Wireless hardware manufacturers and hotspot operators are going to be at the sticky end of a boom in enterprise wireless, according to a new study.
Strategy Analytics Inc.'s report Wireless Enterprise Ecosystem Outlook 2004 -2009, published last week, predicts the wireless LAN and wireless WAN industry will end up looking much like the PC business in five years' time, with cheap, standardized hardware and most industry revenues generated by software and services.
In the wireless industry, however, the process of commoditization will be much more extreme: "The PC market was much less fragmented from the start," Cliff Raskin, director of Strategy Analytics' global wireless practice, told Techworld. "It was fortunate to have one device, the PC running Intel microcode, and basically one protocol, Internet Protocol. This does not characterize the mobile world."
Transport, or revenues from actually providing networks, will be the smallest piece of the pie, according to the firm's projections, with wireless WANs — such as GPRS and 3G networks — amounting to six per cent of the industry and hotspots just one per cent.
The two big winners in the software arena will be managed services and core business applications, the study found. Managed services, such as outsourced services, service bureaus and wireless application service providers (WASPs), are currently dwarfed by system integration, but this relationship will reverse. In 2009, system integration will be 12 per cent of industry revenues, compared to 24 per cent today, while managed services will make up more than a quarter of all revenues — 26 per cent, according to the study.
Similarly, revenues from "enabling" software such as operating systems and middleware will drop to five per cent — for operating systems — and four per cent — for middleware — while applications will grow to 19 per cent by 2009, Raskin said.
This is partly a result of the increasing trend toward commodity hardware and standard protocols, Strategy Analytics argues. This means enterprises won't have to spend as much on buying and setting up wireless systems, and will be able to concentrate instead on the services and applications these systems are supposed to provide, the firm said. Strategy Analytics and other analysts also expect costs for services to drop as the offerings sign on more users.
"There is a certain amount of price elasticity there," said Robin Duke-Woolley, director of technology consultant E-Principles.
He agreed that the wireless industry is heading down the path of commoditization, which will mean good things for enterprise customers, even as it makes life difficult for hardware makers. "As those become commoditized, that makes it easier to connect and more user friendly. Anything like that helps to reduce costs," he said. "That's a good thing. As those costs come down, the likelihood of using [wireless networks] increases. It helps to enable the market."
Applications ahead
So what kind of applications will succeed? Strategy Analytics and others singled out email as wireless' killer app, but Raskind noted that businesses can't expect a clear return on investment from email alone. Other applications, such as sales-force automation (SFA), systems linking field sales representatives with companies' centralized systems, could be more alluring to businesses.
"We are particularly optimistic on the prospects for mobile SFA as that added application that will convince sceptics to reach the tilting point in terms of making a significant investment in wireless," Raskind said.
Enterprise software makers believe mobile SFA is a large untapped market. In a recent survey conducted by Sybase Inc. subsidiary iAnywhere Solutions Inc., for example, 80 per cent of respondents said a PDA-based SFA system would make them more productive in the field. Another big market will be imaging applications of all kinds, Raskind predicted. These could be just about anything, from systems "highly integrated into corporate platforms, insurance adjusters' accident reports for example, to generic MMS being used by small construction companies to report progress", he said.
E-Principles' Duke-Woolley added that IP telephony — routing voice calls inexpensively over IP networks — is also seeing more interest from enterprises. "There are also tremendous opportunities in video conferencing and video telephony using PC technology over a wireless network," he said. "There are high traffic requirements for that as well, which adds value for operators."
Enterprises are currently showing strong interest in the combination of Wi-Fi and IP telephony, according to analysts, even though the technology faces serious hurdles before it can become widespread. Nevertheless, Wi-Fi phones — particularly those also capable of connecting over cellular networks — are already predicted to boom. A report from ABI Research published earlier this week predicted that such dual-mode handsets would top 50 million by 2009, and would represent about seven per cent of all handsets shipped in that year.
"Many enterprises now have established Wi-Fi networks and integrating voice-over-Wi-Fi functionality is a natural progression," said Phil Solis, senior Wi-Fi analyst at ABI Research, in a statement. "As Wi-Fi networks proliferate, it only makes sense to give users the ability to switch from the cellular carrier's network to the enterprise Wi-Fi network."
Hardware revenues will continue to be a significant but minority share of industry revenues, dominated by client devices such as PDAs, smartphones and Wi-Fi gear at 18 per cent in 2009. Back-end hardware such as servers will amount to nine per cent, the firm said.
The wireless switch market is already proving too tough for some competitors, with AirFlow Networks Inc. recently bailing out of the hardware side of the business in favor of licensing its software to other equipment makers.