As I look to the future of the Wireless LAN (WLAN) market there are a few key trends that I’ll be watching for 2020:

• Wi-Fi 6 is racing ahead. We expect Wi-Fi 6 will rise significantly, particularly as vendors bring to market lower-priced 2×2 Wi-Fi 6 access points. Concurrently, we’ll pay close attention to Wi-Fi 6 access points driving the Campus adoption of NBASE-T (Ethernet 2.5 Gbps and 5.0 Gbps).
• Macroeconomic uncertainties impact near-term corporate spending. We expect 2020 to be a soft market for wireless LAN as short-term economic deterioration unfolds in many regions in the world. For example, in Europe Brexit is disrupting the general flow of business. Economists from the leading world banks have pulled down their GDP growth forecasts from 1.5% to 1.1% in 2020—a significant reduction. The good news is they predict a rebound in 2021. In the USA, according to the senior executives of wireless LAN manufacturers, large companies are delaying purchases as trade tensions create economic uncertainty. Economists forecast USA GDP growth to slow in 2020 to 1.8%, down from 2.3%.
• More Wi-Fi 6 deployment in China. Although government incentives for 5G in large public venues has dampened wireless LAN sales in China, we learned that in 2020 Wi-Fi 6 will be big, particularly with the manufacturing vertical industry. We’ll be watching for innovation and use cases of Wi-Fi 6 deployments within the manufacturing sector.
• 6 GHz turbo charging Wi-Fi 6. The availability of new unlicensed 6 GHz spectrum will increase the performance of Wi-Fi significantly. This will be the first time in over 20 years that additional mid-band spectrum has been made available to Wi-Fi, yet the use of Wi-Fi technology has increased on a massive scale. This is rocking the Wi-Fi market. The additional capacity would enable faster data throughput and lower latency—essentially turbo-charging Wi-Fi 6 and fortifying its competitiveness with cellular in the enterprise.

  The next hurdle to making 6 GHz available is managing the spectrum. The incumbents currently using the spectrum are asking that all Wi-Fi devices connect to an Automated Frequency Control System, whereas the Wi-Fi manufacturers are asking for all indoor and very low power devices not be required to connect. We will be watching with keen interest what rules the FCC structures for managing the 6 GHz spectrum, which may be in the March / April time frame.

An increasing amount of publicity is shifting to user applications, and away from the network. Enabling the user to extract more value out of the network is the topic of acquisitions and new product launches. For example, Arista recently acquired Mojo Networks not for its wireless LAN technology, but for its ability to deploy network intelligence; Cisco launched greater levels of security and troubleshooting enabled by its new DNA licenses; Juniper acquired Mist Systems which boasts its cutting-edge location Wi-Fi services. Yet, a closer look at companies such as Alcatel-Lucent Enterprise (ALE) and Extreme Networks, we observe these folks have been laser-focused on user applications all along. Let’s first discuss ALE.

ALE recently celebrated its centennial with a conference including some 1,000 partners, as well as 100 industry members of the press and analysts. Enthusiasm and energy levels were high.

Here’s what I think is important:

ALE has a long-running subscription-based business. As the networking industry incorporates applications and network intelligence via subscription-based services, this experience on ALE’s part will be a definite asset. In 1919, ALE founder Aaron Weil launched a subscription-based private telephone business, “Téléphone Privé,” as a productivity enhancement tool targeting enterprises.

ALE’s near-term strategy will be to target select vertical industries focusing on applications specific to customer operations.  ALE’s focus on customer applications is the likely explanation as to why its customers place a high value on ALE’s products. For example, in Campus Ethernet Switching, we observed that ALE’s average prices for the past few years have been the third highest, well above many other larger vendors.  Figure 1 shows how ALE’s average sales price per port compares with that of the largest vendors in the most popular segment of the Campus Ethernet Switch market (Fixed Managed 1 Gbps switches). ALE senior management explained that the customer interaction process has included building custom applications by vertical industry. Whenever ALE could not on its own deliver the application, it brought in a partner that specialized in the operations of businesses in that particular vertical industry. This high-touch approach to service helps explain ALE’s ability to maintain high perceived value as reflected in its average prices.

ALE’s networking business (Campus Ethernet LAN in particular) was challenged in 2017 and 2018, which we attribute largely to Huawei’s expansion in Europe, the Middle East and Africa (EMEA), the region representing ALE’s stronghold. During the past two years, Huawei has run aggressive promotions with new channel partners it added in 2016.  As the honeymoon period for these engagements comes to a close, we suspect the longer-term relationships with its new partners will change. Looking at the Campus Ethernet market on worldwide units (port shipments) basis, the performance was flat during the past two years, with the exception of China-based vendors, as well as vendors such as Ubiquiti that are targeting the low end of the market. The challenges ALE experienced on a unit basis was similar to the experience of other Western vendors focusing on the high-end and midrange segments of the market.

Dell’Oro Group believes that enterprise campus networks are entering a refresh cycle that will enable users to run new applications (click here to learn more about Dell’Oro Group Ethernet Switch Campus Network market report). This refresh of the installed networks, which will unfold over the next several years, will be the most significant upgrade during the past two decades—and many will be seeking high value from their networks, not the cheapest price.

Last week, I attended Extreme NOW Forum 2018, Extreme Networks’ customer and partner conference in San Jose California, the first in a series of events to be held around the world—more than 50. What impressed me was how familiar the senior staff were with individual customers. This clearly was not the first time interacting.

A few items caught my attention:

• Senior staff knew many of the customers by name and there was a joviality and friendliness indicative of familiar relationships. Clearly the priority is on tight customer relationships, and this is coming from the top.
• Software application development consumes over 95% of research and development spend—led by customer requests and use cases.
• Two use cases amused me:
  • The first one was a large retail customer which deployed security cameras throughout its stores—monitoring theft was not its primary purpose! Instead the shop managers used technology to identify facial patterns—sadness or happiness. If a shopper was sad, an assistant would be immediately dispatched to offer help.
  • The second use case was a firm in the education sector which used security cameras in the classroom—not to just monitor cheating, but whether or not students were falling asleep during lectures. This monitoring allowed management to evaluate professor performance.

Certainly Extreme has its work cut out to harmonize the technologies and operations of its recent acquisitions, but its steadfast connection with its customers creates a lasting loyalty.