional bandwidth and better pricing schemes (see GNS Deltas 847, 7 Mar 2001, and 823, 11 Dec 2000). Software tools and mobile application servers (see GNS Delta 860, 17 Apr 2001) 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. As a result of these rapid changes, users must ensure capital investments for infrastructure can be recouped before they become obsolete (i.e., 12-18 months). Projects with a longer-term payoff (i.e., venture, investment) should include budget provisions for frequent technology refresh.
Core/Operational Expenses: "Keeping the Lights On." Few mobile applications are truly a core expense except for some industries such as logistics and delivery; however, some investments in mobile applications that replace existing equipment could be considered core. Replacing custom or specialized wireless devices with off-the-shelf, rugged products during normal replacement cycles, putting 802.11b wireless LANs (e.g., in warehouses where it is expensive and difficult to run cable), and replacing private mobile radio infrastructure with public networks could be considered core. Other projects include equipment or airtime consolidation, using combined personal digital assistants, cellular phones, and pagers. Key metrics are cost savings over more traditional technology.
Non-Discretionary Enhancements: Supporting Organic Growth. A non-discretionary project focuses on enhancing core run-the-business process and productivity. Mobile projects that replace paper forms improve information accuracy, reduce latency, and eliminate duplicate process (e.g., one paper, one digital). Metrics for non-discretionary enhancements include an increased number of tasks completed per day (more sales/service calls per day); reduced information lag (i.e., info gets into system immediately vs. days); reduced inventory (better real-time sales and delivery information); and reduced age of accounts receivable (faster billing info).
E-mail access, typically the first mobile application requested, could be considered a non-discretionary enhancement in certain industries (i.e., mobile sales/field force), though for most it is a discretionary investment. Confusing end-user demand for "cool" technology with real business value is a common mistake, leading to higher IT costs with little real payback. Nevertheless, IT organizations must also weigh the value of satisfied end users.
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 enhance 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. Here, ROI metrics might include the displacement of people (e.g., fewer call center customer service reps), an increase in productivity, elimination of duplicate process, and a merger of job tasks. Potential payback due to expense savings should be in the 12- to 18-month range.
Investments: Supporting Competitive Differentiation to Deepen Market Penetration. Investment and venture projects are typically B2C projects where the payoff is usually described in longer-term business metrics. Mobile commerce (see GNS Deltas 933, 26 Nov 2001, and 940, 14 Dec 2001) is still a nascent industry in the US, but mature in Japan and emerging in Europe. Typical metrics for investment-type projects include customer acquisition, increased customer wallet share (the share of a customer's business within the market), and increased customer intimacy, switching costs, and market share. Payback for investment spending, often through revenue or market share versus cost savings, should be 18-36 months.
Venture: Supporting Major Innovation to Broaden Reach Into New Markets. General Motors believes it could potentially get more income during the lifetime of a car from the telematics services sold though the use of a dashboard computer than from the sale of the vehicle itself. Mobil Oil is expanding the use of its wireless Radio Frequency Identification (see GNS Delta 815, 15 Nov 2000) "Speedpass" payment system to other merchants, starting with McDonald's. These types of investments are aimed at expanding revenue opportunities beyond 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 extensive testing and at regular intervals. Metrics for venture ROI include market share in new markets, incremental revenue, and customer attainment. ROI will generally be measured in two to three years.
As the technology improves, applications that have an unacceptable ROI should be reconsidered periodically, as aggregate project costs continue to decline 20%-30% annually.
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