1 Mobilizing Enterprise Flexibility Unlocked
2 2 Preface Dear Readers, While the benefits of mobile enterprise solutions have been discussed for several years amongst operators, equipment suppliers, device manufacturers, software vendors and system integrators, the uptake was poor. This has changed considerably over the last couple of years driven simultaneously from the demand and the supply side. Today, in most European countries UMTS networks have been launched offering higher bandwidth at lower cost. Tariffs have decreased and a broader range of devices and software solutions suitable for business users is available. On the other hand, enterprises strive for better customer satisfaction and more cost control while their workforce becomes more mobile. In this joint study, covering the European countries of Austria, Belgium, Germany, the Netherlands and Switzerland, Arthur D. Little and Ericsson have analysed the current status of the mobile enterprise solutions market. We have focussed on identifying benefits and barriers of mobile solutions by conducting interviews with so called lead users companies that can be considered as early adopters of mobile business solutions. We have seen that the adoption of mobile enterprise solutions is gaining speed and examples presented in the study underline the benefits that enterprises can realize by introducing mobile enterprise solutions. Benefits for enterprises include lower communication costs, more efficient processes and resource allocation, and improved customer and employee satisfaction. Operators may increase revenue, win additional customers and reduce churn. We are thus confident that the market for mobile enterprise solutions will continue to grow and penetration of businesses across industries will accelerate. We would like to thank all those who contributed to the Arthur D. Little and Ericsson study on Mobilizing Enterprise. We trust our findings and examples of successful implementations will generate curiosity from those companies who have not yet implemented mobile enterprise solutions and motivate them consider introducing their own mobile enterprise solutions in order to benefit from the many advantages of such services. Yours sincerely, January 2006 Dr. Arno Wilfert Head of TIME CE Arthur D. Little GmbH Jef Keustermans Market Unit Head Ericsson Northern Europe Peter Zehetner Country Manager Ericsson Austria
3 3 Executive Summary The market for mobile enterprise solutions (MES) has primarily been ignited by the growing mobility requirements of employees as a part of day-to-day business and the improved performance of location-independent communication systems. Prerequisites of MES, such as the availability of high mobile bandwidth, suitable devices and dedicated software applications are being increasingly fulfilled. High mobile bandwidth is ensured with the ongoing UMTS roll-out and enhanced by the announced HSDPA upgrade expected in all of the surveyed countries. Devices are currently designed much more for usage in the business environment than in the past, but issues with economies of scale still persist. The availability of industry-specific and processcentric MES has increased considerably, but not at the same rate in all of the surveyed countries. In addition, decreasing prices for mobile data traffic has increased the attractivity of MES to corporations. The survey found that the value proposition of MES includes the realization of both cost reductions and productivity gains. Examples of higher customer and employee satisfaction have also been identified. However, some expected benefits were not realized; for example, no clear evidence of a direct relationship between the implementation of MES and an increase in sales has been found. No real show-stopper has been identified in terms of implementation of MES. However, companies face challenges when trying to take advantage of the full potential of MES. These challenges include the integration of the MES into the existing enterprise systems, the sustainability of the MES, voice and data pricing and the buy-in of employees with respect to the day-to-day usage of the new solution. A
4 4 Table of Contents 1 Introduction 5 2 Current Status of Mobile Enterprise Solutions Enterprise Communication Trends Mobile Applications Integration Benefits and Challenges of Mobile Applications 8 3 Mobile Enterprise Markets Market Characteristics Country Overview 15 4 Impact of Mobile Enterprise Solutions Survey Results Cost Savings Productivity Gains Enhanced Customer Relation and Satisfaction Increased Employee Satisfaction Increased Sales Implementation Challenges 26 5 Conclusions 27 Glossary and Abbreviations 28 Contacts 29 About the Authors 30 List of Figures and Tables Figure 1: Evolution of Mobile Enterprise Solutions 7 Figure 2: Key Benefits and Implementation Challenges 9 Figure 3: Mobile Enterprise Data Market Development 12 Figure 4: Bandwidths and Coverage of Mobile Technologies 13 Figure 5: Mobile Enterprise Solutions Value Chain 14 Figure 6: Evaluation of Mobile Enterprise Solutions 27 Table 1: Clustering of Mobile Enterprise Solutions 8 Table 2: Mobile Market Overview 11
5 5 1 Introduction The market for mobile enterprise solutions (MES) has primarily been ignited by the growing mobility requirements of employees as a part of the day-to-day business and the increased performance of location-independent communication systems. The underlying network infrastructure and the range of available applications are now in a stage where the benefits of MES can be fully exploited. The trend that top management is often the primary driver for implementing MES will further drive the MES market in the future. In the fall 2005, Arthur D. Little and Ericsson initiated a joint survey to analyze the prospects and benefits of MES. The main goal of the survey was to identify benefits and related challenges resulting from the implementation of MES. Our findings have been summarized in this report, which is structured into four main sections: In Chapter 2, we describe underlying trends driving the MES market and the MES evolution stages, as well as identify potential benefits and challenges. In Chapter 3, we provide an overview of the MES markets covered in the survey. Chapter 4 presents the results of the survey with a focus on cost savings, productivity gains, customer and employee satisfaction as well as sales. In this context, we have also identified major challenges which have to be overcome to make MES a success. In Chapter 5, we briefly summarize our findings and present our conclusions. Our study comprised a survey of medium and large companies which have successfully implemented MES, within a range of industries including retail, telecommunications, food, transportation, insurance, energy, engineering, manufacturing, utilities, entertainment and medical services. The geographical area covered consists of Austria, Belgium, Germany, the Netherlands and Switzerland. All interviews have been conducted as open discussions with MES users based on a structured interview guideline. A
6 6 2 Current Status of Mobile Enterprise Solutions 2.1 Enterprise Communication Trends There are currently fundamental changes taking place in the way enterprise communication solutions are designed, delivered and used. Increasing bandwidth in wireless communication infrastructures allows anyone to work anywhere. The share of employees working in jobs which require internal and/or external mobility 1) is continuously growing, driven by the ongoing employment shift towards the service sector in combination with higher mobility requirements. Mobile employees need to keep in touch with their office, with other colleagues working on-site or off-site and with customers and contacts outside the company. In many business situations, a voice call is still all that is required. But, the increasing shift to greater employee mobility demands more complex applications to be involved in order to take full advantage of as yet untapped efficiency gains. Data communication is especially of growing importance for business users on the move. Enterprises are looking for communication solutions that enable them to generate new competitive advantages, for example, by making business-critical applications available everywhere. This will fuel the demand for MES. 2.2 Mobile Applications Integration The changes in working style are driven by new location-independent IP-based communication systems, including mobile phones. Future communication solutions will assist enterprises to become more responsive, more available, more flexible and more efficient by enabling multi-dimensional convergence and interworking across the voicedata, fixed-mobile and public-private divides. MES are initially communication-centric, paving the way for more process-centric solutions in the future, which involve a more complex integration of business processes. Although enterprises adopt mobile solutions at different rates and in a variety of ways, four major phases within the solution evolution can be identified and are illustrated in Figure 1. 1) Internal mobility refers to mobility within the business premises, external mobility to outside the premises.
7 7 Figure 1: Evolution of Mobile Enterprise Solutions Process centric Vertical Back End Applications Vertical Front End Applications Horizontal Mobile Applications Communication centric Personalized Mobile Applications Deployment of solutions Source: Ericsson, Arthur D. Little The first phase includes personalized mobile applications. Currently, many enterprises have already implemented these entry level communication applications. The next phase, which many enterprises are already considering today, consists of horizontal mobile applications. Mobilizing these horizontal enterprise applications enhances personal control over time and supports enterprise communication and collaboration. The third phase covering vertical front end applications is mobilizing more complex business processes, where the value of mobility and immediacy is of high importance, mainly contributing to a reduction in process delays. This phase involves the integration of applications across a company s entire management system infrastructure requiring interfaces with a range of other fixed and mobile enterprise applications. In the fourth phase, mobility will enable the creation and transformation of business models. Vertical back end applications will create new ways of delivering products or services in the future. Table 1 summarizes the four phases and contains respective application examples. A
8 8 Table 1: Clustering of Mobile Enterprise Solutions Clustering of Mobile Enterprise Solutions Phase Applications Explanation / Examples 1 Personalized Mobile Applications Voic Automated attendant Personal information management SMS Voice messages delivered on a phone or additional device Computerized replacement for a human operator Mobile access and organization of s, Address book, Calendar, Task lists and scheduling, Notices, and so on Classical P2P application 2 Horizontal Mobile Applications 3 Vertical Front End Applications 4 Vertical Back End Applications Mobile intranet Mobile extension Mobile Unified messaging Mobile instant messaging Instant talk Field Force Automation (FFA) Sales Force Automation (SFA) Customer Relationship Management (CRM) Supply chain management (SCM) Enterprise resource planning (ERP) Machine-to-machines Wireless sensors and transmitters Mobile access to company information Rerouting of incoming calls to a mobile device Ability to send and retrieve s on the device Handling of voice, fax, and regular text messages in a single mailbox Instant voice and text based communication Instant communication with a person or a group via one button click Mobile connection of field force employees with the company's systems and processes Mobile connection of sales force with the company's systems and processes Mobile access to the company's CRM system and utilization/update of included information Integration of a mobile application in company's SCM system (ordering, warehouse, ) Mobile access to the company's ERP system and utilization/update of information Wireless communication between machines such as vending machines or parking ticket machines Advanced application in daily use business equipment such as cars, clothes, inventory, Source: Ericsson, Arthur D. Little 2.3 Benefits and Challenges of Mobile Applications The introduction of a MES may require a considerable investment by the company. If implemented correctly, MES can have positive results, but the management must be aware of the challenges involved. The major reasons for enterprises to implement MES are benefits such as: Cost reductions Increased productivity Increased customer satisfaction Higher employee satisfaction Increase in sales However, several challenges need to be overcome to make mobile solutions a success: Consideration of aspects like sustainability and suitability Observation of potential hidden and downstream cost Focus on seamless integration with existing systems Removal, rather than shift, of process bottlenecks Necessity to gain employee buy-in
9 9 Figure 2: Key Benefits and Implementation Challenges Cost Reduction Productivity Gains Customer Satisfaction Employee Satisfaction Sales Performance Key Benefits Reduction of direct and indirect communication cost Reduction of infrastructure cost in the area of communication hardware and office/ storage space Realization of productivity gains through Achievement of significant time savings Improved resource allocation Optimization of processes Reduction of response and lead times Service level improvements Achievement of higher flexibility and freedom for employees when it comes to the organization of their workload and time Reduction of compulsory office time Decrease of overtime Increase sales through crossselling and upselling opportunities arising from instant availability of sales information Shorten the sales cycle and close deals more quickly Implementation Challenges Selection of the right approach Consideration of aspects like sustainability and suitability of intended MES Observation of potential hidden and downstream cost Selection of the most suitable MES available Integration of the MES in customers' existing systems Employees need to adopt the MES in order to realize productivity gains Unbiased focus on customer related front end and back end processes in order to eliminate and not to shift existing bottlenecks Implementation of a MES may result in higher requirements for the employees with respect to availability and flexibility Necessity and advantage of MES has to be communicated Efficient integration of the MES in the sales approach Ensuring mobile access to up-todate product specifications Source: Ericsson, Arthur D. Little In terms of reduction of total cost of ownership of MES, there are substantial cost savings that can potentially be realized through the introduction of mobile-enabled converged communications. Integrating mobile devices with a one-phone solution into the corporate environment are expected to reduce IT management cost due to simplified processes, cut mobile phone cost and improve efficiency. With regards to the challenges, new MES require new usage policies and instructions for employees. The downstream cost should also be considered, as well as how to balance the various requirements within the company. In addition to cost reduction, mobility-enabled converged communication solutions may help enterprises to boost productivity. These productivity gains can arise from time savings due to better scheduling, a reduction in idle time, improved resource allocation and the optimization of processes. The related challenges are the suitability of the envisaged solution, which must match the requirements of the company, the seamless integration into existing systems, the reliability of the solution and the acceptance by employees. Intensive testing and involvement of the end user from the beginning is required before putting the MES into operation. Enhanced mobility and communications convergence could have a positive impact on customers perceived service quality resulting in increased customer satisfaction. In addition, improved responsiveness to the customer can be achieved by providing employees with mobile access to relevant information, independent from their location. This means that customer requests can be handled more efficiently and effectively. Therefore, the customer s perception and image of the company might be improved through a faster response time in providing appropriate information on demand. But this will only happen if the implemented MES will actually remove existing bottlenecks and offer improved services to customers. If this is not the case and bottlenecks are only shifted, the perceived service quality will suffer and customer satisfaction will be reduced. A
10 10 Employees are likely to experience increased flexibility with MES due to location-independent mobile access to business relevant data, information and administrative tools, as well as enhanced reachability. This can lead to enhanced employee motivation and satisfaction through the reduction of compulsory office time or decreased overtime. However, this also represents a challenge for companies; increased flexibility and the need to always be available may increase stress for employees. It is essential to get employee buy-in and involve the future users from the beginning to maximize acceptance and possible benefits arising from the implementation of a MES. With regard to increasing sales, mobility-related improvements might also add to the top line. Access to better selling tools while interacting with the client can lead to up-selling or cross-selling opportunities. Giving field workers mobile access to support services, from simple product questions to order placement, can shorten the sales cycle and allow the mobile sales force to close deals far more quickly. As a side effect, this could lead to more or intensified customer contacts, and therefore increase the overall probability of successful deal making. This requires a seamless integration of sales tools with existing systems and the provisioning of the mobile sales force with access to upto-date product and pricing information. Security issues might represent a challenge during the implementation of MES as well. Security standards mostly established within fixed enterprise solutions need to be applied to the implemented mobile solutions to ensure seamless services and the successful integration with existing processes.
11 11 3 Mobile Enterprise Markets 3.1 Market Characteristics Growing Demand The enterprise environment in all countries covered in this study (Austria, Belgium, Germany, the Netherlands and Switzerland) is characterized by a high and still growing share of the mobile workforce, i.e. the share of employees working in jobs where internal and/or external mobility are integral parts of daily work. In this context, none of the investigated markets has yet met saturation concerning MES. Today, mobile solutions are reaching a maturity level where benefits are likely to outweigh the related cost of implementation. Table 2: Mobile Market Overview Mobile Market Overview Austria Belgium Germany Netherlands Switzerland Mobile Penetration of Employees with Enterprise Connections ,4% 11,7% 16,4% 16,1% 18,7% Mobile Market Size in 2004 (bn Euro) 3,3 3,8 18,9 5,7 3,7 Number of Enterprises in '03 ('000) Maturity of the Mobile Enterprise Market Source: Statistical office of the respective country, Merrill Lynch, Ovum, Ericsson, Arthur D. Little While the overall mobile enterprise market is expected to remain stable, revenues from mobile enterprise data are supposed to show significant growth with average annual growth rates (CAGR) of about 20 percent until 2009, which will support growing demand for MES, as shown in Figure 3. A
12 12 Figure 3: Mobile Enterprise Data Market Development Mio. EUR % % CAGR 2005/ % % 19% 20% Austria Belgium Germany Netherlands Switzerland Source: Ovum, Arthur D. Little Fulfilment of Prerequisites Status Quo In order to capitalize on MES, several prerequisites have to be fulfilled. Firstly, a high capacity mobile network infrastructure providing sufficient bandwidth is required. Secondly, end-devices particularly suitable for the use of MES must be available. Finally, solutions or industry specific software and applications need to be developed and supplied. Mobile networks: At present, most of the installed MES are based on GPRS where bandwidth is limited. UMTS has been launched in all markets and coverage is continuously increasing. 3G technology is expected to be deployed at least to the extent of fulfilling regulatory obligations, but will not reach the same areacoverage as 2G/2.5G networks in the near future. In all countries, the roll-out of HSDPA 2) (High Speed Downlink Packet Access) in designated 3G areas has been announced for The mobile operators roll-out plans imply that mobile data transmission speeds will increase in the near future, which will improve the value proposition of MES. However, mobile broadband will be available only in regions with a high concentration of commercial activities or high population density. As a consequence, enterprises intending to implement mobile solutions might have to cope with significantly differing mobile data transmission rates depending on the location of their business and the operational radius of their mobile workforce. 2) HSDPA will provide higher bandwidth in comparison to current 3G network performance. In the first phase achievable peak rates are expected between 3-4 Mbps (downlink) and up to 384 kbps (uplink). HSDPA is considered as an upgrade of the currently employed UMTS technology (also called Release 5). Besides the fact that it provides a significantly higher download capacity, HSDPA also offers reduced latency, more efficient frequency usage and is relatively easy to implement.
13 13 Figure 4: Bandwidths and Coverage of Mobile Technologies Maximum Bandwidth in KBit/s Download Upload GPRS GPRS EDGE UMTS UMTS HSDPA HSDPA Min. GPRS coverage 2005 (in % of pop.) Min. EDGE coverage 2005 (in % of pop.) Min. UMTS coverage 2005 (in % of pop.) HSDPA announcement Austria ~ 95% 62% yes (1Q 06) Belgium Germany ~ 95% ~ 90% not deployed 61% 60% yes (2006) yes (1Q 06) Netherlands ~ 90% 60% yes (1Q 06) Switzerland ~ 90% 90% yes (3Q 06) Source: Ericsson, Arthur D. Little Devices: MES relevant hardware encompasses all kinds of devices designed for usage in the mobile environment (i.e. laptops, PDAs, tablet PCs or mobile phones). The market is dominated by large global suppliers. Therefore, device availability does not differ significantly from one country to another. However, the majority of available devices are not designed for usage in mobile enterprise environments, but rather for usage in residential environments due to issues concerning economies of scale. Devices optimized for industry specific MES often do not yet reach critical mass from a supplier s perspective. Software solutions: The variety of available industry-specific MES differs across the countries covered in the survey. The fact that employee interfaces should be available in the respective national language can greatly influence the market size for application software developers. The German speaking countries of Austria, Germany and Switzerland represent the largest market within the analyzed countries and are leading with respect to available MES offerings. In addition to the three main prerequisites listed above, there are other important factors which have a significant impact on the overall attractiveness of a MES. These are amongst others, tariff levels for mobile voice and data traffic or the compatibility of a company s existing infrastructure with the individual MES. Market Players and Positioning The end-to-end provisioning of MES requires the involvement of several market players as no one player is currently able to cover all necessary parts of the value chain. Figure 5 illustrates this situation and the MES value chain. A
14 14 Figure 5: Mobile Enterprise Solutions Value Chain illustrative Mobile Enterprise Solution Develop. Company Systems Mobile Network Operations Personalized Mobile Applications Horizontal Mobile Applications Vertical Front End Applications Vertical Back End Applications Device Design/ Manufacturing System Integration MES related Maintenance Mobile Network Operator Application Developer System Integrator Hardware Supplier MES Competence High Low Mobile Network Operator Examples of MES Market Players Application Developer System Integrator Hardware Supplier Source: Ericsson, Arthur D. Little The specific elements of a MES include the development of the application software, which has to be compatible with existing back-end systems, the mobile transmission of data or the related system integration. The introduction of MES requires enterprises to deal with several market players. Here, horizontal and/or vertical specialized software developers are in the driver seat for the development of MES, but companies from each market segment, especially mobile operators, are increasingly trying to position themselves in the mobile enterprise market and expanding their position on the value chain. As there is as yet no player covering all of the necessary value chain elements to provide end-to-end MES, there is a clear trend towards partnering across the industry. In all surveyed markets, there are operators that have extended their service offering beyond their own scope of expertise by teaming up with third party providers of industryspecific software solutions and/or system integrators to be able to offer a wider range of MES. These partnerships are increasingly institutionalized in official partnership programs 3). Although these partnerships do not yet result in a true one-stop-shopping solution, they offer at least a single point of contact to potential customers. For a mobile operator, the rationale for a partnership is to acquire and retain business customers, as well as to expand its footprint in the MES business. From the perspective of a software developer, system integrator or hardware supplier, one of the main drivers for partnerships is to access the large customer base of mobile operators. In many cases, these companies will not team up with one mobile operator on an exclusive basis, but try to reach agreements with several companies. Without partnering, the mobile operators services and solution portfolios focus very much on standardized, easy-to-implement services that are not industry-specific and involve a relatively low level of complexity. The offered standard solutions mainly comprise communication centric person-to-person (P2P) services such as push in combination with PDA/MDA devices and data cards for laptops enabling mobile data 3) Examples for institutionalized partnership programs are O2 and E-plus.
15 15 transmission. In addition, some operators offer machine-to-machine (M2M) SIM cards. However, in most cases, customized MES require software programming and/or device configuration for particular application-to-person (A2P) and M2M services that are offered by specialized software developers or system integrators. 3.2 Country Overview Austria Austria s mobile market is characterized by a high level of competition. Five mobile operators and three MVNOs offer services in Austria, the smallest of the analyzed countries. In August 2005, T-Mobile Austria merged with fourth entrant tele.ring. The high level of competition strongly influences the pricing structure, especially in terms of 3G pricing, which is significantly cheaper in comparison to other European countries. The highly competitive mobile market environment in Austria is also reflected in the wide range of MES offered. Solutions range from mobile office applications like unified messaging and mobile field force management systems, to m-payment business solutions and advanced services in the logistics industry. Besides the intra-operator competition, a number of non-operators have entered the MES market. For example, Austrian hardware supplier Kapsch is offering not only push , but also fleet and field force management systems. Network operators are also partnering with established non-operators; for example, mobilkom austria (A1) offers mobile solutions in collaboration with Nokia and T-Mobile cooperates with Datafactory, an IT-specialist for fleet management and telematic solutions. The well-advanced 3G network infrastructure supports a wide range of MES in Austria. The country can be regarded as 3G pioneer in Europe with an early start of 3G services in April 2003 (mobilkom austria shortly followed by Hutchison 3). Actual UMTS population coverage is up to 60 percent. The first upgrades of the UMTS networks with HSDPA technology have already been implemented in some parts of Austria s capital, Vienna, but are not yet commercially available. The main part of the networks will be upgraded in the first half of Belgium In Belgium, services like mobile office applications are offered, and M2M services are also available. Similar to the other markets covered in our survey, mobile operators tend to offer business services in cooperation with solution providers and IT specialists. In this context, Proximus primarily cooperates with Siemens (Mobile Field Force Management), SAP (Field Force Management), and HP (Mobile Access), while Mobistar integrates MES partners in the provision of its mobile business services. Mobile operator BASE offers MES enterprise solutions for self-employed professionals only and has MES partnerships. Proximus covers 61 percent of the Belgian population with its 3G network infrastructure and plans to launch HSDPA during summer Also Mobistar is pursuing the roll-out of its UMTS network. Having upgraded its deployed EDGE network to cover 99 percent of the population, Mobistar is rolling out its 3G network in urban areas and has reached the license coverage threshold of 30 percent of population by end BASE also started the deployment of its 3G network to meet its obligation, but had apparently not reached the threshold by end of A