By Al Emid

A while ago, back in the technology dark ages, I sat in a Toronto office awaiting an appointment, watching the habitués struggle to configure their new and then-novel fax machine. One triumphantly shouted “Hey, we’re online with our Vancouver office!

What a great way to exchange recipes!” while staring admiringly at the organization’s newest toy.

Now, in the e-age, technological gear is often less expensive than the price of that early fax machine, but training requirements, installation time and upgrades can all ramp up the costs. The total bill can quickly become a formidable addition to any annual operating
budget.

Meanwhile, the proverbial suits—cost accountants with eyes fixed on the bottom line—obsess about cost-benefit analyses.

This puts them at odds with toy-of-the-month types who believe they have fallen back to a technological Paleolithic period unless equipped with every conceivable new gadget.

“A lot of people get marketed to and get excited by the technology,” said Martin Wales, president of The Customer Catcher Institute, and a Toronto-based business development specialist.

He speaks from expensive experience. Wales carried a Blackberry for a year but never used its e-mail functionality. “It was a waste.

My objective was really to have a pager.” Salespeople took him further than necessary at the time of purchase. “They were saying ‘If
you’re going to get a pager, take advantage of our new technology and do e-mails too.’ I didn’t cost justify it.

How often do I get emergency e-mails? I didn’t have a clear objective.”

THE COST PICTURE

The economics of business mobility will increasingly matter to wireless carriers, since it’s business customers who will drive spending growth, according to IDC Canada Ltd. And while 60 per cent of respondents to a recent IDC survey are currently using various wireless technologies, another 16 per cent plan to adopt wireless within a year and a further 10 per cent plan to adopt it over the next three
years. Amongst companies not planning on adopting wireless technology, a majority of naysayers cited lack of conviction regarding benefits, and continuing concern about the costs.

Wales said the economics of mobility start with business objectives. “Determine and identify your objectives and align those objectives with all your business processes. Then, [for example, ask whether] you need wireless e-mail or just a pager?”

Wales boils objectives down to two questions. “Any objective analysis should question whether [a mobile device] will enhance customer experience.” Although happier customers make likely purchasers, a full mobile arsenal might not win a sale.

However, it may redeem part of its cost when it becomes a contributing factor, such as when a client becomes re-assured by a project bidder’s ability to mount a complicated mobile training program.

“The second part of enhancing customer experience is by increasing productivity,” Wales said. “If I increase the productivity of salespeople, they respond faster to clients and we will have higher satisfaction ratings.”

Interestingly, the IDC survey found that when asked about their reasons for spending on wireless devices, almost half of respondents cited “improved staff productivity” while less than 20 per cent listed “improved customer service.”

So, answering ‘Yes’ to Wales’s two evaluative questions should point to a wireless purchase, while ‘no’ should lead to deferring that purchase, he said, adding this approach fits most businesses, although detailed scrutiny is even more crucial in small businesses. “Small businesses have to be even more considerate of costs because they don’t have large budgets,” he said, adding, “I’ve known small businesses to buy $30,000 worth of equipment with the newest software and go out of business next month because they blew their budget!”
In the customer experience area, mobile technologies are best viewed as one of several strategies, along with customer call centres and training. “It’s not about the technology. It’s about process. Wireless is just a tool. Is it worth the cost?” Wales asked. While the dollars may be well spent on road warriors, they may not be justifiable for desk jockeys. “A desk jockey doesn’t need a wireless Blackberry. He just wants one.”

Still, facing the suits means looking for specific numbers when checking the costeffectiveness of laptops and personal digital
assistants (PDAs).

SHELLING OUT FOR MOBILE TECH

Where laptops are concerned, making road warriors mobile costs roughly US$1,000 more than it would to buy them a desktop computer (excluding software and wireless services), said Doug Cooper, country director for Toronto-based Intel of Canada. “You are going to buy them something anyway,” he said.

In the customer service area, it can be near impossible to attribute a sale directly to laptop equipment. Cooper recommends conducting customer satisfaction surveys with questions designed to ascertain whether the experience improved because the representative came mobileequipped and therefore had quicker and better access to information.

“Customer satisfaction tends to drive new purchases so there is an element of being able to quickly and effectively service the customer,” Cooper said.

On the productivity side, Cooper points to studies by Intel and other companies suggesting that the break-even point starts when the warrior spends 20 per cent or more of total work time on the road.

“That tends to be the break point that helps decide whether this person…gets a desktop or notebook.”

This points to what Cooper calls “the typical road warrior profile: salespeople and services professionals who act in consulting
capacities, like accountants.” These are people who spend large amounts of time away from their offices.

THE LURE OF TOYS

With many technologies—and especially PDAs—the novelty can blur the costeffectiveness calculation, according to Paul Heino, the president of Toronto-based Sundex Information Systems, which specializes in advising utility companies on the usefulness and cost-effectiveness of
PDA technology. That’s because new tech is cool, and people want it.

“I talk to CEOs and try to figure out exactly that—whether this is a toy the IT department wants or whether this is actually going to save money.”

Again, the equation involves customer experience and productivity considerations.

In a customer-service scenario, Heino said PDAs help in effectively booking field crews. “You are going to give better customer service in an emergency situation when you know where your crews are.”

To illustrate the productivity side, Heino stressed a principle he calls “single point of data entry.” Traditionally, he said, when information comes in from the field it’s on a clipboard or piece of paper. It is then transferred to data-entry personnel.

“You’ve got 10 people entering the same information.”

Now introduce PDA technology.

Utility crews digging holes for new residential gas services, for example, will record all activities—equipment and materials used, meters installed and crew hours—on the PDA directly.

“So get PDAs into the field and people who write on clipboards will now choose from menus. Then you can have information flow into whatever system you have in your office automatically.”

Heino estimates the single point of entry principle means 15 utilities people in the field, divided into five-person crews with one PDA per foreperson, translates to an annual savings of between $45,000 and $55,000 by cancelling repetitive data entry.

“That’s strictly (looking at) double entry time. How we arrive at that is the plain old administration costs and eliminating salaries of data-entry people making about $30,000 to $35,000 a year.

“That costs the company about $50,000 a year,” he calculates.

“If you have two of them full time (it costs) $100,000 a year to have two people entering data.”

THE TAXMAN COMETH

A comprehensive analysis would take in other considerations, including one that overhangs countless business decisions: the Canada Customs and Revenue Agency(CCRA), aka the taxman.

The CCRA has a system of Capital Cost Allowance (CCA) deductions for most types of buildings, vehicles and equipment. A fancy name for depreciation, the CCA works through a series of classes, each consisting of specified components and an applicable CCA rate. Computers
and notebooks both fall into Class 10 with a 30 per cent CCA rate, meaning that with two exceptions the business can claim a 30 per cent CCA on the notebook it supplied to its road warrior as an annual deductible expense item. In the first exception, the CCRA applies what it terms the half-year rule in the first year of ownership. This allows the purchaser to deduct only half of the 30 per cent calculation, since it likely did not buy it on January 1 but during the year. In the second exception, the CCA applies to the declining balance or the
reduced value of the equipment, calculated by subtracting CCA previously claimed from the purchase price.

What that all amounts to is a notebook that cost $2,000 would net a $300 deductible item. The book value becomes $1,700 and in year two the calculation spits out an allowable expense of $510. At the end of the machine’s useful life, the company can claim a terminal loss on the notebook. That means that if the notebook’s book value declines to $450 over several years and the company junks it or donates it to charity, it can claim $450 as a terminal loss. Therefore total CCA claimed over time will usually equal the purchase price.

So, reflecting Doug Cooper’s suggestion that the cost differential between desktop and laptop is around US$1,000, the analysis here would use that amount as a base figure, instead of using the total cost of the laptop.

Mobile telephones and many other types of personal electronic equipment fall into what the CCRA terms Class 8, which provides for a 20 per cent CCA operatingin the same way.

But tangible financial data explain only part of the picture, according to Lawrence Surtees, director of telecom and Internet research at IDC Canada.

There is a set of benefits that is not quantifiable in straight numerical terms, meaning there are advantages that cannot easily be crunched into hard numbers.

“For example, mobility itself, which I believe is the single greatest benefit, is overlooked as a benefit,” he said.

“In looking at case studies of wireless adoption and use, I think it becomes quite clear that many of the most profound benefits start from the unquantifiable part.

One of the big buzz words in the IT world in the last couple of years is return on investment or ROI, ” he said, adding that real ROI includes intangibles such as actual mobility along with hard numbers.

“Ultimately ROI analysis for a company is going to try to do the whole mix.”