Mobile project ROI- How to determine the return on investment of a mobile application
Strite Potter
LinksPoint 1 Selleck Street, Suite 330 Norwalk, CT 06855
Abstract
Decisions to implement IT projects are made based on exacting financial criteria. This
paper will present tools for how to develop a "return on investment" (ROI) analysis to be
used in supporting the decision to finance a mobile project. While it may be intuitively
clear that mobile projects will produce numerous operational benefits, justifying projects
in terms of real decreases in operating costs is difficult. This paper reviews some of the
basic ways of identifying and calculating cost savings as well as accounting issues that
the “bean counters” will appreciate. Mobile GIS projects are often given brief
consideration in economically constrained times, but it is in exactly these times that
leveraging the GIS asset has the greatest financial benefit.
The first thing to define in the process of preparing a return on investment (ROI) is: what
is an ROI? An ROI is the measure of the average income generated or the average
decrease in cost generated by a project. When a project is to be considered that will
directly result in an increase in revenues, as defined by the definition above, an ROI can
be stated in terms of the increase in net income. An example of this might be where
wireless technology is used in a point of sale to verify credit card purchases, thus
decreasing credit card transcription errors and fraud. However, when a capital expense is
incurred on technology that will increase operating efficiency and result in a decrease in
operating expense, an ROI can be stated in terms of the decreasing costs.
The days of implementing a new project because the technology is new and “cool” are
over. An operations manager intuitively knows that many processes in the field are
cumbersome and inefficient and would benefit from automation. However, senior
management isn’t willing to believe the value of a mobile project unless it is presented
with cold hard numbers.
The goal of this paper is to help give you some of the tools to justify the mobile project
and do it in terms that the “bean counters” will understand. Intuitively one knows that
mobile applications can deliver significant productivity gains and cost savings, however
it is the ability to show clear financial benefits to management that will decide whether
the project gets the “green light”.
The math involved in producing an ROI case study is actually the easy part. The
challenge is to understand the processes and procedures currently in place well enough to
identify areas that can be improved by mobile data technology. Once you know the
problem(s) you are solving, calculating the ROI and the payback time of a project is
simple. The final challenge is presenting the findings in a form that will convince senior
management to approve the mobile project.
The Six Steps to Success in preparing the case are:
- Know the current process
- Identify the problem(s) you are solving
- Benefit Analysis
- Calculate ROI
- Calculate Payback Time
- Sell the project to management
Step 1: Know the current process
Before creating a convincing ROI, let alone an effective solution, one needs to
understand the current process backwards and forwards. This is probably the most
challenging step in developing a cost justification, but it can be made much easier by
going about it in an organized fashion.
Identify:
The best way to do this is by talking to the people who use the current process. While
there is almost always a defined and documented procedure manual for every work
process, it is almost always the case that the people in the organization have developed a
number of improvements to the process that didn’t make it into the documentation. One
wants the “as is” process, not the “as designed”. To get to this one needs to talk to all
participants in the process. This includes:
- End users
- Managers
- Dispatchers
- Data Entry
- Accounting
- IT/IS
- Other business line managers involved in the process
- Senior management (COO, CFO) if necessary to define the process and
metrics
The people who do the work will tell you the real process and give you the problems that
need to be solved.
What does what?...when?...and where?
Once one has spoken with everyone involved in the process, a pretty good understanding
of what actually happens, and how mobile technology can help improve the process is
determined. Because of this one will be able to identify the various steps in the process,
when they happen and since this is a mobile process, where. One key process feature not
to miss is the verbal component. Another element to address is what information is being
exchanged by voice and what impact a mobile data application might have on this
method of communication.
Get the documents
Get all the paperwork involved in the current process. Figure out how these fit the steps
you’ve identified from the interviews. This is crucial: find out how long it takes for the
paperwork to be filled out, whether it needs to be re-keyed into the system and what is the
time lag before the data is available to the enterprise. Information latency can result in a
cost that can be recaptured in the ROI.
Additionally, paper processes require transcription from job status reports into the digital
form for use in work management systems and the cost of paper. The personnel
previously used to enter the job status data into the work management system can be
repurposed, thus further increasing the efficiency of the work force. Paper can be a
sizable cost to consider as well if much of the information utilized in completing a work
order is provided on paper, including the work order, plans and schematics, manuals and
historic data.
Providing all of this to the field worker in a digital format and having all status reports
filed digitally can show a tremendous ROI both in terms of reducing material costs as
well as increasing efficiencies.
Map it out
When interviews have been completed and paperwork reviewed, then it is time to
document the “as is” process on paper. Include the time it takes to complete each task
and the time it takes for data to reach the enterprise. From this, one will be able to
identify and quantify the productivity savings that will result from the proposed mobile
solution.
