Calculating ROI of your enterprise app

Mobility has emerged as the most disruptive technology in the enterprises today. Businesses are deploying enterprise 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 apps to support their line-of-business activities in the next 12 months. However, deploying line-of-business or customer-facing applications requires high amount of upfront investments and substantial recurring expenses every year. As the global economy continues to stagnate, thereby exerting financial pressure on businesses, decision makers are taking a hard look at their mobility expenditure and are asking questions like “How much these mobile apps are benefiting the company?” or “How to calculate the ROI of mobile apps 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 apps by looking at various approaches to measure benefits and costs incurred in deploying mobile apps.

[download file=”http://www.xcubelabs.com/coverstory/Calculating-ROI-for-your-enterprise-app.pdf”  title=”Calculating ROI for your enterprise app”]

Mobile ROI

To calculate the ROI of a mobile app we will first need to ascertain two components : benefits and costs.

Benefits: The benefits arising out of deploying enterprise level apps in an organization can be classified into qualitative 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 getting the bigger picture of deploying an app. To measure quantifiable benefits, a step-wise approach could be illustrated by the following example –

Step-wise approach to measure benefits

Increase in productivity of the work force has emerged as a major benefit arising from deploying enterprise apps. Various studies suggest that workers have been able to gain additional work time by using mobile apps. Let’s assume that a technician in a manufacturing unit gains 30 minutes of additional productivity per 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 = $55000
Using this approach, the equation can be extrapolated to the entire organization.
Benefits, no matter how high, must be weighed against the expenses incurred in deriving it. And therefore it is also equally important to look at the costs involved in deploying a mobile app / enterprise mobility strategy and to see whether the benefits-costs equation is profitable.

Costs: The 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, training for new users and IT administration.

• 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.
• 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 will spread over the years. Also, the total costs involved in deploying an app will vary significantly depending on 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 on the type and the range of costs involved across various deployment stages.

Costs Of BlackBerry Solution Deployment Captured In The TEI Analysis

Source: Forrester Research, Inc.

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, platforms to be supported, scale of users and the mobility strategy adopted by the organizations. The study by Forrester 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 benefits where we saw a productivity gain of $25 per day per user or $6500 per user per year and assuming costs to 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 not form 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 of cost 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.

Conclusion

Quantifying 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 good part of the benefits derived from an enterprise app remains intangible and hence difficult to quantify, but various case studies, precedents and data available can help decision-makers to judge and justify their investments in deploying an enterprise app.