May 11, 2011

How is ROI calculated with respect to mobility?

I know it's a broad question, but I need a good primer to get me started. Anyone?

Craig Mathias

Ah, this is a very good question indeed, and the answer may depend upon the accounting rules that apply in a given industry. But let's start with a simple, non-accounting answer: return on investment is the value realized from an investment. This can be positive or negative, of course, and can often be very difficult to calculate, especially when variable like productivity come into the mix. A good example of this situation is in fact in networking – the network is almost always pure overhead; an expense. And yet without the proper and appropriate network resources, almost every business of any form will collapse – by analogy, the network is the circulatory system of the enterprise. No circulation, no information, nothing gets done, no user productivity, and thus no business/government/whatever. Since we have to have a network, then, it's often more appropriate to talk about minimizing costs (while still of course still provisioning optimal network services) rather than ROI alone.


Cost has two components: capital expense (CapEx), and operating expense (OpEx). CapEx includes the cost of any required hardware and software, of course, as well as any non-recurring engineering (NRE) required to get a given installation or upgrade on the air. This includes analysis, planning, physical installation, initial configuration, and similar activities. OpEx includes ongoing costs related to network operations – management, troubleshooting, help desk, user support, and many other tasks. Note, however, that CapEx primarily involves the purchase of products, and these almost always decline in cost over time, or at least see much-improved price/performance as the faster/better/cheaper of high tech works its magic. OpEx, on the other hand, is primarily that of services – it's labor-intensive, and costs here only rise over time, even when operations productivity is maximized (staffing can only be reduced so much, and the costs of that staffing continue to rise over time nonetheless). The strategy we therefore almost always recommend is to use optimal CapEx to minimize OpEx. Buying more management capability, for example, can minimize troubleshooting expense, as well as maximize network uptime and thus the productivity of users – again, the reason one buys a network in the first place.


So it's best not to think strictly in terms of ROI when evaluating any wireless or mobile (or, indeed, any IT) expenditure. Instead, look at how any given purchase will minimize OpEx, especially over time.

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