Exploring the Wireless Wilderness

Forget the hype: Which B2B and B2C m-commerce applications are really expected to succeed in the future? Experts weigh in on these and other wireless challenges facing corporate America -- including privacy, security and cultural issues -- in the latest chapter of Computerworld and ebizChronicle.com's roundtable series.

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Kashmeri: Please define what's meant by 3G, or third-generation, wireless:
Distefano:
Third-generation typically is characterized by a set of services as well as a technology. So services being third-generation advanced services like moving video, integrated location-based services, depends on high-speed bandwidth, the ability to get instant connectivity.
Then there's a technology aspect that includes new radios, new spectrums, new distribution, new billing mechanisms to actually support that third generation of application services. So it's really not a sequential, not a linear, step. It's really in many cases an order-of-magnitude jump in technology, hopefully in services and with the applications provided.
Kashmeri: What about 2.5?
Distefano:
That was 3G, 2.5 being incremental improvement on existing technology that, at least from a positioning standpoint, would aspire to deliver many of the services of a third generation without the massive investments in infrastructure.
So it's today's spectrum, today's technology, switching from circuit-based networks, which we have today, into a packet based or an IP-based network that allows you to get into much better sharing of the bandwidth, much more accommodating to data traffic as opposed to voice traffic.
Black: [Holding up a wireless phone] There's also confusion about what to call this. Is this a Web phone? Is this an Internet phone? Is this a cell phone? Most people don't understand the differences between data vs. the voice side of the phone.
Hoffman: Which appear to be the long-term winners for mobile-commerce applications? Are there any killer apps out there, either in financial services, travel or other vertical industries?
Glessner:
There are many different pieces to it. There's B2B, business to business; B2E, business to employer; B2C, business to consumer. Most people would define m-commerce as the B2C piece using some type of mobile technology. It could be a cell phone with voice or it could be a handheld or another device.
A lot of our customers are using handhelds for horizontal applications like mobile office, which is e-mail, calendaring and scheduling. A second broad horizontal is in the area of CRM -- customer relationship management -- to provide better customer service and grow top-line revenues.
Then there are other horizontals like enterprise resource planning, supply chain management that you see across all different verticals. But I guess what we see initially for this year and next year is the mobile office and CRM, as companies are trying to figure out how to deploy mobile solutions to improve their top-line revenue growth or provide better customer service and better vehicles for customer retention as well.
Esherick: One of the things that prevents consumers from participating more here is that it's too tough to figure out which device to buy. I know; I have three [a PalmPilot, a Research In Motion pager and a cell phone].
I think the killer app is fixing that problem, making it much easier for people to select the device that makes sense for them. And consumers shouldn't have to know the difference between Web and WAP [Wireless Application Protocol].
I don't think the industry has made it easy enough for people to understand what they're getting. And until those things converge, I think there's going to be a limit to how many people adopt these services, because it's just not that easy.
We have no customers that are only online. Our best customers are using every single channel to do business with us. We have 85,000 people that are trading and having information pushed out to them on one of these devices. We're burned into the Palm VII, so every Palm VII user can get delayed [stock] quotes from us. But I think there's a ways to go in terms of ease of use before you really see people living by these things like they do in Europe and other parts of the world.
Black: M-commerce is too narrow; it's about m-business. And I think you have to be cognizant that m-business isn't always about using a wireless device for financial transactions. It can include business efficiencies, such as the use of these technologies by a ground crew for an airline.
It's very ironic how Tracey [Esherick of Fidelity] and I are in totally different industries [financial services and travel] but the same paradigms are happening. Our best customers are the ones that carry these devices because they're the ones that travel the most and want to check on flight schedules, fares, etc.
Esherick: I think the example that Dan [Black] gives is great. Because if a customer has two or three devices, how does United know what device to push information out to? You can't take advantage of that great technology unless you know where people are and what device they have. That's going to be key in knowing how to service these customers with the killer app. And that's not here yet today.
Distefano: I think trying to figure out what the killer app is is a bit of a scavenger hunt. The degree to which something allows us to conduct our personal life, our business life the way we want when we want it, that fits our natural workflow at home, on the way to work, on the way to our kids' games or whatever, I think that will be a key element.
There are a lot of workplace-type apps that are a good fit for untethered field workers. It's the ability to give real-time information in a sales situation. If I'm a maintenance engineer, if I'm a field service rep, the degree that I can know right then at the point of repair what the part history is, what kinds of maintenance have been performed on this device -- whether it's an airplane or it's an expensive piece of medical equipment.
Esherick: I would also add that everyone at Fidelity is completely tied to these pagers. We use them to make decisions. We're in meetings all day long, we're spread out between 15 buildings around Boston. And you can't get somebody unless they have a pager.
You'd have to cut their hands off to get people [at Fidelity] to give you their pager back. It's the way we communicate; it's the way we make decisions
Lambert: When I look at a business plan of a new wireless company that wants financing, I look at two things. First, is there a productivity improvement, meaning either cost or time improvement?
One segment that we haven't looked at here is the device-to-device [market]. I think that's going to be an important part of the wireless sector. For example, this is a really simple app: a location-based security system, where you stick a little device in the car and a [security] company can track that car and get insurance companies to pay them for doing the tracking of stolen cars.
There are a lot of applications that can save you time, save you cost and help companies take advantage of opportunities in other ways.

ROI
Kashmeri: Speaking of costs, is it possible to apply historical return-on-investment criteria against wireless investments? Should companies factor in these huge 3G licensing costs?
Esherick:
Overall, we view this as part of doing business. And while it's a new, leading channel now, I think it's going to eventually be just like 800-number service was. It's going to be a cost of doing business. And so the way we are looking at it is really from three different perspectives.
One is brand, we want to be perceived as a brand that is leading edge as it relates to technology in the financial services space. And if that's a core competency, we've got to be out there with the latest technology.
With the wireless investment that we have made, it has moved the needle more in that direction than any other thing that we've done. It has repositioned us as a modern, technologically innovative company. So the brand attribute is important across all of the channels we do business in, whether you're a 401(k) customer, a plan sponsor or whether you're a retail customer. So we invest for that reason.
The second is acquisition. Through an agreement we have with Palm, we have seen how some Palm VII users would like to be able to get quotes and news. And we work through our marketing departments to try to get them to convert to customers. And those customers that are early adopters of technology tend to be more affluent and be our target audience. So [customer] acquisition is another reason. And we have measurement around that.
The reason we're in this space is customer service. Ideally, this will allow us to serve our customers better. When you talk to customers who are actively using these devices today, they love them -- they absolutely love them. It gives them freedom, and it allows them to keep on top of things, and they're easy to use. [Wireless technology is] still not where we'd all like it to be, but it's a heck of a lot easier to use these than it is to log on to the PC sometimes.
Lambert: I cover one of the companies that was bidding on the U.K. wireless spectrum and won one of the licenses. And some of the reasons they gave me for paying so much for their license were that there are capacity constraints for voice [and] that it was a strategic move because if you think you're eventually going to have voice over IP in the wireless segment, then new networks will be more efficient than the old networks. And you're capable of paying more for the spectrum if you're able to put in a more efficient network.
In the end, I think they have paid too much for the spectrum in the U.K., but I also think they're going to have a competitive advantage of using mobility for the services.
Glessner: Do historical ROI analyses apply to these multibillion-dollar investments? From my perspective, the answer is absolutely yes. And Old Economy rules apply to this New Economy kind of situation, and the stock market is bearing that out.
I echo everything that Tracey [Esherick] said about how consumers or businesses will pay for what they perceive to be the unique value. That's the convenience of getting information anytime, anywhere, providing a new service, etc. And that's what businesses will have to think through as they're making these major investments.
Another ROI aspect to consider: How do you measure the ROI on improved patient care or a saved life? We've got some customers like Cedar Sinai Hospital in Los Angeles that are using wireless Palm VII handhelds for their doctors to provide better patient care, to check test results, medical records and check for issues with medication prescriptions.
Distefano: On the topic of the hundreds of billions of dollars that have been spent [on 3G licenses], I struggle with that. Right now it's not necessarily an enviable position, but I guess these guys are a lot smarter about exactly where this market may be going than I might be.
So I've got to put myself in their shoes and think out 10 years from now. This is not an investment that should be measured or evaluated within a three- to five-year horizon. This is a 10-, 15-, even 50-year investment that they're making.
If you look at what's happened in the European markets from a carrier perspective, this may be unfortunately something that just may not be financially digestible by some of the carriers, and it's going to force consolidation perhaps sooner than it would have happened.
But I think the ones that are going to come out of this, again, 10 years from now, are going to look back and this is just going to have been something that was a brilliant move, that would have been probably cheap by those current standards. That you are going to get in and invent a multitrillion-dollar market with just a few hundreds of billions, I mean, that's forward-thinking.
It's going to allow them to create a market for pennies on the dollar for returns 15 years from now.

Kashmeri: So, then, this is about brand-building, about building customer relationships?
Distefano:
It's really about "How can we accelerate the process to drive more claims, quicker cycle times, increased cash flow, some of the basics that I think were in vogue 15 years ago that maybe fell out of vogue over the last five years? They're absolutely back going strong.
Esherick: I think what happens sometimes with these new technologies, and I know it has happened at Fidelity, is that everybody wants a wireless strategy. Well, no, we have a business strategy, and the wireless strategy should sit underneath the business strategy. It happened when we got started on the Internet. Everyone asked, "What's our Internet strategy?" Well, our business strategy is here, and here's how the Internet fits.
Companies sometimes get caught up in the sexy new technology and lose sight of what they're trying to accomplish as a business.
Channel expenses are the biggest driver of profitability for a customer, and if you can manage that aggressively, you can manage the profitability. It actually has more impact than revenue. But at the same time, each time you introduce a new channel, the other channels aren't going away.
And so, it's cost shifting and becoming more efficient and offering better customer service than it is necessarily taking cost out of the system. We have the same number of phone calls we've had forever, even though 85% of our trades are done online.
People are now demanding things of the phone rep because of the Internet that they never did before. like trying to balance their health and tax issues while they check their quotes or place trades online. So I think the implications back to the old-line businesses are pretty significant.
Black: Tracey [Esherick]'s right. You cannot assume that you will never want to talk to anybody from a transaction perspective. I want to go back to the topic about cost issues and the efficiency of the channel. The cost for our organization was more of a construction cost. It was not that we pay an ISP necessarily, per transaction, per access, per information view.
What's the value of that at the end of the day? It's not very tangible at this point. The ROI is not black and white. You draw some soft qualities like customer retention that are more measured by surveys than they are measured by financial execution transactions.
Lambert: Coke is looking to advertise on cell phones, and they'll pay for the first five minutes of use on your cell phone. So all you have to do is listen to a 30-second ad on your phone before you dial in and then the first five minutes will be paid for, that sort of thing.
So you're going to have revenues coming into businesses and not necessarily from the users. And I think that's one of the elements that's been missing in calculating the ROI for building out networks and purchasing spectrums.
Esherick: We've done a couple of things. With Palm, one of our competitors was actually on the Palm before us and we were able to move them off because we gave Palm some capability that the other company didn't have. We didn't require you to have a Fidelity account before you got quotes. And that was a key differentiator so that the Palm device would be more useful to the Palm audience with functionality that we could deliver.

Market Successes
Hoffman: What are some concrete examples of mobile-commerce successes, either in the business-to-business or business-to-consumer space?
Lambert:
I think there's going to be a few categories that emerge. As with the Internet, advertising is going to be a key area. I think the mobile device is going to create customization where carriers can actually track to some degree what you do and have a personal file on you. And then, if you happen to need something, then they'll be able to communicate the fact that somebody's offering a product or service that's cheaper or better.
There's a company in Canada called Grocery Gateway, and they're basically a grocery ordering service where, pretty soon, you're going to be able to order your groceries over wireless devices. So while you're in your car, you're going to be able to say, "OK, I need some milk and butter," and then use your wireless device to order them.
Glessner: Safeway in the United Kingdom is giving out Palm-powered handheld devices to their customers with little magnets on the back of them to put on their refrigerators. As people go through the orange juice carton or the milk carton they just tick off [that they'd] like the MinuteMaid or or whatever the brand is. And this gets transmitted wirelessly to the Safeway store.
Am I more likely to stop off at Safeway to pick up the groceries that they know that I want, or would I stop off somewhere else to buy food on the way home? Safeway's bet, of course, is that this is a great customer-retention opportunity.
Fiat in France is using handhelds to automate and improve the whole buying process for cars. And we all know how pleasant that is. But they're basically trying to provide the salespeople with all the information about promotions and financing and options so they never have to leave the customer for any period of time and they can always answer all of their questions.
And then they can print the contract [just] by beaming it to a printer with their Palm. So they just tried to automate and improve the whole experience of being in a car dealer, which is not the most pleasant necessarily.
Prudential uses Palm VII handhelds to improve the whole real estate home-buying process. Real estate agents can ask the client about their disposable income, debt, desired neighborhoods, etc. Then they can get all the information wirelessly on the Palm VII and they can go around and show houses.
On the B2E [business-to-employee] side, The Atlanta Journal-Constitution uses handhelds to automate the newspaper delivery process, where drivers touch the screen and see that they need to deliver the morning newspaper to the second house on the left, touch it again, drive two blocks, make a right turn, deliver the evening newspaper to the third house on the right.
Sears recently announced that they're going to be deploying 16,000 Palm-powered handhelds in all of their stores for inventory management and other types of in-store applications.
Esherick: During the whole IPO frenzy over the last year or so, we allowed our best customers to participate in the initial public offering as they were coming out. And because of the tight [Security and Exchange Commission] regulations with all kinds of back and forth, we were figuring it was probably six phone calls back and forth to a rep. What's the IPO? Who is it with? What's the pricing range? I mean, a lot of back and forth.
As a requirement to participate, customers had to have a pager. And because some of these deals were priced at midnight, we're calling customers trying to see whether they still wanted to participate in the deal.
And so it was easy for them if, say, they were out at dinner -- wherever they got the message that the deal was priced. Did they still want it? And if so, off it went. It was a way to solve a service problem and deliver better customer service at the same time. And it fit with the regulatory requirements of the communication with the customer.
Hoffman: I would guess that the IPO market is a lot less frenzied these days.
Esherick:
A lot less frenzied. But they still have their pagers. I think we've done seven deals [as of March 31] this year.
Distefano: When you think about some really leading examples, look at what FedEx has been doing now for several years, even Avis.
They had a particular need that they went after, and there's been enormous advantages from an internal cost perspective as well as from a branding perspective for FedEx.
One good example is one of the largest trucking and transportation companies in the U.K. They looked at their operations and realized that they've got somewhere between 20% and 28% of their vehicles on the back haul [from a delivery] that come back empty.
They said, "How can we take advantage of that excess capacity?" So what they've done is basically create a marketplace that allows shippers to bid on the ability to move that gear.
So if there's a two-pallet load in Manchester that needs to be moved to London, I've got two empty trucks there that just emptied out this morning, As a carrier, I can take what would have been unused excess capacity that was just going to make this drive back to London totally empty, bid on that deal, get it within minutes because it's a real-time auction, load up the gear and drive it back.
That couldn't happen without the visibility of the marketplace itself. It couldn't happen without the visibility for all your drivers out there to have access to the marketplace. Nor would it be able to happen without the central dispatching to be able to see with location-based technology much like Dave [Lambert] described.
The industry now has the opportunity to become much more efficient, to let suppliers bid and let carriers and shippers communicate where that wasn't possible before. And it just simply couldn't have been done without mobile technology, without the ability to communicate anywhere, anytime and understand where my assets were, my moving assets as they were flowing through my distribution stream.

The Continental Divide
Kashmeri: Is Europe really ahead of North America in its use of wireless technologies? Or is it ahead in just a couple of areas like sending SMS [Short Messaging Service] messages and in thinking about the deployment of 3G technologies? What about Japan?
Black:
I don't like lumping Europe together as a whole. It's way too much to deal with, and if you separate out the Scandinavian countries and leave everything else, I would call everybody else equal to us in some perspectives, such as data penetration.
Scandinavia is ahead of us in terms of data and Web phone type of abilities, but Europe in terms of France and Germany and the U.K? Absolutely not. I think they're having the same struggles we are in making those type of decisions.
Japan is a community of people that have standardized on an NTT DoCoMo phone and are able to communicate as a community among themselves. And so that standardization issue we talked about earlier has helped accelerate things that are not possible in [in North America] because the standardization doesn't exist to that level.
Distefano: I think Dan [Black] raised one of the key points, which is that [Europe] is not homogeneous. I think there are elements from a coverage standpoint, from a penetration standpoint, that come out. I do think that there are some common aspects of the infrastructure where I think Europe is ahead.
Clearly from a spectrum standpoint, I mean we haven't even had a spectrum auction for 3G here; they're well into that [in Europe]. They've already spent $100 billion. Is that good or bad?
I think the pace of adoption is going to be much quicker [in Europe] based on where they're at. I do think there are some advantages because there is a relatively standard communication mechanism [Global System for Mobile Communications, or GSM] across Europe. There are probably more examples of companies doing asset management or track-and-trace-type applications in the European countries than there are here. There are certainly more examples of position-based commerce going on in Europe because they've been able to take advantage of at least one element of their infrastructure that's a bit ahead of ours.
One of the challenges that we're seeing in the industry may not be bandwidth, but coverage-related. One of the guys on my team just came back from Milan, where he was up on a mountaintop in Italy -- perfect coverage, perfect connection.
Now, if you're in downtown Paris, there are still issues getting a connection just like there are here [in the U.S.]. But in general, there's a higher level of delivery coverage in Europe.
Glessner: From what I've seen, there's more innovative thinking about how to use mobile technology effectively to improve business operations maybe in North America than elsewhere.
In Japan and Europe, there's more of a predisposition toward using a cell phone vs. a handheld.
And to the point that Tracey [Esherick] made earlier about device proliferation, what will we end up using long term? Cell phones? Smart phones? Handhelds? We're not exactly sure. So we're licensing our operating system to Samsung, Nokia, and Motorola to try to make sure that we're a play for those cultures regardless of the device that people or businesses choose to use.
Lambert: I think the reason mobility has been more popular in Europe largely dates back to pricing. What they have there, because their fixed-line infrastructure was not as good as in North America, is variable cost pricing, where they charge you for the minutes to call next door.
So if you're going to get charged for the minute, you might as well do it on your mobile phone, which is almost the same cost. That's why mobile phones became so popular in Europe.
On the data side, North America is further ahead as far as Internet adoption is concerned. So when you start comparing the two, I think Europe might have a slight advantage as far as technology is concerned.
But I think nine months or a year from now, North America will probably be ahead of Europe as far as mobile data is concerned.
For sure, the mobile phone in North America is a luxury item; in Europe, it's just a utility.

Key Challenges
Hoffman: What are the key challenges organizations face in rolling out mobile-commerce applications? Privacy and security issues? Skills shortages?
Esherick:
One of the biggest challenges is that I'm not sure we're thinking big enough, speaking for Fidelity. I think that there are so many possibilities with some of the new technology that even the experts can't envision how it can make people's lives easier. So I think one of our challenges is to be thinking far enough out so that we can really get to the killer app or get to that next service or next revenue stream or whatever it is.
I think the other challenge with new technology is making sure it's closely linked with the business. People get very excited about new technology, and sometimes you have technology out there for the sake of technology.
Lambert: Financing is going to be a serious challenge going forward. A lot of the new businesses are going to have to prove that they have a viable business model by generating revenue before they get significant financing.
I think the days of financing a concept are over and you're going to have to see some cash flow and some revenues to give companies significant financing.
There's a company called Micro Cell Telecommunications. It's the only GSM operator in Canada. They have people go look all over the world for applications that [mobile telecommunications] carriers want. They have a big conference every three months where all these companies that they are looking to invest in get together, and the mobile carriers' customers come to these conferences and then you have that financing process that starts.
That's a great way to make these applications come to fruition. Because ultimately, financing is going to be based on their demand for the services that the application provides.
Glessner: One of the big challenges companies are facing is how they cost-justify a lot of these wireless investments. Enterprises are struggling with that, and so they are obviously just looking to begin with the highest-ROI projects. And we tend to see this from our enterprise customers in the area of customer service, customer retention, customer loyalty.
Another challenge that enterprises are sharing with us is security, including wireless transmission of e-mail, authentication and device security.
The whole wireless infrastructure, concerns about standardization, coverage, bandwidth, speed, is also a big concern for enterprises today. As more B2B, mission-critical applications are used on handhelds, support also becomes crucial: What kind of support do you have for handheld devices?
There's a lot of converging technologies as well. So having systems integration capabilities is very important. There's also a multitude of devices right now: cell phones, WAP phones, handhelds, laptops. So enterprises are struggling with "How do I support, how do I manage, how do I get out this enterprise information to a multitude of devices? And how do I do it securely?"
Distefano: Infrastructure is an enormous challenge, all the way from multiple carriers to coverage. I mean, if you're a BP Amoco, there's an enormous value proposition for having wireless communication from your oil rigs back for managing maintenance, for managing product flow. Unfortunately, coverage in central Oklahoma is just not that good.
Another big challenge is that the life cycle of new technology is now less than the life cycle of delivery. So we start a six-month project, [and] there's a new device. Are we outmoded as soon as we launch? That's extreme, but still, there's an issue there -- there's a challenge there that we have to think about from a technology and infrastructure perspective.
Finally, if you look at an organization that has just invested maybe three years and tens, if not hundreds, of millions of dollars in building their wired architecture, now you start talking about a mobile architecture. Let's pull this out, let's remove that, let's replace this. And that's just not tenable; it's not supportable.
Black: The consumer has come to a mind-set that says, "This is what I want now, and why can't you do this right now? Why do I have to wait until tomorrow? Why can't you get access to this database information now? Why do you have to send me an e-mail later on?"
I think the consumer is already there in terms of expectations. It's the back-end systems that are not there. And that is obviously the pain for a lot of things.
There's also a big challenge on educating the consumer on [m-business] and what they can and can't do.
Also, how does this compare to other business priorities? The Internet is the bread and butter right now. How much time and energy do you put into this wireless stuff that's really on the edge of adoption?
You've got to put some effort into it, because you don't want to be left behind. But at the end of the day, where's your bread and butter? It's not here. My point is, where do you draw the line?
This roundtable was a joint effort of Computerworld and ebizChronicle.com Inc., the online daily of business-to-business e-commerce.

Copyright © 2001 IDG Communications, Inc.

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