Calculating ROI for your enterprise app

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In this cover story, we take a look at the process of calculating ROI for enterprise mobile apps by looking at various approaches to measure benefits and costs incurred in deploying mobile apps.

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Calculating ROI for your enterprise app

  1. 1. Calculating ROI of your enterprise appProcess, approaches and considerations
  2. 2. Mobility has emerged as the most disruptive technology in the enterprises today. Businesses are deployingenterprise mobile apps in earnest resulting in a unique interaction between people, process and products.As per a recent survey by Zenprise, 74.7% of decision-makers said they have or will deploy mobile appsto support their line-of-business activities in the next 12 months. However, deploying line-of-businessor customer-facing applications requires high amount of upfront investments and substantial recurringexpenses every year. As the global economy continues to stagnate, thereby exerting financial pressure onbusinesses, decision makers are taking a hard look at their mobility expenditure and are asking questionslike “How much these mobile apps are benefiting the company?” or “How to calculate the ROI of mobileapps to justify the expenses?” and so on.In our cover story, this month, we take a look at the process of calculating ROI for enterprise mobile appsby looking at various approaches to measure benefits and costs incurred in deploying mobile apps. Mobile ROITo calculate the ROI of a mobile app we will first need to ascertain two components : benefits and costs.BenefitsThe benefits arising out of deploying enterprise level apps in an organization can be classified intoqualitative and quantitative benefits. • Quantitative benefits are those that can be put in numbers such as percentage increase in cost savings, reduction in time to perform specific activity, percentage increase in revenue /profits etc • Qualitative benefits, on the other hand, are intangibles like increase in customer satisfaction, boost in customer loyalty and brand perception etc.The qualitative benefits may be impossible to measure but form an important consideration in gettingthe bigger picture of deploying an app. To measure quantifiable benefits, a step-wise approach could beillustrated by the following example -Sample Benefit AnalysisThe benefits arising out of deploying enterprise level apps in an organization can be classified intoqualitative and quantitative benefits. • Reducing response time- As technicians are getting real-time information on tickets raised they can quickly respond to the client needs. The time spent on handling each ticket after app deployment can be compared with the previous scenarios to ascertain the improvement. • Travel savings: Real-time information on devices will also help technicians in reducing their travel time. They don’t need to make needless trips to central office and can plan their schedule so as to minimize their travel. Reduction in travel time not only increases work-time of technicians but also saves on fuel costs. • Resource management- Your existing staff has more work-time now and also can now handle Calculating ROI of your enterprise app: Process, approaches and considerations / 2
  3. 3. more tickets with the same resources.In addition to that, the field service app provides many intangible benefits like quicker and improvedcustomer service leading to higher customer loyalty, boost in brand perception etc.Step-wise approach to measuring benefits 5 Make sure that each 4 quantitative benefit is derived using a credible method and if possible supported by 3 Consolidate the quantitative benefits to see the big picture. data and case studies. 2 Identify the immediate quantitative and qualitative benefits. Identify the 1 benefits that the listed functionalities will bring to your organization. Make a list of functionalities envisaged in the app according to your mobile strategy.Increase in productivity of the work force has emerged as a major benefit arising from deploying enterpriseapps. Various studies suggest that workers have been able to gain additional work time by using mobileapps. Let’s assume that a technician in a manufacturing unit gains 30 minutes of additional productivityper day owing to mobilized environment in his workplace.So, if the pay per hour of a technician is $50 then the productivity gain for the organization would be Productivity gain per day = ($50/2) $25 per day per worker. Productivity gain per month (22 working days) per worker = $25*22 = $550 If there are 100 technicians operating in the unit; the cumulative productivity gain per month = $550*100 = $55000Using this approach, the equation can be extrapolated to the entire organization. Calculating ROI of your enterprise app: Process, approaches and considerations / 3
  4. 4. Benefits, no matter how high, must be weighed against the expenses incurred in deriving it. And thereforeit is also equally important to look at the costs involved in deploying a mobile app / enterprise mobilitystrategy and to see whether the benefits-costs equation is profitable.CostsThe total cost of ownership for an app can be classified into: upfront costs like licensing, app development,hardware procurement etc., and recurring costs involving data plans, maintenance, up-gradation, trainingfor new users and IT administration. Cost breakdown for a mobile user Maintanance Licensing & Upgradation Device Data Plans Procurement App Cost breakdown IT training & development for a mobile user administration costs • Licensing- Deployment strategies drive the costs incurred in licensing of servers and other software for your mobile app. • App Development- The costs of app development depend on many factors including the functionalities, complexity and the technology used in the app. Also the costs may vary depending on whether it is developed in-house or outsourced. If development isn’t your core functionality, it is always economical to outsource to specialized companies. • Device Procurement- Increasingly BYOD is becoming popular in enterprises, relieving organizations of device procurement cost. However, if you have a policy of providing company-owned devices to employees then the costs will vary depending on the model and manufacturer of the device. • Voice & Data Plans- Every app and mobile device will need voice and data plans to function. These are the costs incurred every year and form a substantial part of overall expenses. Calculating ROI of your enterprise app: Process, approaches and considerations / 4
  5. 5. • Maintenance & Up gradation- Every application needs periodic maintenance depending on a number of factors like frequency of new version releases, addition/changes in functionalities etc. • IT Training & Administration- The end-user training costs are largely driven by the number of users and the number of apps available to users.The upfront costs in owning a mobile can be significantly higher while recurring costs will be lesser but willspread over the years. Also, the total costs involved in deploying an app will vary significantly dependingon the scale, scope and functionality of the app. However, calculations (provided in the table below)based on a study by Forester for a BlackBerry solution deployment provides us with some indications onthe type and the range of costs involved across various deployment stages. Costs Category Comparisons Across Blackberry Maturity Stages Integrative Reactive deployment Proactive Cost category deployment Cost drivers stage deployment stage stage Empowers learners to $48 $100 $45 Variances are driven by control activities. the number of BlackBerry Enterprise Servers, whether the organization has separate testing,production or back- upservers, the cost of each server, and the maintenance fees. BlackBerry smartphones $639 $739 $741 Costs vary due to the number of BlackBerry smartphones supported and corporate liable device policy. User support $66-$73 $71-$75 $171-$206 User support costs increase along with the number of mobile applications deployed. End user training $52-$77 $231-$254 $240-$289 Costs driven by the number of users and the number of mobile applications available to users. Voice and data plans $2,363 $2,459 $2,079 Voice and data plans are the key driver of costs across all deployment stages. Mobility applications $0 $72 $193 Costs driven by the number of mobile applications beyond email Total three-year cost per $3,168-$3,200 $3,672-$3,699 $3,470-$3,552 BlackBerry smartphone Average annual cost Per $1,056-$1,067 $1,224-$1,233 $1,156-$1,184 BlackBerry smartphoneSource: Forrester Research, Inc. Calculating ROI of your enterprise app: Process, approaches and considerations / 5
  6. 6. Calculating mobility TCO can be a challenge in the absence of a standard model or a popular formula.Moreover, a major part of the costs vary depending on the functionalities of the app created, platformsto be supported, scale of users and the mobility strategy adopted by the organizations. The study byForrester Research Inc. puts the average annual cost per BlackBerry user to be in the range of $1,056 to$1,184 per user per year in all deployment stages. So continuing the scenario used for calculating benefitswhere we saw a productivity gain of $25 per day per user or $6500 per user per year and assuming coststo be the average of the range provided above i.e. ($1056 + $1184) /2= $1120, we find that the ROI= Productivity gains/costs = $6500/ ($1120) ROI= 5.8X.As discussed above, upfront costs like licensing, app development and device procurements etc., will notform part of expenses in the following years and only recurring expenses like data plans, user training(depending on new users added) and app maintenance costs etc., will be incurred leading to lowering ofcost per user and further increase in the ROI of the app. Key considerations • It is important to note while calculating ROI for an enterprise app that not all benefits can be measured. Moreover, not all benefits can be accrued in the first phase or year of deployment. This could be because of the functionality used, scale of coverage or adaptability levels among the users. Similarly, a few benefits of mobile app may end after a few years of deployment. • The costs of owning an enterprise app goes significantly lower after a few years of deployment. There are significant investments upfront but as the scale of adoption increases, the cost to serve per user starts coming down. • Another way to increase the ROI by bringing down the costs of developing an app is to consider outsourcing it. In-house app development requires significant investments in technology and manpower which pushes the cost. • To gain the most from your mobile app, it is important that user-centricity is kept in mind while developing it and sufficient motivation and encouragement is provided for its large scale adoption. The bigger the scale of adoption, the more ROI you can gain. ConclusionQuantifying ROI for an enterprise app is challenging but is something that can be very useful in decision-making and can play a large part in developing mobile strategy for future deployments. Although a goodpart of the benefits derived from an enterprise app remains intangible and hence difficult to quantify, butvarious case studies, precedents and data available can help decision-makers to judge and justify theirinvestments in deploying an enterprise app. Calculating ROI of your enterprise app: Process, approaches and considerations / 6
  7. 7. About [x]cube LABSHeadquartered in Dallas, U.S, [x]cube LABS is aleading specialty mobile solutions provider andconsulting company. With expertise across all the Reach [x]cube LABSmajor mobile platforms, [x]cube has delivered connect@xcubeLABS.comover 500 apps till date and has an enviable clientlist comprising of some of the biggest brands likeGE, Intel, Texas Instruments, Hasbro, Mattel and 1-800-805-578324 Hour Fitness. Perfect understanding of themobile technology space complimented with the www.xcubeLABS.comcapability to deliver end-to-end solutions, makes[x]cube the perfect mobile consultant of choice.To integrate your enterprise people, processes and products with customized, avant-garde mobilitysolutions or to explore mobility opportunities in your enterprise with our experts, please feel free tocontact us at connect@xcubeLABS.com.We encourage you to continue exploring our website ( www.xcubeLABS.com ) to find out more aboutour services. [x]cube is the premier mobile solution partner for companies and individuals creating the next generation of digital applications. [x]cube develops custom solutions for the iPhone, iPad, Android and Windows Mobile platforms. [x]cube is a division of PurpleTalk, Inc. xcubeLABS.com | 1-800-805-5783 | connect@xcubeLABS.com

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