From fancy coffee outlets to airports, wireless technology is all the rage at the moment. In the home, wireless broadband modems allow you to share the connection around the house with other devices you might have, without a wire in sight. This is why the home sector drives the entire market.
In the business sector, however, most companies see wireless as a gaping hole in their security set-up, signposted by a giant, flashing neon sign that invites hackers inside.
Enterprises have resisted the lure of wireless because of a mix of immature business-grade products, security fears and confusion over the benefits. But in the past year, things have started to pick up, thanks largely to a new breed of product: wireless LAN (WLAN) switches.
They underpin the first truly affordable business-grade wireless systems for larger companies.
Throughout 2004, this sector was a hotbed of activity, and consolidation in this space is well underway as big networking and telecoms manufacturers see the opportunities and start to home in on the many start-ups.
The whole wireless switch market got the shot in the arm it needed when Cisco bought out one of the leading wireless switching companies, Airespace, last December for $450m.
It is ironic that Cisco had spent years rubbishing wireless switches in favour of its own wireless technology. They might still be only a small blip on the edge of the WLAN radar, but everyone agrees that wireless switches are getting there.
"WLAN switching is not a very big part of the market at the moment, but it is growing," says Evelien Wiggers, senior research analyst at IDC.
"There are a few firms leading the way but also a lot of start-ups in the sector. Wireless switches account for only three per cent of the EMEA WLAN market, but this will grow in decent increments in the coming years."
Analyst Dell'Oro Group claimed recently that large-scale enterprise adoption is going to boost WLAN equipment sales in 2005 by 13 per cent, thanks largely to wireless switch technology.
Greg Collins, senior director of WLAN research at Dell'Oro Group, says: "The centralised deployment and management offered by dependent access points (APs) and switch/appliance architecture will become an increasingly popular method for enabling centralised management and security functions in corporate WLANs."
In the second quarter of last year, the EMEA WLAN market suffered a 10 per cent decline in overall sales of equipment, according to analyst IDC. However, in the same quarter sales of wireless switches were up by a massive 363 per cent on the previous quarter.
IDC put the unprecedented corporate interest in wireless technology down to the newly ratified 802.11i security standard and wireless switches.
Wiggers said: "Even though enterprise adoption continues to be low, the recent uptake in wireless switches shows that enterprises are starting to grow interested again in deploying wireless networks."
It should be remembered that WLAN adoption in EMEA is a one-sided affair, with the small-office/home-office market driving sales. That is now beginning to change, albeit slowly: within a couple of years, business WLAN sales will make up the bulk of the marketplace.
"The WLAN market is getting stronger and stronger, and there is now finally some good progress on the enterprise side," says Albert Benhamou, vice-president sales EMEA at WLAN switch vendor Aruba Networks.
"It's also interesting to see incumbent vendors in the networking space adopting a wireless strategy."
Jess Thompson-Hughes, managing director of reseller React Technologies, says: "We have had an astonishing January. We have sold in one month what it would normally take six months to sell. Last year there were a lot of pilots but no really big deals.
"Now those pilots have come back to us, and firms want to do proper roll-outs. The closure rate is now between 80 and 90 per cent with businesses we have worked with over the past six months."
But the turn-around has just started, Thompson-Hughes is quick to point out.
"Wireless switching has been a hard market," he admits.
"We've been doing it since 2002, when no one knew what WLAN switching was all about. It's taken 18 months to explain the difference between consumer-grade and business-grade WLAN technology to customers. Usually, with other technologies, it's a three-month sales cycle."
Prior to the WLAN switch, WLANs connected to wired networks via APs that were loaded with security and management software and other data needed to manage the wireless aspect of the network. These intelligent - or 'fat' - APs were complex, difficult to install and expensive. The more you needed, the bigger the headache and the price tag became.
When you consider that the average number of users per access point ranges between 10 and 20, large companies might need hundreds of APs to get the wireless coverage they desired. This is before tackling the management aspect and covering the expense. All in all, it was seen by many as too little for too much.
It did not help that earlier versions of WLAN technology were woefully insecure. Even though most of those early problems have been addressed with newer versions of the 802.11 standard, most manufacturers in the market and their channel partners are still trying to undo the damage and reassure potential customers.
Things changed in 2002 when Symbol Technologies launched the first wireless switch, and since then there has been a surge of start-ups offering variations on the approach. The wireless switch is a centralised device that manages and configures a lot of less intelligent - or 'thin' - APs.
In a short space of time, wireless switch start-ups such as Airespace, Aruba Networks, Trapeze, Chantry, Airflow and Legra were on the scene, all challenging the Cisco approach. The thin AP approach has grown in popularity; it is simpler and cheaper to install, and is generally easier to manage.
It offers less functionality than the fat approach, but then again the latter was really suited only to very large roll-outs. With WLAN switches, firms of all sizes can now invest in a robust WLAN infrastructure without breaking the bank.
But technology is no good without faith in its future, something potential customers lacked. Few large enterprises were going to trust start-ups - no matter how good the technology was - to provide them with a safe, WLAN system.
That all changed when Cisco bought Airespace and Siemens took over Chantry at the end of 2004. Suddenly, thin was a validated technology, something even other WLAN switch vendors agree was a good thing.
"Of course, Cisco taking over Airespace was a good thing," Benhamou claims.
"It's an endorsement of what we have been saying for the past few years. The only ones that will be upset are the Cisco customers that spent a fortune buying its system. I'm sure they'll be asking questions now Cisco has bought in an offering that is simpler and cheaper than the one it sold them."
Thompson-Hughes says: "Cisco realised that it needed a cheaper offering than its fat AP approach, which was too complex and expensive to deploy and maintain for many companies. It has made a good acquisition there, because Airespace is a great company."
Ron Sandison, managing director of Network Partners, a networking reseller acquired by Matrix Communications last November, says: "You have Symbol and Cisco as market leaders, but last year saw the introduction of some new players in the UK, with Airespace as the pack leader, followed by Aruba, Trapeze and Colubris.
"In Q4 2004 Airespace did more business than the other start-ups put together, so the Cisco purchase was genius. Now it has its brand aligned to a technology leader."
Not everyone will be happy with the move. Alcatel, Nortel and NEC were Airespace OEMs, an arrangement that the Cisco take-over will put an end to, effectively leaving three big players looking for a replacement. Again, they will be faced by the options of buying in another WLAN switch product or biting the bullet and just buying someone out.
Wiggers says: "I'm not sure what will happen with Alcatel or Nortel now that Airespace has been bought out by Cisco. I asked them and they don't know yet."
Sandison believes that the Cisco/ Airespace deal creates issues for Nortel and Alcatel as Airespace OEMs. "Do they buy or, at the very least, move to another one of the start-ups? Nortel still has an OEM deal with Colubris so it may buy here. Alcatel is talking to Trapeze, but then again, they all are.
"So here is the crux of it: all of the major LAN players know they have to have this technology in their armoury. They are not going to let this market space slip away from them," he says.
Business-grade WLAN technology, especially switches, is seen by many as the clincher in getting companies to commit to trying out WLAN technology. IDC reports that businesses spent $850m on WLAN products last year, but that is expected to grow by 65 per cent this year.
In Q3 2004, Cisco dominated the market with 55 per cent, followed by Symbol on 8.3 per cent, 3Com on seven per cent, Proxim on seven per cent and Airespace on six per cent. According to Synergy Research, Cisco, Symbol and Airespace were the top three players towards the end of 2004.
Now that Airespace is part of Cisco, the top two have increased the gap between themselves and the rest of the field.
Even with market validation, and the reassurance of getting your product from established networking players, businesses continue to harbour security concerns about WLAN technology.
"People are still worried, and I don't blame them," says Thompson-Hughes. "Some businesses are still not convinced and there is a lot of evangelising to do. It needs to be explained that most of the security problems have been addressed."
Andy Zollo, UK channel manager at Extreme Networks, says: "Security is always an issue with WLANs, so there's a lot of education involved in the sell.
"There is also the problem of companies heading off down to their nearest retail outlet, buying some cheap wireless kit that is not suited to the business environment and then suddenly experiencing security breaches all over the place."
Key to overcoming those fears will be the role of the channel, which is being used by most of the WLAN switch vendors. It also helps that this arena is still a largely untapped margin-making resource.
"The role of the channel is vital here," Zollo says. "Because WLAN switching is a fairly new technology, we spend a lot of time educating our resellers: at least once a month. Without them we couldn't reach the kind of customers we want.
"The margins in this sector are also very good, especially in pre-sales, from network audits to securing the airwaves."
Benhamou agrees. "It is a good market for our channel partners. Most resellers today selling wired networking products see little margin, because of price competition. Wireless is a leading-edge technology and there is still margin to be made.
"It's all new to the customers and they need help in planning, installing, testing and maintaining a WLAN. With traditional network equipment, customers are able to do a lot of that themselves," he says.
WLAN switches are now set to grow at a steady pace, but that might all change once the so-called 'killer' applications arrive. Most believe that voice over WLAN and Remote Frequency Identification (RFID) will be the ones that really accelerate take-up this year.
Thompson-Hughes thinks so. "We have been pushing voice over wireless heavily for the past six months, and we are definitely seeing more pilots coming online - more than last year," he says.
"Wireless is essentially a transport mechanism, but it will really start taking off when it has combined with GSM. Hitachi and Motorola are promising combined Wi-Fi and GSM handsets later this year."
Zollo adds: "We are seeing a lot of WLAN switch demand from our existing wired customers. What's coming though more and more is voice over wireless. In the healthcare arena, some of the WLAN applications we are seeing now include RFID tagging."
Aruba Networks (001) 408 227 4500
Dell'Oro Group (001) 650 622 9400
Extreme Networks (01628) 552 400
IDC (020) 8987 7100
Network Partners (0870) 055 0000
React Technologies (01256) 345 625
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