Five steps for successful adoption

Tablets in the enterprise

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Strategy& Contacts Motorola Mobility

Beirut

Bahjat El-DarwichePartner +961-1-985-655 bahjat.eldarwiche @strategyand.pwc.com

Delhi

Ashish SharmaPrincipal +91-124-499-8705 sharma.ashish @strategyand.pwc.com

Düsseldorf

Roman FriedrichPartner +49-211-3890-165 roman.friedrich @strategyand.pwc.com

Madrid

José AriasPartner +34-91-411-5121 j.arias @strategyand.pwc.com

Milan

Luigi PugliesePartner +39-02-72-50-93-03 luigi.pugliese @strategyand.pwc.com

Moscow

Steffen LeistnerPartner +7-985-368-7888 steffen.leistner @strategyand.pwc.com

Mumbai

Jai SinhaPartner +91-22-6128-1102 jai.sinha @strategyand.pwc.com

New York

Christopher VollmerPartner +1-212-551-6794 christopher.vollmer @strategyand.pwc.com

Paris

Pierre PéladeauPartner +33-1-44-34-3074 pierre.peladeau @strategyand.pwc.com

São Paulo

Ivan de SouzaSenior Partner +55-11-5501-6368 ivan.de.souza @strategyand.pwc.com

Chicago

Wayne WhiteCorporate Vice President, Global Enterprise Sales +1-847-523-3992wayne.white @motorola.com

This report was originally published by Booz & Company in 2012.

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Executive summary

The enormous popularity of tablet computers among consumers is forcing enterprises of all sizes to accept them as part of their technology arsenal as well. Indeed, while companies bought just 5 percent of all tablets sold in 2010, that figure is expected to double, to 10 percent, by 2015. So far, much of this activity has been driven from the top down, beginning with top executives and board members of large enterprises. But that will likely change soon, as the productivity gains from new ways of using the devices become clearer.

Device makers who wish to compete in the enterprise market, however, must offer the right combination of advanced features, if they are to attract the attention of CIOs. That will have to include seamless synchronization among devices, a strong ecosystem of available apps and software, strong security, low cost, and the right partnerships with telecom operators for mobile broadband connections.

Meanwhile, of course, tablet prices will come down, security will be improved, and a wide variety of software will become available to create as well as to consume content. We expect that the productivity gains to be had will be significant — indeed, companies embracing tablet computers early will soon be seen as having a distinct competitive advantage over their slower rivals.

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Small is beautiful

The explosive growth in the worldwide market for tablet computers may be unparalleled in the history of high technology. Tablet shipments totaled 17.6 million units in 2010, followed by almost 50 million in 2011, and that figure is expected to rise to more than 300 million by 2015.1 Although the vast majority of tablets are currently being sold to consumers, the number of tablets bought by both large and small corporations is also expected to skyrocket. IDC estimates that although just 5 percent of tablets were shipped to large enterprises and small and medium-sized businesses (SMBs) in 2010, companies will double their share of tablet purchases to nearly 10 percent of total shipments in 2015. According to market researcher Techaisle, nearly a third of all SMBs already own at least one tablet, and Apple claims that its iPad is being used or tested at 80 percent of Fortune 100 companies.

In hopes of gaining a better idea of what is driving the popularity of tablets in the business world, we conducted research into enterprise tablet adoption and spoke to a wide variety of CIOs at companies large and small. The result is a picture of a very new technology that has already succeeded in making a real impact on how companies operate, but which will need to continue to evolve if it is to gain a permanent foothold in the enterprise.

The tablet’s technology will need to continue to evolve if it is to gain a permanent foothold in the enterprise.

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The appeal of tablets

Certainly much of the interest in tablet computers is due to the ongoing consumerization of corporate IT, as more and more employees insist on using their favorite devices in the workplace, whether sanctioned or not. In fact, adoption of tablets has large and small IT departments alike scrambling for new infrastructure and policies to run and manage them. CIOs have been forced to devise programs and processes that support workers who bring personal devices — not just tablets but also smartphones — into the office and use them in their regular work activities.2 Some companies have even gone so far as to give employees an allowance to buy the devices they prefer.

The uptake of tablets in both the SMB and large enterprise markets has been primarily driven from the top down. At large corporations, it is typically the board of directors and the executives who adopt tablets first; in SMBs, especially smaller ones, it is often just the CEO who has one (see Exhibit 1, next page). It is from these heights that the use of tablets will inevitably trickle down.

Another critical factor in the tablet adoption curve is the demand for mobility at every level of the company. The value of tablets is tied closely to the need to consume content — check e-mail, review PowerPoint presentations, manipulate downloaded sales data — on the go (see Exhibit 2), page 8. Very few notebook computers (less than 10 percent, according to our estimates) are broadband-enabled, compared to roughly half of tablets, and our CIO interviews suggest that mobile broadband tablets are being strongly considered as alternatives. The ongoing battle between ubiquitous Wi-Fi and mobile 3G/4G networks will likely continue for some time; meanwhile, we continue to see a healthy mix of the two modes in the corporate segment.

Further adding to the appeal of tablets is the preference among IT departments for the greater security provided by mobile broadband (including the ability to erase a tablet’s sensitive data remotely, if necessary) compared with Wi-Fi connectivity. “We need encryption at rest,” says a CIO at a global workforce firm, “policy enforcement via active sync, remote data wiping, encryption, and associated policies.

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Source: Techaisle, “U.S. SMB iPad/Tablet Usage, Adoption and Trends,” 2011

Exhibit 1Tablet use in small and medium-sized businesses, by title/role

SMB tablet users by role (% of businesses)

9%

26%26%

50%51%

65%

IT Department/Developers

Sales Execs/Personnel

CEO/President/Partner/Owner

Storefront/Retail Store Personnel

Customer Support

Marketing Execs/PR Personnel

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* Structured creation (e.g., drop-down menus)

Source: Strategy& analysis

Exhibit 2Putting tablets to work in the enterprise

3

4

5

High

Medium

Consumption vs. creation

Value of mobility

Low

ConsumptionConsumption + structured creation*Creation

2

3

4

1

2

3

E-mail

Exec PPTWeb

browsing

Board of directors

binderShop floor

KPIs

Retail surge

Medicalproviders

B2BsalesVoice

Complex sales

MS Office creation

CAD

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It is all basic stuff, but it needs to be supported out of the box.” Such security requirements will increase the role in the tablet ecosystem of the telecom carriers that provide mobile broadband services. The adoption rate of tablets will depend on the size of the subsidies those carriers are willing to offer to add subscribers to their networks.

So far, the adoption of tablets has taken many observers of the enterprise device market by surprise. Corporate users on the go already had cellular phones and notebook computers in their bags. Now they’ve added a tablet. In general, we see this trend continuing, and we believe that the cannibalization effects will be real but not significant. Many CIOs actually want some degree of cannibalization, and some will certainly occur, but use cases will remain that favor notebooks, tablets, and smartphones, and product improvements will continue to generate demand for multiple devices. More important, the success of tablets is already spurring innovation by traditional PC and smartphone makers, both of which are looking to make faster, lighter devices with even more apps and services available.

Many CIOs are considering purchasing tablets for employees where the productivity case is strong. In general, however, tablets will be a continuation of the bring-your-own (BYO) movement. The next two to three years will see a very interesting battle for the corporate share of mobile device spending. Thinner, always-on notebooks; the next wave of tablets, including some from Microsoft; and smartphones will all compete for limited corporate budgets. Says the CIO of one global oil company: “Why should I pay for two devices and two expensive data plans, when employees can use their tablets for most of their data needs, and make their phone calls on a simple feature phone?”

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A winning combination

Apple has been the dominant player in both the consumer and corporate markets for tablets thus far; however, given tablets’ significant enterprise potential, other makers will be competing to gain a foothold. To do so, however, they’ll need to create an entire ecosystem based on their tablets while taking into account how it functions in the overall corporate IT environment. Tablets will need to solve five distinct problems that no model has yet to completely address. These five problems are beyond the table-stakes issues of required functionality and usability.

1. Seamless synchronization: The ability to quickly and easily sync with the personal information and content of users, most notably on iTunes, has helped the iPad to build and maintain its market share. No tablet based on Google’s Android operating system has the ability to do that yet, and that fact remains a major drag on adoption of Android devices. Consumers, including those hoping to use their new tablets for business — expect their tablets to work right out of the box. Whether or not a cloud-based music service will prove an adequate substitute remains to be seen.

2. Available ecosystem: Enterprises are looking for a complete ecosystem — applications, user experience, available software, and a strong service model. Available applications are critical, including consumer applications, since end-users will want these on their devices. Claims that popular apps like Netflix or Angry Birds will be “available soon” simply won’t fly. In fact, we’ve seen a high rate of return for Android tablets attributed to the lack of such apps. Tablet makers must ensure that a critical mass of popular apps and services exists before launch. There will also be an opportunity for tablet makers to focus on specific verticals, such as healthcare and education, to build customized tablet-based solutions and differentiate themselves from a mass consumer device.

Tablets will need to solve five distinct problems that no model has yet to completely address.

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3. Security: Despite the move to consumerization, IT departments remain hesitant to add new devices and security threats to their corporate networks and data systems. This is particularly true concerning Android devices, for it is believed that the very openness of the operating system poses greater risk for security breaches. This may actually be a real opportunity for Microsoft to enter the business market, given just how familiar most IT departments already are with the company’s ecosystem and security protocols. Any tablet manufacturer looking to gain traction in the corporate world must be able to assure CIOs of its product’s inherent security, including a good firewall mechanism. Alternatively, companies could seek out reliable ways to store sensitive data in the cloud — though that, of course, involves an entirely separate set of security and productivity concerns.

4. Cost: Like security, cost is top-of-mind for CIOs. A current major drawback of the iPad is its relatively high price. It’s difficult to justify, especially if the device is to be used in conjunction with both smartphones and laptops or desktops. Other, lower-cost tablets haven’t gained momentum in the corporate market, but that may be in part because companies aren’t buying them in large quantities. This may change, as developers create more business-oriented apps and companies develop their own. Amazon’s new Kindle Fire is likely to sell well at just $199, but whether it has the features required to work in a corporate IT environment, and to please the consumer impulse, remains to be seen.

5. Telecom carriers: For tablets to function fully, they need a broadband connection. As a result, telecom carriers have landed squarely in the middle of the tablet ecosystem. So tablet makers face one final hurdle: to persuade the carriers to get on board, support their own competing ecosystems, and help push their tablets into the market through subsidies. Given how reluctant carriers are to allow one ecosystem to dominate their portfolios, this shouldn’t be that difficult a task, if — and it’s a big if — the tablet makers can solve the first four problems and thus begin to take market share.

A case in point is the Motorola Xoom™, released in early 2011. This Android tablet included many of the features people wanted from tablets: dual cameras, a high-definition display, and a large amount of memory. But because it didn’t fully sync with customers’ content, and was launched without a critical mass of apps, it didn’t gain the market traction that Motorola had hoped for. Most consumers expect their new tablets to do everything they want right out of the box, without extensive fiddling or maneuvering. That requires a level of infrastructure elegance that few tablet makers have achieved to date.

IT departments remain hesitant to add new devices and security threats to their corporate networks and data systems.

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Motorola’s designers recognized this hurdle, and with the launch of the Droid3 Xyboard, they are deliberately trying to leap over it. The Xyboard was recently launched in the U.S. in partnership with Verizon, in two versions, both of which are lighter, thinner, and more powerful than the previous entrants from this company. And they are designed specifically as tablets for professional users (in contrast to the consumer orientation of the iPad). To appeal more to the enterprise, Motorola has developed an integrated hardware and software solution. The new device aspires to create productivity gains not only through pre-installed apps for printing and office work but also through document management, telecom integration, and enabling professionals to gather and use data more extensively than they can on other tablets. Motorola has also focused more on security to address the concerns of enterprise users. The market is open for a tablet manufacturer to succeed in this arena, if only because none have yet realized the potential.

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Hidden value

As tablet makers overcome the five hurdles to corporate adoption discussed above, more and more CIOs will be considering the purchase of tablets for their enterprises. As they do, they would be wise to keep in mind four key points:

Structured creation: Initially, tablets will be used in the enterprise primarily in applications where mobility matters and where content is mostly consumed rather than created. However, the new frontier of mobile productivity will be driven by “structured creation.” The nature of tablets inevitably limits extensive free-form content creation, while promoting the structured creation of content. Executives can enter information in standard methods, such as drop-down menus, resulting in data sets that can be easily compiled and analyzed. This means faster processing of data and gathering of insights.

Beyond the business case: Additionally, CIOs calculate the return on investment of equipment purchases by weighing the potential productivity improvements against the investment cost. But tablets will likely bring additional benefits that will be harder to quantify:

Unanticipated productivity improvements: Because tablets can significantly increase employees’ connectivity, they will likely result in higher productivity, as employees respond to queries faster, review materials more frequently, and plan work activities in advance. And tablets provide mobility for content consumption at any time and in any place.

Retention benefits: Consumer technology is taking over every facet of people’s lives. Employees want access to the newest and best technology at work because they most likely are using something even more cutting-edge at home. Providing employees with new technology to help them become even more productive can boost retention by improving their engagement with the company.

Unexpected creativity from employees: In their push to persuade management to invest in tablets, employees will likely search far and

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wide for new ways of using them, in order to justify the costs. Companies should be ready and willing to harness this creativity. Search for the diamond in the rough.

Competitive advantage: Inevitably, the use of tablets will become standard in virtually every industry. Companies that can devise new applications and uses for tablets may be able to gain real advantage over competitors.

Customer perception: Tablets can also offer an advantage in industries where it may be important for customers to see that the company is on the cutting edge of technology. Are there a variety of ways the workforce is interacting with customers that could be standardized through the adoption of tablets?

Cost: Price advantages will become more and more common as Android tablets continue to proliferate. The Kindle Fire has shown that a lower price point can be achieved, and its popularity among consumers will certainly open the door for additional players to pull the price lever. This will likely lead to price breaks and deals for large-scale tablet buys.

Security: Solutions to the current concerns regarding security will certainly be released in the near future. In 2012, the industry is expecting the release of the Microsoft Windows 8 tablet, which should offer security features that enterprises are accustomed to. Companies such as Good Technology are already developing identity management software, which allows users to separate their professional identities from their personal identities. This will create greater security for business information while allowing users to access personal content. By solving the security issue, CIOs can feel more comfortable allowing content to reside on the device itself rather than pushing it all into the cloud. Striking a balance between cloud-based content and on-device content will enable end-users to be even more productive.

With manufacturers producing more and more competitive tablets, the uptake of these devices in the business world is not likely to slow down anytime soon. Their attraction is apparent to board members, top executives, lower-level executives, and even middle managers. To ensure their rapid adoption, tablet makers must still tackle the five hurdles we’ve identified. To make the most of them, CIOs should keep in mind how best to balance value, cost, and security.

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Endnotes

1 Forecast: Media Tablets by Operating System, Worldwide, 2010–2015, 3Q11 Update (Gartner, September 16, 2011).

2 “Friendly Takeover: The Consumerization of Corporate IT,” by Rainer Bernnat, Olaf Acker, Nicolai Bieber, and Mark Johnson (Strategy&, 2010). http://www.strategyand.pwc.com/media/uploads/FriendlyTakeoverVP FINAL.pdf

3 DROID is a trademark of Lucasfilm Ltd. and its related companies.

© 2012 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. Disclaimer: This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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This report was originally published by Booz & Company in 2012.