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When it comes to purchasing a new mobile phone, consumers are nearly four times more likely to choose a carrier's branded outlet than any other option. Wireless subscribers are most likely to begin thinking about a new phone when their old one breaks down or is deemed inadequate as new features catch their eye. Alas, despite all the money that carriers pump into traditional advertising channels, consumers are least likely to cite these ads as the catalyst for their purchase.
Industry buzz abounds about WiMAX, the next big wireless networking technology. Promoters like Alvarion and Intel imply that it will turn the telecom network upside down -- and do everything short of making your coffee in the morning. The reality? WiMAX will indeed have a big global impact on consumers, enterprises, vendors, and telecom operators by making high-speed wireless access cheap and mobile but not until 2010 or later -- because of myriad spectrum, customer premise equipment (CPE) availability, regulatory, cost, and competitive reasons.
Rogers Cable, Canada's largest cable company, and Rogers Wireless, the country's largest cellular company, announced a new fixed-line operating division, Rogers Telecom, following the purchase of Call-Net Enterprises in early July 2005. Rogers Telecom will sell a full portfolio of access and long-haul voice, data, IP, and wireless telecom services to enterprises, businesses, and consumers across Canada. Firms that hesitated to give long-struggling Sprint Canada more of their telecom spend but that want a backup or alternative to the telcos, should take a closer look at the new Rogers Telecom.
2006 could be a turning point in business use of managed voice services -- but only if providers make services truly enterprise-class. While the current generation of softswitch-based hosted VoIP services is aptly, but not perfectly, suited to meet the needs of small and medium-size businesses (SMBs), the providers are ill-equipped to meet many fundamental enterprise requirements. For example, none is geographically ubiquitous. Distinctions between the three major providers are emerging, such as the ability to support soft clients/softphones, integration with wireless services, and the availability of unified messaging. Each tier one hosted VoIP service provider plans major service enhancements this
year.
As network gear commoditizes, Cisco's weak network management -- previously an afterthought to its big iron gear -- looms as a problem. But its acquisition of Sheer Networks changes all of this. How? By creating an abstraction layer that simplifies the interface between management tools and network devices. As a result, Cisco gets: 1) management software proven in service provider networks; 2) technology to improve the interoperability between Cisco gear and systems management vendors; and 3) the foundation for a sophisticated systems management platform. Ultimately, Forrester believes that Cisco is planning to move from selling networking products to providing a platform for integrating IT systems. This won't come without challenges though, as Cisco must preserve its interoperability work with systems management leaders, such as HP and IBM, while working to compete with them.
Large multinational corporations will replace their aging international data WANs with IP-based WANs by the end of the decade. To stimulate earlier adoption of next-generation WAN services like multiclass MPLS, major international network operators are expanding their portfolios to include blends of MPLS, Frame Relay, ATM, L2TPv3, and IPsec VPNs. Tier one and many tier two international WAN vendors offer customers the ability to outsource and outtask portions of their global WANs. During the next five years, the international WAN services market will be dominated by three facilities-based network operators -- Equant, AT&T, and the combined BT/BT Infonet. These three players have the broadest portfolio of multiregional WAN services and an estimated combined market share of more than one-third of multiregional WAN service revenues. Other strong performers -- MCI and Sprint -- will likely focus their sales and international investments on existing customers and enterprises that
have a large number of sites within their IP footprints, and they will rely elsewhere on local carrier partners or reselling the services of other global network operators.
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Enterprise Spending On Telecom And Networks Will Lag Broader IT Market
For Forrester's Business Technographics May 2005 North American And European Network And Telecommunications Benchmark Study, we surveyed 1,007 network and telecom decision-makers at enterprises -- companies with 1,000 or more employees. What did we learn? Overall, spending on communications will grow 3.3% at North American and European enterprises in 2005 -- respectable, but less than the 3.5% by which enterprises told us at the end of 2004 they would increase overall 2005 IT budgets. This disparity is even larger in North America, where communications spending will grow 3.3% but significantly lag the reported overall IT spending increase of 3.9%. Communications spending, like IT spending, is strongest in the public and government sectors, which expect a 6.7% increase in telecommunications spending this year.
But There Are Opportunities . . .
Is there unmet demand? You bet. For example, in Ellen Daley's Companies Want Wi-Fi/Cellular Calling, we find that almost half the North American enterprises in another Forrester survey want Wi-Fi/cellular calling. But we do not expect significant deployments for at least three years because carriers only support the devices grudgingly. Today's integrated devices are data-oriented PDAs, not mobile phones. In Charles Golvin's Will Mobile Phones Get Wi-Fi? we note that new low-power Wi-Fi chips will bring Wi-Fi/cellular handsets down to mainstream consumer prices by 2007. But consumers are downstream; carriers make the decisions on which phones get sold and foot the bill on subsidies that feed consumer expectations that new phones cost less than $100. Perhaps the cable industry will take up the challenge; MSOs like Time Warner Cable have invested heavily in VoIP infrastructure in hopes of winning share of the home telephone market, but the only successful pitch to date is based
on undercutting incumbents' pricing. By joining together with a mobile operator to offer integrated calling over Wi-Fi and cellular, cable operators can begin to market new capabilities that VoIP enables, such as selective call filtering and click-to-dial, rather than simply hawking discounts.
Driving spending will demand additional innovative approaches both for the enterprise and the consumer. One such innovation comes from BT Fusion in the UK (BT's Project Bluephone Goes Commercial), the world's first fully integrated fixed and mobile telephony service. We believe the service will work; it addresses key mobile user pains of high mobile costs and poor indoor mobile coverage, and we think that it will force BT's competitors to respond in kind. But a combination of mobile market saturation, intense mobile and broadband competition, lack of user awareness, and apathy will limit BT's commercial success with the service. And BT needs a plan to keep the highly lucrative fixed phone line rental in the house, since BT Fusion actually adds to the pressure to cancel this subscription. This is no idle threat. In North America, cord-cutting -- the practice of giving up a fixed phone line in favor of exclusive use of a wireless phone -- increased 20% in 2004, and for every
current cord-cutter, there are two more mobile users who plan to join their ranks in the future (Cord-Cutting Reaches One In 20 Mobile Households). That said, only the youngest consumers actually followed up on their threat in prior surveys; had consumers followed through on what they told us last year, the number of cord-cutters would have grown by 100%, not the 20% that we observed.
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Enterprise wireless ought to be a bright spot, and there is stronger-than-anticipated use of some mobile data applications across all sizes of enterprises. Penetration within organizations that use mobile applications is strong -- on average, 22% of their workforce now uses mobile applications like mobile email and calendaring, field force automation, and logistics. But this is low-hanging fruit. Why aren't there more applications? Frequently cited obstacles include cost, reliability, and ease of management -- but security trumps them all. (Editor's note: The graphic shown here is not a complete representation of the initiatives covered in the full report.)
Network Security Has Many Facets
Dealing with wireless security is challenging. As Rob Whiteley points out in Mobile VPNs: Securing Mobile Remote Access, today's standard IPsec and SSL VPNs just aren't cutting it. Mobile VPNs -- a secure connection optimized for low bandwidth, high latency, and unreliable wireless links -- are an emerging opportunity. Look for vendors like Columbitech, NetMotion Wireless, and IBM that offer true mobile VPN products. Healthcare, government, retail, and transportation should look to invest in mobile VPNs now. Others can wait for this technology to mature and fold into standard remote access solutions from vendors like Aventail, Cisco, and Juniper.
Wired networks have their own issues. In Choosing The Right Network Quarantine Solution, Whiteley predicts a surge in the second half of 2005 for this category as well. Although Cisco will dominate in the long run, its solution for the LAN will not be ready for prime time until late 2005. As a result, many firms that need to tackle it now will purchase standalone appliances and software-only solutions. Enterprises with simple network topologies should look to standalone appliance solutions from vendors like Caymas Systems or Vernier Networks; enterprises with larger, more complex networks should look to server- or switch-based solutions from vendors like Sygate and Cisco, respectively. Consider implementation details like your willingness to require client software, the age of your LAN gear, and how you build and enforce your access policies. Done right, network quarantine lays the foundation for enterprises to build an end-to-end, virtualized security framework -- a key
element of Organic Networks.
More broadly, Paul Stamp points out that intrusion detection and prevention systems have had a checkered history. In Network Intrusion Prevention Comes Of Age, he adds that faster hardware, together with maturing correlation and management technology, means that many organizations are now deriving real value from their intrusion detection and prevention systems. Successful implementations demand smart choices and expectation management on the part of the customer -- a network intrusion prevention system (IPS) will never be a panacea, but it will help organizations segment their flat networks while mitigating Internet-borne risks.
Ultimately, if we are to see spending in the sector rise, enterprises will need to be cognizant of all these dimensions and arrive at a comfort level that will support increased investment. As always, I look forward to your comments and suggestions for future directions in our research here.
Merv Adrian
Senior Vice President
mervadrian@forrester.com
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