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Mobile Computing Business Cases

Developing a business case for a mobile computing project is a serious and complex exercise. It requires analysis of both costs and benefits from undertaking such a project. First of all, there are a number of ways in which you can evaluate IT investment. While some of the methods are qualitative, most financial officers want quantitative analysis. In fact, in a recent press article, John Berry, an independent consultant suggested four different approaches:

Treetop : These metrics, primarily financial, look at high-level impact of any investment, including It on the profitability of the corporation. We do not see any difference from our suggested approach.

Pure Cost: Different consulting companies have suggested TCO (total cost of ownership) and other acronyms like Gartner's NOW (Normalized Cost of Work Produced.  TCO emphasizes support and other hidden costs.

Holistic Approach: Balanced scorecard approach to any IT expenditure. This balanced scorecard aligns a project's accomplishments with corporations key strategic and performance goals by measuring several indices (e.g. financial, customer, customer retention, internal operations, employee morale, etc.).

Financial ; Most important attribute that considers tangible costs and benefits in terms of  reduced costs and tangible benefits that can be translated into dollar numbers.

MobileInfo's Recommended Approach : Ours is a hybrid approach that takes a holistic view of management decision-making process i.e. Cost and Benefit Analysis combined with other intangible decision-making criteria that is assigned a given amount of weight in the overall decision matrix.  We suggest that this criteria and weight should be decided by the senior management.  This is the methodology that we have described and advocated in our "Systems Integrator's Handbook". 

Business Metrics Defined

Return On Investment (ROI): a general-purpose phrase defining the business value of a mobile computing project. In more specific financial terms, it means the profit or difference between benefits and costs divided by the total investment in dollar terms. It is generally a percentage figure. In traditional terms, products generate revenue and one uses that number to define ROI. In IT project terms, it is really the benefits or cost savings by a specific initiative divided by its capital cost over a period of time.

Net Present Value (NPV): Cash inflows (benefits) less cash outflows (investment or project costs) expressed in present dollars, allowing for interest costs of the capital requirements.

Internal Rate of Return (IRR): rate at which the present value of cash inflows equals cash outflows.- or rate at which net present value is equal to zero. The IRR must be higher than a predefined management policy in a particular industry. This takes into account expenditures on other competing initiatives in a specific business.

Payback: It is the period that it it will take for an investment to pay for itself. 

 

Costs and Benefits Analysis
While costs of hardware and software for these projects are less difficult to estimate, application development, application integration, and wireless network usage  costs are far more difficult to predict.  Estimation of benefits is even more difficult effort because many of the potential benefits from mobile computing and wireless applications result from mobile worker/professional productivity gains, business process changes (elimination of sub-processes), superior customer service and competitive advantages.

We suggest taking a careful systems engineering cum business analysis approach to developing a business case in an iterative fashion i.e. a preliminary cost-benefit analysis based on rules-of-thumb estimates should be undertaken first and if it appears promising, a detailed refined analysis with more accurate estimates should be undertaken.

For a detailed analysis of the subject, please refer to Chapter 4 of "Mobile Computing - A Systems Integrator's Handbook"  by Chander Dhawan and published by McGraw-Hill. Since the book is presently out of print, you may buy a soft copy of this from this site. The soft copy is included when you buy the templates described below.

For mobile computing solution costs, click on Mobile Computing COSTS.
For mobile computing solution benefits, click on Mobile Computing BENEFITS.

Business Case Template
For obtaining a mobile computing template (in the form of an EXCEL spreadsheet), click here.  Please note that there is a small charge for this service - the cost is well worth the time it will save you. 


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