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Hidden Cost Factors and Total Cost of Ownership for Enterprise Mobility

By April 24, 2012Article

More and more companies are quickly taking their business mobile to capture powerful competitive advantages. The 105 participants in Sand Hill Group’s recent study, “Leaders in Mobility Strategies: Tug of War Between Business Risk and Value,” unanimously agreed that the rewards of transitioning to enterprise mobility are huge. One of our study participants gained an entirely new customer audience for its products creating an innovative mobile app for its existing workflow system. Another company created a mobile app that has the potential of generating $300 million in revenues. But the total cost of ownership (TCO) tab is also huge and contains some hidden costs.
BYOD model
Although some aspects of mobility may bring cost savings, other aspects actually increase operational costs. An example is the Bring Your Own Device (BYOD) model. Shifting device ownership to employees usually results in a cost savings, but that can quickly be negated by the expense of major refreshes every six to 12 months.
The BYOD model also impacts IT support costs. Our study revealed that it usually results in a short-term increase in costs and a long-term decline in costs – but only if the company is responsible for supporting the applications and the employees are responsible for their own device support. A CIO in our study reported that his company decided not to implement a BYOD model because of the associated increased support burden on the IT staff.
Our study, comprised of an online survey and in-depth follow-up telephone interviews with CIOs, CISOs, principals and vice presidents, revealed several best practices for the BYOD model. For companies that want to provide device support in this model, participants recommended the following tactics to reduce support costs:

  • Provide support for only a reasonable number of devices as opposed to all devices.
  • Establish a means for employees to request support for a given device that may not be supported and then put the device through a set of acceptance criteria before allowing support for the device.

Hidden costs
There are also areas of hidden costs. For example, many companies overlook the fact that telecommunications usage fees will become more expensive as the data usage in mobile devices increases. A study participant who is the CIO of an entertainment company commented, “A big cost in managing mobile devices is the usage costs – and nobody is talking about how to manage or control that effectively.”
Another hidden cost is the need for some employees to retain their laptops in addition to a smartphone or tablet because the touch-screen mobile devices are not effective for inputting large amounts of data. Some study participants cited this as an issue in justifying the cost of iPads and other tablets in developing the mobility business case.
Mobile device and operating system upgrades are another cost area often overlooked. In today’s nascent mobile market, there can be interoperability challenges. The three parties involved in updating devices (manufacturers, OEMs and carriers) have separate update procedures. All three updates must integrate. A large update program can cause a device to become inoperable due to OEM or carrier modifications to the device.
Among other hidden cost factors cited in our study is that some devices are obsolete by the time companies develop adequate corporate policies and programs to securely deploy and support access to company data and applications on mobile devices.
Ongoing investment in mobility
Moving to a mobile environment requires a significant capital investment in infrastructure, security and managed services not only up front but also on a continuing basis. Several participants stated they expect their spending on mobility as a percentage of their total IT budget to “climb pretty rapidly” or “go up exponentially” because of the demand. The study found that companies spending 11-30 percent of their total IT budget on mobility today expect it to increase to 50 percent in one to three years.
Developing apps for the disparate – and evolving – technologies in mobile device and operating systems is a major portion of the ongoing TCO. For instance, Apple, Microsoft and 20+ versions of Android are too different for developers to be able to build one app that provides a good user experience on all three platforms. The cost can be huge. Most of the study participants stated their companies’ tactic to control that cost is to limit the number of platforms they use. However, this is not always a viable solution, as explained by a participant:

“To deliver content to our customers, I have to support every platform out there. I am spending money implementing and testing all our apps on various platforms and picking up the support calls from customers who can’t access something. We will lose a customer completely if they are carrying a version of Android that our app doesn’t work on or where I don’t have that version in my test pad.” – CIO, U.S. media company

Is it worth the investment? Yes, according to our study participants. Mobile technologies lead to a wide variety of competitive advantages in customer-facing apps. But as the CIO of a global financial services firm in our study pointed out, the ability to move employees away from PC dependencies so they can work remotely in a virtual environment is crucial to being able to acquire the right talent.
The key to building an effective business case for moving to a mobile environment is to understand the total cost of ownership. The Sand Hill study, “Leaders in Mobility Strategies: Tug of War Between Business Risk and Value,” provides insight into the cost factors, security issues and other risks and challenges.
For other articles in the series on findings in the Sand Hill study, see “The What, Who and How of Enterprise Mobility Adoption,” “Five Trends in Enterprise Mobility for 2012 and Beyond,” and “CIOs Reveal Risks and Strategies in Enterprise Mobile Solutions.” Stay tuned for additional articles in the series, coming soon.
M.R. Rangaswami is co-founder of Sand Hill Group and the publisher of

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