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Commentary: Changes are in the air for wireless services

Although selling wireless applications to corporations rather than consumers offers better economics, it also comes with its own problems.

By Michael King, Gartner Analyst

Although selling wireless applications to corporations rather than consumers offers better economics, it also comes with its own problems.

The real advantage of selling to corporations

See news story:
Wireless goes to work
comes from more easily showing the customer a concrete financial advantage. However, this approach will mean a longer sales cycle--that is, the seller of wireless applications has to wait longer for income--and requires more extensive sales and support. Thus, although this model is more profitable, it also means a higher cost per sale.

Vendors have started making this shift because it's easier to see that benefits outweigh costs in corporate sales than in direct-to-consumer sales. After all, wireless services provide largely intangible benefits, such as greater convenience and just-in-time information.

Enterprises will buy wireless applications and the services based on them if they can achieve a return on investment (ROI) greater than the "mobility tax"--that is, what wireless applications cost in money, support and reduced bandwidth when compared with fixed-line services. For now, wireless' appeal to enterprises is limited mainly to vertical markets, such as shipping and receiving, utilities and services (such as appliance repairs).

In some of these markets, wireless repays its cost in just nine months. Elsewhere, however, ROI is harder to justify. Wireless services may, for instance, give salespeople greater flexibility, but being able to make one more call per day still may not justify the outlay in many cases. For this reason, wireless adoption among enterprises in general has gone slowly.

Although some consumer-oriented vendors have built some brand recognition--and spent a lot of money doing it--the consumer wireless market likely has entered a period of rapid change. Successful vendors will have to learn from mistakes and refocus on strategies that work. For example, successful services will be location-specific and sensitive to the customers' preferences. A service uses wireless advantages well, for example, when it can recommend to a customer a restaurant near his or her immediate location--based on the consumer's preferences.

Many providers of wireless services that have not done this will likely go out of business or be acquired during 2001 in what Gartner predicts will be a major shakeout comparable to what happened to many dot-com companies in 2000. Adding to the pressure will be mobile device manufacturers such as Kyocera, Nokia and Samsung, which have begun to embrace the larger handheld operating system community--for instance, Palm and Windows CE--and thus draw on its strong ties to the developer community. These companies will start to drive more of the innovation in the consumer market.

Finally, established Internet companies such as Yahoo and media companies such as AOL Time Warner will continue to pursue wireless services and applications. They will offer consumers one-stop shopping. For example, many consumers will welcome the convenience of setting up a profile just once with one company for both fixed-line and wireless Internet service. Life is bound to become more difficult for pure-play consumer wireless providers.

(For related commentary on what surveyed CIOs said about security and mobile device, see registration required.)

Entire contents, Copyright © 2001 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.