Mom and pop get wired
By Ben Heskett
September 18, 1997, 6:00 a.m. PT
special report No longer an idea reserved for tech junkies looking to be the most wired on the block, networking is going mainstream.
Increasingly, small businesses are finding that connecting their PCs to each other--and to the Net--is a necessity in doing business. And networking companies have noticed, with many small and large firms entering this lucrative niche by marketing low-priced gear. Home computer users also are being targeted by networking companies, as more and more families find that one PC is not enough to satisfy the computing hunger of the household.
From a competitive standpoint, the low end of the networking market remains relatively wide open, largely because the requirements for entry are simple: Make technology easy to install and simple to use for customers.
The usual suspects--3Com, Cisco Systems, Bay Networks, and Cabletron Systems--all have increased their commitment to this segment of the computing community. Some are leveraging their experience in high-end technology and repackaging it in smaller sizes that can be implemented easily.
"The small office represents a significant opportunity for all of the major networking players, so they all have pretty significant business units targeted at them," said Esmerelda Silva, analyst with International Data Corporation, in a recent interview.
Others, such as D-Link Systems and Linksys, are almost exclusively focused on the low end, offering proof that multibillion-dollar backing is not necessarily a prerequisite for entry. Some users are still attracted to brand names, but many small sites looking to build a network are focused primarily on price, according to industry observers.
Brand-name companies with specialties in computing, such as Hewlett-Packard, Intel, and Compaq Computer, are seeing the benefits of catering to this market, and also have been delving in with increasing interest.
Market researcher Computer Intelligence recently released a study that found that only 13 percent of sites with 100 or fewer computer users have a LAN installed. (LAN is a networking moniker for local area network, or a series of connected computers within an organization.) This "100-user sites or fewer" segment of the market has a larger year-over-year growth rate than large installations, topping nearly 30 percent from 1996 to 1997.
Similarly, 3Com has found that 70 percent of small businesses own a PC, but only 15 percent have implemented a network. Company representatives focusing on the small-business market, where 3Com is a huge player, note that users typically don't know what a network can do for them. Thus, 3Com has several education programs underway, with plans to offer materials and a free CD-ROM for potential customers.
"The opportunity is growing because there are just so many small businesses out there," said Dianne Myers, analyst with In-Stat, a market research firm.
Although small businesses are increasingly attracted to networking concepts, barriers remain for companies, leaving a large, untapped market for hardware companies.
The implications of a superior network infrastructure for worldwide corporations like Federal Express are clear: Cutting-edge technology can be used for competitive advantage against rivals. But what of the small office with 20 employees and 15 computers? What do they have to gain?
"Small businesses know they have a problem, but they don't know the solution is a network," said Kerry Langstaff, marketing manager for small-business operations at 3Com. "And they certainly don't know they can solve that problem for a couple of hundred dollars."
Two office necessities are driving the small-business market, according to analysts. The first is having the ability to share resources, such as files and printers, and the second is gaining Net access via networking equipment.
"Even if a business only has two PCs, they have a reason to connect those PCs and they have a reason to share information," Langstaff said.
Go to: Lotus: a case study