|
VoxTechnologies
Enterprise Network Series
|
Wireless Local Area Networking:
ROI / Cost-Benefit Study
Executive
Overview
10/98
Sponsored By The Wireless LAN
Alliance (WLANA): WLANA is a non-profit industry alliance of leading
worldwide suppliers of wireless local area network products and technology
dedicated to promoting increased knowledge of wireless LANs through market
education.
Conducted
by Tech Research (Mt. Laurel, NJ): 4305 Tarnbrook Drive, Mt. Laurel, NJ
08054; TCHRESCH@AOL.COM, Sonina Velasquez
A fundamental challenge facing information technology
(IT) decision makers is identifying and implementing architectures,
technologies, and processes that reduce the total cost of ownership (TCO) of
corporate networks—one way is the wireless LAN. Based on the results of this
study, we believe that if companies understand the true costs and economic
benefits of wireless LAN solutions they will generate quicker return on
investments.
Currently
the wireless LAN is not a replacement for the wired infrastructure, but it is a
significant complement to what currently exists. Schools, manufacturing
companies, hospitals, and offices purchase these wireless LAN systems for two
predominant reasons: they are seeking an increase in user productivity and IT
team productivity.
Companies that integrate or upgrade with these
systems will stretch IT resources further and be able to reap economic and
business benefits sooner than companies taking a wait-and-see
approach—especially now that a solid standard exists for wireless local area
networking. As a result of this standard and higher performing or higher speed
systems, tomorrow’s enterprises will likely have a mix of wireless and wired
LAN systems.
Interviews for
this study were conducted with wireless LAN users in the following industries:
·
Education (In-building K-12 and University/College connectivity)
·
Healthcare (Point of Care)
·
Manufacturing
(Production/Distribution/Maintenance/Shipping/Receiving)
·
Retail (Point of Sale)
·
Financial/Office -Automation (Stock Exchange, Banking, Consulting)
This Wireless LAN Cost of Ownership report is focused
on the results of a detailed end-user survey to identify cost of ownership and
tangible and intangible gains in using wireless LAN technology. It is apparent
that the technology is taking its place as a viable alternative and/or
complement to wired LANs and for new strategic applications.
·
89% of the companies experienced a successful implementation.
·
92% of respondents interviewed believe there is a definite
economic and business benefit after installation.
·
92% of respondents reported that they will continue to deploy
wireless technology in their network through 2000 because of the benefits
experienced by end users and/or IT staff.
·
Payback was less than one year, across all industries surveyed
The survey combines both telephone and written
responses from 34 organizations. (See Scope of Study for more details). The
survey consisted of both open-ended and multiple-choice questions. It was
designed to provide the Wireless LAN Alliance (WLANA) with as broad a response
base as possible regarding specific costs, attitudes and experiences with their
overall wireless LAN ownership. All of the respondents involved subsequently
completed a more extensive, follow-up written survey. Companies, schools, and
medical facilities were assured anonymity. The analysis that follows identifies
only by industry category and reports the data in the mean.
Some important findings are listed below:
One of the consistent findings of this study was how
end-users benefited from real-time information. In fact, 97% of respondents said
they either strongly agree or agree that the wireless LAN contributed to the
speed in which they completed a task requiring real-time or near real-time
access to information.
Cost of Ownership
The study compared the costs of 34 wireless LAN
installations. Costs for applications, outsourcing and network management are
critical factors that need to be considered before the wireless LAN can either
supplement the wired LAN or replace it as a wired LAN alternative. These savings
are substantial from the viewpoint of manufacturer, retailers, hospitals,
schools, and financial organizations. A wireless LAN enables them to provide
better quality goods, at reduced costs, in a significantly less time.
On average, the total cost per user was found to be $4550
for a wireless LAN solution. This
includes the costs identified below (Note that the WLAN Hardware/End User
Devices category includes the computing platform used, which was generally a
handheld or laptop computer.) Wireless LAN infrastructure and end user devices
account for the highest percentage cost out of this total.
The percentages for wireless LAN expenses, by category, were as follows:
WLANA Hardware/End User Devices: 50%
Monthly expenses: 1%
Management expenses: 16%
Application development expenses: 16%
Outsourcing: 16%
Downtime: 1%
Economic Benefits
With large investments in wireless LAN technology at
approximately $300,000 to $4.2 million dollars per year, we clearly realize and
sympathize with the managers that have been struggling to quantify the benefits
that derive from wireless LANs. Organizations implementing an average of 300 client cards reaped annual
savings of up to $4.9 million, which translated into per user savings of $15,989.
As the wireless LAN solution is implemented on a large scale, these savings will
eventually trickle down to the consumer.
Payback
Retail
Manufact.
Healthcare
Office Automation
Education
Benefits per company (millions $) 5.6
2.2
.94
2.5
.5
Costs per company (millions $) 4.2
1.3
.90
1.3
.3
Payback (# of months)
9.7
7.2
11.40
6.3
7.1
OVERVIEW BY INDUSTRY
Education
With Wireless LANs
in place, respondents cited a more efficient use of space, and more in-class
productivity. At most education sites, the access point was located directly in
the wiring closet or in a lab. With a wireless LAN, only the access point needs
a wired network connection. Classroom or lab computers were connected to the
access point via radio frequency.
K-12 schools
needed a way to save money on network and computer costs. The Education Rate
(E-rate) with 10% to 90% savings was available, but they needed even more ways
beyond this to save. With wireless LANs they were able to save money by buying
fewer computers. The solutions ranged from using cart-mounted computers
wirelessly hooked to the wireless LAN. The carts could be moved to the
classrooms where they were needed. The schools saved money by buying fewer
computers as well as wiring to a central hub.
Wireless LANs
turned out to be very inexpensive on a per-student basis. Wireless
infrastructure costs for the educational sector averaged $2308. In this study
1345 students benefited from the wireless solution which in an average
configuration included 25 access points and 112 computers equipped with wireless
adapters. The savings can be attributed to the utilization of cart-mounted
computers and fewer network drops as a result of the wireless LAN. With carts,
fewer rooms would have been required to be networked and populated with
computers.
Also, since many
of the schools had a mandate to get students on the Internet to access more or
better learning activities and since the wireless system served as a tool to
make this happen, a very fast and easy installation was required. Wireless LANs
met their needs as well. In this study students in the university setting
demanded access to LAN resources from dormitories, classrooms, and throughout
campus. Wireless LANs were being used to help students be more mobile and the
schools to reduce network costs and connect remote locations to central
buildings and servers. In the university environment providing a wired
connection was extremely expensive, especially when it involved historical
buildings—running cable through ceilings and walls was cost-intensive. Running
wire through ceilings and walls in buildings at one site was going to
potentially disturb asbestos insulation, forcing a removal process estimated to
cost over $90,000.
Healthcare
With fast-rising healthcare costs, reimbursement and ROI are key
to the requirements of IT investments in the medical industry. Healthcare
spending in the U.S. has grown from $280 billion in 1981 to more than $1.5
trillion in 1997 and currently accounts for about 14% of the total gross
domestic product.
With healthcare costs increasing at a rate of about 5% per year,
cost containment is an important issue. Hospitals
are centralizing laboratories, reducing costs, and increasing their use of
automated technology.
The wireless LAN has shown to meet the technology and
organizational needs of healthcare companies today by decreasing the length of
hospital stay, speeding diagnostic and case analysis time turnaround, reducing
hospital labor, procedural costs, documentation, and scheduling time.
Manufacturing/Warehouse
Warehouse
workers are increasingly demanding mobile scanners or pen-based computing
tablets for inputting and accessing data in real-time. These devices are linked
to mainframes or servers that usually have a software application running on
them such as inventory collection, order fulfillment, and shipping/receiving
applications. By connecting to inventory records and purchase orders, companies
reduce the inefficiencies of transferring numbers through paper forms.
Wireless LANs
connected to automated, handheld computers on manufacturing or factory floors
are a viable alternative to wired LANs. Laying
cable in these environments proved cost prohibitive, or not feasible because of
the size of the warehouse. Also changes in assembly lines are frequent and many
employees do not work in any fixed location for one straight month. In this
study, we have seen that workers and management in the manufacturing environment
need instantaneous access to accurate information so they can better track
orders, production runs, and production quantities in real time.
Production
Wireless LANs
automated the production, maintenance, and troubleshooting (repair) process at
production bays of a foundry, production lines of an automotive manufacturer,
and the outside work area of an aircraft manufacturer. The use of production
planning and control software combined with wireless LAN technology illustrates
the positive effect of this specific IT on an organization.
A typical medium-sized to large manufacturing firm must stock, control
and ensure the availability of thousands of items (end products, parts, and raw
material). Further, production of the parts and raw material must be coordinated
to ensure that the firm meets order commitments and production plans. Using
manufacturing software with automated inventory status reporting, order
processing, production scheduling, and invoicing features, made it possible for
companies to control complexity. But in this study, we found that having a
wireless LAN connected to this software enabled operators to go beyond
second-guessing the age of the information coming over the wire. It appeared in
real-time or near real time. This combination of hardware and software reduced
the control and coordination and associated costs.
Retail
The retail
industry category in this study comprised a collection of segments from diverse
businesses, such as restaurants, specialty stores, prepared food stores, and
military stores that vary in the types of items they sell and the market size
for the items. But, they all sought faster rates in getting customers through
checkout and totaling orders, and faster receipt of goods, and taking inventory.
In retail establishments considerable effort is taken to attract customers, and
reduce long lines.
Wireless LANs
also contributed to the good health of retail establishments. Wireless POS cash
registers and bar code client devices provided access to store inventory and
pricing information. Scanning had a high impact on productivity at checkout
through improvements due to easier price changing, and price removal, price
identification. For example, price changes can be recorded in a central database
at the store rather than on each item.
The wireless
LAN infrastructure provided critical decision-makers in retail with real-time
information on the ordering, collection, distribution, and sale of goods. The
wireless network offered them a higher initial purchase price, but reduced
support costs and increased checkout productivity and flexibility.
Financial
The
financial/office automation category in this study comprised a collection of
segments with varying businesses, such as banking, stock trading, consulting,
auditing, and the office areas of a technology firm. Office automation was a
goal for the consulting, auditing, and technology firm. All of these firms face
come under considerable competition. Keeping
up with the competition as well as offering new services are paramount.
In almost
every instance the cost conscious system manager chose not to standardize
exclusively on this new technology. This is because doing so required a large
investment in changing the nearby network infrastructure. Many system managers
were attracted to the wireless LAN for its flexibility, easy installation and,
in the case of the stock exchange participant, mobility.
In the case
of banking, the wireless LAN enabled account representatives and tellers to
provide better service to customers and has been used to support a plethora of
new transaction processing services.
The auditing
and stock trading organizations were just as, if not more data-intensive
environments, characterized by volumes of accounting, analysis, and statistical
data. The auditing firm was concerned about the quality of business generated by
auditors, as measured, for example by the level of engagements handled by the
company. But all these companies
must be able to predict risks and risk factors and facilitating group
collaboration is critical for reaching that goal. In the financial area, the wireless LAN saved hundreds of
hours because group collaboration was easier. Individuals within these
organizations are increasingly turning to portable computers to communicate with
the home office or master server for various functions. The auditor tied to the
home office through a portable wireless LAN can serve a customer much more
effectively than by dial-up lines, as can sales people and consultants working
or collaborating in a conference room.
The cost of owning a
wireless LAN consists of infrastructure and software costs, client device costs,
monthly costs, power costs, downtime costs plus all of the related management
and support costs. Identifying management costs is a complex task. Management
costs can include network infrastructure planning, training, troubleshooting and
repair, and hardware management.
There are various types
of criteria used to determine the cost savings of wireless networking equipment.
We looked at business benefits and economic benefits. The main way in
classifying technology benefits is to analyze how it assists in measuring and
monitoring them, with a perspective to controlling and maximizing any positive
effects of the change. There are criteria for measuring the benefits on a new
system or a system already in place with an upgrade.
The measuring
techniques in this study varied slightly depending on the benefits sought and
the application that used the wireless LAN. Wireless LAN total cost of ownership
must be derived from across a range of applications. However, there is always
the one constant, that there is a history dating back to a time before the
system was implemented. Meaningful analysis of the effects of the change is
undertaken here.
This study focuses on radio-frequency-based systems. These
wireless RF LANs compliment wired LANs, providing installation flexibility in
difficult cabling situations, and user mobility. The wireless technologies used
to support data transmission over short distances in buildings and without
physical connections include radio waves and infrared light. The radio frequency
(RF) in-building wireless LAN products are designed around radio technology and
protocols using spread spectrum modulation techniques (Direct Sequence or
Frequency Hopping).
This study looks at the cost of ownership of in-building
RF LAN products that operate within 100 to 3000 feet of an access point.
The study involved in-depth interviews with wireless LAN
customers. Note: This study
involved WLANA customers, as well as customers of several other wireless LAN
vendors who are currently not in the WLANA organization.
The Cost of Ownership study encompassed a
phone-administered interview. Tech Research asked participants about the costs
and benefits of wireless LAN ownership and the difference it is making in
end-user and IT staff work and within the organization.
Each participant was interviewed over the phone at his or
her office. The interviews generally lasted between 40 and 60 minutes. The
length and quality of answers coming from the interview depended on the
participant’s experience/contact with the wireless LAN system and/or contact
with people using the wireless LAN.
Respondents were knowledgeable individuals regarding the
subject matter. The administrator probed for detailed information and/or
clarified questions at times to maximize respondent understanding and yield
complete answers for the study. The questionnaire contained no questions leading
to one conclusion or another. The questioning allowed end-users to speak in
their own words and reveal their thoughts surrounding the purchase process,
ideas of ROI of the wireless LAN, costs and the benefits associated with
wireless LANs.
After the phone interview answers were documented and faxed
or mailed to the participant for confirmation. We told participants that by
answering the phone interview/faxed/mailed questions about their experiences
with wireless LANs that it will help in influencing the generation of a report
on Cost of Ownership of Wireless LANs
that will address the cost savings and benefits of wireless LANs.
The faxed/mailed questionnaire was usually returned within
2 to 10 working days. The faxed/mailed questionnaire was easy for participants
to understand and mark up. In the case of 85% of the respondents the faxed
questionnaire forced them to do research into their notes or invoices on the
subject.
The WLANA organization provided a gift incentive for
participation—in this case it was a Palm Pilot Organizer. After the interview
process was over it was clear the incentive was not only the gift, but also the
ability to see their costs and economic benefits written out for them, a tool
they could use at a later date for cost justification of more equipment. Both
provided incentives to participate, answer more questions and/or answer
questions more thoroughly.
Because the sample size is small (n=34) the possibility
that inadequate information and the probability of error is high. However
because the feedback during the phone interviews and from faxed questionnaires
were consistent in nature, they provided an adequate indication as to what
general trends were. Due to data collection techniques at the personal
interviews we were able to get higher quality data than anticipated.
Not every cost savings derived from using the wireless
LAN was quantifiable for participants. They are real however, and no less
important. Many of these are related to organizational efficiency and network
availability.
Standard editing and coding procedures were utilized.
Simple tabulations and cross tabulations were utilized to analyze the data.
We are grateful to all participants for their time. We
value their participation and thank them for their cooperation. We hope this
study will provide information that is useful to current and future wireless LAN
technology adopters.
Our research was based on the experience of small, medium,
and large enterprises in the Healthcare, Manufacturing/Warehouse, Retail,
Education, and Financial/Office Automation industries. The results should be
interpreted as reflecting viewpoints indicative of a part of the larger wireless
LAN installed base. Our intention to deliver a broad cross-section of the
representative industries with applications conducive to wireless LANs was
generally successful, although not equal to the population represented. Survey
findings should be interpreted accordingly.
The breakdown of participants by industry was:
Education: 23%
(8)
Healthcare: 23%
(8)
Manufacturing/Warehouse:
21% (7)
Retail: 15%
(5)
Financial/Office Automation: 18% (6)
This study primarily features customers who have wireless
LANs installed at one or more sites and had completed deployment or were still
in the process of upgrading.
ABOUT
WLANA:
October 1998
About
WLANA
The Wireless LAN Alliance (WLANA) is a non-profit industry trade association
formed to increase awareness and encourage the adoption of wireless LANs
products and technologies.
Members
The Wireless LAN
Alliance membership is comprised of 11 leading worldwide suppliers of wireless
local area networking products and technologies.
3Com
Corporation
Aironet
Bay
Networks
BreezeCom
Cabletron
Systems, Inc
Harris
Semiconductor
Intermec
Technologies, Inc.
Lucent
Technologies
Proxim,
Inc.
Raytheon
Wireless Solutions
Symbol
Technologies
Contact Information
Media Contact
Alliance Contact
Rich Henderson
Mack Sullivan
Media Relations
WLANA Director
Email: rich@papr.com
Email: mack@wlana.com
 |
Back
to Home |
 E-Mail
|
VoxTechnologies Corp. - Industrial
Computer Leader
Tel: 972-234-4343 Fax: 972-234-4295
Toll-Free: 1-888-568-6224 |
| 
Related