iPhone in Your Business: Pondering the ROI Case 20 comments
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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 and all iPhone resources).
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.
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.
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.
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Even though this may not materialize as strongly as say, a kid's desire to get a blackberry being thwarted because their parents each have one, there is still the chance the iPhone could be less appealing in its current core demographic.
That said, I believe this opens up the door to a newer, non-enterprise model of the iPhone (nano?) that is less costly and takes on even less of a 'corporate' visual styling.
Thoughts?
The new Apple/MSFT combo is very appealing. Zero cost to add full sync and admin to our mobile devices. It might cause us to stay on Exchange and adopt iPhones (which are bleeding in at a high rate anyway)
Mr Dignan...as a follow-up post please post a high level cost profile of the three ways to now get OTA PIM sync. It would be very interesting for many of your readers.
Dignan as usual...
In the big scheme of things, $400 is not a large amount of money to invest every 2 - 4 years on a volume producing individual. If a salesman is bringing in $10 million/year, what is $400? Not going to buy them for everybody on the factory line or the showroom floor. Heck - a worker's insurance can cost more than 2x that per month.
2- If you already have the MS Exchange infra-structure, I do not see an enormous cost to add iPhone support, some, but not a huge amount. (Perhaps I am naive here.)
3- If the USERS see value in the iPhone for whatever reason, then they will go to it.
And a lot of users apparently do.
Excerpt from CNET News.com:
Stutz said that SAP had decided to introduce the iPhone software ahead of programs for those devices at the request of its salespeople, saying they prefer using iPhones to the other devices.
--
Bottom line -
Not going to sell 10 million iPhones to big corporation next week, but the major roadblocks to purchasing have been removed. Now they WILL be adopted in ever increasing numbers.
As for the entrenched vendors, how was it then that RIM managed to get in when Windows CE was already entrenched?
Another aspect is that the iPhone+activesync is Safer than the Blackberry (no intermediate server) and is less likely to go down (one less point of failure). Plus the numbe of custom mobile applications which will run the iPhone can make the business case a no-brainer.
My prediction: In 2009, 25% of smart phone replacements will be iPhones. For companies which are starting out new (very few), the number will be between 50-75% in the favor of iPhone. RIMM is going to fight back with lower device prices but since the cost of the device is a very small percentage of the total life-cycle cost (air-time dominates), it will be an uphill battle.
Exchange Active Sync has the device prompt for passwords when your network password changes and it's SSL is a pain compared to the BES which just works.
The only things you can pick on the BB for is the browser and attachments, not the BES.
That's funny, of course you know that all SMTP emails are readable by someone with a computer at the right place.
I hold a meeting with the senior mgmt every few years to explain this simple concept.
'Exchange Active Sync has the device prompt for passwords when your network password changes'
You don't see this as a problem? Has Jobs a solution? It seems like nothing but it's annoying - we have very few CE devices because of this. I'm not sure what your job is but I support this all the time - with the BB it's 100% the physical device(I dropped it in the toilet, why doesn't it work?)
1) Custom vertical apps will drive the iPhone into large businesses
2) RIM is already working on its competitor to the iPhone (whither the current blackberries?) at which point THEY will be playing catch up.
That's a good point about SMTP. You do indeed have to basically encrypt your actual message or else ALL email is like sending a note in the US Mail w/o an envelope.
However, regarding the prompting for passwords... I really don't see the problem. If your password really is changed, the system should prompt for a password before letting you get your new email. Anything less would be a massive security hole.
Also, when I look at the RIM NOC, BES system, I just don't get it. Can you explain how having the NOC helps? *Today*?
I can see how the NOC helped *yesterday* before the age when TCP/IP stacks over Cell networks were common. But now that Internet access *is* common, I don't see the point. In addition, I can see how the BES was needed in age when the NOC was needed: RIM needed something at the company to talk to the NOC. But with the NOC out, the BES is no longer essential.
So basically today both look like anachronisms. AOL/CompuServe type architectures for getting online before the age of the Internet and Netscape.
From what I have read, the only advantages I can see to RIM's BES architecture are:
- Better policies and management tools at the BES (for now). However, the same sort of features can and are being added by MSFT to the Exchange server itself. The more MSFT's solution provides in this area, the less and less any remaining BES advantages remain. It's all about velocity and cost. Can MSFT on the server and AAPL on the client create value-add faster than RIM and undercut RIM's substantial BES upfront and licensing costs at the same time. Current growth from both suggests they can.
- Ability to sit in front of and create unified policies for email servers from different vendors. However, not many companies have, say, Domino AND Exchange. They tend to have just one, in which case this is a nice feature that would never be used -- like a heated steering wheel in the Caymans.
Actually I think the best analogy here is Novell NetWare vs NT Server (and Unix). NetWare had certain advantages and certain features that took a long time for NT Servers and Unix servers to replicate. But the NT/Unix Server approach was so much better fundamentally, it was only a matter of time before NetWare died and Novell became irrelevant. I see the same thing happening with RIM.
Sincerely yours,
-akimbe
Your points are well thought out. Exchange push email is flawless from our experience but so has RIM's BES. The BES doesn't rely on the network password and lives off public/private key(I admit that I don't know all the internal details) instead which is why there's no prompts. I'm not saying it's a killer, it's just lame - the users of these devices get confused easily.
I do miss the massive amount of features available with the BES - the next Exchange refresh is 2010/2011 so don't expect any of those until then. At least one of the most important, remote wipe is in 2007.
I've seen the supposed leaked prototype specs of the new Blackberry and it looks interesting. The slide out keyboard is probably a must due to the typing requirement Execs have over consumers. The BB has always had a weak browser and attachment handling(things the CE does well) - it'll be well worth it if this forces them to fix that. Competition benefits us all.