It’s budget time in the enterprise
But will mobility initiatives survive scrutiny?
September 5 2008 - 1:30 pm EDT | Phil Carson | RCR Wireless News
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Verizon Wireless and Bank of America's mobile application.
Businesses are watching their bottom lines amid uncertain economic conditions and may reign in their spending to mobilize their workers, several analysts who monitor the mobile enterprise said last week.
And though the growth in mobile workers may slow over the coming year, investment in mobile technology that directly serves consumers will continue to grow, due to surprisingly robust return on investment.
“Mobility is still among the enterprise’s priorities, but companies will take a hard look at the proliferation of devices and service plans,” said Phil Redman, analyst at Gartner. “We’ll see an increase in the number of companies reducing their spend in 2009.”
Though wireless-related spend in enterprise is only 10% to 20% of overall telecom-related spend, it is a tempting target for budget cuts because it is highly visible as a cost directly related to individual employees, Redman said.
Unease leading to cuts
Corporate budgets this fall are being constructed in a time of uncertainty, from macroeconomic factors such as high fuel costs to the presidential campaign, according to Redman.
“There’s a feeling of unease — not dread — over 2009,” Redman added. “The outlook is not as bad as it was earlier this year.”
Bob Egan, analyst at Tower Group, concurred. (Tower Group’s mobility consulting focuses largely on financial services companies.)
Egan said he sees two areas of mobility spending: first, the devices and service plans that serve as productivity tools for individual employees and, second, investments made to serve consumers directly. “My markets grew conservative in the first quarter of this year around workplace mobility,” Egan said.
In the second half of this year, companies are remaining cautious about starting new mobility initiatives. For instance, a vertical application such as sales-force automation has a clearly defined ROI, which has driven adoption. But companies may be slow to expand such programs heading into the uncertainties of 2009.
The prevailing mood of caution, however, has driven up business for companies devoted to managing an enterprise’s mobility program and costs, according to Egan.
Time is still money
In contrast, Egan said, financial-services companies in particular are investing disproportionately large amounts of capital on technology that delivers mobile point-of-sale convenience to consumers.
“For most individuals, time — and convenience — is the new currency,” Egan said.
A quicker retail experience drives much of the consumer uptake of mobile point-of-sale technology on their handsets, the analyst said. Businesses see as much as a 30% cumulative, annual increase in consumer spending when they make mobile transactions possible.
“Consumer spending, around services that provide convenience, is definitely escalating,” Egan said. “By contrast, spending on mobility for employees seems to be stalled or growing more slowly in the second half of this year.”
Cost shifts
It is the latter category that concerns analyst Bill Hughes at In-Stat, because his data shows that enterprises that shift the burden of mobility costs to workers see lower productivity as a result.
Hughes said that between the spring of 2007 and the spring of 2008, about 8% of companies shifted the burden of paying for devices and service plans from the corporation to the individual worker.
“It’s not a sea change, but it’s a significant shift,” Hughes said. “My data doesn’t say why, but my gut feeling is simply that companies are feeling the pinch (of a sluggish economy) and that’s unfortunate.”
At the same time, however, the amount of air time used by companies and individuals continues to rise dramatically. “That tells me that wireless is increasingly important,” Hughes said.
Hughes data has shown, however, that as employees foot a greater portion of the cost of mobility they tend to use it less, resulting in an overall decline in productivity. Thus, in general, shifting the costs of mobility from company to worker actually ends up costing businesses more than it saves them, the analyst said.
