No Hockey Stick for WLAN

The Wi-Fi market is about to undergo a sea change, according to a report from Dell’Oro Group. The Redwood City, Calif.-based research firm said that although enterprises will continue to embrace wireless data communications using 802.11 protocols, most segments of the market will decline by 2007.

Dell’Oro Group said it expects the wireless LAN/802.11 market to grow by 23 percent in 2004 to reach $2.2 billion, with strong growth continuing in 2005. Growth is expected to peak by 2006 with a substantial decline by 2007.

While the enterprise adoption curve might look like a hockey stick, the revenue chart for makers of equipment for consumers and small offices such as low-end gateways and wireless routers will look more like a speed bump, peaking then going down again.

Manufacturers of network interface cards (NICs) will also feel the pain. “Increases in enterprise spending help to offset but don’t completely compensate for losses in other segments,” said the report’s author, Greg Collins, senior director of Dell’Oro Group.

It’s not that use of wireless will fall, according to Collins. Businesses will continue to adopt 802.11 for its convenience. However, other markets will subsume the two biggest segments: equipment for small and home offices; and network interface cards (NICs) and USB adapters for laptops. For
example, WLAN access is becoming standard on laptop computers, so makers of
NICs will see diminishing sales.

Enterprises will continue to buy access points, along with wireless
switches, security appliances and gateways to tie access points into regular
phone and data lines, Collins said. “We see more integration between
wireless LAN and wired networks happening over time.”

In the early days, Collins said, specialty resellers and integrators will
sell into industry verticals such as healthcare or retailing. “As more
typical office environments adopt wireless LANs, you’ll see incumbent and
new network vendors offering the systems.” The hottest products, he said,
will be devices and software designed to improve the management and
security of wireless LANs in enterprise deployments.

“The technology itself is important and is doing tremendously well,”
Collins said, “but we’re seeing changes on the horizon.”