Home and small office networking has for years offered the channel plenty of potential. Indeed, Microsoft and OEMs are encouraging consumers and small business to adopt it: the former includes networking wizards in Windows Me and XP; the latter, network cards as standard equipment in many new PCs.
Vendors have plenty of stock available and a wide choice of technologies, ranging from simple routers to complete wireless LANs. But so far the market has failed to live up to expectations. Customers remain confused, and the telcos have failed to provide and promote reliable broadband Internet access - the major driver for SOHO networking.
There may also be another problem. Some vendors say resellers can take some of the blame because they have not presented networking as an option to their customers. And in failing to do so, they are missing an opportunity to improve their margins. With the PC market so competitive and margins so tight, selling network hardware to a PC buyer can make the deal a lot more profitable.
Maurice Famularo, marketing manager Australia and New Zealand for D-Link, says it is up to resellers to make consumers aware of networking. "The chances of finding anyone over the age of 18 behind the counter who will suggest that a customer buy network equipment to go with the networkable game or printer they have just bought is very low. The customer may not want to buy a couple of cards and a network switch at point of sale, but at least they will know they can do it at a later date."
He says that while vendors provide training for the retailers, high staff turnover in retail makes it difficult to keep trained salespeople.
But Famularo is upbeat about the market potential and believes it will begin to take off as ADSL broadband becomes more widely available in this year's second half.
The potential market is healthy, with an estimated 1 million Australian homes already using more than one computer, and about a third of those with three or more. On top of that, the small office market is only just being tapped.
Cable networking is cheap but its popularity has not met industry expectations because few people are willing to lay networking cable throughout their home or small office. Alternatively, wireless has the advantage of not requiring cabling, but it costs up to 10 times as much and there are security concerns - but its costs are coming down and vendors are pushing it as the favoured option.
Cisco wireless LAN product manager Troy Andrew says the bad media about apparent security vulnerabilities provides an opportunity for the channel to gain service revenue by setting up security systems on wireless LANs. He claims wireless security is a lot better than people think, but many SOHO users are going to uneducated resellers who fail to explain the security features - "So we provide the channel with training, and make sure they know how to turn the security features on".
Andrew says home networking falls into two categories: mums and dads networking to share their Internet connection and printer; and employees working from home who need broadband speeds to connect to the office. "There are a lot of opportunities for the channel in wireless LAN. Even 12 months ago when we were really in a downturn, wireless LAN was a growing market. Now the home networking space is starting to take off because more people are taking work home and want to be able to link into the office network at broadband speed."
But 3Com country manager Mike Clarke says people still seem very confused about networking. "We are seeing the very early adopters take it up but the rest of the market is still trying to come to grips with the concept - particularly wireless networking. Even fixed-line networking in the home is still not very common. It is seen as a bit difficult and the general consumer is still a little way from it," he says.
A number of tier-two distributors see the market opportunities as potentially lucrative and have moved to create customised services for resellers willing to partner in selling and implementing networking projects. South Australian Hitech Distribution, for instance, is forming partnerships with resellers to help them sell into the SOHO market. Networking product manager Marco D'Agostino says Hitech provides the reseller with the expertise it needs to sell a job and then supplies the hardware that the client needs. "We will work with a reseller but never go into competition with them because we are solely a distributor," he says.
One of the first things people want to do with a network, according to D'Agostino, is use it to share Internet access, but Internet connectivity over LANs has been held back because of a lack of affordable broadband. However, he says sales of network infrastructure are picking up because the hardware is now so cheap and broadband is becoming more available.
"It wasn't that long ago when a basic eight or 16-port dual-speed hub cost $600 or $700, but now you can get a 16-port switch for under $400. We have ADSL/cable routers that allow small offices to connect Internet over a LAN very cheaply. For instance, a four-port 10/100 switch with ADSL/cable router and built-in print server retails for around $329."
D'Agostino says the Internet appliance market never got off the ground. While there were some excellent devices available, consumers did not like them. However, he is hopeful the situation will change as broadband becomes readily available at a reasonable price.
Vendors agree the SOHO network market is suffering because of broadband problems. Netgear managing director (Asia) Ian McLean says broadband problems are "holding the SOHO network market back big time".
"In the United States and Europe, high-speed Internet access and particularly shared access has been the big driver of SOHO networking," he says. "But broadband has been slow to be adopted here because of the policies of the major telcos. In Australia we have about 2 per cent penetration for broadband compared with about 10 per cent in the United States and 50 per cent in Korea."
Nevertheless, opportunities are there to be taken, especially where vendors have defined the right products and programs for service providers. The recently introduced Cisco Mobile Office: At Home, for instance, looks at teleworking solutions, encouraging resellers to develop an expert knowledge base about telework-specific issues and technologies; Alcatel has released its 7340 line of optical gear for bringing fibre directly to homes and businesses, which is said to deliver data services at speeds up to 20Mbs over fibre; and Netgear is months away from releasing its plug-and-play Powerline product, which will allow any power socket in a home or business to become an access node to the Internet or a private LAN to the Australian market. Broadband is just the missing link that service providers will have to learn to work without, at least for a little while.