Mobile Investment Will Grow, Returns Will Wait

Global corporate investment on mobile enterprise infrastructure will grow from $300 million in 2002 to $2.3 billion in 2005, according to Datamonitor.

Datamonitor’s report predicts strong growth for the mobile sector, but it also warns companies that financial gains to be made from mobile projects in the corporate space will not be particularly noteworthy for sometime. Integrators, in particular, will have to bite the bullet, focus on low-value horizontal projects and take a hit on the balance sheet first, to stimulate interest.

The mobile industry set itself on a more enterprise-focused course when the consumer market stagnated. But a year later, the percentage of global enterprise hardware spent on mobility remains tiny. By the end of 2002, Datamonitor expects it will still account for far less than 1 percent of global enterprise hardware spending.

In the meantime, companies continue to develop their e-business systems, but Datamonitor doesn’t expect the rush to turn on the mobile channel to occur until 2004. Technological problems surrounding the “plumbing” of mobile solutions (mobile connectivity of existing, in-house applications) still need resolution, while end-users are still unaware of the benefits that this type of solution would bring.

“When technology improves, companies become more familiar with mobile applications and overcome paranoia about offsite IT services, integrators will focus on high-margin, bespoke implementations that generate substantial revenues,” said Richard Clifford, Datamonitor m-commerce analyst. “At present, however, the market is not sufficiently developed and there is very little demand for this type of solution. This will largely remain the case until 3G networks and devices are rolled out. Until then, integrators must use low-value, horizontal mobile projects to gain expertise – perhaps even regarding this type of project as a loss-leader.”

Clifford also said that significant levels of investment are still required before any revenue in mobile revenue will be evident. There is also a lack of understanding among end users who need to see mobility as revenue-generating or cost-cutting, as opposed to a time-saving luxury.

North America accounted for $141 million of the mobile enterprise infrastructure market during 2001 and will grow to $840 million in 2005, according to Datamonitor. While this figure seems small (it excludes integration and software), compound annual growth rate for the period is 56 percent. By comparison, the European market will grow from just $79 million in 2001 to $706 million in 2005 (73 percent compound annual growth). Asia-Pacific will also see substantial growth, rising $79 million in 2001 to $447 million in 2005.

“North America is undergoing difficulties in the rollout of next-generation networks and as a result is not especially advanced in mobile technology,” Clifford said. “However, the region has a far higher penetration of handheld mobile devices than Europe or Asia-Pacific. At present, as smartphones are still undergoing improvements in their form factor, the PDA is the device of choice for mobile data. North America benefits, in this case, as users are more familiar with this type of device and also through widespread pager use. In addition, the industry psychology is one that continues to regard mobile as an enterprise technology that has spilled into the consumer space.”

Approximately 80 percent of companies in each country globally are small to medium-sized businesses (SMBs). Datamonitor found that, although businesses of this size are unlikely to present a significant opportunity at the moment, they will in time as mobile solution price comes down, technology improves and “out-of-the-box” solutions become available. In the Small Office/Home Office environment, wireless solutions will become relatively popular as small businesses opt not to implement more expensive and cumbersome ISDN connections.

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