Does anyone have a clue about mobile enterprise? Apple?

Summary:There are real problems with building for a mobile market. Issues with Apple's business model explain why a massive rethink is needed.

The last few months I've been observing quietly as enterprise vendors put their toe into the mobile waters. Of late, that trickle has become something of a steady stream. Workday, Infor and Sage have all announced mobile applications in the last week or so. It cannot be long before the pace at which mobile apps accelerates rapidly. Among buyers and developers alike, I get a sense of anticipation and - dare I say it - excitement about the potential. But...there are problems.

Mobile applications open up a new world in more ways than one. Today, many mobile apps are offering simple access to information for people who are not office bound. Some are doing a little more. But it's not like your ERP is on mobile. And that may not be the case for years to come. What could happen goes something like this:

Back office ERP, whether cloud based or on-premise becomes the commoditised infrastructure for handling tried and trusted, automated processes like sending invoices, receiving bills, bank account entry postings and payroll. That's already happening across the board in large, medium and small businesses.

The information that can be surfaced and here, cloud based BI vendors like GoodData are springing up like weeds, becomes the source of value. If that same information is surfaced in context - travel expense submission is one thought, over due account chasing by field sales and service is another - become tangibly valuable. An example from Lawson:

Lawson Mobile Employee, an extension of Lawson Employee and Manager Self Service, provides employees and managers access to select human resource (HR) information -- contact information, company directory, employee profile, pay checks, pay history, and benefits -- while they are away from their desktops. This helps organizations minimize the burden on traditional HR channels and saves employees time by providing critical information when they need it.

[my emphasis added]

Some developer organisations anticipate hundreds or thousands of mobile applications. Some believe that mobile applications in large enterprise will be built and deployed in pretty much the same way as desktop apps - behind what amounts to a cloud based firewall.

Whichever way you view these new classes of app you can be sure of one thing - enterprise applications and/or subsets of them will achieve far greater reach than ERP could ever dream.

Now to the business model. Today, many of those same apps are offered as freebies. No cost, nada. One vendor I spoke with shrugged and said they get their money from the main sale so why charge for small additional functionality? Sage is making a strong play on the fact its nascent mobile apps are licensed separately from the main app but are free. Lawson's offering noted above is free:

...to customers who have licensed and are paying maintenance for...Lawson Employee Manager Self-Service (Lawson Mobile Employee)

SAP, with its Sybase Unwired Platform seems to be anticipating charging for the platform but its strategy around pricing the apps is far from clear.

I believe that the notion of free mobile applications is insane.

That must sound nutty coming from someone who has relentlessly banged the buyer drum on these pages. Follow the logic and then judge.

Vendors should be using the opportunity to encourage developer ecosystems to build and create the myriad of apps that could add value. There is no end to the potential for highly tailored apps for different, nuanced purposes in vertical as well as horizontal markets. SAP sees the potential and has stated that it expects its ecosystem to build 80-90% of what will be available. On the basis of the current apps count upon which most people agree, that would amount to at least 300 apps if nothing else happened. It could be as many as 1,000 if rumors about the number SAP itself has in development are to be believed.

But if they are all free then how does the developer achieve an economic reward and especially if SAP is going to sell the platform anyway? For all other vendors that are offering 'free' - how will they create/develop/encourage an ecosystem if 'free' is the current baseline?

When viewed through that lens then it turns the current enterprise software business model on its head to one where consumption is the name of the game, tied to infinite flexibility, value delivered and elasticity. The core apps go into reduced maintenance mode because of their commodity status and the vendors pick up way more users on mobile. Even at cents and dollars for the apps, the vendors still have a healthy revenue stream because of the new reach. I've done the math - I am sure of this.

From the end user's perspective, it means they are assembling pieces of functionality they need rather than paying for a monolithic app where they only use 10% of what is available on a day to day basis.

So far, so good and if you look at the reporting around the Apple B2B AppStore you can surmise that Apple is getting there with the right kinds of tools that enterprise expects and a nascent model for volume pricing. Except there are major holes in that model.

According to a post by li'l ol' Xero:

Like every other iPhone app, we provided a way for people to signup from the app itself. However, Apple insisted we must use Apple’s in-app payments if we wanted people to signup from the app. Funny thing is, that’s not possible – their in-app payments can’t handle a subscription service like ours with upgrades, downgrades and volume discounts.

Beyond the billing mechanics, the pricing model for subscription software – 30% of lifetime revenue – is not an option. We can accept paying a one-off bounty for each signup, because that’s the value the app store delivers.

That blows a massive hole in any business model that relies on subscription pricing yet that is the one that makes the most sense for many of the current and future apps of the kind I have described based upon the need to deliver value and functional assembly. It is also the basis upon which the entire SaaS market works so there is a good fit into that model.

Some people think - as evidenced above - that mobile is just another interface so free is OK - but that in turn chokes any ecosystem. It means the developer ecosystems have little or nothing by way of incentive and all Apple sees is some dribbling revenue from developers prepared to pay to sign up.

Is Android/Blackberry any better? Apart from the 30% issue (the Apple tax) no - at least not as far as I can tell.

I believe this to be a major problem that every vested interest needs to hash out. Apple knows it has a strong following in the enterprise with iPad and I have seen many examples of analytics apps that add genuine value. They cannot remain free forever.

But what do you think?

If you're into video - there are more views here and here.

Topics: Browser, Apple, E-Commerce

About

Dennis Howlett has been providing comment and analysis on enterprise software since 1991 in a variety of European trade and professional journals including CFO Magazine, The Economist and Information Week. Today, apart from being a full time blogger on innovation for professional services organisations, he is a founding member of Enterpri... Full Bio

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