Investing in Wi-Fi: Finding the ROI

Guest commentary: In today's tough business climate, can IT managers justify upgrading wireless infrastructure? Technology equity strategist Melanie Hollands, president of technology long/short hedge fund Koala Capital, provides her perspective on

In the current economic climate, corporations have little incentive for increased investment in IT in general, let alone upgrading from fixed to wireless network infrastructure. Contrary to popular market wisdom, wide-spread installation of wireless networks and accompanying hardware upgrades for seamless, reliable wireless delivery of information services and/or interactivity with fixed networks is likely to be several years away. Longer-term, however, wireless should present a substantial global revenue opportunity.

In general, interviews with IT managers and purchasing consultants indicate that companies are placing a higher priority on security, storage, and hardware replacement over wireless infrastructure. While field interviews reveal that there are unlikely to be widespread increases wireless spending in 2003, few actually plan cuts to their wireless budget in 2003 versus 2002.

A switch to wireless means considerable equipment replacement. When wireless takes off, it will be a huge boon to infrastructure and notebook PCs. However, in industries where many employees are already working with notebooks - financial services, media, technology, telecom, and healthcare - the phase-in of wireless equipment should be relatively painless and inexpensive since IT personnel need only to plug a WLAN card into the notebook.

Field interviews with IT purchasing managers and consultants indicate that wireless IT, while not an increasing proportion of total IT, is also not being cut significantly. Spending increases on wireless technologies are generally occurring in larger companies; in particular, in companies in the defense, healthcare, and media industries.

This makes sense for four reasons. First, larger companies have proportionally larger IT budgets. Second, larger companies have more ability to connect wireless hardware to secure nodes in the existing wired network. Third, the healthcare sector in particular (and to a lesser extent the media companies) is one of the few with stronger, or growing, fundamentals. The defense companies are benefiting from increased military activity. Finally, companies with more wireless workers have more to gain from improved efficiencies offered by wireless in the mobile environment.