NEW YORK-Even as corporate information technology departments are scaling back expenditures in the current economic downturn, the business customer is the business case for wireless data, at least for the next several years.
While the opportunities are real for serving enterprise customers seeking to maintain contact with their mobile workers, in all likelihood the number of companies rushing into this niche far exceeds the need.
“The consumer market will not carry the mobile Internet for the next several years,” Etan J. Ayalon, vice president of equity research for FAC Equities, New York, said at a recent meeting of the New York Society of Security Analysts on “Pervasive Computing and e-Wireless.”
Echoing his sentiments, Tom Kucharvy, president of Boston-based Summit Strategies, said during a recent conference call he believes “the North American market for wireless data will be driven by businesses, not consumers.”
Despite “scary” projections that corporate chief information officers have released for IT department spending during the next 12-18 months, “companies will be spending on wireless where it makes sense, but not on every aspect of wireless,” Ayalon said.
Consulting and wireless projects are most likely to be cut back during an economic downturn, according to a Morgan Stanley Dean Witter report cited by Warren Wilson, senior analyst for Summit.
“Macroeconomic conditions continue to choke the wireless data sector as investors seem paralyzed with fear that the enterprise market will evaporate in 2001 as companies curtail wireless IT spending in the wake of a slowing economy,” said Bo Fifer, a wireless data analyst for Deutsche Bank Alex. Brown, New York, in a recent report. “We have stated before that, while poor economic conditions are hardly positive for any company or industry, the wireless data group may be positioned to take advantage of tighter macro economic conditions by offering a service that increases productivity, lowers costs and generates an exceptional ROI (return on investment).”
Only a handful of companies, including Mobilize, Salesnet and Sapient, have been successful at quantifying ROI “by building a case on the customer’s sharpest pain points with the customer’s own numbers and by identifying every conceivable cost,” Wilson said.
“Mobilize identified $1.2 million in annual savings for order entry across the 1,700 sales people of Arch Communications (Group Inc.).”
Asked for projections about the size of the addressable market for field force and sales force automation and other enterprise use of wireless data, Kucharvy offered this response: “I have been in this business for 20 years, and I have never identified anyone at any time able to correctly hit the knee in the hockey stick of anything.”
One clue to the potential is that more than 70 percent of the 50 million mobile workers in the United States today work without any kind of automated connectivity, said Jen DiMarzio, a Summit Strategies analyst.
“The U.S. Department of Labor classifies more than 40 percent of the U.S. population as a mobile worker,” Rob Veitch, director of business development for the iAnywhere Solutions division of Sybase Inc., Waterloo, Ontario, told RCR Wireless News.
“When you look at the last 40 years of advances in computing, all that productivity has gone so far to the PC …We don’t yet truly have a thin client model for the Internet because the revolution on the Internet so far has gone to the desktop.”
While the size of the enterprise market potential seems large but uncertain, there is more confidence in the outlook that the supply of wireless data companies seeking to serve enterprise customers exceeds the need, Ayalon said.
“There are similarities to the dot-com world, the waves of adoption surrounded by hype, with big name managers leaving established companies for start-ups. The PR companies that made money from dot-coms are now into this, and I have never seen so many announcements come out since the dot-coms. Don’t pay any attention to them. Talk to the CIOs and ask them who they’re talking to,” Ayalon said.
“FAC Equities has a joint venture with Meta Group, an IT consulting company. We have met with thousands of these WASPs, many with no idea of what they’re doing. We believe 65 percent of WASPs will fail within the next year.”
Early implementations of wireless data focused on business-to-consumer, particularly in financial services, but the pay-off proved very slow, Summit’s Kucharvy said. The business-to-employee market likely will be the first area to take off, with business-to-business communications following at a slower pace due to security concerns, he said.
