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Wireless LAN investment chugs along during recession

A worsening economy hasn't dampened enterprise interest in wireless LAN investment. Companies will turn to the technology to save money and improve productivity during hard times.

Despite the faltering economy, enterprises continue to invest in wireless LAN infrastructure because it can help them save money and become more productive.

"[The wireless LAN] market remains relatively stable because these aren't networks being built out as a convenience or as a nice-to-have at this point," said Chris Silva, analyst with Forrester Research. "The wireless LANs that are being built are driven by business cases."

Some vendors are touting their success during these hard times. Proxim Wireless Corp. has announced that it sold 1,000 units of its new 802.11n wireless LAN access points in their first week of availability.

Aruba Networks, a publicly owned wireless LAN manufacturer, last week announced its highest-ever revenues in the fiscal quarter that ended Nov. 1 -- $52.4 million, an increase of 9% over the previous quarter. The company added 700 new customers during the quarter.

"We faced the worst of the economic slowdown for the majority of our quarter, and we were still able to deliver a solid performance," said Aruba CEO Dominic Orr during an earnings call with financial analysts. "We believe this performance reflects our strong competitive position and our ability to succeed in an environment where customers are focused on reducing operational expenses, improving productivity and making the most of existing infrastructure."

Silva said Forrester recently surveyed a panel of 50 IT leaders about their spending plans in 2009. "We found that things like networking gear are not as subject to spending contraction as other products, even if [companies are] faced with budget cuts," he said. "So while wireless networking might experience a slight decrease in spending, the rug is not being pulled out from under it."

More on the wireless LAN industry

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Enterprises will continue to spend on wireless LANs because the technology can deliver direct cost savings and productivity gains, whereas four years ago the networks were more of a luxury, Silva said. Today, many companies are pushing out mobile and field service applications that rely on wireless LAN connectivity. Warehousing and logistical organizations are relying on wireless barcode scanners and handheld devices to become more efficient.

"In many cases, the wireless upgrade will drive investment," he said. "802.11n can provide throughput and give you the reach such that employees can use it as their primary network. Now you look at for every 10 or 20 employees, you're cutting out the cost of 10 [wired] network drops. Those range from $300 to $500 apiece, so the ability to deploy wireless LAN is in many cases looked at as a cost-saving measure if you're building new office space or if you're reconfiguring it."

Silva said that many companies will continue to build out their existing wireless networks. They may hold off on upgrading to 802.11n and instead focus on expanding their 802.11a/b/g networks because many organizations are trying to expand their existing infrastructure with a more pervasive network that can support applications such as Voice over Wireless LAN (VoWLAN).

"I also think companies have been steadily moving toward centrally managed access points, where they are all managed by one controller," Silva said. "The cost of supporting that network is brought down so that you don't have a need for the IT department to literally go out and troubleshoot one-for-one every access point that has a problem. You have the ability to push out changes and updates from controllers."

Craig Mathias, principal of Farpoint Group, agreed that enterprises will continue to invest in wireless LAN technology during the recession, but he said vendors will have to offer good bargains in order to make their sales until the economy improves. He pointed to the fact that Aruba reported a $6.4 million loss during the quarter, up from a $600,000 loss a year ago. Now more than ever, enterprises can hope to find a good deal on new wireless infrastructure.

"If you look at Aruba's margins, they have eroded some, and obviously discounting is a heavy element in winning deals," Mathias said. "So I'm expecting that their margins probably won't improve much with their sales. But this is an industry that will continue to grow, and it will accelerate into the future."

Let us know what you think about the story; email: Shamus McGillicuddy, News Editor

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