The wireless revolution hits a bumpy road

The wireless revolution is still around the corner, but that corner seems to have moved.

This revelation, according to Iain Grant, managing director of research firm The Yankee Group in Canada in Brockville, Ont., comes after the recent announcements of several wireless application and software makers’ plans to slash workforces and curb spending.

Still, Grant said that although the economic decline can be held partly to blame, wireless companies like Toronto-headquartered 724 Solutions should see a turnaround within the next 12 months.

“Most of these companies…were working on business plans funded by venture capital and investors based on a business plan that was going to realize momentum at a later stage,” Grant said. “We were putting speculative money here to build a company who would be ready to capitalize on a market which would be here ‘soon.’ The business models are still clever. ‘Soon’ has been redefined. I am not faulting the companies for thinking the market would have been here. I thought it would have been.”

As did many others, according to John Riddell, senior telecom analyst with Ajax, Ont.-based Angus Telemanagement. Riddell stressed, however, that what is not causing the wireless market downturn is wireless technology itself. He said that the problems come from the sphere of investment, financial projections and often a lack of realism.

“The technology is marching on and making this goal of anywhere, anytime service more possible,” Riddell said. “What is Research in Motion’s (RIM) big problem? It’s not the device. The [BlackBerry] has won its niche. The problem is that one of RIM’s biggest customers is not going to pay its bills. That hits a small company like RIM quite hard. (But) you have to differentiate what is happening to wireless technology and wireless usage on the one hand, and what is happening to the companies on the other.”

RIM has announced that as a result of the recent plight of Motient Corp., a major customer and partner, RIM has had to reduce its revenue forecasts for the third and fourth quarters of this year.

Another wireless manufacturer, 724 Solutions, said that a recent move to lay off half of its staff in an effort to cut costs is not going to hinder its developments. The company remains hopeful that the demand for wireless banking, along with other wireless services will grow once the economy becomes stable.

“When you get into situations like we are in the market right now, with the great macro-economic background of uncertainty,…companies like ours have to focus in on the things we think are going to really make a difference,” said 724 CEO John Sims in Toronto. “Even in uncertain times, where customers will spend money is on things that will let them take cost out of their business. For example, in our case, we are working with our financial services customers to offer them wireless solutions that help them get information to their customers.”

Sims said that the cutbacks will not have a damaging effect on 724. He said that because 724 has already built and developed core pieces of wireless technology, the company can now focus on evolving applications and solutions built atop those pieces.

Still, the blanket of uncertainty of when these solutions and applications will hit the market, hangs over the wireless industry.

For one financial institution that is looking at rolling out wireless services to its customers, there is still faith in the future of wireless. However, Toronto-based RBC Financial’s strategy has been to handle them as an emerging technology.

“A lot of the wireless solutions that are out there now are still fairly primitive,” said Jim Connor, manager of electronic services technologies for RBC. “There is a limited capability, and add to that the relatively low transmission speeds, and this hasn’t made a very strong, positive experience for customers.”

Connor said that RBC’s plans to implement wireless solutions will not be hindered by the issues facing companies like RIM and 724. Working with its wireless partner, Toronto-based Sona Innovations, Connor said RBC remains confident that it will be able to deliver wireless services to its customers. Connor did not specify when these services will be available.

Grant also remains confident that the market will catch up.

“Is the wireless revolution over? Absolutely not,” he said. “On the face of it, the services of 724 are still needed, and that is why we think the business models are still sound.”

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