Wireless LANs: Assessing Total Cost of Ownership

Installing and operating a wireless LAN may sound like a cost-effective and productivity-enhancing move for your business. But is it? An analyst from Gartner applies the consultancy's TCO (Total Cost of Ownership) methodology to alternate W-LAN scenarios.
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When enterprises first started deploying wireless LANs, cost justifying them seemed straightforward enough - once prices came down to a certain level.

You still paid a premium for wireless LAN hardware and software, of course, but that was offset by the wired LAN cabling and installation costs you avoided.

And then there were all the soft-dollar W-LAN benefits associated with the convenience of being able to move around in a facility and stay connected.

But calculating real costs and real benefits is a notoriously tricky business. Does a wireless LAN truly end up being cheaper than a wired LAN? It's something prospective users rightly want to know.

To find out, we turned to an acknowledged master of this kind of analysis, Boston-based Gartner Inc.

Gartner pioneered the notion of a total cost of ownership (TCO) for technology. TCO takes into account all kinds of costs besides the equipment or software vendor's price. As Gartner has shown over and over, capital costs are often only a small part of the total.

Phillip Redman, research director in Gartner's mobile and wireless communications group, has been doing some intensive work on W-LANs recently. His conclusion: in some scenarios, even in horizontal applications, W-LANs definitely have a lower TCO than wired LANs.

Small Offices Make Good W-LAN Candidates

That doesn't necessarily translate into a clear return on investment (ROI), Redman cautions. Where a W-LAN is used instead of, or to replace a wired LAN, you have to take into account possible loss of productivity due to slower network speeds on the W-LAN.

"But for a small office using a wireless LAN for e-mail, printer sharing, light Internet browsing, and database access we believe there is a very good opportunity for a good ROI," Redman says.

"The reliability of wireless is very high. In small offices especially, and especially in a temporary office environment, there is lot of room to succeed."

This kind of reassurance about W-LAN TCO and ROI coming from a vendor is one thing. Coming from Gartner, it means a good deal more.

For his analysis, Redman developed two TCO scenarios. In one, a company deploys a W-LAN in a large office as an extension to a wired LAN to allow about 100 users to stay connected as they move around the facility.

In the other scenario, the company deploys a W-LAN instead of, or to replace a wired LAN in a small office of 45 users.

The Gartner TCO model takes into account four broad categories of cost: capital, IT operations, administrative, and user operational.

The operations category factors in, among other things, the cost of integrating hardware and software, customizing applications, and providing technical support to end-users.

Admin costs include impacts on budget, purchasing, procurement, and training.

User operational costs, perhaps the most difficult to accurately calculate, include lost productivity when the technology malfunctions or the user can't figure out how to do what he needs to do - and even lost productivity when a workmate stops what he's doing to help out.

Gartner gathered raw data on costs from equipment vendors, systems integrators, and clients who have actual experience implementing W-LANs.

In the small-office, wired LAN replacement scenario, Redman calculates the total cost of ownership per user for the first year at $4,732. It declines slightly each year over the three-year amortization period.

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