Vertical applications have become one of the hot areas in the wireless industry. With cellular penetration approaching saturation and subscriber ARPU slowly declining or remaining stable despite the strong growth in mobile data adoption, turning to applications where humans are not required or only play an ancillary part is understandably appealing. Wireless technologies were largely developed on the assumptions that people would be the end points--but they can very effectively connect, measure, and keep track everything out there. And there are far more machines and other objects that can be connected than there are humans.
The internet of things will fundamentally reshape the way wireless technologies are used and deployed, and yet there is a widespread sense that it is not growing as fast as initially hoped--or not as fast as technological innovation allows.
Still a lot of work ahead
The potential for vertical applications such in segments like healthcare, utilities, military, safety, and generally across any enterprise area, is undisputed. It is also evident that vertical players in these segments are actively engaged in exploring the potential of wireless, defining their requirements, developing the business case, and, in the process, going through a steep learning curve, through RFIs, RFPs and trials. In some cases, enterprises and public agencies are pushed by regulation. In other cases, the opportunity to cut costs, improve performance, or expand the services offered motivates the search for wireless applications.
Vendors have been responsive to the vertical players' interest and have allocated resources to target specific segments, or developed partnerships with system integrators and other vendors to more effectively reach their potential customers. To gain credibility and to sell into a vertical market, it is crucial to have sector-specific expertise, to understand the specific requirements of their customers--hospitals, train operators, utilities, and so on. While this expertise has been the relevant even for the core wireless broadband connectivity supported by Wi-Fi, point-to-point or point-to-multipoint links, where the equipment and network planning is not too different across segments, it becomes much more central when the wireless equipment has to interface with application-specific devices, such as cameras or sensors, that may have to be installed in challenging locations.
Private or public?
Vertical players do face a complex choice among technologies available, cost and performance tradeoffs. One key choice is whether to build and operate their own networks, or rely on public cellular networks. This decision often is one of the first to introduce delays in the choice of solution to be adopted.
The choice between a private and public network is in some cases an obvious one. For a fleet management application that keeps track of vehicles across the country, the use of a public network is virtually unavoidable. At the other extreme, for a mining company in an isolated location where there is no cellular infrastructure, a private network for local connectivity is the obvious choice. In between the two extremes, there are many situations where both private and public networks bring in some advantages, but also limit what the organization can do. A public network typically offers better wide-area coverage and it is already available. A private network give the vertical player complete control over the applications and often a lower opex, but it also requires a long deployment time, ongoing support for operations and maintenance.
The decision between the two often has deep implications for the role of wireless applications within the organization--how tightly integrated they are with the core business, and how critical they are to operations.
Disruption does not come easy
Again and again, however, what emerges to be main factor in slowing down the selection process is not the decision about which technology, which vendor, or whether to use a private or public network, but how all of this fits in the organization and in the business model. The assessment of technologies, requirements, costs, and tradeoffs among them frequently starts much broader, soul-searching debates about the role of wireless applications and more generally about operations within the organization, about which teams or individuals should be responsible for the decision, deployment, and operations of a wireless network, what to do with the legacy systems that wireless applications are expected to replace. These are clearly crucial strategic decisions and it is well worth for organizations to consider them carefully, but in many cases organization culture and personality clashes become equally central issues because of the disruptive potential of wireless applications in environments with mature and solidly established practices.
Better slow than too fast
Obviously these are issues that reliably accompany innovation and change, and they are not limited to wireless. But for the wireless industry--and vendors in particular--their relevance is amplified by comparison with network operators for whom wireless is the core business and have a more streamlined solution and vendor selection process for wireless equipment.
As the slow pace in adoption is in large part caused by the genuine need to figure out what is the best directions for different organization, different applications, and different requirements, it may be beneficial to the emerging market for wireless applications, as it may help avoid the hype, half-baked business models, and hurried deployments that we have seen in muni wireless Wi-Fi.
Back to vendors, patience has become the other essential ingredient, alongside sector-specific expertise. The sales cycle for vertical applications is often much longer and requires much more effort in assisting and educating the potential customer. Most vendors at some point question whether their choice to get into a given vertical market was the right one, or whether the promised opportunity will ever get realized.
This is especially a challenge for startups and small companies that exclusively focus on vertical applications and need a shorter-term sustained stream of revenues for their survival. They are finding out that they may need to tighten their focus even further, or to increase focus on solutions that have a market among telecom operators. And this may come to the advantage of tier one vendors which have traditionally preferred to focus on larger market segments, but now they start to appreciate the appeal of niche, but sometime more profitable, vertical applications.
Monica Paolini, PhD, is the founder and president of Senza Fili Consulting and can be contacted at [email protected]. Senza Fili Consulting is an analyst and consulting firm that provides advisory services on wireless data technologies and services.