Home Networks Hold Promise, Challenges for Vendors

The number of networked homes jumped 43 percent in 2002, but the technology is still in the “early adopter” stage, according to The Yankee Group.

The Boston IT researcher said 8 percent of PC owners surveyed last year had a home network. The increase is due to broadband adoptions and families with more than one computer who want to be online concurrently.

Of those without a home network, 25 percent were interested in the technology, 20 percent were neutral and 5 percent unsure. Half of the respondents said they were not interested, The Yankee Group found.

Twelve percent of those interested in home networks said they intended to buy now, 36 percent in the next year, and 12 percent in the next one or two years, The Yankee Group said. The remaining 37 percent didn’t know when they’d buy.

Dominic Ainscough, a consumer technologies and services analyst at The Yankee Group, said it’s a critical time for companies with aspirations in the space.

“Product and service companies must gain traction among early adopters, not only to drive near-term sales growth, but to establish brand recognition and secure channel relationships,” Ainscough said.

Others, including retailers, need to identify which consumers are most likely to buy soon, he added.

Though households do not assign the same level of importance to audio, video and gaming as productivity applications, entertainment is a promising area, Yankee said. The growth is contingent, however, on more households buying home networks.

The trend, though still in its early stages, isn’t lost on the IT industry’s heavy hitters. Last month, Cisco Systems paid $500 million in stock for Linksys Group, a maker of wireless routers, access points and other equipment for home networking.

Among the reasons Cisco chose to buy rather than build was the fear that its competitors would make a buy and gain a foothold in the market before Cisco was ready. Late last year Microsoft had made a foray into the sector.

Previously, Cisco has avoided the consumer market, designing its equipment for bulk buyers such as telecom carriers and enterprises.