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With 60% of enterprises upgrading or deploying wireless local area networks (WLANs) in 2005, comprehensive management of the wireless network is a top priority to limit burgeoning operational costs. A lack of standards has confused the market -- resulting in a vendor mix of proprietary and open solutions heavily dependent on hardware capabilities. When evaluating a WLAN management solution, watch what network management vendors like Hewlett-Packard (HP), IBM, and Computer Associates (CA) are doing -- they ultimately will consolidate wired and wireless network management.
The UK is one of the most competitive broadband markets in Europe. Incumbent BT faces tough competition from both cablecos and alternative ADSL ISPs. Prices have dropped in the past year, and aggressive local loop unbundling is in the pipeline. Forrester expects residential broadband penetration to more than double from 2004 to 2010, eventually reaching 42% of all UK households.
AOL recently announced the details for its long-anticipated entrance into the voice over IP market (VoIP), which will be based on two partnerships with Level 3 and Sonus. The company will extend beyond today's voice chat, offering telephony services that link to its email and IM portals. AOL's entrance into the market will drive awareness, but VoIP use will be low while AOL ramps up its broadband subscribers.
Users demand support for more than just research in motion (RIM) hardware for push email. Interoperability between back-end wireless email servers and multiple device types is key. With partnerships just gelling, enterprises should avoid multiyear contracts, focus on user experience, and expect to support more than one email push system for now. Expect RIM to make strides with its interoperable BlackBerry Connect and BlackBerry Built-In software, and expect Microsoft to attempt ownership of the device-to-server Exchange email flow. To remain viable, vendors like Good Technology, Extended Systems, and JP Mobile will need to offer and expand complementary products like wireless application access amid fierce competition from vendors like IBM and Sybase.
Organizations often move ahead with the purchase of an IP telephony (IPT) product before preparing their technical organizations to support a converged voice and data network. IPT is much more complex than a standard LAN-based application and has distinct requirements that necessitate technical skills in both data networks and telecommunications. Companies that shift all responsibility to data managers face challenges in managing voice features and applications, as well as expertise in traffic engineering and telecommunication functions. Success requires that companies clearly identify the skills needed and train their IT organization with those skills before deploying IPT. To prevent organizational gaps, evaluate roles and responsibilities needed for IPT and equip IT departments to support this transition.
The WAN traffic compression market is growing at a healthy speed. New vendors are entering the market, increasing choice for potential customers. In addition to the two market leaders -- Expand Networks and Peribit Networks -- consider two strong challengers: Packeteer and Riverbed Technology.
US consumers continue to embrace mobile phones, defying predictions of saturation. By the end of 2004, two-thirds of all households had a mobile phone, and households with mobile service averaged 1.8 phones. While handset-makers continue to cram new features like cameras and color screens into their phones, consumers still say that what's most important are basics like battery life and price. Prepaid wireless has increased in popularity, doubling its share of households in the past two years. The billions of dollars that carriers have invested in their networks in the past two years have not translated to increased customer satisfaction -- although fewer customers report a high level of dissatisfaction today than did in 2002. (Editor's note: The graphic shown here is not a complete representation of the criteria in the full report version.)
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Lessons From Europe: Boosting Mobile Customer Loyalty
Most mobile users are not loyal to their operator: 22% of them churn in any year to get their hands on a new, discounted phone and cheaper service. The results? A 300 million euro cost to the average medium-size operator, and customers who fail to develop an interest in advanced mobile data services. Operators should move up the differentiation ladder to develop great customer service that takes advantages of cross- and upselling opportunities. But that's not the endpoint. As soon as they've mastered customer service differentiation, operators should move on to creating differentiation experiences. Only then will they create truly loyal customers who reward their operator with a growing wallet share and peer recommendations.
But implementations of customer analysis systems at a medium-size incumbent telecom already draw on more than 1,000 other systems to extract data, making customer analysis a complex business. And the level of complexity will increase due to:
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Fixed, mobile, and broadband convergence. Integrated telecom firms like Telecom Italia and TIM converging their fixed, mobile, and broadband organizations will want a holistic customer view across business units to be able to offer more integrated products. Customer management systems will have to draw on three times the number of systems to capture and process customer usage, profile, and experience data.
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The revival of mobile virtual network operators (MVNOs). In our surveys three years ago, 70% of mobile operators believed that they would be hosting not one but multiple MVNOs by 2005. This hasn't happened, mainly because MVNO prospects backed out when the economic downturn started. Now, MVNOs are on the rise again. Customer view systems will have to accommodate virtual barriers between the views of the host network operator and the virtual one.
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Operators face a two-pronged challenge: First, they need to speed up the adoption of new services to raise annual revenue per user (ARPU), and second, they need to boost customer loyalty to lower churn and its resulting costs. Differentiation is the key to both. As markets develop, its players move through different competitive stages, during which they use varying differentiation tactics.
Security Appliances Unwrapped
Why are security appliances so popular with data center managers? Because they're easier to install, configure, test, and often offer better performance than systems that you build yourself. However, not all security appliances are created equal. Vendors' architectural choices have profound implications for both the throughput that your appliance will handle and your ability to upgrade in response to new threats. So what's next for the security appliance market? Expect application-specific integrated circuits (ASICs) for perimeter firewall operations and XML processing, FPGAs for IDS and IPS, and even gateway antivirus, and custom processors for SSL VPN functions.
VoIP Update: Carriers, Listen To Your Prospects
Enterprises are very interested in hosted VoIP services and have strong opinions about the extent to which they plan to use these services, the types of suppliers that they prefer, and the requirements that providers must satisfy to gain their trust. These assumptions are often in stark contrast to many mainstream providers' current abilities and near-term plans. Incumbent local exchange carriers and interexchange carriers must improve their offers to meet customer expectations before customers seek out and implement alternate solutions from other suppliers.
UMTS Will Speed Up Fixed-Mobile Substitution in Europe
Fixed-telco execs already experiencing significant fixed-mobile substitution (FMS) should worry about the impact of UMTS. Forrester believes that consumer 3G service launches will stimulate further voice substitution. Mobile-only companies and recent 3G entrant 3 will slash prices to attract customers, trying to overcome the main reason for people to continue to use their fixed phone -- mobile's price disadvantage. However, we don't think UMTS represents a real threat to fixed providers' broadband business; its biggest impact on fixed voice will take place in countries like Austria with high mobile-only numbers, low mobile prices, and a fully integrated telco with a limited or delayed convergence response to FMS.
Editor's Note: Action Everywhere
In this issue of Telecom & Networks First Look, the breadth of Forrester's coverage of enterprise use and of telecom market issues is very evident. Our European colleagues offer our vendor clients excellent research on what drives mobile customer loyalty, the growth of fixed-mobile substitution, and the UK broadband market, while our enterprise customers get a heads up on WAN traffic compression. Our colleagues on Forrester's Devices, Media, & Marketing team discuss AOL's entry into the VoIP market and offer insight into the explosive growth of handsets -- and what consumers want in a new mobile phone. And the Americas team contributes discussions of WLAN management, a deeper dive into the security appliance market, the growing battle for wireless email that will challenge the BlackBerry's dominance, a very practical guide for organizational structures for the move to IP telephony -- and guidance for the carriers who hope to succeed in the space. On all fronts, much is happening.
We're very excited about our recently completed Technographics survey of more than 1,000 North American and European enterprises on communications issues. In the coming months, we will have a wealth of new data to analyze and prepare for research publication. Stay tuned -- there are some real surprises in our early looks at this data. And as always, I welcome your comments.
Merv Adrian
Senior Vice President
mervadrian@forrester.com
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