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Why ROI Isn’t the Best Way to Calculate the Worth of Mobile Apps

Companies frequently use traditional ROI calculations to judge the success of an IT project, or determine whether to go forward with one. But a Gartner report, "Approving the Correct Mobile Projects Requires Additional Evaluation Criteria," written by analysts Leif-Olof Wallin and  Bryan Taylor, warns that ROI may not be suitable for determining the worth of a mobile app. Worse still, relying on ROI calculations to decide whether to move forward with a project can put an enterprise at risk.

GartnerGartner warns in the report that between now and 2019, "40% of all mobile app projects will be denied funding due to inadequate projections of ROI," and that "through 2019, half of all approved mobile projects will be inadequately funded to ensure their success post deployment." That's all the more reason to come up with a better way than ROI to gauge the success or projected success of a mobile project.

Why Value on Investment (VOI) Trumps ROI in Mobile

Traditional ROI calculations don't make sense for mobile apps for a number of reasons, Gartner says. A big one is that "The expected life of the actual app or infrastructure investment is not the same." Infrastructure frequently lasts quite a few years, while mobile apps instead have life-spans of 18 to 36 months. In addition, mobile apps often need a higher level of ongoing support to stay current --- for example, to be rewritten for new operating system releases.

So rather than ROI, Gartner points to several other kinds of calculations enterprises should use when calculating the value of an app:

    • Value of investment (VOI): This generally works best when security and risk, compliance, competitive pressure, or brand impact are driving the need for the app.

    • Limited cost: This is a fast-track decision process for smaller projects.

    • Business willing to pay upfront: With this option, a line of business or department would be willing to front the cost of app development.

VOI should be used for speculative investments, Gartner says, such as opening up a new business area. It often works well when it comes to compliance as well, because the cost of non-compliance can be so high. VOI should also be used in instances of competitive pressure, in which survival requires that you build the app.

When it comes to fast-track, limited-cost calculations, they come into play when a mobile project is "so small from a budget perspective that the overhead introduced to follow the standard heavyweight project approval process may be larger than the actual project."

As for a business willing to pay upfront, if a line of business (LOB) absolutely needs an app, IT and the LOB can charge the cost of the project back to the LOB.

More information about the report.

Whether you use ROI, VOI, or some other method for determining the worth of an app, you need a flexible development platform that lets you iterate quickly --- something at which that Alpha Anywhere excels.
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About Author

Amy Groden-Morrison
Amy Groden-Morrison

Amy Groden-Morrison has served more than 15 years in marketing communications leadership roles at companies such as TIBCO Software, RSA Security and Ziff-Davis. Most recently she was responsible for developing marketing programs that helped achieve 30%+ annual growth rate for analytics products at a $1Bil, NASDAQ-listed business integration Software Company. Her past accomplishments include establishing the first co-branded technology program with CNN, launching an events company on the NYSE, rebranding a NASDAQ-listed company amid a crisis, and positioning and marketing a Boston-area startup for successful acquisition. Amy currently serves as a Healthbox Accelerator Program Mentor, Marketing Committee Lead for the MIT Enterprise Forum of Cambridge Launch Smart Clinics, and on the organizing team for Boston TechJam. She holds an MBA from Northeastern University.

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The Alpha platform is the only unified mobile and web app development and deployment environment with distinct “no-code” and “low-code” components. Using the Alpha TransForm no-code product, business users and developers can take full advantage of all the capabilities of the smartphone to turn any form into a mobile app in minutes, and power users can add advanced app functionality with Alpha TransForm's built-in programming language. IT developers can use the Alpha Anywhere low-code environment to develop complex web or mobile business apps from scratch, integrate data with existing systems of record and workflows (including data collected via Alpha TransForm), and add additional security or authentication requirements to protect corporate data.