Enterprise Briefing

 

 

Mobile data offers employees great productivity and efficiency benefits, but many of them are left to buy their own connectivity and these costs often end up buried in expenses claims. For example, analyst Gartner says that only 13% of companies actually pay their employees' hotel WiFi bill directly and a quarter of companies have no centralized view of their remote workers' connectivity spending whatsoever. 

 

To stop costs spiraling out of control it is vital to gain centralized control of mobile data, and the IT department is best placed to manage this along with the rest of the company's communications requirements. Operational costs can be reduced by eliminating ad-hoc purchases, contract management is easier with a single supplier, and wider access to WiFi hotspots will reduce mobile data costs, particularly when roaming. A global mobile data strategy can also provide softer benefits, such as better customer interaction, improved sales effectiveness and ultimately higher customer satisfaction and fewer complaints.

 

 

However, many IT managers struggle to build the financial case for a global mobile data strategy. Finance directors are not interested in technology and are simply looking in terms of a return on investment (ROI) on all projects across the whole business. Therefore the first step in making a successful business case is to describe the benefits in clear financial terms. And the three measures that financial directors are most interested in are payback, internal rate of return (IRR) and net present value (NPV).

 

Put simply: payback is the length of time that it takes for an investment to pay for itself; IRR is the effective yield on the investment and it is presented as a percentage per year; and the NPV is the total value that the investment will be worth over the period studied, basically the benefits minus the costs in today’s terms. When calculating the ROI, it is vital to take the 'cost of money' into account, which is how much return you would make if the money simply stayed in the business and wasn't invested in the project.

 

"Generally speaking the most interesting ROI measure for mobile projects is NPV, because the majority of spending is made in operational costs," says Martin Cowan, Commercial Director, at ROI specialists Shark Finesse. "However, even in opex-heavy projects there are always capital costs that need to be taken into account, such as the software installation or the new phones required."

 

Before embarking on a business case it is essential to work out the business' current mobility costs: WiFi hotspots, cellular data and any other ad-hoc connectivity. Unfortunately, given that these costs are often hidden in line-of-business expenses, it can be very difficult to get an overall view of mobile data spending. A more fruitful approach is to estimate the number of remote workers, how often they log on, and the approximate costs of the connectivity. This will provide a total cost that the business case will seek to reduce.

 

 

There are three key parts to the business case: the evidence, the conclusion and the rationale. The evidence is the benefits that you would derive from making the investment. For a global mobile data strategy, this would be eliminating uncontrolled ad hoc spending, simplifying contract management, reducing spending on roaming, improving customer satisfaction and retaining staff. The conclusion contains the financial metrics to make the case, such as the NPV. And finally, the rationale is the explanation of how these figures were reached and any assumptions made.

 

"However there can be too much of a good thing," warns Cowan, "and IT departments need to be careful when calculating the benefits that they don't over promise savings in the business case, as the business will hold them to this figure." This can happen if suppliers use a traditional sales technique of promising extremely high returns. The IT department needs to decide what combination of benefits should be included and sponsored in the business case. 

 

A properly-couched business case is instrumental in proving the ROI of a global mobile data strategy and will help IT departments get control of all of their employees' data connectivity requirements when traveling. To help IT departments make their financial case a success, Shark Finesse has drawn up its 10 business case rules, which are listed below:

 

1.   Business case must reflect the real world

2.   Securing budget for technology is a competition for funds

3.   Valid proposals often get stuck or delayed

4.   Proposals need the right economic language

5.   It is hard to see the true economic case without ROI measures

6.   Suppliers may claim excessive ROI for their own differentiation

7.   You need to understand and sponsor your own ROI case

8.   Know when the benefits are 'enough' to deliver ROI

9.   The best technical features do not always deliver the biggest benefits

10. The business case is what delivers ROI validation

 

Orange Business Services has extensive financial consulting expertise and uses Shark Finesse's tools to help customers independently calculate their ROI.