Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Enterprise spending on WLAN equipment has outpaced the growth rate of both the Layer 2+3 Ethernet switching and the IP telephony markets for the past five consecutive years. We believe this trend will continue through 2012 despite the current economic climate. Let me explain why this growth will continue.
Once considered simply a medium providing basic network connectivity for mobile applications, and transient user groups, WLAN is beginning to drive efficiency and enhance productivity in ways that change how enterprises operate. Enterprises value the benefits of WLAN. With the introduction of enterprise-class 802.11n equipment, WLAN technology is increasingly able to support larger deployments at higher speeds. WLAN technology is ready for the enterprise. The consolidation of enterprise WLAN vendors is expected to drive scale and thus enable price reductions. Vendors are positioned to deliver.
Customer – enterprise transforms
While the term “enterprise” typically conjures up images of a large indoor workspace lined with cubicles, reminiscent of a scene from the movie “Office Space,” the term categorizes a range of environments including hospitals and retail outlets as well as more traditional corporate settings. All these enterprises increasingly recognize the benefits of WLAN.
Here are a few examples:
–Schools: WLAN is enabling large nomadic user bases to access information anywhere on campus, fostering collaboration and anytime access to online course work, training materials, and library resources.
–Hospitals: WLAN is enabling physicians and nurses to access patient information on handheld devices, reducing the time wasted walking from patient room to patient archives and maximizing the time spent for patient care.
–Manufacturing Facilities: To maximize the velocity of goods and raw materials, WLAN is providing the infrastructure to deploy RFID and scanners to track the flow of materials throughout the manufacturing process.
–Retail Outlets: WLAN is being used to maximize the coverage of store personnel, ensuring that the needs of customers are quickly attended to. Retail assistants use VoWiFi headsets to coordinate with their in-store team to conduct tasks ranging from an inventory check to restocking store shelves.
–Carpeted Enterprises: WLAN is facilitating employee decision making and collaboration by enabling real-time access to information from business intelligence systems while in conference rooms, cafeterias, and anywhere in between.
Expectations for wireless connectivity in the “carpeted” enterprise are rising. Advances in Wi-Fi-enabled devices including ultraportable PCs and dual-mode handsets like the Blackberry Bold and Apple’s iPhone are not only giving users greater mobility but also transforming the perception of WLAN in the enterprise from a complementary to a core network service. The value of WLAN is obvious and yet the enterprise adoption rate of WLAN is only 14%. We believe this rate will double by 2012 as the popularity of Wi-Fi-enabled devices continues to grow, WLAN technology evolves, and vendors position themselves to broaden product portfolios at competitive price points.
Technology – evolves for enterprises
WLAN technology has reached a new plateau with 802.11n – faster speeds with greater scalability. 802.11n delivers higher throughput (over 248 Mbps) over two frequencies (2.4 Ghz and 5 Ghz) at twice the distance of 802.11a/g. These performance improvements have helped to change the perception that WLAN can be a part of the core network technology. IT departments are not only evaluating how 802.11n-based equipment can extend their existing network coverage, but are also considering how the new equipment can enable the delivery of applications and services such as video distribution.
Centralized management remains a key customer requirement. Rather than configuring each WLAN access point individually, a switch-based architecture enables IT departments to remotely configure and manage their WLAN access points without having to physically visit each node. The introduction of dependent access points in 2003 prompted an architectural transition away from standalone independent access points to a switch-based architecture that now dominates enterprise WLAN sales.
Scalability remains a key consideration in the adoption of WLAN. As IT departments begin to roll out WLAN coverage to a larger user base and wider areas, enterprises are looking to expand coverage or intensify signal strength by increasing the number of access points to their WLAN environments. Recently, we saw a product mix shift towards higher-end WLAN controllers that can support an increasing number of access points per controller. Compared with 2003, when the average number of dependent access points used per switch was six, we expect the average number of dependent access points per switch to exceed 20 by 2012.
While security issues sometimes represent a barrier to WLAN adoption in the enterprise, vendors are addressing these issues either by investing R&D dollars to enhance their security features or by acquiring niche security vendors to supplement their WLAN offerings. Motorola recently acquired AirDefense, a software vendor specializing in RF scanning and intrusion detection. This acquisition highlights the importance of WLAN security, as the top three enterprise WLAN vendors (Cisco, Motorola, and Aruba) continue to enhance WLAN security and monitoring capabilities.
Vendors – deliver to enterprises
Enterprise WLAN vendors recognize the market potential and are positioning themselves to secure a greater portion of this market through consolidation. These vendors seek to broaden their appeal to enterprise customers by expanding their product portfolio through M&A. Taking advantage of lower company valuations, larger enterprise vendors are broadening their product portfolios by acquiring smaller WLAN vendors.
We expect the consolidation of enterprise WLAN vendors will also drive scale to facilitate competitive pricing. While the average selling price (ASP) of 802.11n-based access points is nearly twice that of 802.11a/g equipment today, we expect 802.11n ASPs to decline through 2012 and reach levels similar to 802.11a/g ASPs in 2008. We expect this price decline to lift demand for WLAN in the enterprise. We anticipate that unit shipments for enterprise access points will triple over the next five years.
All enterprises are not like “Office Space,” but most value what WLAN can deliver in productivity and efficiency gains. The push towards ubiquitous WLAN coverage in the enterprise is coming: customers want WLAN, the technology is ready for the enterprise, and vendors are prepared to deliver.
Contact Ben at ben@delloro.com. Contact RCR Wireless News at rcrwebhelp@crain.com.
