[Networkers want retail]
From today's (actually Monday's) IBD, an article on why networkers want the retail market. Look at COMS. They've been struggling to find a product to replace USR's analog modems for the retail customer. Obviously 56K has run into trouble with the standards issue and perhaps performance issues, as well --- witness earnings' disappointments. Now COMS is making noise about going back to ADI for DSL-Lite, a consumer product, versus the standard ADSL telco solution. I didn't know until yesterday that every DSL player has a splitterless Lite solution --- or could in a heartbeat --- however, there are regulatory and performance issues involved for the consumer. (Benahamou, haven't you played this song before????) First of all, it doesn't comply with the Telecommunications Act, and secondly, you have to put filters on each phone jack or in the PC in order to have clean service without a potsplitter. Besides quality of service, regardless of which DSL the consumer uses, they still have to have a corresponding modem at the central office --- whether standard ADSL or some variation, it doesn't matter. It has to be there. So once more, the same as with 56K, the customer has to know whether his or her telco or ISP has the right equipment before buying a modem off the shelf. Once telcos start deploying standard ADSL, they'll advertise service is one phone call away. No expertise needed.
I'm not exactly sure where TI stands on a Lite solution --- I know they're studying its viability --- but if COMS succeeds with ADI in getting it to market, they may lose this business temporarily. However, if COMS' DSL-Lite turns into another 56K, they'll be back on TI's door before you can say "C6X rules."
Cisco is working closely with GTE and I think they'll come out with a telco solution and be among the winners. I don't know about Bay or Cabletron other than I know Cabletron made noises about Amati but weren't willing to pay the price.
As for Compaq, I know they're working with TI's DSL division, though I don't know if they have a formal partnership. Probably a simple MOU at this point. When I visited the Microsoft-GTE trials in Redmond, WA, I saw CPQ and Cisco equipment everywhere. I'd put my money on both being big winners.
Convergence is real and every day brings us closer to understanding where each of the players fits in. I suspect TI will win no matter who wins out in the field. One other player to keep an eye on: Siemens. They're working hand-in-glove with TI to develop an ADSL/ATM -DSLAM for the C/O. Will it beat out Alcatel's??? Who knows.
Then there's NEC. . . and Fujitsu. . . and Lucent. . .
Not knowing all the answers is what makes this sector so intriguing.
Cheers!
Pat
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Network equipment makers want to come home with you.
Once only the darlings of corporate technical gurus, makers of computer networking gear say they're targeting consumers in '98. Both Cisco Systems Inc. and 3Com Corp. plan to set up divisions dedicated to wooing residential customers. Networking companies will seek more retail sales. They'll also partner with Internet service providers to find customers, and advertise more in mainstream media.
The firms plan to sell to consumers everything from network interface cards - little circuit boards inserted in PCs to connect them to networks - to low-end routers and hubs - devices that move data on networks. With these products, consumers can create their own mini-networks.
Of course, networking companies' stock in trade is still technical - but they're becoming less technical. And consumers are still consumers - but they're becoming more technical. Those trends will meet in '98.
Networking Hits The Home
People are doing more work at home, and they need products to link PCs, printers, modems and other peripherals. Many need to connect to a corporate network or the Internet.
Not that breakfast cereal or razor blades need to fear their place in the hearts of consumers. Networking gear is notoriously complex and pricey. With a tough pitch to make, it remains to be seen how well network nerds can court consumers.
But try they will. Besides Cisco and 3Com, Bay Networks Inc., Compaq Computer Corp., Cabletron Systems Inc. and Microsoft Corp. want to sell more networking products to the home. Bay already has a line called NetGear aimed at the small- office market, as does 3Com.
As General Mills and Gillette can attest, big prizes await those that win consumers.
''The potential is huge . . . . Bay, Cisco, 3Com are rubbing their hands and dying to get into it,'' said Stephen Dix, sales director for Santa Clara, Calif.-based Bay's NetGear product line.
Compaq is keeping mum on its plans. But going after consumers is a natural extension for the largest seller of PCs, says Ed Olkkola, communications vice president for Compaq's products division.
''The opportunity in the consumer market is quite enormous,'' he said.
The key word so far is ''potential,'' say executives with Cisco. The San Jose, Calif.-based company is the largest seller of networking gear.
''Residential networking will be on the front page of all the papers next year, but it won't be material (in terms of sales),'' said Ed Kozel, Cisco's chief technology officer.
Still, now's the time to set the stage for the consumer networking market, says Janice Roberts, marketing vice president of Santa Clara-based 3Com.
''We see over the next two years that there will be an emerging opportunity for networking in the home,'' she said.
Bay's Dix agrees: ''You might not even think twice about networking 12 to 24 months from now.''
Internet access is driving demand for home networks, says Mike Dolbek, 3Com's vice president of business development. Where once there was one PC in a home, now there's often more, along with other once-fancy gadgets such as scanners, removable drives and CD-recordable drives. Networking them together makes sense.
''All of a sudden, you have many boxes you brought home'' from the local electronics retailer, Dolbek said.
Many Challenges Ahead
Though the move to the home seems a natural, networking firms face many problems in reaching consumers. The main challenge is to make the gear so simple that anyone can set up a network.>>>>
''Otherwise, consumers aren't going to be bothered,'' said John Armstrong, an analyst with Dataquest Inc., a San Jose, Calif.-based market researcher.
The industry is wrestling with the issue of complexity vs. simplicity, says Cisco's Kozel.
''The consumer market isn't as simple as the corporate market,'' he said.
Networking companies must make complex technology easy to use. Cabling and configuration are key, says Compaq's Olkkola. Cabling refers to connecting a PC to the network and configuration to setting up the system.
''Any time you can simplify the configuration and cabling, you come up with a good product,'' Olkkola said. ''You need a Ph.D. in networking for a Cisco router. Consumer networking products have to be like running your toaster or your blender. It's that simple.''
Where Are The Customers?
Networking firms are looking to decide if they should develop new types of products for consumers or simplify existing ones.
Then, finding customers and getting products into their hands is the next hurdle.
''The challenge is how to get to them,'' Bay's Dix said. ''You know who the Fortune 500 is. But you can't hit every household in the country easily.''
Networking companies will work with Internet service providers and telecommunications firms to find - and sell to - consumers, Kozel says. He says '98 will be full of trials to see how consumers want their networking delivered.
Large corporations are another source of home customers. More employees are working from their den, so they need networking products just like they do at the office, 3Com's Roberts says.
Educating consumers and retail outlets will be another crucial step, Dix says. Bay and 3Com already have networking products on retail store shelves. So far, the retail products are limited to network interface cards and small versions of hubs and routers. These products are easier to use than their complex brethren, but still are nowhere near as simple as they must become to spark consumer sales.
At What Price Glory?
Finally, after products are developed and customers are found, they'll only want to pay so much.
Prices, though, are plummeting. The cost of a four-connection hub dropped to about $60 in December from $100 in May, says Dix.
Such price drops are needed, say analysts.
''It's going to come down to dollars,'' Dataquest's Armstrong said. ''Consumers will have to have a compelling reason. What's the price point? Is it $50 a connection, $35?''
Networking companies plan to find out. >>>> |
