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Mobile and cloud computing: Today's center of innovation?

Consultant Bob Egan says that companies need to spend money on mobile cloud not just because it's beneficial to productivity but because it's required to keep up with competitors.

Mobile devices and cloud computing have a symbiotic relationship: Cloud computing enhances the use of mobile devices, and mobile devices have propelled greater use of the cloud. Together, the two enable increased agility for consumers and for businesses, says Bob Egan, chief research officer and founder of Sepharim Research Group. The real benefit of cloud-enhanced mobility is not about the device or the applications, Egan says, but about the positive impact on the business.

In this Q&A Egan explains why mobile devices represent such an important platform for businesses, why incumbent businesses can't afford to fall behind in their use and support of mobile and cloud computing, why companies should strive to make it easier for customers and employees alike to use mobile devices, and what role mobile backend as a service (MBaaS) should play in IT strategy.

This interview has been edited for length.

Why should mobile cloud be of interest to CIOs and other senior IT people?

Bob Egan: I think that the primary reason that CIOs are propelled to invest in mobile [is] to generate business impact.

Image of Bob Egan, Sepharim Research GroupBob Egan

I say to people, "Measure the return on your investment by looking at two primary factors. One is the dollar return on revenue per employee that's been mobile-enabled versus those who are not. And look at the dollar return on the base assets that you have. So, if you have $1 million in assets, take a look at you versus your competitors, or the new companies that are emerging [that] represent a threat."

One of the examples that I talk about is the U.S. Postal Service, which generates about $1.85 return on every asset that they own compared with someone [a company] like Box, [which] is basically in the same market. The U.S. Post Office's value per asset is $2.80 whereas Box's value per asset is $3,630. The Post Office's value per employee is $113,000, whereas Box's value per employee is $1.4 million. You can make the same argument when you look at the incumbents in the automobile business; a GM versus a Tesla, [for example]. General Motors' value per asset is $1.85, and Tesla's value per asset is $11. GM's value per employee is $240,000, whereas Tesla's value per employee is $2.9 million.

You would look at the return rather than cost reductions enabled by mobile devices?

Egan: Yes. One of the big mistakes that a lot of organizations have continued to be plagued by in terms of innovation investment is that they still put IT on the expense side, the balance sheet, rather than as an organizational weapon on the revenue side. And mobility, in particular, really is much more suited to draw revenue in new and investing ways. It's about creating opportunity.

Can you give some examples of how that would be done?

Egan: If you think about new-idea companies, their return on assets and return on revenue are far bigger than some of the old, stodgy incumbents. ... If you talk to a Ford or a General Motors, you see a huge disparity against a new-idea [company] like Tesla, where the incumbents have now begun to think of themselves -- and this is all the [auto] manufacturers -- ... as a transportation business. Old, incumbent companies tend to be very heavily loaded in the assets they own; a lot of middle management; management of networks that they own and operate; [and] the big-box, on-premises equipment that they own and operate.

New-idea companies are not overweighted with people; they're not overweighted with a lot of on-premises hardware. But they do weight themselves in distribution and analytics. They create ways to anticipate the needs of customers in more proactive ways.

What's driving companies to invest in mobile and cloud computing?

Egan: The biggest reason to invest in mobility for enterprise is that you have a bunch of workers who organizations are saying, "You need to be agile. You need to be fluid." And the consumers are saying, "Fine. But build the infrastructure that's at least as agile as you expect me to be." And that's been the big disconnect.

And by that, you're talking about apps that can be used to improve productivity?

Egan: Yes. Help me save time, help me generate more money. If you're saying to me, "You want to do more and do more in a quicker, simpler, more efficient [fashion]," what you're describing is agility and driving increases in business velocity.

When you look at the number of [mobile] units today and the number of units that we predict -- more than twice the desktop in 2020 -- [it seems clear that mobile is] the new center of innovation.
Bob Eganchief research officer and founder, Sepharim Research Group

[Employees are saying that the] infrastructure still moves at largely a snail's pace. It's not very agile. It doesn't meet the needs and the expectations of the average worker who has come to appreciate the agility and the opportunity created on the phones through consumer-oriented applications.

So employees are saying things like, for instance, "Don't make me log on to the VPN in order to get my work done"?

Egan: I think it's that. You raise a secondary problem. "It's hide technology from me. And present content and services to me to get my job done. Don't make me work harder because I have a new tool in my hand. Make it much easier for me."

I think a lot of organizations ... have to really take a look at this portfolio of technologies that are emerging at various maturities. So you think about cloud computing. You think about enhancements in security. You think about mobility. You think about analytics. At some companies, they're already thinking real serious about Internet of Things, or how to apply that to the business. They're also talking about big data and little data and all that.

And the new-idea companies are taking a portfolio approach to all of those items; [the portfolio approach considers the use of the technology and all the issues that flow from it, such as measuring performance and productivity of that technology through analytics]. They're looking at the incumbents in the market, and they're picking them apart at the most strategic place where they see the weaknesses.

If you have a new-idea company that takes a look at a particular [incumbent] and says, "You know, they're really not doing much with big data and analytics. They really haven't made the move to the cloud. Let's go attack them at that front with a suite of services, and go try and steal the customers."

So if you're a CIO working for an incumbent, then you really should be concerned about that?

Egan: You should be really concerned. Because this really is about true digital transformation across the entire supply chain, whatever your market is. And too many companies are very risk-averse to take on that portfolio approach. So you have some people that are specializing in mobility and some people that are specializing in analytics. And the real leaders are going to emerge because they've taken a portfolio approach across a couple little segments and the sections that may come along with those segments.

And some of that's not very sexy. Just think about expense reports. That is not a very sexy application. If you've got 5,000 employees and half of them need to do two or three expense reports a month, you can very easily add up the return on an employee if you're able to streamline that through some digital transformation method.

What are the biggest headaches or challenges of mobile cloud?

Egan: Well, I think the biggest headaches of mobile cloud range from worries about security to, in many cases, ease of use. [For instance], you actually have to manually, through a phone or a tablet or your laptop, for that matter, log in to a VPN and then log in to the cloud.

And then there's also some performance issues, what's known as "latency issues." Because if you don't orchestrate your cloud in a way to reduce latency, that ruins the user experience. So the good news about cloud is that it exists. The bad news about the mobile cloud is that the implementations, in many cases, are pretty terrible.

Are they getting better?

Egan: I think they are getting better. I think that we've seen a lot of companies blindly go down that path with the idea [of building] a mobile app," but without the experience to actually understand what works for consumers and what doesn't. And that gets back to some companies just not taking the portfolio approach to bolt on things like analytics, to efficient cloud use, and taking a look at big data and converting it to little data, so that they can actually understand what's going on.

Only after they fail the first two or three times do they start getting it right.

What else should CIOs be thinking about in relation to mobile and cloud computing?

Egan: Well, I think the big thing is that it's really about cloud computing, not necessarily mobile computing. But the whole thing around mobile cloud really is part and parcel with the big shift that CIOs need to consider as they move from an organization that is very committed to the on-premises model. And take a look at how they create a back office that's at least as agile as the consumers and the workers that expect to use it, while also guarding for security and privacy.

That's a pretty big order to fulfill, it seems.

Egan: Right. Coupled with that, there's still a big [mistake] by a lot of organizations [that don't consider] mobile [as] the center of innovation. And they still hold onto the desktop far too dearly. So just to put this in perspective, over the next four years, the Windows operating system [market] will cap out at about 2.2 billion or 2.3 billion units.

The smartphone industry is already, in total, about 4 billion units. Of that, something just less than 3 billion are smartphones. And you layer on top of that tablet adoption and then you layer on top of that the Internet of Things, which I call the sensorization of everything. You have to realize that if 30 years ago, the center of development and therefore innovation from an IT standpoint was mainframes, and then beginning some 20 or 25 years ago, it became the desktop primarily in Windows ... it's tough to [explain] why mobile isn't the new center of innovation. When you look at the number of [mobile] units today and the number of units that we predict -- more than twice the desktop in 2020 -- [it seems clear that mobile is] the new center of innovation. We really have to put a lot of development dollars [into mobile]. And for a lot of organizations, that's very tough because mobile started off in the land of voice.

And that also has big implications because mobile [is much less] homogeneous environment [than] Windows [was]. Mobile is very heterogeneous. Since we have competing operating systems and [there are] competing cloud [environments], and the way people build applications and the development tools that they use are very diverse.

And so, that's a lot to take on, but you have to stand back and say that if 100,000 mainframes was where all the action was in terms of developing and innovation 35 years ago, and beginning 25 years ago it was all about the desktop and Windows, then you have to conclude that a mobile environment including the mobile cloud is where you need to put your investment dollars today.

What about mobile backend as a service? How does that fit in with a company's mobile cloud strategy?

Egan: I think that the term "mobile backend as a service" is sort of foolish. It's really "backend as a service." In fact, if you made something specific to mobile, by definition, you're putting limits on your opportunity. The desktop isn't going to go away.

But, the fact is that we spend more time on the "traditional desktop." But what we do is actually a lot more complex, and it continues to consume more and more bandwidth, especially with audio and video. And the growth rate certainly around smartphones and tablets is growing at a much more exponential rate, upwards of 86% [in compound annual growth over the next four years]. Part of that has to do with [the fact] that it's more of a continuous-use model. We always have our phones with us, even when we're sitting at our desk. The CAGR for the desktop is projected to be 23%.

The point is, you're not building a mobile backend as a service, you're building a backend as a service to serve up a suite of services that are completely agnostic to the screen or the network that you're connected to. And that's absolutely key. I think there were  [a lot of] VC-vested companies that were trying to create some public relation messages and marketing messages out there to differentiate and frankly substantiate the funding they were getting. But I think even those companies are beginning to move away from this MBaaS. Because it's just too limiting. I don't think there's an audience for it.

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