[With proprietary software such as Adobe’s Flash Lite or Qualcomm’s BREW having shipped on more than 500 million devices, and with the emergence of promises for successful ecosystems from giants such as Google’s Android or Apple’s App Store – there is a growing question about whether “proprietary” may be the way forward. “Is it indeed?”, asks guest blogger Elad Granot]
I have always been an early adopter of innovative services, from cellular to VoIP and advanced messaging. But more often than not, the advanced services that I want to use are restricted to a small community that uses the same type of device or shares the same network provider. Most of my contacts are not necessarily in that group, so even if I have access to these services, I have no one else to use them with. In many cases, the reason for the lack of interoperability is that these services are based on proprietary solutions, owned by only a few vendors or service providers, and this prevents mass-market reach. Contrast this with SMS, a standard service that generates a fortune for mobile operators and is nowadays considered a basic and mandatory service (would anyone today buy or sell a mobile device that doesn’t support SMS?).
It Needs Wings to Fly
What is the magic recipe that allows a service to become so widely adopted that its market reaches an audience of millions? While I can’t prescribe a full recipe, I can identify at least three of its key ingredients. It is a mix of business vision, business models and open technical standards that creates a widely adopted offering in the communications market. Take out any one of these ingredients, and your market is technically crippled — it may be perfectly sound, but commercially it can’t fly.
- Business Vision: The first ingredient may seem pretty obvious, but not every company has a long-term vision. Not all companies can develop a long-term plan for conquering the market, non-conformist enough to try shaping the existing industry landscape or willing to invest resources for conquering the market. But even among the businesses with ambitious strategic plans, very few enjoy the execution power that can change the market. Even a compelling offering like the iPhone coming from a giant like Apple who enjoys a herd of religious followers and a glory of buzz eventually remains a niche offering, such as the (perhaps overly) hyped iPhone, which has a 4% share in the global handset market,
- Open Technical Standards: The second key factor is having a strong technical solution that offers usability, scalability, security, manageability and most importantly, interoperability. When it comes to interoperability, relying on open standards is a highly effective way to achieve mass-market support. I ‘ll discuss this factor in depth later on.
- Business Model: The third ingredient, which sometimes comes late into the mix, is business models that sufficiently reward all the players for their role within the value chain.
If the business model is not well balanced to compensate all the parties involved, then stakeholders who don’t benefit sufficiently may become barriers to adoption.
The mobile industry has seen the rise and fall of great initiatives that offered compelling use-cases leveraging feasible technology on paper. However, when it came to realisation, no one found the right formula to either generate or share the generated revenues from the offering. Finding the winning model could be a trial-and-error evolutionary process, in which a compelling offering starts without a proper business model or with a bad one and only gradually finds the golden path that allows it to prosper.
The freemium-based Web 2.0 has been criticized and named “Bubble 2.0” due to a lack of compelling business models. Some emerging market sectors, such as mobile advertising, have yet to prove that they can scale. In the case of mobile content pre-app stores, the developer only got 20-30% of revenues and most went to the middlemen. The lack of proper compensation for the developer led to poor diversity of content and therefore poor adoption. This model has therefore evolved to App Stores that offer 70% rev share to developers, which in turn gave birth to ‘there is an app for that’.
Joining Forces Makes the Difference
In this article, I’ll focus on the second factor mentioned above: the importance of technical standards to the success of a large-scale mobile service.
With proprietary elements such as Adobe’s Flash Lite and Qualcomm’s BREW embedded on more than 500 million devices each, and with the emergence of promises for successful ecosystems from giants such as Google’s Android and Apple’s App Store, there is a shift in thinking away from standards-driven technology towards services that are based on proprietary solutions.
Yet, BREW is still having a hard time penetrating non-CDMA markets. Adobe has backtracked on Flash Lite and is now trying to re-seed the mobile market with Flash (the desktop cousin of Flash Lite).
Without ignoring their signs of growth, one should keep in mind that some of these promising services were only recently born and have yet to prove their long-term success and sustainability. Moreover, success stories can be classified as rare exceptions where giants exert their mighty market-force or cash flows to steer the whole industry (e.g. ARM has built up the ARM Connected Community around its own technology; Sun Microsystems sponsored the development and adoption of Java). But how many such giants exist? The average company is far from having such forces and so the odds for dominating the market using proprietary technology are daunting, if not impossible.
By creating an open standard, on the other hand, companies can join forces with other players across the value chain to achieve the critical mass required for leading an industry.
Standards as the Meeting Point
Standards are published by various types of organizations, typically not-for-profit, which exist purely for standardization (e.g. ISO) or other associations and consortia motivated by business, engineering, governmental and similar interests (e.g. WiMax Forum, IEEE, ITU-T). Each of these entities has membership classes, IPR and other legal policies, governing rules and membership costs that must be borne by the joining members.
Depending on the organization, members could be commercial companies, research, government agencies, educational institutions, or in some cases, like the IETF, anyone interested regardless of whether he or she represents any legal entity.
The scope addressed by the organization varies. For example, while the OMA develops service enablers independent of the underlying network technology, the NFC Forum is focused on Near-Field-Communication technology, the OMTP develops mainly use-cases and requirements (as opposed to detailed specifications), and the IMTC targets the testing and deployment phase of rich media communication standards by organizing test events. Finally, there are also organizations, such as the GCF, that test and certify products for compliance with standards.
Some of the organizations are global (like the IEC), some are regional (e.g. ETSI in Europe), and some local (such as KWISF, which developed the WIPI platform in Korea).
The collaborative development of technical documents is usually done in topic-oriented Working Groups or technical committees that are chartered to discuss proposed contributions and make decisions regarding the standard. Predefined decision-making rules, such as consensus, public or secret vote vary according to the working procedures of the committee. Once completed, the resulting standard specifications are published for free or offered for purchase. Cross-organization collaboration and exchange of information between different bodies is possible through liaison relationships, which establish the legal rapport and the scope of joint work between the liaised parties.
Develop It in the Right Way
Just because the industry invents a new standard does not mean success is guaranteed. There are different ways to measure the success of communication standards: market penetration, timing, quality, interoperability, costs and affordability, deployment simplicity, ease of use, scalability, etc. So sometimes “success” of a standard is relative to the way one defines what success means. A standard could be successful in one aspect but a failure in another.
Standards have many disadvantages, perhaps too-well known, that may lead to failure. However what’s interesting is to also look at how these drawbacks can be mitigated.
Time to market. Many argue that standards take too long to hit the market and prefer to go proprietary instead of waiting years for the standard to be ratified by the industry. But it’s like comparing a monarchy to a republic. In a monarchy the king makes a decision that everyone else follows. On the contrary, in a Republic, decision making is more complicated and lengthy. A group-decision process has advantages; more alternatives are typically considered for the solution, more critics validate the selected approach and more evaluation criteria are taken into consideration. The market pays expensive development time in order to reach a solution after any debates have already been resolved. This promotes quicker adoption of the final deliverables. Nevertheless, in order to reduce the risks of losing the market, timing should be seriously considered when developing the standard. Publishing incremental version releases, limiting scope and managing priorities are useful tools to improve time to market. They also make it hard for internal opponents to attempt to delay the standard in order to give their proprietary solutions a chance to grow market share and defeat the standard in its infancy.
The lowest common denominator. Some argue that standards end up being a poor lowest-common-denominator solution, lacking sophisticated features. While this is true in some cases, successful standards are designed with extensibility in mind. Extension can be provided by proprietary differentiating offerings, and successful ones can be considered for future versions of the standard. Complexity and advanced features can (and do) exist in standards, but standards should have them only where extremely necessary. The novelist Gustave Flaubert said that “perfection is the enemy of the good”. In general, to promote their quick and wide adoption, standards should strive to follow the Keep It Simple Stupid principle wherever possible, sometimes at the expense of engineering or feature perfection.
Design by committee. To avoid challenges notoriously known as ‘design by committee‘, attention should be given to those who officially lead the work of the committee, such as those taking chairman role. Quality of leadership can be improved by internal training on how to resolve lengthy debates, overcome cross-cultural gaps and increase the amount and quality of contributions from members.
The dark side of politics is yet another challenge to manage. When self-centered agendas and exchanges of favors overcome community considerations, an internal threat is posed to the standards from within. In these cases the decision patterns start to resemble those of independent market players, who try to steer the market for their own benefit. Policies and procedures that promote transparency can help reduce this threat, but the downside of politics is inherent in any community-based institution.
Fragmentation. Fragmentation in standardization is another well known weakness of standards – consider for example CDMA vs. GSM. While competition brings survival of the fittest, it also leads to market confusion and fragmentation, which defeat the purpose of standardization. To minimize these risks it is imperative for standards organizations to liaise with each other and agree on a clear scope of work that avoids duplication and redundancy, hence eliminating the need to compete. Considering that different parties and interest groups (including competing ones) drive different standards, it would be too naive to assume that this would kill fragmentation, but it can help reduce it significantly. If all stake holders can be convinced that there is a compelling need for a single standard, and show willingness to cooperate (i.e. not block), then fragmentation due to a competing standard is not likely to happen.
Marcoms. Too often standards don’t focus in marketing; i.e. communicating with the industry about their existence, features and advantages in a language that targets decision makers who lack the engineering background. This is a challenge for many standards organizations that focus on technical work and may lack the skills and huge resources required for extensively marketing their outputs. I believe that marketing activities should not be led by standards organizations, to avoid blurring their focus on the technical work; nevertheless, they do enjoy the critical mass that can draw media and analyst attention that will drive industry interest. Therefore they should leverage it and proactively inspire their members to engage in joint marketing and education efforts. I must admit, however, that this is easier said than done.
Another challenge is one of resources. At the end of the day, the work is driven by contributions of the delegates, and they are usually employed by their companies and not by the standards organization. These companies are focused on their balance sheet, but measuring the contribution of standards activity to its bottom line is extremely hard, so unless the company’s management believes in the standardization and understands its strategic impact on their business, it may be difficult to approve budgets for this activity, especially at times of economic uncertainty.
Having been involved with standards for the last 6 years, I do not know (and believe no one does) how to predict the success or failure of an emerging standard. The same standard can succeed in one time or market and fail in another. Success is dependent on business motivations, the regulatory environment, combined with personal leadership, market demand, timing and technical maturity to name a few factors. No single player can simultaneously control all of these factors.
When It Is Ready to Go (and hopefully fly)
The single most significant element of standards that makes them so important in the telecommunication domain is interoperability, which can be proven to exist through practical testing of products implementing the standard specifications. After developing these specifications, standards organizations (e.g. ETSI) and industry associations (e.g. the IMTC) typically organize and promote test events, which help identify bugs and issues like missing or unclear parts in the spec as well as broken implementations). Vendors also use their own labs to test their products for bilateral interoperability with other standards-compliant products made by their partners, and sometimes even by competitors. For some standards there are also authorities (such as the WiFi Alliance) that run thorough tests and certify products for standards compliance.
A vendor may be able to create a marvelous state-of-the-art handset, but if there are no other vendors that can produce inter-operable network equipment, more types of inter-operable terminals, add-on features and services, etc., then the addressable market is limited and can’t scale beyond a certain point determined by the reach of the company and its partners. Interoperability defines the limits of ecosystem reach and an ecosystem is a necessity for addressing the mass market.
When explaining my work to non-techies I often point out how surrounded we are by standards on a daily basis; even a technophobe can understand the pain of fragmentation when experiencing the frustration of looking for power adapters in a different country, or when realizing that everyone around you drive on the wrong side of the road.
There is strong link between interoperability and market growth in any domain, especially in telecommunication where end point terminals and network equipment must interwork to achieve conversation; just consider the growth of SMS or the slow adoption of MMS.
In the early days of the MMS market you never knew whether the message you sent to your friend could be received by their handset, because not all handsets supported MMS. But even when both handsets support MMS, they might support different multimedia formats (e.g. mpeg4 vs. AVI). To work around these issues, operators added transcoding servers that transparently adapt the multimedia formats sent back and forth.
Lower costs and lock-in. Cost is another major factor that drives standards for the mass market. Everyone hates lock-ins to proprietary technologies, as it increases the exit cost. With standard solutions, competition increases and prices go down. Not just because of the fact that standards put a pressure to commoditize products, but also because patent issues are of less concern. Even if royalties or patents are included in the standard, these should comply with “reasonable and non-discriminatory” policies (also known as RAND) that are typically required by the bylaws of standards organizations. From service providers that buy back-end equipment, through integrators who build a system from multiple standard parts to the end-user (a consumer or enterprise), they all enjoy lower prices. If standards didn’t exist, there would be far fewer options to choose from and they would probably be more expensive – perhaps even too expensive to afford by the majority of potential customers.
Benefits for Vendors
There are also considerable internal benefits that companies can gain from embracing the standards.
Thought Leadership. Vendors can use standards to coin new concepts that promote their business agenda; for example over-the-air software update, which has been backed by standards like OMA Device Management, FUMO and SCOMO. Topics can be raised for discussion, debate and development in the standards community, where teams of major stake-holders are present. This fosters an environment where thought leadership can be demonstrated and pushed forward. If done successfully, a concept can be accepted as a standard solution, which fast-forwards the long process of convincing an industry to realize the concept and make it happen.
The PR aura. Being associated with standards often is an affordable way to build buzz, and get analyst coverage that endorses and goes side-by-side with the marketing activities of the company.
Ease the creation of ecosystem. Standards promote the creation of ecosystems. Most single-vendor companies cannot offer an end-to-end solution on their own. It is the ecosystem (including their competition) upon which these companies rely to contribute the other pieces that complement their offering to create the end-to-end solution.
“The Same – but Different”
Standards don’t exist in a vacuum. There are plenty of proprietary excellent solutions that comprise the puzzle of the ecosystem, and it is imperative that standards leave room for those to exist. These proprietary extras enhance, innovate and leverage the standard while allowing vendors to differentiate themselves. Only few companies will be able to make sustainable profit by producing just the plain-vanilla implementation of a standard. If everyone produced exactly the same solution then they could only compete by criteria like pricing and service, which would make it hard for everybody to survive. Successful standards should therefore be designed with proprietary extensibility in mind.
Mobile software, OS, UI and the like are in the focus of these business-driven industry forums that complement the work of official standards organizations. But whether an industry forum (such as the OMTP) or an established standards body (such as the OMA), or even a partnership of such organizations (such as the 3GPP) leads the unification is not important. Even when led by a single company, if it is done in a fair (including legally) and pluralistic manner and gets to the critical point where it becomes a real joint effort with large participation across the industry, then we get a similar effect.
So even if the origin begins with proprietary roots, the essence of these associations becomes similar to those of standards, and the outcome can be categorized as such. It is the endorsement of the participants that makes the standard and not merely the signature of the organization that published it.
The Symbian Foundation or the Open Handset Alliance could serve as good examples for proprietary commercial platforms being ‘donated’ to the community for joint development.
Where to standardise
Looking at the OSI model, the lower we are in the protocol stack (i.e. towards physical, media access such as IEEE‘s Ethernet), the stricter role the standards play and the less room there is for differentiation. For example, physical components and radio protocols are more streamlined and offer less differentiation than the applications built on top. This is partly because the higher layers typically need to communicate with fewer peers, while further down in the stack there are more ‘hops’ to traverse, and each of them could be using different equipment. For this reason, a greater variety of vendors that handle the traffic at the lower layers. This could explain why we see much more consortia-driven initiatives at the higher layers, where standards organizations sometimes do not provide enough or any unification. Too many options are allowed and the result is fragmentation.
Bottom Line
Android, Symbian and Flash are examples of market growth that builds upon wide-scale proprietary solutions; yet these examples are glamorous exceptions of cash-rich companies and their partners in conspiracy. More commonly, community-owned standards (like those from the GSMA, IETF, etc.) are a key ingredient for the mass market adoption of a new technology.
Despite its overheads and drawbacks, the process of standardisation is critical for services to reach mass market. The higher we are in the protocol stack, the more room there is for differentiation (and fragmentation), and that is where the bulk of consortia activity is.
If you’re fairly convinced of the importance of technical standards to the success of telecom offerings and they will not be replaced by proprietary solutions, then the next question is which standards to embrace and follow, since competition is not a realm limited to companies and products – it is sometimes the fate of standard initiatives as well (e.g. the rivalry between WiMax and LTE). Perhaps this could be a topic for a future post.
– Elad
[Elad Granot, a Technology Strategist, has actively participated in several standards committees and industry consortia (e.g. within the OMA and the LiMo Foundation) for the past 6 years. Some of the standards he worked on have already been successfully deployed in the mobile communications market. He became involved with standardization at Vocaltec Communications, who led the first VoIP standards in the mid 90’s. Today Elad serves as Director of Technology Strategy at Comverse.]
The current mobile phone market of around 1 billion devices per year roughly breaks down into four price-points. At the top are the iconic devices that bring new mobile experiences to the world such as the iPhone and N95, next are the less distinctive smartphones such as the Nokia 5800 and Motorola’s Droid, then the feature phones that bring last year’s new experiences to the mass market, and at the bottom are the voice phones for people who really do just want to make a phone call and maybe send an SMS.
VisionMobile is proud to present our latest update to the 100 million club, the watchlist of mobile software products which have been embedded on more than 100M handsets. This H1 2009 update is the latest in our semi-annual publication series that started in 2007, offering a watchlist of the most widely deployed software in the mobile industry.
