iPhone in your business: Pondering the ROI case

iPhone in your business: Pondering the ROI case

Summary: Apple has dressed the iPhone up in a business suit, but the real work is just beginning. Apple needs to convince chief information officers that there's a return on investment in a switch to the iPhone.

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Apple has dressed the iPhone up in a business suit, but the real work is just beginning. Apple needs to convince chief information officers that there's a return on investment in a switch to the iPhone.

The day after an Apple event is always the analysis day. You get wowed by Steve Jobs. You go ga-ga for the eye candy. You're ready to buy every Apple product on earth. And then the buzz wears off a bit. That's what corporate America is waking up to following Thursday's iPhone SDK and enterprise feature extravaganza (Techmeme, notebook, photos, video, all iPhone resources and News.com).

The question for any enterprise pondering the iPhone is this: Where are the savings? Given IT budgets are likely to get cut Apple will need a compelling ROI case if it's going to upend Research in Motion, which was clearly the target of multiple jabs at Apple's shindig.

The hard numbers will vary by company. Some analysts say like BMO Capital Markets' Keith Bachman expect that Apple will first make inroads into small and medium-sized businesses.

In a research note, Bachman writes:

"We believe Apple still faces some roadblocks in the mid- to large-enterprise accounts, but will make better inroads in the small- and medium-business market, similar to its CPUs."

Bachman's argument goes like this: CIOs are reluctant to allow multiple devices and operating systems into their environment. Why? It's total cost of ownership. You need more people to support various devices and operating systems. That's why the one-vendor-to-choke model is appealing.

Bachman also makes another key point: Apple's enterprise friendly moves--support for Microsoft Exchange, remote wipe, push email and contact synching--just get the company into the business conversation. For Apple, those features are merely the price of admission to reach CIOs.

Bachman writes:

"Given the proliferation of BlackBerry, Windows Mobile, and other mobile devices that support wireless personal information management (PIM) functionality, Apple's announcement is not breakthrough in our view, but a minimum requirement to crack one of the barriers of the enterprise segment. We believe Apple's decision to license Microsoft's Exchange ActiveSync is the right strategy, rather than Research in Motion's BlackBerry Connect and Motorola's Good Technology, among others, given the large installed base of Microsoft Exchange Servers."

Indeed, few analysts on Friday are predicting the demise of RIM over Apple's move. And there's a good reason for that take--RIM is entrenched with CIOs. Even other devices from Nokia and Motorola that work with RIM technology don't hold a candle to the BlackBerry among large corporations.

Citigroup analyst Richard Gardner says:

"While Apple claims superior reliability and security with ActiveSync, RIM currently enjoys an overwhelmingly dominant position within the enterprise installed-base."

Analysts, however, say that Apple has a lower inertia hurdle to clear with smaller companies. Meanwhile, software as a service is prevalent in small to mid-sized businesses. That's where iPhone's Web browsing capability shines. With the iPhone and SaaS smaller corporations suddenly have all the in-the-field access that larger rivals do.

But since iPhone is at least in the conversation now, businesses will have to do some due diligence on Apple and how it fits into the mix. It's definitely worth checking out the iPhone Enterprise Beta Program to see what Apple can offer. To be in the beta program you need the following:

  • A team of no more than five people to test the iPhone 2.0 software beta
  • One team member with administrative access to your IT infrastructure
  • A designated technical lead to act as a primary contact for Apple
  • All team members to read and accept the terms of the Apple Customer Seed and Confidentiality Agreement
  • A Mac computer using Mac OS X Leopard v10.5.2 or later
  • Up to five iPhones that are dedicated to testing the software and assigned to individual team members

In the meantime, here are a few key variables to monitor as you ponder the return on investment with the iPhone.

Volume discounts: Big corporations can get devices cheap. But Apple isn't exactly known for cut-throat pricing and it's unclear whether its enterprise sales reps will cut CIOs some slack. If you can get a Blackberry for an average of $99 per user and the iPhone is $199 (assuming a hefty discount on the 8 GB retail model at $399) Apple is already in the ROI hole. Vinnie Mirchandani took a stab at the iPhone's total cost of ownership in January.

Support costs: Apple with its ability to make things simple for users could give the company a support cost argument over time. Here's the challenge: Apple can only make that case if a company goes all iPhone. If a company decides to have BlackBerry, Windows Mobile and iPhone devices the support costs could rise. Apple's best bet is to be so easy that support requirements are nil. Another question: If something goes wrong with the iPhone does a CIO have to go to the Genius Bar?

The AT&T factor: AT&T is a massive carrier, but corporations typically are consolidated on one provider. Any company that has Verizon Wireless as its default carrier will be a tougher sell for Apple--unless AT&T offers a better deal. Businesses will have to weigh the costs of switching carriers. In many respects, AT&T's corporate sales army will be critical to pushing the iPhone to the enterprise.

Along those lines, AT&T has detailed some of its enterprise rate plans for the iPhone.iphoneent.png

The killer app: Those first three items are clearly hurdles for Apple to overcome. However, those challenges disappear if the iPhone can drive revenue growth or productivity gains. Here's where the iPhone SDK comes in handy. If you're company is on Salesforce.com and the iPhone gives you the best anywhere access available Apple has an easier sell. Ditto if companies like SAP and Oracle join in the Apple iPhone SDK party.

Topics: CXO, Apple, Banking, Hardware, iPhone, Mobility

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58 comments
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  • "one vendor to choke"

    What a bunch of horse hockey. If that were the case, CIOs
    would be going for Apple in droves. One vendor for
    hardware AND software.

    No, here's the truth. CIO and IT types will push what they
    know. Period. And they know blackberry and Windows.

    Apple will enter the enterprise dragging IT kicking and
    screaming behind them as IT curse out CEOs who tell them
    flat out "Make it work, because I write your paycheck."
    frgough
    • truer words have never been spoken

      Apple will enter the enterprise dragging IT kicking and
      screaming behind them as IT curse out CEOs who tell them
      flat out "Make it work, because I write your paycheck."

      True, but ROI is a bunch of crapola?
      Larry Dignan
      • ROI

        If business is a paragon of efficiency, why are they paying
        for what amounts to "company cars" for every single
        employee?

        Why no thin clients?

        Apple, that's why.

        No one could live without the GUI. It became bound to
        personal freedoms, and became synonymous with the
        "American way". After 15 years, Microsoft has yet to get
        their second rate copy of the Mac OS right. Now we are
        being told that business is "serious" and it's implied there
        has never been a precedent for consumer frivolity in the
        workplace?

        I think you folks might want to get a grip. Apple has left an
        indelible mark on computing. "Worry" less about an
        interloper in IT's sacred sanctums, you let that horse
        through the gates a long time ago. Pretending your logic
        gates are more "serious" than ours, certainly doesn't help.

        IT doesn't have the chops or the budget to throw up a veil,
        and once it starts, you will have to tear them out of cold
        dead hands.

        ROI stands for Reject Old Interfaces, did you miss that
        memo?
        Harry Bardal
        • Ever the Faithfull Knight

          Ready to smite those who dare speak against the King and his wares.

          Were he to parade around the square with no clothes, you would lambaste those who could not admitt to seeing the beautiful colors of the new cloth that you claim adorns him.

          But that bothers you little for as a true believer "For King and Computer will I die" is your battle cry.

          iPod sales are slowing, the Touch not selling to true expectations, iPhones sitting boxed on shelves collecting dust, unwanted even after the price is cut, and in the end only one question remains:

          "In what manner of suicide will do Harry in, when Apple fails to unseat RIM?"
          GuidingLight
          • Please tell us

            "In what manner of suicide will do you in," when Apple
            succeeds?

            I give RIM less than 2 years. And GuidingLight will probably
            see better once he's in heaven.
            Len Rooney
          • Many an expert.

            So, once again, those who clamor in support of all things Apple regardless, predict an outcome that those who deal in the industry on a daily basis are too stupid or uninformed to see?

            Would you take offense to the statment that even though I have no idea what you do for a living, it is guaranteed that [i]I[/i] can do it better?
            GuidingLight
          • Well then

            Maybe you should go work for RIM, they're going to need
            your superhuman, guiding-light skillz.
            Len Rooney
          • It's been my observance that...

            People who grow comfortable with one thing are less
            inclined to change or adapt. Comfort is a strange thing.
            One often wonders why a woman in an abusive relationship
            does not simply leave? Yet one finds she is comfortable in
            her relationship not matter how bad it is.... it is known to
            her while change is the unknown and much more likely to
            cause her fear than the known.

            Also people might have tried Apple solutions years ago
            found them wanting and that experience remains even a
            decade or more later. Despite the fact that Apple has gone
            through a lot of changes during that time.

            Fear of the unknown and comfort with the known can
            explain a great deal.

            Pagan jim
            James Quinn
          • ummm

            Your stats are wrong...best check them dark knight.
            SquishyParts
  • Hype before Reality

    Hype before Reality...Let's wait till a product is released before we pray to it
    CatsNDogs
  • Discount?

    Based on the pricing shown for AT&T I would have to really decline. We current get unlimited data for $39/month with a Windows Mobile device. Why would be want switch just to be charged $65/month.

    No ROI there!
    htotten
    • Um...the cool factor?

      You might lose a sale if you don't look "with it" in the presence of a potential client.
      Techboy_z
      • How old are you anyway? "if you don't look with-it"???

        From the sounds or your insipient postings, I'd say no more that 11. Am I close?
        IT_Guy_z
      • The Cool Factor?

        You know - I didn't know that everyone who works in business who needs mobile email and data is a salesman!!

        Thanks for clearing that up and making the ROI all make sense. Thank you.

        And beleive me - in business the "cool factor" takes a big back seat to the "cost factor". It seems that IT spending is getting cut in business more and more at the moment so it's going to take something more that pretty things and cool factors to get Apple into enterprise companies. Espcially with Blackberry being so very strong in that area.
        Average-IT-Guy
      • Not exactly

        [i]You might lose a sale if you don't look "with it" in the presence of a potential client.[/i]

        Hopefully you're good at something besides sales so we don't have to worry about how you're going to make a living.

        Although you're not totally off the reservation, even if you missed the mark.

        The "with it" factor may play more in hiring than sales. The really desirable employees have a lot of options where they work. If your work environment isn't compelling, they'll go somewhere they like. The old days of "do it or you're fired" are over. Turnover is expensive.

        When it comes to Apple products in the workplace, the decision may ultimately be decided by factors other than cost. The best enterprise can let people pick the tools they like best without extensive modification. If you have a chance to pick up a high flier in sales and they want to use an iPod, you let them. You can't let some petty little detail, like their choice of phone, undermine the deal.
        Chad_z
  • It's not the CIOs they're selling to

    ...just as it's not the CIOs that quite a few tech companies are selling to. These days, it's all about the guerilla attack--get your product into the corporation via fans both high and low, and present the result to the CIO as fait accompli. This has ALREADY been happening with the iPhone--yesterday's announcement will just accelerate it.

    Morever, while your points about ROI, single-vendor support, and TCO are all good, don't you think that sooner or later the enterprise is going to have to grow out of its "one size fits all" approach to small, personal electronic devices? I am increasingly pushing companies toward SOA-like platforms which generically support delivery of standards-based services, rather than platform-based devices. If you want to talk about an ROI-sink, consider the hardware costs of people who don't like and don't take care of their company-issued devices. Giving them the ability to use what they want both makes them more productive and reduces the corporate IT support-case.

    If the iPhone isn't a harbinger of that day, I don't know what is.
    IMS_Scott
    • What?? Are you nuts?????

      "Giving them the ability to use what they want both makes them more productive and reduces the corporate IT support-case."

      How can the addition of a whole host of USER chosen devices REDUCE the corporate IT support-case?

      Never going to happen?it will have the complete opposite effect.
      IT_Guy_z
      • Not so Grasshopper.......

        "IF" the devices work then support very well could be
        reduced rather than increased.

        Take the ole Palm Treo commercial where the new
        employee is given the grand tour and handed a Treo. Now
        they went on and on about what that thing could do and
        the last point of the tour was "It's like having to office with
        you where ever you go" Now at that point I would have
        thrown the Treo to the ground and stomped it too dust"
        However if you handed me something that had dual
        purpose the ever annoying work related tasks and tasks
        that I on a personal level might find useful or even heaven
        forbid enjoyable I might learn more about said device
        (relieving support needs) and take better care of it.

        Pagan jim
        James Quinn
        • Well Jimbo, I'll let you in on a little fact...

          I am network manager for a university, with 24,000+ students and 15,000+ faculty and staff. If they ALL came in with different devices, with different platforms, and different operating systems, do you really think that our support staff's jobs would be easier? Not a chance. That is why we have restrictive policies in place on what can & cannot connect to our networks.

          A simple analogy for you?you don?t take your Toyota to a Ford dealership for service, and vice versa. It has everything to do with the training of the sales people, staff & techs. Otherwise, there would be only ONE store where you could buy & fix every type of car on the planet.
          IT_Guy_z
          • Ah but there are repair shops that take in all models.

            They are not connected to a dealership and they manage
            well enough. Like I said "IF" they do what you claim they
            need to do to work with your network why not? As for
            other support issues like the screen dies or the keypad or
            in the iPhones case the virtual keypad does not show all
            the letters something like that it's the organization that
            sold and normally supports issues that is responsible. All
            you need to do is list the requirements ie say Exchange
            server compatible and that should do it. If you offer any
            other support then well thats on you.

            Pagan jim
            James Quinn