Get your fill of wireless

What can service providers do to devise a profitable strategy for the wireless LAN market? The big news is the prices of hardware have dropped, a mixed blessing for reseller.

Wireless lans can be a point of profitability for every category of service provider, from one-person shops to giant corporate resellers and xSPs.

The keys to making a buck in that business will be staying focused on the sweet spots and going with the flow as the margins shift.

The big news in the LAN area is the IEEE 802.11b band wagon and its shrinking effect on hardware prices. Wireless network interface cards (radio NICs), for example, have eased from the US$300 to US$500 range two years ago into the less than US$200 price range now. Although wireless PCI network cards are available, the leading form factor is PC Card, with Compact Flashcard being the impending newcomer. Meanwhile, access points - which connect the wireless cards into the wired LAN net work - have plunged from the US$995 to US$1,500 price level, to less than US$600.

That overall price decline, a mixed blessing for resellers, is also the major reason that International Data Corp. researcher James Smolek believes the wireless LAN market will grow from US$603.5 million in 1999 to US$1.58 billion by 2004. "The [reduced price of] radio cards is really driving this market," says Smolek.

Although equipment margins are shrinking, note researchers, increased volume should shore up the bottom line. Companies can equip more desktops, portable computers and PDAs, and extend the physical range of the wireless LAN to reap serious profits.

Ken Dulaney, VP of mobile technology research at Gartner Group, similarly sees huge growth in wireless LANs, noting that large corporations will be major customers for the equipment.

However, both Smolek and Dulaney also see radio NICs becoming commodity items in retail stores. Individuals within corporations may purchase radio cards for their portables or PDAs to use wireless Internet points of presence at airports, hotels and even social gathering places. So unless you can compete against chains like Best Buy or Circuit City, wireless NICs are probably not a great business for you. Nevertheless, that doesn't mean integrators and resellers can't generate some profits from wireless cards. Given that few manufacturers make user-friendly and competent-configuration software, which often requires tweaking, the door is open for you to walk into the corporation and sell some provisioning services.

Another profitable strategy, adds Smolek, is to change the focus of hardware sales from the NICs to the higher-margin wireless access points. That involves performing site surveys - mapping out the optimal number and locations for the access points at the client's buildings.

In addition, you need to en sure that the wireless equipment offers sufficient encryption and security so that secrets don't beam out and intruders don't beam in. You also can offer to physically mount, wire and configure the access points on the corporation's network. Finally, you can top off the sale with qualified network-management tools for monitoring the wireless equipment.

Wrap It Up
Much more important than any pricing or technology changes, however, is the change in the fundamental sales process itself. Customers, who once bought equipment, maintenance and support service, now want to buy a complete, bundled package under the umbrella of a service-level agreement. But while the total service package approach is becoming the purchase style du jour, not all of your corporate customers can be expected to embrace it.

As for those industries that will flock to wireless technologies, the obvious hot verticals include warehousing and health care. A trickier issue for wireless vendors is which type of customer to pursue. Dulaney sees both large and small businesses as good potential clients, noting that small-to-midsize (SMB) firms will be drawn to the equipment as prices continue to drop.