Mixed Signals for Wireless

Predictions of a wireless world may be slightly premature, affording companies some breathing room.
Alix StuartJune 1, 2001

Earnings disappointments and layoffs at major wireless-device makers constitute just some of the bad news emanating from a technology sector widely viewed as the next big thing. Yet all is not bleak. Leading cell- phone maker Nokia cut its projected unit sales from as many as 540 million to as few as 430 million, but its first-quarter net sales were up 22 percent over the previous year’s quarter. And wireless was the only bright spot for service providers like AT&T and Sprint, which found declines in long distance snarling their revenues.

But even as the number of wireless users grows, a new awareness is setting in. “Companies are beginning to see that wireless or mobile commerce won’t happen just because of the proliferation of wireless devices,” says John Distefano, leader of Cap Gemini Ernst & Young’s mobile commerce practice. Only 2 percent of mobile phone users pay for monthly data services, says Yankee Group, largely because downloading data onto a tiny screen is such a painful process. And Forrester Research Inc.’s recent survey of executives at U.S.-based billion- dollar companies indicates that only 9 percent have implemented any sort of wireless component to their business, while more than 50 percent were still in a wait-and-see mode, and some had no plans to pursue the technology at all.

Companies that sell wireless-related services to businesses admit to a slowdown in the wireless revolution. “We had more conversations about wireless last year with clients than we’re having this year,” says Vivek Wadhwa, CEO of Relativity Technologies, which sells software that makes data accessible via wireless devices. Reason Inc., once an online purveyor of wireless devices and services, revised its business model last fall to become a manager of other companies’ wireless devices and services. “You hear the exact same story at every company,” says Reason CEO Jeff Kohler, “and it usually comes from the CFO–they’re dealing with five service companies, 15 approved devices, and 50 rate plans, and no one knows how much money they’re spending on wireless.” Reason client Jeff Jackson, president of IT consultancy Everest Consulting Group, agrees. “Eventually, we’d like to have our field staff sharing their expertise and logging their time by using wireless applications,” he says. “But right now, we want to know how many cell phones are out there and who has them.”

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

That new pragmatism hasn’t killed wireless by any means, but it has prompted companies to evaluate the technology in light of their specific needs. Those with large field sales or service forces, like Everest, can achieve measurable results quickly. Cap Gemini’s Distefano says that a global beverage manufacturer with which he is working has found that the faster it can fix soda fountains, the more soda it can sell. Equipping its technicians with wireless devices so they can reach broken machines and order new parts immediately, then, should translate directly into higher profits.

Other companies that should consider a near-term leap aboard the wireless data bandwagon, say analysts, are those that offer customers information that changes often and is numerical in nature, like financial and travel data. Even in those situations, however, companies are proceeding with caution. Countrywide Home Loans Inc. made its Web site accessible to wireless devices last year, enabling real estate brokers and consumers to see mortgage rates and other financial data. The firm is currently developing more data-rich applications, like loan approvals, for Palm- and Microsoft-enabled PDAs. “I am convinced that, for the vast majority of projects, the incremental approach is best,” says first vice president Brian Ruggiero. “If you can’t deliver a usable piece of wireless technology in less than two months, you’re taking the wrong approach.”

Some companies are making larger investments. Last month, Starbucks announced a five-year, $100 million deal with Compaq Computer Corp. in which the ubiquitous coffee purveyor will equip its shops with gear that gives customers wireless Web access.

But most businesses may be tempted to sit out the wireless game for at least another few quarters. That will not only preserve precious capital but also will allow a murky technological picture to become clearer. Ericsson, Motorola, and Nokia announced in April that among other initiatives, they’d work together to standardize specifications for mobile instant messaging, currently one of the most popular uses in other countries.

And, because financial returns are still about as visible as bandwidth, many companies may heed Ruggiero’s advice: “If you can’t take an incremental approach, then peg incentives to large projects that come in well below budget.”

Predictions of a wireless world may be slightly premature, affording companies some breathing room.

By Alix Nyberg


Widely viewed as the future of wireless, “3G” technology suffered a setback at the end of April when Japanese wireless firm NTT DoCoMo Inc. said it would delay launching 3G service by four months. This third generation of wireless operates at much higher transmission rates than today’s 1G (analog) or 2G (nascent digital) technology, making it suitable for video and other data-intensive applications. Japan has been seen as the trendsetter in this area, and European and American wireless firms have been paying keen attention to how the technology is being rolled out there, eager to see which applications business users and consumers will embrace.

DoCoMo attributed the delay to software problems, and vowed to fix them in time to begin offering service by October 1. The news not only affected DoCoMo’s stock price (down almost 5 percent on the day the company announced the bad news) but also was deemed responsible for a brief sag in the entire Nikkei index.

Even before that development, however, analysts were questioning whether 3G could live up to its hype. Telecom carriers paid enormous sums to license the spectrum on which 3G data travels, trusting that a ready market for high bandwidth was a given. But businesses don’t seem to be clamoring for such wireless capacity. Ray Jodoin, principal analyst at Cahners In-Stat Group, in Scottsdale, Ariz., says that “moderate subscriber uptake” is a full two years off in Europe, largely because there is little to entice consumers or businesses to invest in more-expensive handsets and other equipment.

Complicating matters further are a host of competing high-speed wireless standards, including 802.11a, 802.11B 9 (nicknamed “Wi-Fi,” and incompatible with 802.11a), 80211G (faster than Wi-Fi, but compatible), and Home RF. The existence of so many different ways of cramming data into some subset of the wireless spectrum will, in all likelihood, paralyze businesses. Even venture capitalists admit it’s confusing. “The world’s going to look like a hodgepodge,” says Michael Feinstein, senior principal at Atlas Venture, in Boston. “To get low prices, you need to have common products that you can distribute worldwide,” a situation that may be years away.

In the meantime, wireless service providers, handset makers, and customers will have their hands full coping with the advent of 2.5G, which provides a performance boost without requiring a migration to 3G hardware and software. That may suit business users just fine, for now. — Scott Leibs

4 Powerful Communication Strategies for Your Next Board Meeting