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KEEPING SCORE ON MOBILE SOLUTIONS
Mobile ROI Boot camp
By Dale Troppito and Dawna Paton
With mobile solution TCO (Total Cost of Ownership) under your belt from the last two month's columns, it's time to continue our journey through the mobile solution value chain. Thus far, we have concentrated solely on how much you are spending (or not spending) to keep your mobile enterprise solution fully functional with a fully enabled user community. Now we're ready to make the leap from costs, or investment, to the consideration of benefits.
Mastering the lingo
We might as well get this over with at the get-go. We know it's dry stuff, but let's just plow through it. Knowing the lingo makes what's to come that much easier to digest. This standard terminology is universal, and applies to any type of business initiative assessment -- whether a technology purchase, a new service launch, an outsourced business process, or a mobile enterprise solution.
While the mathematics behind ROI (Return on Investment) is seemingly straightforward, there's nothing simple about identifying all the different ways that costs and revenues are recognized within an enterprise. Cost savings can arise out of a myriad of categories peculiar to the business application, customer's industry -- or both.
Costs can be one-time, or ongoing. Increased revenues can issue from existing customers, and from new business (from new products, greater market share or new markets). And finally, all of these categories have both tangible and intangible components.
ROI (Return on Investment) is a financial term for the economic gain directly associated with a particular capital outlay. It's a calculation of how much money comes back (or is not spent) for every dollar invested. Essentially, ROI is nothing more than the sum of all the cash flows associated with a specific project or initiative, over some period of time. Simply stated:
Dollar ROI = Total Benefit - Total Investment
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ROI is meaningful only when considered within a defined time period. An 800% ROI may be staggering for some industries if it can be achieved in 6 month, but unacceptable if it takes 24 months.
Selecting the time period to be modeled is the first step in your ROI model planning. In the world of IT -- and mobile solutions -- a 3-year ROI view is most common. An ROI Scorecard typically profiles ROI based upon data prior to technology deployment, as compared with the same business metrics 12 months, 24 months, and 36 months following deployment.
Total Benefits are the set of value drivers, each of which brings a discrete, positive, bottom line business impact to your company. ROI value drivers should connect directly to the bottom line and measure hard, not soft, ROI.
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