Data Vs. the Bear

Will it be feast or famine for wireless data in these savage economic times?

The Worst-Case Scenario Survival Handbook offers this advice for surviving a bear attack: “Lie still and quiet. Documented attacks show that an attack by a mother black bear often ends when a person stops fighting.”

In other words, the wireless data industry should stay calm and not act as if the economy were about to have data for lunch. There is reason for concern, though, as 2001 has been a brutal reality check for the U.S. economy, particularly in the technology and telecom sectors. Companies that lived it up in the last few years' utopian economy now find themselves in the middle of a harsh wilderness, where only the strong will survive.

If the bear persists, the handbook offers this strategy: “Strike back with anything you can. Go for the bear's eyes or snout.”

So if the wait-it-out approach fails, fight back with all the virtues of wireless data. As most companies have responded to the downturn by slashing revenue forecasts and issuing layoffs, IT budgets have been spared so far. (See Figure 1 on page 8A.)

But there is growing evidence that wireless data will have to defend itself in this eat-or-be-eaten economy. In a February CIO survey conducted by Morgan Stanley, 38% of respondents (www.morganstanley.com) listed wireless initiatives as the area most likely to be cut if they had to reduce spending. Only two other areas — new custom development (44%) and consulting (68%) — received more responses. Only 9% of respondents listed wireless as the area least likely to be cut. On the flipside, the Yankee Group (www.yankeegroup.com) estimates wireless data revenue will total $6.36 billion in 2002 and then climb to $43.9 billion in 2006.

These dissimilar views reveal a disconnect between what the market understands that wireless data can do, and what it ought to be expected to do, says Warren Wilson, Summit Strategies practice director (www.summitstrategies.com).

“There is a lot of confusion in the marketplace about the wireless value proposition,” he says. “It's unfamiliar territory for a lot of people, so when times get tough, and you are looking for stuff to cut, it's easy to single it out. But for companies that do that, it may prove to be a shortsighted move.”

As wireless data chugs closer to the uptake the industry has long dreamed of, it may find the perfect weapon to help ward off the bear.

“We see the hockey stick (of wireless data adoption), and it's a great place to be,” says Janet Boudris, Cingular Solutions vice president (www.cingularinteractive.com). “Everybody always predicted that it was (going to be) the next year, and now it has arrived.”

To Data Turn, Turn, Turn

Data acceptance with general consumers is perhaps the most vulnerable market in this economic climate.

“Most of what you see on TV is people using cell phones to check stocks and the weather; I think you'll see some pressure on those types of services because those are discretionary,” Boudris says. “When an economy turns down, people tend to think twice about a convenience vs. things they consider a necessity.”

Given that the wireless Internet has yet to see strong acceptance beyond early adopters, such a loss may not be substantial for carriers. The safer place, though, is with the enterprise market, where wireless data is becoming a necessity.

“Most of the customers (carriers) have are business customers that have a pretty obvious business need that isn't going to go away,” says Barney Dewey, Andrew Seybold Group analyst. “In fact, historically, people will turn to productivity enhancements in times of economic downturn.”

Wireless data, then, could actually help deliver enterprises through the economy's current tempest.

“On the enterprise side, there has been a shift away from business-to-consumer applications to business-to-employee applications,” says Jason Guesman, Sprint PCS director of business marketing (www.sprintpcs.com). “These are solutions where if my salesperson could place an order from a mobile device, how much could I shorten the sales cycle, improve delivery times, and how many additional sales calls can I conduct in a day? That has a robust ROI, whereas trading stocks for a consumer on a phone is a little bit harder for a company to figure out the ROI on.”

Currently, remote data access enjoys penetration only with a select number of corporate employees. Sixty-five percent of respondents to the Morgan Stanley CIO survey say that 10% or less of their workforce has remote access now or will have it next year. Only 4% of respondents say they plan to support network access via wireless. Mobile access to critical enterprise information, though, will become an increasing need. According to IDC (www.idc.com), the U.S. mobile-worker population will increase from 39 million in 2000 to 55 million in 2004.

Evidence for that growing demand is in Cingular Interactive's subscriber additions. Between 1988 and 1999, the carrier gathered 200,000 subscribers. Last year alone, it added 400,000 subscribers.

An example of how wireless data can improve enterprise efficiency is with Cingular Interactive customer GE. The company's field technicians can accept customers' credit cards wirelessly, which means instant revenue without the expense of issuing bills. Technicians also can download the appliance's maintenance history to better understand the unit's problems.

Got ROI?

Not only is the demand for wireless data increasing, enterprises are examining potential solutions thoroughly.

“They are looking for a return on investment, and they are demanding that the solution be cost effective as well as increase their productivity,” says Ellen Flora, GoAmerica executive staff (www.goamerica.com) vice president. “We're finding that we have to work with them to show what the return on investment is.”

As alluring as sci-fi-like technology can be, wireless data apps still have to bring home the bread.

“We're selling productivity, and that's a real compelling story vs. it's cool,” Guesman says. “The cool factor is nice; it gets attention, but it's got to be compelling. That's where you get into proving an ROI.”

Given the recent bankruptcies of NetMorf (www.netmorf.com), Paradigm4 (www.paradigm4.com) and the pending merger of bankrupt paging carriers Metrocall and WebLink (www.weblinkwireless.com), enterprises have good reason to examine wireless data solutions carefully (www.metrocall.com). Wilson says enterprises have to question whether their prospective data providers still will exist six months from now.

“A lot of people aren't going to make it through this shaky time and, if you are a customer, you don't want to bet on the wrong horse,” he says.

Device Decisions

If enterprises and consumers trim their device arsenals, choosing one over another basically comes down to what apps run best on the device. For all of the talk of the handset being limited by its small screen, it may be the device that's left standing after cutbacks. Included with almost any phone sold today is at least rudimentary data capability. More important, though, is the forever-essential voice capability.

“Nobody is going to give up their cell phones,” Wilson says. “At the same time, people are holding onto their phones and not replacing them with the latest and greatest quite as fast as the handset makers had expected them to.”

Indeed, rather than cutting wireless data, enterprises could pass on the latest whiz-bang invention and keep their proven devices.

“Companies will pull back more quickly on more sophisticated, more expensive devices that may be able to do more but cost a lot more,” says Greg Santoro, Nextel (www.nextel.com) vice president of Internet and wireless services.

With new Java phones, Nextel enterprise customers have an additional advantage in that they will be able to download upgrades to their handsets rather than having to buy new phones. Nextel recently even cut the price of its i85s and i50sx Java-enabled phones by $100 each.

As much as phones may become the wireless data workhorses, many data carriers and W-ISPs focus on Blackberries and PDAs as the devices of choice. Even traditional carriers are branching out to additional devices. Through its partnership with Palm, Sprint PCS will offer much more than phones (www.palm.com).

“We're not a phone company anymore, we're a communications company,” Guesman says. “We help people get information and stay connected to the information they need. That means we've got to do more than phones.”

Data Is Cheap

Enterprises won't save any money by cutting their wireless data projects, because data solutions aren't that expensive, Santoro says.

“Most companies are starting small, working on customizing specific applications for a particular function,” he says. “We're seeing all that stuff move forward because it's not that hard or expensive, and there actually is an ability to save money from it.”

Sprint PCS has created Wireless Web for business starter kits to give enterprises a quick and cheap entry into wireless data. One option includes 10 wireless modems and three months of flat-rate service for around $5,000, Guesman says. The second data-in-a-box package includes 10 Wireless Web-enabled handsets pre-connected to the enterprise's server for real-time access to e-mail, calendar and contacts.

More challenging to wireless data uptake among enterprises than the economy is educating customers on the reality of wireless solutions.

“This stuff is real; it's here today,” Santoro says. “You don't have to wait for the so-called wave of 3G to be able to deploy practical wireless applications. But until you sit down and touch and feel applications and show them how they are working and give examples of how customers are using them, you get a lot of blank stares.”

Carrier	Data Subscribers
Alltel	N/A
AT&T Wireless	600,000+
Cingular	N/A
Cingular Interactive	670,000+
GoAmerica	47,632
Metricom	40,900
Motient	226,031
Nextel	1.1 million
OmniSky	39,000
Sprint PCS	1 million+
Verizon Wireless	1 million+
VoiceStream	N/A
Total	4,723,563

Carriers' current data subscribers compared to overall market forecast