Government Spending Buoys Wi-Fi Market
Even though the economic downturn has slowed enterprise spending, government-driven wireless sales have kept the Wi-FI infrastructure market on track for $7 billion in sales by 2014.
At the turn of the millennium, there weren't that many wireless LANs around. By 2005, however, the market reached about $2.4B, according to Dell'Oro Group. By the end of 2009, it had almost doubled to reach $4.3 billion. And Dell'Oro anticipates a further leap to more than $7 billion by 2014.
The analyst firm bases its numbers on WLAN "infrastructure" equipment like wireless routers (SOHO), access points (APs), service provider mesh (i.e. enterprise-class outdoor APs), and cable and DSL gateways that have an integrated WLAN. So this doesn't even take into account the vast number of client devices, as well as wireless network adapters and media bridges.
One of the big drivers of growth has been the recent technology upgrade cycle to 802.11n. In discussion for many years, the 11n standard was finally ratified by the standards organization in the fall of 2009.
The proliferation of mobile devices is another source of WLAN expansion. As well as laptops, users now connect via an array of smart phones, e-book readers and tablets.
"CIOs and IT managers can no longer dictate which devices users can hook up to the network," said Shalinsky. "Users are adopting smart phones and demanding a connection. As more devices want to connect, the bandwidth requirements and the need for upgraded equipment go up."
With device anarchy becoming the norm, though, network managers need to figure out policies that help determine what access to information each person received. According to Shalinsky, these policies need to consider such things as: who the person is, what group they are a part of, where are they located and what type of device is being used.
"Bandwidth capabilities and security concerns may be very different based on these types of parameters," said Shalinsky.
Some markets strong, some weak
When the WLAN market is sliced and diced, though, there are wild variations in performance. The economic slowdown translated into slashed IT budgets and replacement cycles on equipment being extended. This shows up most markedly in the enterprise space which actually had a down year in the face of an overall WLAN boom.
"In spite of the economic downturn, 2009 was only slightly down in the enterprise space as compared to 2008, indicating that WLAN spending was getting some priority spending from IT," said Shalinsky. "As the economy recovers, WLAN gets a boost from a backlog in equipment replacements."
While the enterprise segment struggled, the server provider mesh market showed strong growth, though it still represents less than 5 percent of the overall market. But government programs probably caused the biggest surge in sales. All kinds of incentives exist that assist WLAN sales: smart grid investment grants, the broadband investment program, and the e-rate program are a few examples.
"These US government spending programs are helping to stimulate ideas and purchases of technology and equipment," said Shalinsky.
The smart grid investment program, for instance, provided $3.4 billion in grants. Some of this money is going toward smart meters, and most of them have wireless radios to send/receive data from the utility network. Smart meters connect to a device that aggregates data from multiple meters, and then those devices often use service provider mesh units to "backhaul" the data to the utility.
The broadband investment program, on the other hand, is mainly geared towards extending broadband to rural areas. Most of the money is going for middle-mile build out of networks, helping to provide high-speed internet access to major hubs such as hospitals, schools and libraries. Once extended, this generates greater demand for wireless LAN-related equipment.
What about the E-rate program: $2.25 billion a year in funding from the FCC provides assistance to schools and libraries for telecommunications and Internet access. This money comes from a small tax that appears on every phone bill known as the Universal Service Fund. Schools apply for technology grants, and many are applying these funds to WLAN and other networking infrastructure.
With such programs gathering steam and signs of economic recovery slowly manifesting, the WLAN market can expect several years of plenty, according to Dell'Oro.
"The WLAN market weathered the 2009 economic downturn pretty well, and as the economy recovers, the market will continue to rise, driven by the pervasiveness of mobile products and people's desire for information anytime, anywhere," said Shalinsky.