Mobility & The Economy: A Snapshot Of Where We Stand

By  Susan Nunziata — December 09, 2008

The mobile enterprise sector straddles the worlds of I.T. and telecommunications management in most organizations, and both areas are facing budget cuts.

IDC predicts that global I.T. spending will slow by half in 2009, effectively stripping some $35 billion worth of revenue out of the market.

Gartner says I.T. spending will increase 2.3% in 2009, a revision of its earlier projections of a 5.8% growth. However, Gartner remarks that enterprises view I.T. as a way to transform their businesses and streamline their operating models. Other reasons I.T. will not see more severe reductions include the fact that I.T. is embedded in running all aspects of business, according to Gartner.

In addition, many organizations have shifted to multi-year I.T. programs aligned with business, and these are difficult to cut immediately. In addition, I.T. spending decrease typically lags the economy by at least two quarters.

On the telecommunications front, Insight Research predicts that the global telecommunications market will continue expanding over the next five years despite the unsteady economy. This will be driven by growth of wireless services in developing regions that will offset spending slowdowns in advanced economies.

Insight predicts that wireless will be the driver for a compound annual growth rate of 10.3% over the next five years, and that revenues from telecommunications services will reach $2.7 trillion by 2012. Wireless broadband services are expected to grow at a CAGR of more than 70% in that period, according to Insight.

On the handset side, various reports show 2008 growth rates ranging anywhere from 3.2% to 11%. Maybe not the pace the industry has become accustomed to, but any growth at all would be remarkable in this economy.

IDC reports that global shipments of mobile phone handsets were slower than usual in 3Q 2008. While the 299 million units shipped in the quarter represented a 3.2% increase from the same period in 2007, 3Q is typically a period of ramp-up when manufacturers load their sales channels with product in anticipation of the holiday selling season, according to IDC. Year-over-year 3Q growth rates can run as high as 20% in some years, but this year the ramp-up has been lacking.

ABI Research revised its growth-rate expectations for mobile handset shipments in 4Q 2008 down to 7.5% from 10.4%. They estimate that the year-on-year annual growth rate will be 10.5% - 11%, to close out 2008 at around 1.27 billion units; 3Q 2008 delivered 8.2% growth over the same period last year.
 
Smartphones are a bright spot, according to IDC, driven by the iPhone and other new devices. In fact, the researcher reports that in North America, new releases from Apple, Palm, and Research In Motion, along with the highly anticipated release of the HTC G1, pushed smartphones further into the public eye and into users' hands, at the expense of traditional mobile phones, which showed a slight decline from a year ago. Even so, overall growth in North America remained sound heading into 4Q08, according to IDC.

Yet, even smartphone growth has been slower than in recent years, according to Gartner. In 3Q 2008, 36.5 million smartphones were sold, an 11.5% increase from the same period in 2007. While Gartner predicts that smartphone growth will continue, it will be at a slower pace.

On a regional level, Gartner finds North America was the fastest growing market for smartphones, with a 68% increase in the 3Q 2008. RIM and Apple did particularly well in the region; together, they accounted for more than 70% of the smartphone market in 3Q 2008. Apple regained second position behind RIM with 25.4% market share.

Touch-screen phones remain a fraction of the overall mobile phone market, but sales have been soaring. In the 12 months through September, sales of the phones in North America grew 130%, in contrast to 4% growth in the overall phone market, according to comScore M:Metrics, a market research firm.

As of September 2008, more than 2.6 million people in North America had some model of the iPhone, according to M:Metrics. The second-most-popular touchscreen model was the LG Voyager, which was available through Verizon Wireless and had 851,000 users.

There's been no slowdown of mobile messaging, according to ABI, which covers five common messaging platforms: SMS, MMS, voicemail, IM and email/unified messaging. Revenues from mobile messaging services will grow from $151 billion in 2008 to $212 billion by 2013. Mobile messaging ARPUs represent 85% or more of all handset data services revenues worldwide, regardless of region, according to ABI.

Indeed, U.K.-based Portio Research says that 2012, global SMS revenues alone are expected to reach $67 billion, driven by 3.7 trillion messages.

As Jon Covington, Wireless Engineer at UCLA Ronald Reagan in Los Angeles tell us, "wireless is as ubiquitous as walking."

Transportation Management Systems On The Rise
Gartner says the economic pressure to control freight expenses is accelerating growth drivers for what it calls transportation management system (TMS) solutions. This includes business applications such as transportation routing and scheduling solutions, as well as onboard telematics and other technologies that can monitor vehicles and drivers.

Sales of TMS software will total $648 million in 2008, a 20.6% increase from the $538 million in revenue in 2007. Sales of TMS software are forecast to total $730 million in sales in 2009, and will reach $936 million by 2012.

According to Gartner, a $1 billion enterprise will spend $100 million on logistics, with transportation costs accounting for $50 million or more of overall logistics spending. Since transportation costs are most often direct expenses paid by the enterprise to service providers such as carriers, cost reductions directly affect profitability, says Gartner.

Insight Research sees location-based services as another bright spot; it predicted in November 2008 that the worldwide market for LBs will exceed $1.6 billion by year-end.

Field Service Solutions Show Bottom Line Results
Enterprises using mobile field service solutions are seeing a 12% increase in profitability, according to a report from Aberdeen Group. The survey of 250 companies finds that 59% of field workforces in 2008 were equipped with mobile devices (not including personal cellphones). This is up from 49% in 2007 and is expected to rise to 77% in 2009.

"But Best-in-Class Mobile Field Service is more than just handing a device to your field workers, it's about providing and empowering your workers with access to the right information in real-time so as to allow them to complete their service work," according to Sumair Dutta, Research Analyst at Aberdeen. "Companies that are able to do this effectively are seeing a near $10 drop in costs per dispatch and an overall 12% boost in service profitability."

To support improved access, increased data capture and enhanced data transfer capabilities needed for real-time field worker empowerment, leading firms were nearly two times as likely as the average to leverage mobile field service applications for work order management. In addition, best-in-class firms were 42% more likely than others to leverage mobile solutions for optimized scheduling and asset tracking. As a result leading firms were experiencing:

  • An 18% decrease in mean time to repair over the last year
  • A 19% increase in technician productivity over the last year, compared to a 9% increase for all other firms
  • A 93% level of SLA compliance, compared to a 77% performance for all other firms
  • Service-based margins of 25% as compared to a 18% level for all other firms
Ultimately, it's the positive impact on a company's bottom line that is going to make the case for mobility in a tough economy.

"I learned a very interesting lesson in the recession of the 1970s," says industry consultant Andrew Seybold of Andrew M. Seybold, Inc. "I was working for Motorola and doing government sales. We had a business sales unit in the same building. They were complaining that the recession was going to kill their business. And it didn't. In fact, their sales went up. And their sales went up because they started telling people, "You can take a truck off the street if you add radios to the rest of your trucks because you can be more efficient, and you can get more done.'

"I think that's the same thing now. In this economic situation, if you make an investment in wireless, it's going to pay in the fact that you can manage your business and get more done faster. In fact, planning and expansion makes a lot of sense right now. [A] field service department finds that it can provide several more service calls per day. That's money in the pocket right now. And then, of course, you can provide a spreadsheet that keeps showing the ROI."


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