WLANs: ROI Reality Hits Home

By David Haskin

February 19, 2003

To get a positive return on investment from wireless LANs, you may need to narrow your focus.

Even a casual observer of the technology scene can see that wireless local area networks (WLANs) are on a roll. One research firm, Allied Business Intelligence, recently said that sales of 802.11 chipsets tripled from 2001 to 2002 and expects continued strong sales into the foreseeable future. Other research firms have made similar predictions.

But strong WLAN sales doesn't equate into strong ROIs for the enterprise. To get that, some analysts and information technology (IT) personnel say, enterprises must look beyond the hype and narrow in on specific applications.

"Two yeas ago, IT shops would put in wireless LANs just so they could talk about how interesting the technology was," said Rebecca Wettemann, vice president of research for Nucleus Research. "But right now, that's not the strongest motivation for (IT) people who still have their jobs."

"We've been messing around with wireless LANs for three or four years," agreed Kurt Kleinschmidt, senior network analyst for Del Monte Foods, based in Pittsburgh. He said WLANs will never replace the wired network, but his company's initial application for the wireless network will have a virtually instant payback.

The Overlay Strategy

Gary Berzack, CEO of Tribeca Technologies, a New York systems integrator specializing in WLANs, has helped many enterprises install wireless networks. He said that "the only ROI for wireless LANs is an overlay strategy" that augments and doesn't replace the wired network.

"For instance, in the classic bricks-and-mortar scenario, wireless LANs increase your real estate," he said. Putting a WLAN access point in a cafeteria or conference room can increase the productivity of employees who frequently move around a building or campus and carry a WLAN-equipped laptop or PDA.

Another profitable application is using WLANs in temporary office space, sometimes called swing space, Berzack said.

"We did a swing space (WLAN) installation that the client was going to use for nine months until their new facility was finished," Berzack recalled. "The wireless LAN meant they didn't have to run cable at $175 per drop for 90 people for nine months. Besides being cheaper, when they were done, they owned the (WLAN) hardware."

Other profitable applications for WLANs, according to Wettemann, are construction sites and consultants who move into a client site for a limited period, which are both variations of the swing space theme. Warehouses and loading docks also benefit from WLANs, she said, since employees can input shipping and receiving information in real time, which enables precise management of inventory.

Del Monte's Bottom Line

Del Monte's Kleinschmidt said his company has one primary application in mind for WLANs: wireless IP phones. The company currently relies on outmoded paging and radio systems for communicating with employees who constantly move around the headquarters campus, such as maintenance and technical support personnel.

Kleinschmidt said the company probably will expand its existing WLAN, which currently is used only by a handful of employees, to the entire campus. Then, wireless IP phones will replace pagers and radios.

He said a gross estimate is that the company will spend about $100,000 to expand its WLAN from its current 10 access points to an estimated 150 access points.

"We'd have to sink a quarter-million dollars just for the paging and radio system," he said, which makes the ROI for this application obvious.

Ultimately, the number of headquarters-based employees with WLAN-connected computers and handhelds will increase from the current 20 to perhaps 100, Kleinschmidt estimated. In addition, another 100 employees will have IP phones.

Build It and They'll Come

A hidden benefit of building out Del Monte's WLAN, according to Kleinschmidt, is that the infrastructure will be in place for future wireless applications. For instance, he said that WLAN usage eventually could be expanded to the companys sales department.

"We're a sales-driven company and maybe 35% to 40% of our people have laptops and travel," Kleinschmidt said. Since public hotspots and other WLAN access is becoming more common, Kleinschmidt envisioned that all laptops given to traveling employees eventually could be WLAN-equipped.

Berzack said that, in his experience, once wireless systems are in place, good applications start becoming apparent.

"There are likely to be future applications that you don't even know about," he said. "If you can measure the payback in nine to 12 months, that's great. But sometimes the ROI is about the unknown as well as the known."

For instance, he said he was familiar with one case in which the WLAN was put in place for a specific application and the company then learned it could used the wireless network for closed-circuit monitoring and security.

"The ROI in these cases is, 'Build it and they will come,'" Berzack said. But first, Berzack and the other experts agreed, you must start with specific smaller applications.

"You won't replace wired networks where they're established," Berzack said. "But sometimes, after you've put in a wireless application, there are ROIs you didn't have before."

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