Hand-Held Makers Target Federal Market

Terry Bazzone

Several leading manufacturers of wireless hand-held devices are launching initiatives to enter the federal market, banking on long-term success in a market still facing significant obstacles to widespread adoption.

Recent financial difficulties for some manufacturers of hand-held computers ? also called smart hand-held devices, personal digital assistants (PDA), mobile access devices or wireless computers ? and a calming of initial enthusiasm about the devices are among factors standing in the way of early success. Yet the trickle has begun.

"Everyone got so excited about wireless for the first 18 months," said Ray Bjorklund, vice president of consulting services for market research and consulting firm Federal Sources Inc., McLean, Va. "But in the last four to eight months, there is general industry recognition that they've got to work things out," including overcoming functional limitations, such as security and screen size.

Because of the devices' low cost, a number of hand-held manufacturers have attracted government buyers, who have purchased small quantities via consumer electronics stores or distributors. But some have begun setting up federal organizations to pursue larger deals.

Most agree hand-held market leader Palm Inc., which set up a federal unit three years ago, has the biggest presence via contract sales, but even that represents just a toehold.

Canadian manufacturer Research In Motion Ltd. has several U.S. government installations through reseller partners. Casio Inc. is marketing a mobile product line intended to help aggressively expand its business in government as well as commercial markets.

Newer entrants include Compaq Computer Corp., which is adding its iPaq devices to its federal enterprise initiative. Handspring Inc., declined to confirm a rumored staffing up of its federal market business.

Other hand-held makers include Hewlett-Packard Co., Sony Corp., SONICblue Inc., and Psion Plc.

Technology research company IDC is forecasting worldwide growth in smart hand-held devices from 12.9 million units in 2000 to more than 63.4 billion by 2004, creating a $26 billion opportunity.

Peripherals distributor D&H Distributing Co. Inc. has seen greater-than-expected growth in government demand for hand-helds, particularly for those accessorized with wireless modems, wireless networking and global positioning system modules, said Anne Brennan, sales manager for government. State and local agencies lead the way, but federal demand also has the company asking vendors to ship more units, she said.

Many see a natural fit between the federal government's information initiatives and the instant, anywhere access of hand-held devices.

"Certainly, these types of devices play a role in the trend toward automation and mobility in government," said Terry Bazzone, vice president and general manager, strategic business development at distributor Tech Data Corp.

But installations so far fall into the experimental category and will continue in that vein for the next year or so, said Federal Sources' Bjorklund. He expects state and local government to lead federal adoption, for medical, plant inspection, law enforcement and other applications.

Thus far in the federal space, hardware makers agree that personal data uses predominate, followed by inspections, reporting and decision support. Training, global positioning systems and command and control applications are expected to become increasingly popular.

Several factors restrain widespread adoption. The existence of rival operating systems from Palm and Microsoft Corp. forces developers ? and users ? to either choose one system or support two platforms.

"Compatibility could be an issue in regard to certain federal agencies choosing one or the other," Bazzone said.

Government entities also need a wireless infrastructure and applications that can facilitate access to enterprise applications by hand-held wireless devices. Such applications are not widespread, said Ron Ross, president of Compaq Federal LLC, which is banking on selling its devices to agencies as a component of enterprise systems.

Government clients remain skeptical of the ability of such small devices to run critical applications and of their suitability for secure applications. Developers are working to beef up security and encryption to satisfy these users.

"I don't think people have enough experience with these things to think far enough outside the box about all the things they can do with them," Ross said. Understanding hand-helds' potential is key to triggering widespread adoption.

At least two contract vehicles specify Palm devices, said John Inkley, manager of federal sales for Palm: a Patent and Trademark Office vehicle and the Army Desktop and Mobile Computing-1 contract through reseller Comark Inc. In addition, three Palm resellers are GSA schedule holders.

Many hand-helds used by government personnel are acquired at the local consumer electronics store for personal applications, thanks to their low price. But Inkley expects more contract activity in the future.

"I think downstream we'll see initiatives list a 'job performance' aide as a standard tool," perhaps in 2003, he said.

Hand-held-only hardware providers are being affected by stock price freefalls. Fueling concerns are recent warnings
by Palm and Handspring that sales will dive precipitously in the fourth quarter. Several makers have cut prices and launched rebate programs to stimulate sales.

A number of analysts expect Palm's dominance of the PDA category to give way, most likely to Compaq.

The Navy has been a big Palm customer, primarily for inspections, reporting and medical applications. Navy signal officers use Palm Pilots to grade pilot landings, for example. Other clients include the Secret Service, the Army, the U.S. Postal Service and the Federal Aviation Administration.

The makers are not alone in promoting adoption of hand-held devices. Telecommunications providers, software developers, systems integrators and hand-held peripheral makers are also aggressively pushing hand-held solutions.

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