How to Project Wireless ROI

At the turn of the century, way back in 2000, there were few or no best practices governing wireless investments, and there really didn’t have to be. Just saying a project was wireless evoked a limitless landscape strewn with potential profits. Pronounce the magic word, wireless, and CEOs sat up and listened. CFOs unsnapped their pocketbooks.

In March 2001, CIO published a survey of 170 IT executives; 84 percent said they either already had or planned to deploy a wireless project.

But, of course, that was then. A new CIO survey completed last May shows that a good many of those projects either failed to materialize or failed to work. Today, companies support wireless devices and offer wireless applications at rates far below what they anticipated they would a year and a half earlier. (See our complete survey, “2002 Wireless Update,” at www2.cio.com/research.) PDA and pager adoption were both off by 20 percent, and the number of wireless application installations fell anywhere from 8 percent to 20 percent short of expectations.

There are a number of reasons why wireless projects withered on the vine, most notably an economy that no longer encourages speculative investment. CIOs have also been burned by the shortcomings of wireless technology (see “3 Reasons Why Wireless Projects Fail,” Page 60) and by projects targeted at audiences that weren’t really there. Jeff Scott, chief technology officer of New York City-based Thomson Financial, which in the last quarter of 2000 deployed a wireless application that delivered financial data to handheld devices, sums up the feelings of many of his colleagues when he says that “the financial services industry has cooled a bit for these services, either because of the market conditions or a changed view of ROI for wireless or both.” Barry Strasnick, CIO of Quincy, Mass.-based CitiStreet, is more blunt. Describing an abandoned wireless effort to extend website capabilities to handheld devices, he says, “Realistically, you shouldn’t trade your 401(k) as you’re walking through the airport.”

Wireless technology has improved during the past few years but still has a ways to go before it catches up to the original hype, says Victor Milligan, vice president of consulting for Stamford, Conn.-based Gartner. “The only way to make sense of it is to build a business case,” says Milligan. “If you have a mobile workforce that is part of a mission-critical or valuable business process, you need to have a wireless strategy. That strategy may be to defer, but at least you’re making the decision based on information.”

Building a business case is not as simple as it may first appear. Many CIOs still have a hard time determining a hard ROI for wireless projects. In CIO’s latest survey, the two most popular measures of ROI were increased productivity (54 percent) and improved internal customer satisfaction (40 percent), neither of which is easily measured. Furthermore, an astounding 25 percent of CIOs surveyed said that they didn’t measure the ROI of wireless projects at all.

That’s not good.

Although the executives interviewed for this article say they will no longer pay for projects that won’t pay them back, few are able to define that payback in anything more than general terms. Still, best practices for planning, launching and implementing wireless projects can be derived by examining projects that work and those that don’t. And what works are projects that start with a clearly stated problem and proceed by deploying the most direct solution?leveraging the right technology. CIOs who have led those successful implementations are able to track how they increase revenue and how they reduce costs.

“Who’s Got the Doohickey That Fits into the Thingamabob?”

Air Canada is Canada’s largest airline. Its 234 planes make an average of 1,600 flights per day, 40 percent of which travel through the airline’s Toronto hub. The weakened economy and the aftershocks of the 9/11 hijackings have ravaged the North American airline industry, and Air Canada is no exception. From an operational perspective, says Vice President of IT and CIO Alice Keung, the downturn has forced the airline to look for ways to improve airplane utilization, which means keeping planes in the air and off the ground. “With a shorter turnaround time [between flights] you can use the aircraft more frequently,” she says. “This leads both to more profitability and improved customer service.”

The number-one culprit for ground delays is line maintenance?unscheduled repairs to a plane’s equipment, instruments or body. (That is different than heavy maintenance, in which planes can be stripped down to the wires. Heavy maintenance is conducted at scheduled intervals in either Calgary, Montreal, Vancouver or Winnipeg.)

Here’s how line maintenance works: A pilot or mechanic sends an alert to Toronto?by teletype, fax or simply with a note in the plane’s log?saying that a plane needs repairs. When the plane lands in Toronto, mechanics meet it. Or they don’t.

Sometimes the mechanics don’t get the message, or they don’t get it until after the plane has left. All too frequently, a mechanic arrives at the gate only to realize that he has to return to the hangar for a part. So Keung figured that if mechanics had real-time access to the maintenance system, they would be better prepared to service the plane when it arrived. That would mean faster turnaround.

Keung is a wireless skeptic, but after conversations with other Toronto-area wireless users?including the local police force and the Toronto Bluejays baseball team?she concluded that “we needed it whether we liked it or not.” So last April Air Canada invested $254,000 in a pilot project to see whether wireless could in fact improve maintenance efficiency.

Air Canada mechanics needed to access information, including maintenance manuals, diagrams and as many as 10 different data systems, and Keung realized early on that devices connected through a wireless carrier’s data network wouldn’t have the necessary bandwidth. Furthermore, overhauling back-end systems to make them accessible would be prohibitively expensive. Instead, Keung deployed a wireless LAN-based solution, investing in complex encryption and authentication technologies that would keep it secure.

What devices to use was another un-known. “We tried a few,” says Keung. “We started with a handheld device, but the mechanics didn’t like it. They have to wear huge gloves in the winter”?this is Air Canada after all?”and the number of data sources and diagrams made handhelds way too small.” Eventually, with help from IBM, Keung developed a tablet-like device that could be mounted on a mechanic’s truck.

During the five-month pilot, Air Canada found that productivity improved. Mechanics didn’t have to travel back and forth to the hangar as much, and it was easier to plan for repairs. If a plane heading for Vancouver needed a widget, management could make sure the widget would be there, waiting. “That all has a bottom-line impact,” Keung says. She believes that the pilot made a (modest) contribution to Air Canada’s 2002 $134 million second-quarter operating income increase over 2001’s second quarter.

It was, in fact, the only North American-based international carrier to post a quarterly profit.

The next step, says Keung, will be to roll out the devices gradually to Air Canada terminals in other cities.

“Did You Say Champagne or Champale?”

Southern Wine & Spirits is America’s largest adult beverage distributor, controlling about 13 percent of the market. The Miami-based company has 40,000 customers, including restaurants, bars, hotels and liquor stores, and stocks 25,000 different products in California alone. “There’s not enough paper in the world for a sales force to track all the items and vintages,” says Vice President of Sales and Marketing Steven Burrows. Yet, before the wireless system, that’s what they had to do. Reps would keep stacks of books in the trunk of their car so that they could have descriptions of the various brands and vintages handy.

Furthermore, there was no easy way of tracking inventory or sudden price spikes, which are common in an industry where the weather plays a large role in determining both quantity and quality of the grapes.

If sales reps had improved access to inventory and price data, as well as each customer’s order history, they would be more productive, Burrows believed. Based in San Francisco and responsible for Southern’s Web presence (though not corporate IT), he thought that wireless devices with access to the corporate systems could do the job.

The reps thought so too. Most reported wasting several hours a day researching vintages, checking voice mail for order status, and calling the main office for inventory and price updates. They all thought that wireless devices would help them close deals and improve customer service.

Meanwhile, consultants told Burrows that making the data from Southern’s mainframe-intensive back-end systems (which have been highly customized over the years and update information in batches) available to devices in real-time would cost many millions of dollars. But sales reps didn’t need real-time info. Most gathered what they needed?such as price changes and order status?in the morning and spent the rest of the day selling. Converting the back-end systems to allow real-time inventory updates wasn’t worth it. “We’re not an emergency room,” says Burrows.

Instead, Southern spent $1.5 million to extend the batched data from the back-end systems to wireless devices and about $1 million for devices for half of the company’s 2,000 sales employees. It will spend another $1 million as it extends wireless devices to the rest during the next six months. An initial pilot with 20 Northern California sales reps and a second trial with 50 people in Southern California helped Burrows design the access application. Now, sales reps spend five minutes downloading updated inventory, pricing and customer information to Windows Wintel or Windows CE compatible devices through either a wireless or dial-up Internet connection. Reps can also enter sales and customer information through the devices, again either through a wireless connection or dial-up.

The benefits are twofold. If, for example, a restaurant manager wants a brand of Merlot and Southern is out of it, the rep can say so and recommend a similar wine on the spot. Also, thanks to the customer profile he just downloaded, the rep can remind the manager that he normally carries Tanqueray gin, thereby picking up an order that he might otherwise miss. Second, placing orders through the device’s Web-based interface is more reliable than the old automated number-code system. With the old method, reps would find a pay phone and punch in the item number. Then they’d get a notice confirming that the order had been placed, not what the order was for. “If you wanted Beringer Chardonnay you might enter 12345,” says Burrows. “But if you enter 12346 by mistake, you could get Mondavi.” The mistake wouldn’t be noticed until a truck delivered the order. Last year Southern saved $150,000 in California alone by eliminating shipping mistakes.

The biggest return, however, is in increased sales. Burrows admits that attributing a percentage of increased sales to the wireless project is tricky?who’s to say it isn’t because you got lucky or worked harder? he notes. But by tracking order history and conducting interviews with customers, as well as considering overwhelming anecdotal evidence, Burrows credits a 1 percent to 2 percent increase in sales in California?about $10 million (a figure he calls conservative)?to the wireless project.

Stuck in Nashville with the Memphis Blues Again

Birmingham-Nashville Ex-press (BNE) is a midsize transportation company with a fleet of 80 trucks, 65 of which are big rigs that make deliveries throughout the eastern United States. Rick Osgood, CFO of the Nashville, Tenn.-based company, says that he thought he would have to put in a wireless system when his customers started demanding to know where their freight was in real-time. In fact, the customers never did, but when BNE had to replace its fleet management system for Y2K, it bought a system that was wireless compatible.

At first BNE used its old tracking and management method with the new system. Every day, drivers would phone in their location between 8 and 9 in the morning, and again between 4 and 5 in the afternoon. “Unless we had a problem, we didn’t hear from them at any other time,” says Osgood. If, for example, a driver was on his way to Chicago and “we heard he was in Bowling Green in the morning, we’d figure he’d make it by mid afternoon.” They did?mostly. But Osgood recalls lots of times when he’d tell a customer a delivery was on its way and he really didn’t know. “It’s disconcerting,” he says. “You have to hope you’re right.”

Two things would happen when drivers checked in: 1. they would lose drive time; 2. they would either have short conversations or leave messages with overwhelmed fleet managers who rarely captured everything.

Between December 1999 and March 2000, after upgrading the management system, BNE installed a satellite-based fleet tracking system from Owings Mills, Md.-based Aether Systems for an initial cost of $15,000 plus $2,000 per truck. With training, that added up to $150,000. The system let BNE capture real-time location information about its fleet, and saved the drivers stop time. Cell phones would have also saved time?and cost less?but many drivers still would have been forced to leave messages. And always-connected mobile devices don’t have the range that truckers need.

Osgood reports that the investment has produced an immediate return. Excluding freight rate hikes, revenue per truck per day has increased from 7 percent to 10 percent, he says. That adds up fast, and Osgood says that the increased truck revenue has already led to a 115 percent ROI, approximately $175,000. That doesn’t even take into account increased efficiency at the home office. BNE no longer needs staff to answer phone calls from drivers and check voice mails, and Osgood says that those managers have been reassigned. The additional location information also leads to better customer service, allowing Osgood a measure of peace of mind when people ask him where their cargo is.