The death of Flash – 8 years in the making

[Adobe’s decision to stop developing Flash for mobile browsers is the talk of the day – but the reasons behind Flash’s ultimate failure are not that obvious. Guest author Francisco Kattan discusses the chain of events that led to the death of Flash – a time bomb inadvertently planted by Adobe many years ago].

The death of Flash - 8 years in the making

Ever since Adobe announced that it will stop developing Flash for mobile browsers, the blogosphere has been buzzing with a broad range of sentiments including “I told you so” by critics, disbelief by Flash developers, Monday morning quarterbacking by analysts, and even a petition for Adobe’s CEO to resign.  Check out also the Occupy Flash and Occupy HTML manifestos from the opposing camps. Flash is one of those topics that attract very emotional responses from both its passionate developer community and its very vocal detractors. Although I am generally an Adobe supporter, I will put emotion aside and summarize, in hindsight, what went wrong. For full disclosure, I am a former Adobe employee, but this post is based only on publicly available information.

HTML5 did not kill Flash. Steve Jobs did not kill Flash. The death of Flash was caused by a time bomb planted inadvertently by Adobe many years ago.

Although Flash for mobile ultimately died because Adobe did not adapt fast enough to post iPhone changes in the ecosystem, the seeds for Adobe’s failure were planted earlier on. To understand what went wrong, let’s first review what happened before the iPhone and how those events set the stage for what happened later.

Before the iPhone – the Flash Lite era

Back in the early to mid 2000’s, there was great demand from handset makers (OEMs) who were willing to pay for Flash Lite (the mobile version of Flash at that time) and Adobe decided to collect a per-device license fee for the software. This decision set in motion the incentives and behavior that would ultimately lead to the demise of Flash in mobile, and as I explain later in this post, will also kill Flash on the desktop. Adobe’s ambition to create a platform for delivering rich internet experiences is now doomed.

A big question in many people’s minds is why Adobe didn’t just replicate the model that had been successful with PDF and the desktop Flash Player: make the runtime freely available and monetize it with increased tools revenue. Presumably this would have motivated Adobe to prioritize platform consistency over broad (but fragmented) reach. But it was not that simple.

Although there was a thriving Flash Lite ecosystem in Japan (developers creating content and distributing it via the operators), Flash Lite was initially NOT used as an apps platform in other countries. Flash Lite was used in many cases by OEMs who were looking to differentiate their devices by building expressive user interfaces for the core applications (home screen, dialer, address book, messaging, call log, and others). The LG Prada is a great example of the kind of user interface handset makers could build using Flash Lite. This device featured an iPhone-like touch interface back in 2006 (demo). The Samsung D900 and the LG Chocolate are good examples also. Although these devices included Flash Lite, they did not offer an opportunity for developers to distribute Flash-based content. The implementation of Flash Lite was closed to third party developers as there was no Flash in the browser nor the ability to execute Flash-based apps. As there was no clear opportunity for developers and therefore no tools revenue to be made, it made sense for Adobe to collect a per-device fee from handset makers rather than monetize the player via the tools.

Conflicting objectives: handset makers versus developers

As it happens, when the opportunity to deploy Flash Lite as an applications platform presented itself later on (especially on Nokia and Sony Ericsson devices), Adobe did not adapt its business model right away. In hindsight, this turned out to be a costly mistake. At that point, there was an inherent conflict between the needs of handset makers looking to differentiate their devices and the needs of developers who needed a consistent platform across devices. As OEMs were paying the bills and the mobile team was measured on revenue, it was natural for Adobe to prioritize OEM requirements over developer requirements and to let OEMs implement Flash to meet their own needs. OEMs licensed the source code from Adobe and created their own binary implementations that were not consistent across devices. Flash Lite was used sometimes for building device user interfaces, other times for browsing Flash content, and other times for running standalone apps. In addition, OEMs did not always implement the same set of APIs creating additional fragmentation for developers. Worse yet, as the runtime was not updateable over the air, device fragmentation would only get worse with time.

Lack of Distribution and Monetization Opportunities for Developers

Even when Flash Lite was deployed as a platform to run standalone apps (not in the browser), there was no easy way for developers to distribute their apps. There were no iPhone style app stores at the time. Developers had to distribute their content via middlemen (aggregators) who collected a tax and who had distribution deals with handset OEMs and network operators. Worse, the OEMs and Operators did not have good merchandising channels and discovery of apps by consumers was very poor to say the least. There was no streamlined way for Flash developers to reach consumers. This was a major issue for developers as it was for Adobe. At the same time, revenue from OEMs continued to grow –shipments of Flash enabled devices were more than doubling every year– masking the severity of the problem and allowing the time bomb to continue to tick.

A glimpse of hope: partnering with operators to reach consumers

In an effort to create a thriving ecosystem for developers, Adobe turned its attention to mobile operators who at the time controlled content distribution via their infamous walled gardens. Working with operators was not a popular move especially with Adobe’s Web developers who were new to mobile and did not appreciate the level of control that operators had at the time. Adobe worked with several operators but most prominently with Verizon Wireless (see the April 2006 news release) which on paper was an ideal partner. As one of the world’s largest CDMA operators, Verizon Wireless had great influence over its OEMs and was able to specify the Flash runtime on its devices. Verizon Wireless also had the most successful app store in the US at the time (the BREW-based Get it Now download market).

Adobe and Verizon launched two services: A Flash app download service as part of the BREW Get it Now ecosystem (see the October 2006 news) and Verizon “Dashboard” (announced in March 2007), a much more ambitious service based on Adobe’s on-device portal called Flash Cast. Both services, had issues. The BREW Get it Now offering failed because it was too difficult for developers to onboard new apps, developer revenue shares were too thin, app discovery was difficult for consumers, and Verizon moved too slowly to certify new handsets with Flash (for more on this see: Is Brew Dead? Lessons Learned).

The Dashboard service failed because it took far too long to launch, missing its market window. Verizon announced Dashboard in March 2007 promising availability in the second half of the year, but the service did not see the light of day until September 2008. Even then the service was available on only one handset out of a broad device lineup available on Verizon stores. With the iPhone and Android devices attracting all developer attention by then, Flash Cast and Dashboard were too little too late.

It is worth mentioning that the innovation around Flash Cast and Verizon Dashboard was quite promising. In hindsight, the service resembled many of the key attributes of the iPhone: like the iPhone, it had an App Store concept where consumers could discover and purchase widgets with a revenue share back to developers. Like the iPhone, it was designed as a walled garden with a gate keeper (the operator in this case). Like the iPhone it featured an expressive user experience as the widgets and the user interface were based on Adobe Flash. However, unlike Apple, Adobe did not have end to end control of the ecosystem and the service was late to market as a result. The service was designed for 2006, not 2008, a big difference considering the iPhone showed up in 2007 changing all the rules. Although Adobe was innovating fast, its innovation did not reach consumers in time because it relied on slow moving partners.

Enter Steve Jobs and the iPhone — CONTROL-ALT-DELETE on the ecosystem

The launch of the iPhone changed the mobile ecosystem so dramatically that it disrupted all incumbents in ways that were not readily apparent right away. The disruption was so great, that it favored new entrants that were starting from scratch under the new rules (Apple and Google) over incumbents who had existing market positions and established business models (Nokia, RIM, Motorola, Palm, Microsoft, Qualcomm/BREW, Symbian, Sony Ericsson, and of course, Adobe). Like many other players, Adobe did not adapt fast enough and paid the price as a result. Consider three major changes in the ecosystem and how they negatively impacted Adobe Flash:

  • Apple caused the existing operator walled gardens to crumble while Adobe was focused on building ecosystems with operators.
  • Consumers started dumping feature phones in favor of buying smart phones, but Adobe had focused on feature phones which represented a much larger share of device shipments (and revenue to the mobile business unit).
  • Mobile browsing finally took off as a mainstream service, but Adobe’s mobile player did not support 100% of the desktop Flash content as demanded by Steve Jobs.

As you may recall, the first generation iPhone did not have an App Store or SDK. It was all about browsing the internet (see the “internet in your pocket” ad campaign). The iPhone was the first handset with a decent browsing experience and quickly took the bulk share of mobile browsing (even though it represented only a very small share of device shipments). The lack of Flash was a glaring gap at the time.

If there was ever a time that Steve Jobs needed Flash, it was in 2007 with the first generation iPhone 

Unfortunately Flash was not ready at the time. Because Adobe generated revenue from device shipments, it had been focused on the feature phone category which represented a much larger share of the market in terms of shipments (but nearly zero percent in terms of web browsing page views!). Neither version of the Flash Player met Steve Job’s requirements. Flash Lite did not support all the Flash content on the Internet because it had been optimized for more constrained devices and the full Flash Player did not run well on smart phones because it required the power of a desktop computer. Steve Jobs famously once said, “there is this missing product in the middle,” referring to this issue.

Incredibly, Adobe did not ship the mobile version of the full Flash Player until June of 2010 (version 10.1), three long years after the launch of the iPhone! By then, the iPhone was the most popular device on the planet and Apple had shifted focus from browsing the internet to apps where Flash did not matter (recall the “there is an app for that” ad campaign). Adobe had missed the window of opportunity to be part of the iPhone.

Sure, Apple could have still adopted the Flash Platform in 2010, but it was not in the company’s best interest at that time. In the end, Apple decided not to adopt the Flash Platform because Flash would limit its ability to differentiate its devices. Apple marketing was focused on the broad availability of apps that worked best on iOS. To support such positioning, Apple needed developers to target the latest set of proprietary APIs (accelerometer, compass, gyroscope, etc.) rather than write to a higher level cross-device platform that would deliver undifferentiated experiences across Apple and non-Apple devices.  This is why Apple decided to block Flash from iOS (for more on this see: Why Steve Jobs will never put Adobe Flash on iOS devices).

Adobe did react to the disruption the iPhone had created and adjusted its business model, but it was too late by then. In March of 2008, Adobe announced the Open Screen Project essentially making the player free for OEMs as long as they implemented it in a consistent way for developers. To ensure consistency for developers, Adobe also began to create its own binary implementation of the player for the leading mobile platforms in the same way it had always done for Windows and Mac OS on the desktop. However, with “Flashless” iOS devices leading the charts and HTML5 adoption increasing on mobile devices and web properties, the writing was already on the wall and there was no turning back. Adobe had been unable to disarm the time bomb in time and it eventually exploded.

Flash for mobile is dead, but Flash for the desktop lives on, right? Wrong!

It’s pretty simple: Flash for the desktop cannot survive without mobile support. With PCs becoming a smaller and smaller share of Internet connected devices (see chart below), it’s only a matter of time before most web sites will be updated to not require Flash. It is hard to imagine many examples of web properties that would want to exclude the majority of the eyeballs on the internet by requiring Flash.

VisionMobile - Desktop vs. mobile device shipments

Of course, web sites don’t have to remove Flash content outright. They can add logic to serve Flash content for desktops and HTML5 content for other devices. This will in fact be the case during a multi-year transition to a “Flashless” internet. As new content is created that excludes Flash, as HTML5 adoption and capabilities catch up to Flash, and as the share of PCs continues to decline, the percent of web sites that serve Flash content on the internet will approach zero, causing Flash on the desktop to die a slow death.

Note that this transition began several years ago as web properties adapted to support iOS devices — which account for a whopping 62% of mobile browsing page views! YouTube, one of Adobe’s flagship references already added support for HTML5, dealing Flash a major blow. jQuery, a popular JavaScript library that competes with Flash for building interactive sites has already overtaken Flash. The tide on HTML5 is turning and it’s only a matter of time before Flash on the desktop suffers the same fate as its mobile sibling.

To recap, the seeds for Adobe’s failure with Flash were planted many years ago with a revenue model that made sense at that time, but remained as a ticking time bomb for far too long. The model caused Adobe to move in a direction that was opposite to where the market ultimately moved to, especially after the launch of the iPhone (feature phones versus smartphones, OEM requirements versus developer requirements, operators as channel versus Apple and Google as channel). In addition, when the iPhone was launched, Adobe moved too slowly to adapt to the new market reality (3 years to launch Flash Player 10.1), ultimately killing Flash.

What do you think? What do you believe went wrong with Flash in mobile? Do you think Flash will survive on the desktop?

– Francisco

[Francisco Kattan has worked in the mobile ecosystem for over 10 years, including as Director of Product Marketing and Developer Relations for Adobe’s Mobile Business Unit. He also held leadership roles at Edify, Openwave, and currently Alcatel Lucent where he is Senior Director of Product Management. Follow Francisco on Twitter @FranciscoKattan]

 

[Report] Mobile Platforms: The Clash of Ecosystems

[We at VisionMobile have been researching and helping to educate the industry about mobile platforms for the last five years. In this time mobile software has evolved from the world of “open OS” to the world of  complex ecosystems, network effects, app stores which are redefining the rules of telecom industry. Today we share much of this knowledge in our Mobile Platforms: The Clash of Ecosystems report – a critical analysis of major mobile platforms and their battle for dominance – free download here].  

VisionMobile - The Clash of Ecosystems
Mobile platforms are at the center of the epic battle between Internet and telecom giants. The competition is not just about technology, performance, user interface or openness. Today’s mobile platforms win and lose by the strength of their ecosystems of developers, service and content providers.

In the report the Mobile Platforms: Clash of Ecosystems (free download here) we break down  Android, BlackBerry OS, BREW, iOS, Symbian, Windows Phone and webOS across key elements such as history and origins, owner agenda, ecosystem adoption, market penetration, technology foundations and application development experience. Clash of Ecosystems is part-funded by webinos,  a project aiming to deliver an Open Source Platform and software components for web applications across mobile, PC, home media (TV/set-top boxes) and in-car devices.

The report dives into several key trends underpinning the era of mobile platforms and ecosystems – designed to help developers, software companies, entrepreneurs, enterprise CIOs, brands, handset makers and operators to better understand the dynamics of mobile platform competition on intersection of economics and technology.

Smartphones go mainstream, but the devil’s in the details. Just two years ago, smartphones were viewed as expensive toys for geeks and Apple fan boys. No longer. Smartphones have entered the mainstream in developed markets, and are taking a growing proportion of device sales in more cost-sensitive markets around the globe. In the third quarter of 2011, smartphone shipments penetration surpassed 29% globally, although this figure varies widely from nearly 65% in the USA and over 50% in Europe to 19% in Asia-Pacific, 17% in Latin America and 18% in Africa/Middle East.

VisionMobile - Clash of Ecosystems - Regional penetration

The leaders, iOS and Android, are driven by economics of demand. Handset sales are driven not by hardware features (“what the handset can do”) but the user interface and applications available (“what you can do with the handset”). Much like any smartphone platform, iOS and Android are driven by economics of demand, where the demand generated (incl. the number of applications) has a far stronger effect on sales than pure supply chain efficiencies. As of October 2011, iOS and Android are leading the way, with over 500,000 and 300,000 applications, respectively. The rest of the platforms trail far behind with order of magnitude less applications: BlackBerry has 35,000 applications, Windows Mobile 30,000 applications and Symbian 25,000 applications.

Successful platforms are a magnet for financial investment. Application platforms like iOS and Android are able to attract huge financial investments on the part of developers, investors and brands. Taking iOS as an example, and estimating that an app costs an average $30,000 to develop, the 500,000 iOS apps represent an average investment of $15B in the iOS ecosystem. This investment directly contributes to Apple’s bottom line, and its estimated $71B iOS-powered device sales.

App stores are about controlling ecosystems, not profiting from content. The app store business is the polar opposite of the telco content business. As such, application stores like Apple App Store and Google Android Market should not be mistaken for profit centres. Instead, Apple and Google leverage app stores as ecosystem control points. With over 85% of iOS and Android downloads coming from free apps, the 30% revenue share from paid apps subsidizes the operational cost of app intake and distribution, which runs at over $1.2B to date in the case of Apple.

VisionMobile - Clash of Ecosystems - Mobile Platform Status

The rising star of HTML5. HTML5 has the potential to become a common bridge system across smartphone platform islands and the sea of feature phones. HTML5 is the only common app technology supported by Android, iOS, new versions of BlackBerry OS and Windows Phone platforms. With 225 million Android devices and 146 million iOS devices (UPDATE: this figure only refers to iPhones and does not include other iOS devices) sold to date, HTML5 is supported by over 371 million mobile devices today, albeit with mixed levels of compatibility.

Microsoft, Facebook, and mobile operators have very different motivations but are all eyeing HTML5 as a technology that could help dis-intermediate app stores as content distribution silos, reducing the power of Apple’s iOS and Google’s Android platforms.

However, in its present state HTML5 can neither challenge nor displace the leading mobile platforms. In order to become a viable alternative, HTML5 needs to move beyond being just a development tool, and to converge around a dominant solution for web application discovery, monetisation, distribution and retailing.

Mounting developer acquisition costs. Platforms need apps to thrive and developers are the growth engine of the smartphone ecosystems. At the same time, developer attention is scarce; developers are very critical “platform consumers” and need to make far higher investments when adopting a new platform. We estimate that the minimum acquisition cost for a publishing developer is over $2,300 in the case of Apple. As such, Apple, Google, Nokia, Microsoft and RIM have needed to invest billions of dollars in persuading developers to write apps for their platforms.

Moreover, developers are motivated by a complex set of incentives, which includes revenue potential, user reach, ability to raise funding, and the pure coolness or utility of a platform. These incentives vary widely across different types of developers and as such call for developer segmentation as a critical cornerstone of any developer strategy..

Software players put mobile operators on the defensive. The app innovation unleashed by smartphones puts pressure on traditional telecom profit centres, not only around value-added services, but also on core messaging and voice services.

Apple and Google combined control the user experience of nearly 400 million users through their iOS and Android platforms. Both are strategically reducing the role of mobile operators to that of “connectivity providers”.  Internet giants like Facebook and Amazon are using social-centric and retail-centric strategies to profit from mobile. Startups such as Foursquare and Instagram have pioneered mobile-first services. Communication companies like Skype, WhatsApp and Viber put pressure on core telecom services, notably SMS and voice.

Incumbent mobile platforms lose to next-generation challengers. In the last decade we‘ve seen over 20 mobile platforms rise and then die not being able to achieve critical mass. Next-generation platforms (iOS, Android and Windows Phone) have achieved sustainable growth by leveraging on network effects and developer economics. Legacy platforms on the other hand (Symbian, BlackBerry OS, BREW and Windows Mobile) have been designed to handset vendor rather than developer requirements; all have either been discontinued or pushed into narrow market niches. Companies with strong software DNA (common in the US) now dominate the smartphone platform landscape.

VisionMobile - Clash of Ecosystems - Smartphone penetration
No single winner: mobile platforms will remain a multi-horse race. The mobile market will continue to be a multi-horse race for many years to come.  iOS and Android will continue to lead, dividing the market between premium (iOS) and mass-market product segments (Android). Self-reinforcing network effects, gigantic application ecosystems and the rapid pace of platform evolution make the positions of Apple and Google unassailable.  Windows Phone may only challenge BlackBerry for the third place rank.

Patent wars. Apple and Microsoft are trying to leverage their own patent portfolios and paying billions of dollars in patent acquisitions in an attempt to slow down the meteoric growth of Android. Apple’s strategy is to block Android sales starting with Samsung, although with mixed, regional and temporary successes. Microsoft is using an altogether different tactic, namely patent taxes, to coax OEMs like Samsung and HTC away from a higher-cost Android. At the same time, Google is planning to defend Android through the pending acquisition of Motorola Mobile Devices, and its portfolio of over 17,000 patents. We expect a culmination of the patent wars in a multi-vendor consortium designed to standardise cross-licensing agreements across Android, iOS and WP7 handset vendors.

Comments welcome as always,

– Michael V

The post-Motorola dilemma: Same old-Google or the new Apple?

[Google’s pending acquisition of Motorola creates a dilemma: Google must choose between staying true to its core business or reshaping into the new vertical giant that will challenge Apple at its own game. Research Director Andreas Constantinou discusses Google’s dilemma and why both outcomes stand to radically change the rules of the Android Empire]

The post-Motorola dilemma: Same old-Google or the new Apple?

Google’s forthcoming acquisition of Motorola for $12.5B has been largely dubbed a patent deal. And it is. But beyond the patents, Google faces a fundamental dilemma for its core business, and one that will determine the future of the Android Empire.

In mid-August Google announced it intends to buy Motorola Mobility Holdings (MMI), which includes the mobile phone, set top box and DVR businesses, for $12.5B. The true cost to Google is much less though, given that MMI has cash and accrued tax benefits. The move has seen an unprecedented amount of analysis in the blogosphere, with a fair amount of guesswork as to what Google’s motivations were in buying a hardware company.

We believe that Motorola’s acquisition is not just about patents. The move marks a major turning point in how Google runs the Android Empire. Let’s see why.

 

The post-Motorola dilemma

We believe that the Motorola acquisition was sold to the Google board as a patent deal, with the hardware business being an unwanted but inseparable part of the package.

Now Google faces a fundamental dilemma. The combination of Google and Motorola is like building a skyscraper in the middle of the ocean; the two companies are built on very different business models.

Google is a profitable, 28,000-strong direct marketing company. Google uses Android as a platform with which to commoditise mobile handsets, flatten network access and reach billions more consumer eyeballs.

Motorola, on the other hand, is an unprofitable, 19,000-strong hardware company, one that uses Android as a ticket to sell more hardware to more consumers and more carriers in the form of smartphones.

We have no doubt that Google will divest a large part of the Motorola business. A hardware business would not help Google sell more ads, i.e. drive its core business.

Motorola accounts for less than 10% of Android devices sold in Q2 2011 – third after Samsung and HTC who shipped 18 million and 11 million Android devices, respectively, according to data from Gartner and Arete. By fully incorporating Motorola, Google would be just nudging forward Android device sales, while at the same time upsetting all of its major OEM partners. In other words, incorporating Motorola would have the same market impact as buying a local network carrier.

The question then is which parts of Motorola Google plans to keep, besides the patents. This presents a major strategy dilemma for Google – and one whose outcome will have fundamental impact on how Google runs the Android Empire.

 

Android as a software autocracy

Motorola’s IPR portfolio is substantial: 15,000 wireless patents, another 6,200 pending, and 3,000 granted or pending patents in the Home division, according to Arete research. More importantly, Motorola has a host of essential (blocking) patents around GSM.

These patents buy an Android Insurance Policy that Google can issue to “compliant” OEMs that are intended to protect these OEMs from “patent taxes” levied by Microsoft, Nokia and others. This Insurance Policy is essential to protect the vast Android handset population from stalling its so-far phenomenal growth. At the same time, this insurance policy is not sufficient if Apple does attack the mid-priced smartphone segment, as it is rumoured to do.

Android has been built on very shaky legal grounds, heavily “borrowing” from the Java language, the Java SE APIs and integrating with copious amounts of GPL-licensed code. Contrast that with how iOS, Symbian and Windows Phone platforms were built from scratch with very little inbound software licensing above the kernel. In other words, Google is buying Motorola to remedy the lack of IP strategy that threatens to undo 5 years of software craftsmanship. Google is paying for its past sins.

Moreover, the Motorola patent portfolio is comparable to Nokia’s, which not only buys Google insurance but puts Apple and Microsoft on the defensive – see the outcome of the Apple-Nokia patent dispute in which Apple has to pay Nokia 8 EUR per iPhone sold in the future, in addition to a substantial one-off payment.

But beyond the Android Insurance Policy, Google is getting something much more important: it strengthens the Android software dictatorship.

As we discussed here and here Google licenses the Android platform under an open source license but uses several control points to incentivise OEMs to stick to a tight software implementation (and one that goes way beyond APIs). Google’s Schmidt explains eloquently how “OEMs feel like they have a choice” with how they implement Android  [see video segment starting at 28m 50s] but in fact, they have to comply with Google’s requirements as they need G’s permission to add Android market and use the relevant trademarks on their handsets.

What patents buy by extension is practically a software autocracy; Google is now going to extend its Android Insurance Policy only to compliant OEMs. This means that if an OEM doesn’t follow Google’s precise software requirements, they will be prey to patent taxes by Google competitors. This now makes it untenable for an OEM to not pass Google’s Android certification.

 

Android as an Experience Licensing business

Besides software, there is a great deal of value that Google can leverage from Motorola. But that means a substantial change to Google’s business model.

Google’s business strategy is based on the economics of complements – that is, if you want to sell more cars, you need to lower the price of gas.

In Google’s case, if you want to sell more ads, you need to lower the prices of smartphones (Android), commoditise the networks (GTalk, Google Voice) and advance the state of web browsers (Chrome). Notice how everything complementary to Google’s business is “open”, while everything core to Google’s business is closed (Adwords, Android Market, Google Maps)

The Google strategy is to make Android smartphones as ubiquitous and as cheap as possible, with the lowest possible barriers to entry for OEMs and ODMs, so that the last citizen on Earth can be exposed to Google inventory.

However, the trouble with Android is that it has turned into a price-driven battlefield. The vast majority of devices compromise on the industry design and experience with cheap me-too plastics and poorly tested OEM apps and UI overlay. So far Android has managed to grow impressively fast as most devices are well below the iPhone and iPad price points. But with Apple rumoured to be releasing a lower-priced phone design, we expect Google’s empire of Android me-too clones to be challenged by the integrated, consistent and entwined experience that Apple offers.

This is where Motorola comes in. To counter Apple mid-priced phones, Google needs to tightly define and control the experience delivered on OEM licensee phones.

In this scenario, Google would use Motorola’s design teams to develop a complete “reference experience” that encompasses industrial design, hardware specs, complete software specs, marketing specs, pricing norms and of course the Google app suite. The Android open source “take it and fork it” mantra becomes much closer to a contractually enforced “experience licensing” business, in which OEMs that choose Android can compete with Apple on the same level, and get guaranteed margins through Google’s contractually-specified boundaries for Android handsets. How are OEMs going to differentiate you ask? Through regional marketing deals, retailer agreements and pre-loads with local service providers that deliver an additional rev share.

We envisage Android’s Experience Licensing scenario as borrowing heavily from the franchise business model widely practiced in the retail industry.  In franchise stores, the experience is as tightly controlled as the products, the marketing strategy and the pricing policy.

In other words, Experience Licensing is about running the Android Empire with Apple’s grip.

To accomplish this strategy, Google needs to seed the market with “Hero” devices that epitomize the Android experience. Here is where Google can leverage on Motorola’s device production assets.

A quick backgrounder: so far, Google has designed Android to offer three types of handset projects: Experience handsets (based on Google specs and branding), Partner handsets (compliant with Google’s Android specs, but with no Google involvement or branding) and DIY handsets (take the source code and fork it, but you ‘re on your own, e.g. China Mobile’s oPhone). The purpose of Experience handsets is to advance the state of the platform, by working closely with 2 pre-selected OEMs 6-9 months prior to the public release of the codebase under an open source license. Experience handsets (see full list here) are run under tight Google control and co-marketed by both Google and the OEM.

Google would be adding “Hero” handsets to the existing three tiers, which delivers two benefits.

Firstly, it allows Google to divide and conquer among OEMs without giving anyone “special privileges” or know how – it is rumoured for example that Google has been unhappy with the know-how HTC developed as a result of their long-standing relationship in the early Android days which has given HTC the fastest time-to-market for handsets based on the public codebase (note how HTC is no longer involved in Experience handsets for some time).

Secondly, it allows Google to better compete for carrier deals with Apple, by offering carriers exclusive access to the latest and best Android features on Motorola hardware. As we know, carriers die for exclusives, so rather than run Motorola device business at cost, Google can just keep the crown jewel features for carrier-exclusives from Motorola.

 

Redefining how Google runs the Android Empire

The purchase of Motorola makes Google the emperor of the Android Empire. Whichever parts of Motorola Google decides to keep, the laws of the Empire would be irreversibly changed. The how depends on which scenario Google opts for.

1. In the software dictatorship scenario (which we take as the default option), Google would make it untenable for OEMs not to follow its software specifications to the letter or to fork Android. Google stays true to its core ad business and divests everything apart from patents to a Taiwanese OEM wanting to break into the North America market.

2. In the Experience Licensing scenario, Google keeps the hardware design and device production capabilities to allow Android to compete head-to-head on every Apple price points, both the current high-end iPhone/iPad pricing and the rumoured mid-tier pricing. Here Google would have to take a hit on its cash flows and profitability by putting its hand deep in its pocket (both in terms of CAPEX and OPEX) to more favourably compete with Apple.

Irrespective of Google’s mobile plans, the Motorola acquisition offers the search giant a means to control the hardware and software make up of set-top boxes and offer a similar licensing program to Android TV licensees. We know that the first attempt at Android TV failed because there was very little premium content as content producers were concerned with DRM and content security. By controlling the hardware and software specs for Android TV, Google could bring the content producers back on board.

Historically, Apple has been fundamental to the success of Android. As it turns out, it is going to fundamentally challenge the Android business.

Stephen Elop noted in June 2011 that “Apple created the conditions necessary for Android”, by incentivizing carriers and OEMs to offer iPhone-killers at less than profit-killing prices.

Now Apple is creating the conditions necessary to challenge Android’s growth, by milking Android OEMs for patent taxes and challenging the Android clone empire with unique product experiences at more price points.

Whatever route Google chooses to take, it will fundamentally change the rules of the Android Empire.

– Andreas
you should follow me on Twitter: @andreascon

[Mystified by the intricacies of Google’s  Android strategy? Check out our Android Game Plan workshop!]

100 Million Club: Winners and losers in the OS Arena

[2010 was a year of upsets in the mobile industry, as the league of top 5 handset manufacturers saw the inclusion of pure smartphone vendors (Apple and RIM) for the first time. As the rate of smartphone penetration accelerates, Marketing Manager Matos Kapetanakis takes a closer look at the winners and losers of 2010 as part of the latest 100 Million Club].

VisionMobile - 100 Million Club H2 2010 - Winners and Losers in the OS Arena

Welcome to the H2 2010 edition of the 100 Million Club, our semi-annual watchlist tracking mobile software embedded on more than 100 million devices. Click here to download the full watchlist.

Key Highlights
WebKit continues to grow, fueled by the accelerated rate of smartphone penetration. Up to the end of 2010, WebKit-based browsers had been shipped in more than half a billion handsets

– While smartphone penetration has increased to more than 20% in 2010 globally, featurephones continue to dominate the industry. Indicatively, S40 shipments were almost equal to total smartphone shipments.

–  In 2010, Android raced past iPhone’s iOS and BlackBerry, almost reaching Symbian’s shipments despite Nokia’s smartphone woes. While Nokia will undoubtedly push up Microsoft’s mobile market share in the future, we’ll continue seeing Symbian in the smartphone OS top-5 for another year.

– Total handset shipments for the second half of 2010 were 780 million, a 25% increase over the first half. A handful of software products, like vRapid Mobile by Red Bend and CAPS by Scalado, managed to tap a sizable portion of this figure, having more than 500 million shipments in H2 2010 alone.

– Myriad Group is now the only company to have 3 products with more than 100 million shipments, after Nuance merged two products into one, with T9/XT9/T9Trace. With the products combined, cumulative shipments have reached a staggering 10.5B shipments.

VisionMobile - 100 Million Club - H2 2010

Winners and losers: changes in the OEM landscape
Who were the winners and losers in 2010? In terms of handset OEMs, we have two clear losers – Sony Ericsson and Motorola have been seeing declining market share for some time now, but 2010 marks the first time that these two traditionally dominant players were toppled from the top 5 leaderboard by pure-smartphone players RIM and Apple (see our latest infographic for more details). At the same time, LG just managed to stave off competition, but without achieving a growth in shipments. Samsung, on the other hand, has effortlessly held its position as the number two handset OEM, having been the most aggressive incumbent OEM in ramping up smartphone shipments.

ZTE is the one piece of the OEM puzzle that doesn’t fit. Some estimates place the Chinese company near the bottom of the barrel, while others feature ZTE in a prominent position in the top 5 OEM leaderboard.

These upsets in the OEM landscape form the foundation for the OS race in 2011 in both feature phones and smartphones.

Feature phones made up nearly 80% of all mobile shipments during 2010. While it’s true that smartphone penetration has accelerated this past year, the days where every phone will be a smartphone are still far.

The next chart clearly shows that feature phones are still the driving force for the mobile industry in terms of shipments. However, revenues and profits are an altogether different matter (see slides 8-9 in our Mobile Megatrends 2011 report).

If combined, media-favorites iOS and Android barely account for 10% of the total shipments for 2010, which are roughly half the shipments of the lowly S40 OS. Samsung’s strong sales through 2010 have helped the company maintain a sizable piece of both the handset and OS pie.

VisionMobile_OS_Market_Share_H2_2010

The OS Arena – Smartphones
But what about smartphones? Which were the dominant OEMs and OSs in 2010? As always, Nokia has the lion’s share. As a smartphone vendor Nokia claimed more than 34% of shipments for 2010, while RIM and Apple, managed to get around 16% each.

VisionMobile_Smartphone_market_share_by_OEM_2010

The above diagram also shows how Samsung has maintained its lead over immediate competitors, with their smartphone shipments equaling those of Motorola, Sony Ericsson and LG combined. Samsung’s lead in this race of the ‘old OEM generation’ is thanks to reacting very fast to ramping market demand and delivering a highly sought after product; Samsung sold more than 10 million Galaxy S smartphones in 2010 in just 7 months, a figure that exceeds the total smartphone shipments of some of Samsung’s competitors.

So, what does it all mean for our favourite smartphone OSs?

Symbian. Dead, you say? That might be the case in terms of developer interest and Nokia’s R&D expenditure, but the current smartphone leader has yet a lot of shipments left in it. Perhaps not 150M shipments, as stated by Nokia CEO Stephen Elop, but a committed handset roadmap can’t change overnight which means that Nokia will continue shipping Symbian smartphones well into 2012, well after their much-discussed WP7 devices start coming out.

While the Verizon deal has not boosted iPhone sales as much as expected, the operator has the potential to tip the balance of the smartphone scales in the US. The question remains whether the Verizon handsets will cannibalise iPhone sales from AT&T, rather than generating new ones, but that should be little cause for concern. Apple has enjoyed a steady growth in shipments over the past couple of years and that, coupled with an accelerated smartphone penetration rate, should ensure that iPhone sales continue to enjoy a healthy increase. Furthermore, there are indications that the iPhone is starting to replace BlackBerry phones as the ‘executive handset’ and could start growing in that segment as well. This is Apple’s ‘blitzkrieg’ tactics at work, advancing on a market segment not just with a platform, but a thriving ecosystem of app developers and content publishers. The realization of this might be one of the driving factors behind RIM’s sudden adoption of Java and Android apps for its admittedly hurried Playbook release.

The biggest smartphone OS surprise has of course been Android. Growing by 100% QoQ for the first three quarters of 2010, the Google operating system shows no signs of slowing down. The biggest contributors to Android’s success have been HTC and Samsung, with Sony Ericsson, Motorola and, to a lesser extent, completing the top 5 contributors. HTC has enjoyed steady growth in smartphone shipments, mainly concentrating on their Android vs. the Windows line. With 60M smartphone shipments forecasted in 2011, HTC seems poised to drive Android sales once again. Samsung will also continue to grow in terms of smartphone shipments, capitalizing on their Galaxy series success. But what of Sony Ericsson, Motorola and LG? These vendors are losing market share, with the latter two having already lost their prestigious position in the top 5 leaderboard. With more OEMs adopting Android (ZTE announced 3 new Android phones at MWC), the Android map still has a lot of surprises in store.

 

The battle of ecosystems and BOMs
The demand for smartphones continues to rise, driven by mobile operators and handset manufacturers both of which need to remain competitive and differentiate. In 2011 the share of smartphones and the OEM competitive landscape will be determined by 3 fundamental factors: ecosystems, services and price points.

Price points. Firstly, hardware BOM (bill of material, including screen, chipsets and memory) is the key factor limiting how low smartphones can go in terms of price points and therefore how quickly they will be replacing feature phone projects within OEM roadmaps. Qualcomm has confirmed fears of a price war that is going to be taking place amongst chipsets in 2011 which will should allow Samsung or LG to deliver unsubsidized $100 retail price smartphones this year.

Ecosystems. Secondly, as Stephen Elop eloquently said in his burning platform memo, “our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem”. The three horse race of iOS, Android and Windows Phone is a race of developer adoption. Any new horses (including Qt, MeeGo, BREW and SmarterPhone) will have to show sizeable ecosystem support in terms of 10,000s of applications and 10s of millions of downloads in order to join the race as worthy contenders.

Services. Thirdly, smartphone growth is driven by western markets where mobile operators are dominant. With subsidies and marketing boost for smartphones coming from operators, a key determinant of device sales will be how well OEMs can drive operator services revenues; both in terms of supporting ‘hero’ operator services across regions on day 1 of launch and in terms of offering out-of-the-box white label services with a revenue contribution going towards the operator. This third services battlefront is heating up, too, with HTC buying up service companies, Samsung growing its global services deployments (more about OEM services landscape in a next article).

How do you see the future of smartphones in 2011?

-Matos

RIM: a leap ahead in user experience, but can it execute?

[RIM’s acquisition of UI firm TAT marked the largest mobile software M&A of 2010. Research Director Andreas Constantinou explains why the acquisition places RIM a leap ahead of the top-10 OEMs in terms of UI capabilities and asks – can RIM execute on the promise?]

RIM: a leap ahead in user experience, but can it execute?

In December, RIM surprised industry observers by buying TAT (The Astonishing Tribe), a 200-strong UI technology and design firm based out of Malmö, Sweden. At nearly $130 million, RIM’s move marked the largest mobile software M&A transaction of 2010 globally and an impressive 5.5x multiplier over TAT’s 2009 revenues of 170 million SEK. It follows a string of RIM acquisitions since 2009, namely QNX (operating system), Cellmania (content billing and distribution), Dash (two-way navigation), DataViz (document viewer), Torch Mobile (WebKit experts) and Viigo (software house).

More importantly, TAT’s acquisition places RIM a leap ahead in the league of top-10 handset manufacturers in terms of own UI capabilities. Here’s why.

A leap ahead of the competition
TAT was founded in 2002 by 6 games engineers and designers out of university (here’s their story) but has come a very long way. TAT is not just another technology company. It has seen its Kastor 2D/3D graphics framework deployed in over 500 million phones across 5 out of the top-7 OEMs. More important to the RIM story is TAT’s Cascades product, a UI framework that allows OEMs to design their phones not in terms of applications, but in terms of screens, allowing what can be termed ‘rapid variant management’ (more about that later).

TAT has also been clearly ahead of the UI technology vendor pack – vendors like Ikivo, Digital Aria, Acrodea, Bluestreak, YouILabs and Scalado – thanks to its design skills. When other vendors have banked on technology marketing, standards implementation or operator deals, TAT has used its design skills to get into the door of both OEMs and operators/carriers (check out this video on the ‘future of screens’). The marriage of design skills and technology licensing allowed TAT to build momentum and cash-flow when OEMs were cutting budgets post-2005. These same skills were what got TAT the deal to design Google’s Android 1.0 UI. TAT’s strength lies in the combination of UI framework technology and the first-class design skills – both of which are now with RIM.

So what does RIM get?

TAT’s acquisition is far more encompassing than many would have thought – it puts RIM a leap ahead of the pack in the league of top-10 handset manufacturers in six ways:

1. Match the iPhone
With the Cascades technology, RIM can now match and even exceed the sophistication of the iPhone UI (see this and this video demos). Long term this means RIM has a chance to contain the exodues of enterprise customers opting for replacing their RIM with iPhones due to the outdated UI and usability on the Blackberry OS 6. Heck, it would be even easy for RIM to offer ‘deep skins’ for BlackBerry handsets where the navigation and core apps closely resemble the iPhone apps.

 

2. Rapid variant management
TAT’s Cascades is a departure from how OEMs build handsets today, by allowing the UI to be designed in terms of screens and not applications.

The downside is that Cascades-enabling an existing software stack means that legacy ‘spaghetti’ applications have to be ported one by one on top of TAT’s framework, which takes 9-12 months for the complete UI (it’s 10s of millions of lines of code that have to be ported). This is what has historically limited Cascades to only tactical wins for specific applications on Motorola, Samsung and Asus handsets.

The upside is that with Cascades RIM gets rapid variant management; creating 100+ operator variants from a single vanilla UI is just a button (and an XML file) away. Designing in screens rather than apps means that RIM can keep its investment into messaging, graphics and enterprise middleware but radically change the UI look and feel. This allows RIM’s carrier customers more differentiation and exclusivity opportunities, all without delaying the time to market – and therefore securing the carrier multi-million subsidy and marketing carrier budgets.

Rapid variant management is today one of the few domains where Android suffers and Nokia’s Symbian still excels, so a very important differentiator for RIM once the integration work is out of the way.

3. Consumer and enterprise personas
We covered earlier how RIM needs to escape its dual personality disorder by designing separate consumer and enterprise product lines. However, designing a different set of apps for enterprise and consumers is complex – not to mention managing many more device models and variants in the field.  With TAT, RIM buys the ability to have enterprise AND consumer UI personas ship in the same phone – not only that, but in a way that can be easily switched by the user at the flick of a button. Switching between enterprise and consumer personas is also much cheaper to do at the UI level rather than the bare metal level with what’s called ‘mobile virtualization‘.

This implies that with TAT’s technology, RIM can allow users to switch between consumer and enterprise UI personas; a consumer UI when you want to browse on Facebook and check out Flickr and an enterprise UI when you want to check the email attachment for your next meeting. Note that Nokia and HTC Sense have also implemented basic switching between work and personal skins.

4. Enterprise UI customization
Besides the runtime technology, TAT develops Motion Lab, a tool that a designer can use to define UI screens and UI flows through a drag-n-drop environment. For RIM, this means that enterprises can customize the phone’s navigation to focus on the few key applications that are used most of the time. It also offers RIM a level of enterprise customization beyond what other OEMs can achieve out of the box.

5. UI personalities
With the erosion of the market of downloadable ringtones and wallpapers, the industry has turned to apps as the next premium content market. Yet, there are still new revenue opportunities in downloadable content. In Japan, DoCoMo has led the market of downloadable UIs in the form of “standby screens” (programmable home screens), and which Acrodea has extended to the dialer and menu apps.  This has created a small market of downloadable UIs for both DoCoMo and KDDI.

With TAT, RIM can extend that market to the world, and across more embedded applications – creating what can be called the market of downloadable UI personalities. Whether RIM can turn this capability into a new ‘market’ is questionable, but it certainly presents a unique point of differentiation and an opportunity for a new revenue stream for RIM.

6. Connected experiences
With the acquisition of Dash, a 2-way car navigation company, RIM has its sights set beyond phones and tablets into the automotive segment. To deliver a consistent UI across these varied form factors a new OS (QNX) is far from adequate. It needs a portable UI technology that allows RIM to reuse its UI assets with minimum maintenance overhead across different form factors, from phones to cars. TAT’s Cascades is exactly this technology and as TAT has shown, it can be extended to connected screens in the living room, in the street, in the car, and in the hands.

Filling in the gaps that TAT left
With TAT out of the picture, how can other OEMs catch up to the level of UI technology sophistication and design skills? There’s a variety of UI technology vendors out there (see below for an extract from our Mobile Industry Atlas), but none really combine the UI ‘screens’ framework or the design skills of TAT.

Many companies claim to have “UI frameworks”, but they all invariably mean a combination of SVG engines, 2D and 3D graphics toolkits or compositing engines – which address UI development as an application, not a screen paradigm. Historically there have only been three companies who have developed screen-based UI frameworks; TAT, Digital Airways and Next Device. Digital Airways was behind the UI of the Vodafone Simply series of five handsets launched between 2005 and 2007 and the Porsche P9522 handset introduced by Sagem in late 2008; the company has since transitioned into UI services in mobile, embedded, automotive and aerospace – however the company ceased trading sometime in 2010. Next Device was acquired by Mentor Graphics (makers of the Nucleus RTOS), who didn’t manage to leverage the technology asset as the licensing model was markedly different to Nucleus’ site-licensing. The gap that TAT left creates an opportunity for other UI middleware vendors (e.g. Ikivo, Acrodea, Digital Aria, Sasken,) to maneuver into this technology space.

Another way to deliver ‘screen-based’ phone design and variant management is via development tools; much like how OpenPlug (now Alcatel Lucent) uses the Adobe Flash IDE to create mobile apps. However this is still virgin territory and we ‘re not aware of any sufficiently advanced UI tools vendors in the mobile domain.

Can RIM execute?
All in all, TAT can deliver Apple-class user experience that offers RIM a strategic advantage compared to OEMs leveraging 3rd party Windows Phone and Android platforms.  This all sounds great on paper of course, but it’s all a question of execution.

Can RIM’s corporate monoculture adapt to the creative minds of TAT? Will the TATers get the mandate and budgets to innovate deep into RIM’s product lines? How long will RIM take to integrate the TAT technology on top of the QNX platform and where will the competition be at that point?

Ladies and gentlemen, place your bets.

– Andreas
you should following me on Twitter: @andreascon

[Andreas Constantinou is Research Director at VisionMobile, and oversees the research, strategy and industry mapping projects at VisionMobile. Andreas also served on TAT’s advisory board during 2008-9]

[Infographic] The Mobile Developer Journey

The Mobile Developer Journey

A few months ago, VisionMobile published Developer Economics 2010 and Beyond, a research report that tracked the entire mobile developer journey, from app design and platform selection to market delivery and monetization. Now, we’re proud to present the entire Mobile Developer Journey on a single infographic.

The Mobile Developer Journey

Developer Economics 2010 and Beyond was created by VisionMobile and sponsored by Telefonica Developer Communities.

Did you miss the chance to participate in our research and have your say on app development? Well, you can express your views in our upcoming developer research, Developer Economics 2011, which is just a few months away. Pre-subscribe here

Feel free to copy the infographic and embed it in your website.

600 pixels wide version

760 pixels wide version

1000 pixels wide version

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Windows Phone 7: Tipping the Scales of the Smartphone Market

[Windows Phone 7 has the potential to redraw the smartphone competitive landscape and accelerate the evolution of the mobile value-chain. With the arrival of WP7 just around the corner, VisionMobile Research Partner Michael Vakulenko explains what success of the platform can potentially mean for the industry and why Microsoft’s mobile comeback should be closely watched.]
This article is also available in Chinese

Windows Phone 7: Tipping the scales of the smartphone market

Just over a year ago I had written how Apple’s iPhone and Google Android will capture leadership positions in the smartphone race, leaving behind all the legacy smartphone operating systems. Indeed, one year later iPhone and Android are confidently cruising ahead on the tailwinds of consumer, operator and developer ecosystem support.

Symbian continues to submerge into irrelevance distracted by its venture into open-source waters. The only two handset makers who are members of Symbian Foundation board recently jumped the ship. Both Samsung and Sony Ericsson lately said that they do not plan any new Symbian handsets. Worst yet, major chipset makers are scaling down their efforts to support Symbian. The direction is clear: Symbian is soon to become Nokia-only internal OS hidden behind Qt application framework.

RIM is steadily drifting towards mid-, low-end of the smartphone market. Contrary to common perception, enterprise users are no longer the platform’s most important audience. Over half of the subscriber base and 80% of Blackberry growth comes from the consumer space. The reason is the viral effect of Blackberry Messenger application popular with teenage kids and college students.

Contrary to Nokia and RIM, Microsoft took proactive approach. Instead of patching the leaking boat of Windows Mobile, the Redmond giant build ground-up a new smartphone platform carefully designed to address challenges presented by iOS and Android.

Make no mistake, Microsoft’s primary motivation for Windows Phone aren’t its software licensing fees. The real motivation is the need to protect Microsoft core businesses of Windows and Office product lines. Mobile and smartphones became pervasive. Microsoft must have a convincing mobile story to prevent increasing numbers of users churning to Apple and Google product ecosystems.

There are reports claiming that Apple sells just as many computers as Dell to college students. Naturally, a decision to buy a Mac is much more easier for a person already owning an iPhone. A person regularly using GMail or Google Apps on a PC and Android phone is much more prone to dropping Outloook, Word, Excel and PowerPoint in favor of cloud-based alternatives from Google.

With absolute majority of Microsoft operating profits coming from licensing of Windows OS and Office applications, the software giant cannot afford losing users to Apple or Google. Both Windows and Office must be augmented by the ‘mobile screen’ to remain competitive.

A comeback in the making?
Based on pre-release information, Windows Phone 7 has all the necessary ingredients to become a powerful contender in the smartphone race.
First, there is clear differentiation thanks to fresh user interface and deep integration with Microsoft on-line services and products.

The UI and the interaction model are based on well-received Zune HD Player (funnily enough there is Zune Home app on Android Market, which replicates Zune HD look & feel on Android). Finally we see refreshing departure from icon-based navigation that became de-facto standard following iPhone introduction.

The user experience is closely integrated with Windows Live, Xbox Live, Bing Maps cloud services, Zune content platform, together with pervasive Office and Exchange. Microsoft has impressive number of users registered for its on-line services – 360M Hotmail accounts, 299M Messenger accounts, 23M Xbox Live subscriptions. This will certainly help driving Windows Phone adoption.

Second, when it comes to developers Microsoft is playing on its home ground leveraging established developer ecosystem and excellent development tools. Windows Phone 7 application development is based on Silverlight UI framework and XNA game runtime. Both are well-known to large number of PC and Xbox developers eager to apply their skills in mobile environment. Consider that Windows Phone 7 Beta SDK was downloaded 200,000 time in just 2 days since its general availability. Instead of wresting developers from iOS and Android platforms,  Microsoft can tap into large pool of loyal .NET and XNA programmers, converting them into an army of mobile developers.

Developer monetization is high on Microsoft’s agenda. Windows Phone Marketplace avoids the pitfalls of the competing platforms promising predictable and transparent approval process, lack of handset fragmentation, localization, try-before-buy model, app beta testing program, and tools for active promotion of the content in the Windows Marketplace.

Third, operator billing supported by Windows Phone Marketplace will be instrumental in winning operator subsidy and marketing budgets from iPhone and Android. These budgets are critically important for the platform success. Windows Marketplace already supports operator billing for older Windows Mobile platform. This experience will help Microsoft quickly introduce operator billing for growing number of operators. Sure enough, Microsoft can be flexible on splitting 30% of app sales revenue share with operators. Not surprisingly, all five major UK operators will be selling Windows Phone 7 handsets at launch.

All these combined with familiar consumer brand and a huge $500M marketing budget (more than 5 times bigger than any previous Windows Mobile launch) makes Windows Phone 7 a convincing entry to the smartphone game. This entry is already supported by a lineup of handset makers from experienced mobile players like Samsung, HTC and LG, to PC specialists like Dell and Asus.

So what’s the catch? Windows Phone success will ultimately depend on Microsoft’s ability to execute on the promise. Microsoft will need to deliver solid product experience, prove monetization potential for operators and developers, and keep the momentum by following up with subsequent platform versions. Without these, Windows Phone 7 will only remain a great promise.

What will Windows Phone’s success mean for the mobile industry?
The mobile industry has radically changed in the recent years. In an industry where the only constant is change, what impact will the success of Windows Phone have on the mobile industry?

The hardware specs of leaked Windows Phone handsets from HTC, Samsung, LG, Dell, Asus and Toshiba reveal striking similarity between the models. All are based on QUALCOMM’s Snapdragon chipset. The variations are limited to industrial design, amount of memory, optional physical keyboard and FM radio. Are we entering PC-like era in smartphones, where industry will converge on a small number of hardware configurations? Will we see emergence of ‘Wincomm’ alliance in mobile similar to ‘Wintel’ in PC? Value-chain evolution theory says this is not question of ‘if’, but the question of ‘when’. Windows Phone 7 looks like a natural catalyst for this to happen much sooner than some companies would hope for.

This will be great news for low-cost ‘assemblers’ like Dell, Acer and Asus, who lack significant software capabilities and experience. With Windows Phone software and QUALCOMM’s support these companies can readily replicate their PC business models, brands and experience, while thriving on single digit operating margins. To do so, they only need to focus on building hardware platforms for Microsoft software, while leveraging pre-integration with QUALCOMM chips for fast time to market. Microsoft definitely learned from mistakes made with Windows Mobile. This time the approach is closer to the PC model: ODMs are given exact specification of how the hardware platform should look like. From the screen size, to amount of memory, to number of navigation buttons on the device.

For low-cost ‘assemblers’ Android proved to be too difficult to productize. Dell Aero is one example, which is four Android versions behind now. Using Windows Phone software will significantly lower barrier to entry on the software side. Paying software licensing fees to Microsoft may prove a better way forward than a crappy product that doesn’t sell.

On the other side, these will be very bad news for high-margin branded OEMs like Motorola and Sony Ericsson. Such OEMs will have little chance to protect their business from increasing competition from low-margin assemblers. Adopting Windows Phone won’t help: Microsoft is determined to maintain tight control over the platform and limit OEM differentiation opportunities.

Increasing smartphone commoditization accelerated by the entry of low-cost ‘assemblers’ will certainly put strain on today’s leaders, Apple and Google. Apple seems to be well-positioned to keep its positions in the mid-term. But will we see its vertical integration becoming a liability in the next phases of value-chain evolution? The phases where flexibility and customization of commodity products will favour modular solutions.

For Google things can quickly get challenging. Android is yet to grow into a recognizable consumer brand being concealed by operator and handset maker brands (e.g. Droid and Sense). What if Android will get squeezed between style-conscious consumers opting for iPhone and masses of mainstream users opting for the comfort of familiar Windows brand? Will we see Android slowing down and struggle outside the group of tech-savvy users?

What about mobile operators? Windows Phone success will increase the dominance of non-mobile players in the mobile ecosystem and their control over user experience. The distance between user and operator will inevitably increase, and we will see more and more mobile operators settling on the role of a ‘pipe’ satisfied by getting a share of app and content sale revenues.

Tipping the scales of the smarpthone market
If successful, Windows Phone 7 will catalyze further shifts in the mobile industry bringing PC-style commoditization and increasing distance between operators and their subscribers.

Microsoft and low-cost, PC style ‘assemblers’ will be the main winners driving smartphone price declines. High-margin branded OEMs will have no choice but to look for new ways to create value to operators. This is to snatch critically important subsidy and marketing budgets from Apple and RIM.

Apple and Google won’t wait long to make Microsoft’s life harder. Google can be exposed on multiple fronts and finally will have to pay closer attention to operator and developer interests.

Things will continue to be interesting in mobile in the foreseeable future.

How do you think things will shape up with Windows Phone? Who will be a winner and who will be a loser?

– Michael

[Michael Vakulenko is a Research Partner at VisionMobile. He has been working in the mobile industry for over 16 years starting his career in wireless in Qualcomm. Michael has experience across many aspects of mobile technologies including handset software, mobile services, network infrastructure and wireless system engineering. He can be reached at michael [/at/] visionmobile.com]

Breaking the 500 million barrier of mobile software

[Which are the most ubiquitous mobile software products out there? Marketing Manager Matos Kapetanakis opens up our 5th edition of the 100 Million Club, the watchlist of embedded software products and talks about the really big numbers of mobile software.]

Welcome to the H2 2009 edition of the 100 Million Club, the semi-annual watchlist of mobile software products that have been embedded in more than 100 million mobile devices since their release. Despite the apparent opportunity in the one-billion-a-year handset market, very few software companies have managed to overcome the commercial and technical challenges inherent in the mobile industry.

Key highlights in this H2 2009 edition:

– “The cumulative number of shipments of all the 100 Million Club software products up to the end of 2009 is 24.6 billion – an 11% increase since the previous half”

– “The estimated 250 million cumulative shipments for Apple’s WebKit show that it is fast becoming a de facto browser platform.”

– “BlackBerry is the next smartphone platform, after Symbian, that will break through the 100 million shipments barrier.”

What’s new in H2 2009?
So, what major changes have we seen since our previous update?

First off we’re happy to welcome three new entrants to the Club: ARM, Mimer and Numonyx have joined, adding three new middleware products to our watchlist. Mimer has just broken the 100 million barrier with its SQL database engine, while ARM brings us Mali-JSR184, a 3D graphics engine for wireless devices. The Flash Data Integrator by Numonyx is already ahead of the game, having been shipped in more than 900 million devices.

We have also had to remove three software products that have long been part of the Club. For different reasons, Mobile BAE by Beatnik and Picsel’s File Viewer are no longer part of the 100 Million Club, while Nokia’s Series 60 OS has been incorporated in the Symbian OS.

(click to download)

Growth in the 100 Million Club
The H2 2009 edition of the 100 Million Club is comprised of 30 software products by 26 companies. The total number of shipments of all 30 products, up to the end of 2009, comes to 24.6 billion – an 11% increase since the previous half.

In the previous edition, the Club featured 15 software products that exceeded 500 million shipments, 6 of which had also broken through the 1 billion barrier. The H2 2009 edition features 17 products with more than 500 million sales, 7 of which have surpassed 1 billion shipments. In other words, for the first time the majority of the products featured in the 100 Million Club have over 500 million shipments.

In the second half of 2009, CAPS by Scalado and OKL4 by Open Kernel Labs managed to break through the 500 million barrier, while Myriad Group’s messaging client and Nokia’s Series 40 OS now have more than 1 billion shipments each.

Category leaders: apps, browsers, middleware and operating systems
Quickoffice wins by default in the embedded applications category, since it’s the only embedded application featured in the 100 Million Club.

Adobe is still number one in the application environments category, with Flash/Flash Lite having been embedded in more than 1.3 billion devices up to the end of 2009. The growth of Flash Lite has decelerated significantly from 43% (1H09) to 15% (2H09) as share of devices sold with the software embedded; however the pace should be picking up pace again with Flash shipments later in 2010.

Myriad Group, whose browser has almost twice as many shipments as the other category products combined, dominates the browser market.

In the middleware category things are not that clear, due to the diversity of products. In absolute numbers, the messaging client by Myriad Group has the most shipments (1.2B) and vRapid Mobile by Red Bend shows the highest of growth over the second half of 2009. UI software is also highly penetrated within mobile devices, led by graphics engines by Ikivo, Scalado and The Astonishing Tribe which are at or around the 500 million mark.

The operating system market features 6 products that have been embedded in more than 1 billion devices. It’s worth noting that mass-appeal operating systems like OSE, Nucleus and recently Series 40 have cumulative shipments numbering in the billions, while BREW has just broken past the 500 million mark. In contrast, most major smartphone platforms – Android, OSX, Windows Mobile, BlackBerry – apart from Symbian have yet to reach 100 million shipments.

Finally, the input engines category features two products, both by Nuance inherited from the past acquisitions of Tegic and Zi Corp. As is evident in the chart, T9/XT9 is by far the most prominent, having been embedded in a staggering 4.8 billion mobile devices up to the end of the second half of 2009.

100 Million Club facts and trends

Two companies account for 38% of shipments: Only two companies have multiple software products included in the 100 Million Club, each company featuring three products. The cumulative number of shipments of these two companies is 9.5 billion, representing 38% of all 100 Million Club products’ shipments up to the end of H2 2009. The software products are Myriad Group’s Browser, messaging client and Jbed and Nuance’s T9/XT9, eZiText and VSuite.

WebKit on the rise: We estimate that up to the end of 2009 WebKit, the open source browser engine, has been embedded in more than 250 million devices. WebKit owes most of its market penetration to Nokia (Symbian shipments with the Series 40 contribution picking up), while its recent adoption by RIM can only accelerate its market penetration.

Top revenue models: In this edition, we asked the 100 Million Club members to provide us with the top two revenue models for their products. The responses revealed that the most common revenue models for embedded software are per-unit royalties,followed by NRE (non-recurring engineering fees) for product integration or customisation. Despite the tight profit margins, handset OEMs and network operators are still paying for software on a per-unit basis, with the ‘paradigm shift’ to per-active user revenue models taking longer than most would have expected.

What’s in stock for the 100 Million Club
Our watchlist continues to grow, as more products make it past 100 million shipments. Blackberry should be entering the Club in the next edition (H1 2010), with OSX, Windows Mobile and the much younger Android lagging a further 6-18 months behind.

The bigger picture of mobile software is very different than the industry hype would have us think.

– Matos

Wholesale Applications Community: The Operator Love Affair with Developers

[The Wholesale Application Community has made big headlines in the last two months. But beyond the affectionate operator feelings and investments this signals towards developers, will the initiative succeed where JIL has failed? Guest author Simone Cicero digs behind the hype to see what lies behind the WAC buzz]

Despite its impressive line up of network operators, the Wholesale Applications Community initiative has been greeted with skepticism across both industry-insider and developer audiences.

Founded in February 2010, WAC is an initiative backed by 24 operators with the incredibly audacious vision of unifying apps distribution, packaging and execution. WAC’s mission is about realising “write once deploy everywhere” for mobile applications and enabling developers to “create applications for the long tail” (a concept that dates back to 2004)

So how does WAC plan to achieve such ambitions? The operator-backed initiative has indicated it will provide:
– a reference implementation for a web runtime environment as well as Network Operator APIs
– tools for development including an SDK and an emulator
– billing enablers and specifications for WAC compliant application stores (as mentioned in the FAQ)

WAC = BONDI + JIL
Like a phoenix, WAC seems to be born out of the BONDI and JIL initiatives and has committed to evolving BONDI and JIL into a common specification within the next 12 months.

OMTP’s BONDI has been the most-successful operator-backed initiative aimed at developers. BONDI is in essence a specification of Device APIs for securely accessing device functionality (incl. status, sensors, telephony and SIM APIs) and user data (incl. phonebook, location and gallery). BONDI APIs are accessible from widget runtimes and should (theoretically) also become available via browsers.

The BONDI project has attracted the interest of a few thousand developers and provided an official Windows Mobile reference implementation (with more unofficial implementation projects in the pipeline). We should also see deployment on commercial handsets by the end of 2010  with the first BONDI-compliant widget SDK already appearing from LG.

The JIL (Joint Innovation Labs) project was created by four mega network operators (Vodafone, Softbank, China Mobile and Verizon) to hook operators within the App Store game, and control the app submission, billing and distribution process. JIL  is a realisation that the standards route (read: OMA or GSMA) is a turtle-speed approach in a rabbit-speed market. As such, JIL embraced and extended the existing W3C widget specs, adding its own APIs and security model.  However, despite the operator investments and ambitions, to date JIL has not delivered much beyond a widget spec and SDK.

A third operator initiative that is part of the WAC scope is Network APIs, i.e. APIs allowing resources from the network (e.g. location, presence, user info) to be exposed programmatically to developers: in this area WAC will build on early achievements of GSMA OneAPI Initiative.

In essence WAC is an attempt to wrap BONDI, JIL and Network API specs and tools into a single operator-led initiative.

In parallel to the technical objectives, WAC aims to define a simplified distribution and deployment model for mobile apps. Rather than build its own Market WAC will probably seek to certify “associated WAC application stores” as well with third party markets offering WAC compliant applications.

WAC challenges ahead
To pragmatically assess WAC’s potential, we need to consider how it differs to what’s come before, the environment in which it plays in, and its stated ambitions and roadmap.

Some industry observers compare the Wholesale Applications Community with the JCP (Java Community process) and Java ME in terms of the challenges of standardising app development and distribution. Despite being still the most used and, for sure, the runtime with the largest installed base, the story of Java ME as a platform has been undoubtedly fraught with strategic and execution flaws.

Sun failed to see the opportunity of an app store; Java store is both a half-baked effort and a latecomer to the App Store market considering that Java ME was launched in 2001. Neither did Sun succeed at its main goal – promulgating a consistent runtime (open source or closed source) within the 1B-a-year device market by choosing to over-protect its traditional revenue streams coming from licensing and TCK testing. Sun also chose to license its reference implementation rather than impose a Sun-brewed, mobile Java runtime with consistency and compatibility as the first priority.

In parallel, the design of JCP proved too slow and bureaucratic. The JCP members spent too long entangled in preferred ballots, drafts, reviews, public vs private releases, resulting in specs that were just too late to market. The best testament to that was probably the MIDP3 saga, which arrived at the era of Android and iPhone development that doesn’t need Java ME any more. With 24 operator members behind the WAC initiative, it’s going to prove hard to reach consensus amongst competitors.

It’s also worth realizing that whereas Java ME has been loosely governed by Sun Microsystems (an entity external to the mobile value chain) the WAC consortium is led by operators who play a critical role in the mobile value chain and can, at least in the developed mobile markets, drive the product customization phase – and as such WAC is better positioned at – for example – mandating WAC runtime specs to be preloaded on an Android handset. At the same time, operator specs are seen by handset OEMs as long wishlists with the device compliance index being on continual decline for European operators.

The timing of WAC is another challenge. Given that it will take (at least) 12 months to merge BONDI and JIL, the first WAC-compliant device won’t hit the market before mid-2011. Where will iPhone, Android, Windows Mobile and the other competing platforms be in the next 12 months? What features should a developer expect from a runtime hitting the market in 18 months’ time? Not to mention that developer choices are already being set in stone as the major platforms lock-in developer mindsets (just look at how fast iPhone/iPad apps are ramping up now that that OSX is the number one choice for many mobile developers).

Is there a future for WAC?
The apps market is showing worrying signs for operators: mobile app stores are depriving operators from new revenue streams and pushing them further away from the customer front – only leaving operators with the cost burden of supporting customers in the post-sales phase and building out bigger, fatter bit pipes to carry the app-induced traffic.

Once upon a time, operators were responsible for most technology innovation like voicemail, the 2-line-in-1-SIM, premium SMS and Multimedia MMS and high speed networks.

Operators are still in the driver seat with 70% of the mobile trillion-pie flowing through the networks. In Europe, North America and the Far East, network operators still play the dominant role whilst in control of product ranging, subsidy, distribution and retailing decisions.

Yet during the last few years, the ownership of innovation in mobile services and handset products is migrating from the operator hands to Internet/PC players, with operators left to play the role of bureaucrats, support providers and handset subsidization agents.  The latest operator innovation like RCS, JIL and network-exposed location seems only to reinvent the wheel. All this, while players from the PC/internet industry like Apple exploit the rivalry between operators by soliciting major subsidies.

At the end of the day, the Wholesale Applications Community initiative is a knee-jerk reaction on the part of operators – an effort towards embracing developers and seizing the community of value-adding actors away from the likes of Nokia, Apple and Google. Now the question is how well and how quickly can WAC execute on the ambitious declaration of intents that WAC is today.

WAC should exploit its stronghold to add value where gaps exist at present, rather than reinventing the wheel. As such, instead of specifying runtimes or gating (and chocking!) the application submission process, WAC should focus on mandating an affordable and consistent revenue sharing policy across operators. By facilitating micro-payments WAC could enable new service charging models such as pay per (single) use, giving developers important alternatives to the free, ad-supported or paid app options.

Another key focus for WAC should be to empower developers with unique network-based APIs like user demographics and targeting and provide decent usage analytics (as mentioned by O2’s James Parton) and a recommendation engine to allow developers to better target the user audience and their application features based on the vast amount of demographics and usage information the operators/carriers hold in their network.

Finally, rather than specifying a web runtime spec based on a lowest-common-denominator approach, WAC should embrace existing runtime specs as much as possible, and consider embracing HTML5 which seems to be unanimously adopted by the major players of the industry, including Nokia, Apple and Google.

[Update: On May 5, WAC held an analyst webinar outlining a few important points. Specifically, Tim Raby, CEO of OMTP is acting as the interim CEO of WAC, while a formal Board for the non-profit organisation will be elected in July 2010. Secondly, WAC indicated it’s planning to standardise the commercial model (perhaps extending to the revenue share formula) for developers and ‘compliant’ app store owners. Developer documentation, developer events and further details on the mission and deliverables of WAC are planned for the second half of 2010.]

What are your thoughts on WAC and the role of operators in mobile apps?

– Simone

[Simone is an mobile strategist, innovation specialist, technology addict and open source enthusiast, having followed the disruptive changes of the mobile industry over the last few years. Simone has served at Three’s Global Device and Application group and at as a consultant at Altran. You can also follow Simone on his personal blog at meedabyte.wordpress.com]

Why handset OEMs shouldn't mess with UX and other lessons from the automotive industry

[Why are so many phone manufacturers trying to develop their own branded experience? Guest author Thucydides Sigs argues that there should be a limit to UX innovation and looks at what the phone industry can learn from how car manufacturers differentiate]

In Mobile World Congress, during a special panel on “New Devices” Motorola’s VP of software, Christy Wyatt, made an interesting statement: “I don’t want the same phone as my teenage daughter“. This was followed by Ari Jaaksi, Nokia VP of Maemo – nodding his head in confirmation.

Hmm. Last I checked, most soccer moms in the US either use an iPhone or want to get one. Most of their teenage daughters either have one or beg for one. And a surprising number of dads do as well. So why is it that Apple is doing quite well without customizing their iPhone, while Motorola and Nokia make a “Signature experience” such a core components of their strategy?

Before we start, half of the challenge is due to terminology, so lets setup some definitions. For years, OEMs have been trying to create a unique “Branded Experience” that spans multiple dimensions: how the device feels, which functions and services are bundled, how polished the graphics look. Part of this “Branded Experience” is also how consumers launch or switch between tasks, i.e. the “User Interaction model” which is largely dictated by the underlying “Software Platform”.

Most of the major consumer electronics brands have made significant efforts to establish their own “branded user experience”. Lenovo just showed their new U1 Tablet with their own OS and UX during CES, and Dell have been playing with “Dell Experience” on their Linux devices as well.

Nokia, which could have been shipping millions of Android phones today, felt compelled to do their own thing and have been spending hundreds of millions on building their own software and services platform – included the user interaction model, consumer services and branded user experience; making an almost life or death bet that they can become a ‘real’ software company.

The Phone Industry vs the Car Industry
So why are so many device vendors chasing this illusive goal? What are they trying to gain? What kind of user experience customization that makes sense for an OEM? And what doesn’t?

To crack this challenge, lets use the car industry as an analogy. Car vendors compete on industrial design, engine and performance, cost, colors, finish, entertainment, comfort and many other factors. But they don’t try to move the gas pedal to the other side just to have their own “Driving experience. Ford or BMW don’t say “We need to create our own driving experiences so we will use a joystick in the center panel and throttle on the door.”

Why is it that the Car industry competes on “overall user experience” but mostly refrain from touching the “User Interaction” model ?

Design constraints
Any interaction design is driven by three constraints: (i) The human body physical constraints, (ii) the task at hand constraints and (iii) the established paradigm constraints

First: the human body constraints. How many legs we have effects how many pedals we can use simultaneously. How we sit effects what we can do with our hands vs. legs. Same applies to the phone; the size of our palm, the number of fingers. These physical constraints limit the possible variations of both physical design and interaction design. Sure, you can come up with five pedals but you can’t reach them all at the same time. Or in the phone case, you can create a design with twenty main choices – but you don’t have enough fingers. And then there are the mental constraints of the human mind; how many choices we can effectively deal with at the same time, how we scan from right-to left and top to bottom, etc.

Second: the task at hand constraints. You need to drive the car: control speed and direction simultaneously so you need to access both the steering wheel and pedals at the same time. Same with phones; when phones were used mostly for voice calls, you needed to easily access the 0-9 digits with your right thumb and all phones ended up with the 3×5 key matrix. Nobody thought to customize the experience by providing 0-9 keys in a single row.  Well – Nokia did decide to try a circular keyboard with the 3650 – and it didn’t go that well.

Third: the established paradigm constraints: once a working interaction model is accepted, it reinforces itself as more and more consumers use it. It does not – and often is not – the best possible interaction model. It just needs to be good enough so consumers will keep on using it. And once they do – and more and more users do – it becomes very hard for others to transition to a different paradigm. So even if you have a better user interaction model, it is often impossible to change the dominant existing interaction model (the Qwerty keyboard is a great example here: suboptimal arrangement, but impossible to change the established paradigm). Small tweaks here and there (a la Manual vs. Automatic cars, Mac vs Windows, or Android vs iPhone) are possible – but there is only so much that makes sense to customize.

Android didn’t really copy the iPhone – they are similar because of the human and paradigm constraints involved in small touch devices. Once you design an interface for a four inch touch device, there are not too many different choices. The designs just converge on similar concepts. Attempts to customize the UX beyond that are futile – they result either inferior user experience (because the human or service constraints are ignored) or just don’t get adopted for lack of critical mass.

What actually matters
What actually matters for a “branded experience” and where differentiation makes sense – is the services & features. Audi can compete by adopting their automobile industrial design language to the latest fashion, bundling “Services” like  infotainment system or features like ABS. In a similar way, phone or computer vendors can differentiate on slicker industrial design, bundled music or navigation services (Nokia attempts to do with Ovi) or features like inductive charging (Palm).

Instead of OEMs focusing on strengthening their brand by building their own interaction model, they should focus on the consumers (what a novel concept) and what consumers want: which means empowering the consumers to personalize the device to their own needs. This is the powerful role the application store fills and why Apple can ship the same iPhone to the teenage girl, the soccer mom and the business daddy.  Not only is focusing on the services and app store good for consumers, it is also good for the OEMs: making consumers happy is the best thing you can do to strengthen your brand. And – there is a lot to gain by selling real-estate on their app stores: turning them into “Malls” and renting out sections. Turning the OEM into a ‘landlord’ who can ‘auction’ this ‘real-estate’ statically or dynamically to all application developers. VisionMobile have been covering this trend in their annual Mobile Megatrends report.

So why are so many OEMs going down the slippery slope of “Branded User Experience” and end up with their own flawed user interaction model and a large software team needed to keep the effort alive?

The faulty OEM logic
First, because they are looking at Apple and getting envious. We industry insiders hate to admit it, but there is a strong Apple envy syndrome in the industry. The OEM false logic is something like this “Apple has high margins, branded user experience and owns the user interaction paradigm. So if we develop our own user interaction and create a branded user experience, we will have high margins”

WRONG: Just pure faulty logic. The fact that lions have a mane does not mean that if you bought a mane wig you will become a lion.  There is much more to Apple’s high margins than owning the user interaction model.

Second, when new usage paradigms emerge, and there is no dominant user interaction model, there are opportunities to innovate and be the first to build the new paradigm.  When the world was dominated by closed source software (the Microsoft era) this offered significant revenue upside.

But we live in a different era – “Open Source” has changed the dynamics of the game. All it takes is that at least one of the software solutions be open sourced, and the upside from controlling the basic interaction model and underlying software platform is minimal or none. The company who leads this effort gets industry recognition, establishes itself as a thought leader and strengthens its brand – but it is no longer a sustainable source of revenues or competitive advantage.  To the contrary; quite possibly, they can turn into the “mule” which guides the rest of the industry and can be embraced and extended.

Motorola’s Sanjay Jha realized this when he made Motorola embrace (and extend) Android. Nokia on the other hand could have been selling millions of fantastic Android phones with Ovi services if it wasn’t for their Finnish pride.

When Microsoft had to fight Netscape in the mid nineties, it has done so by an “Embrace and Extend” strategy. It would be beneficial to many OEMs to remember this and put an end to their mediocre attempts to invent new interaction models. Instead focus on what matters to consumers; great app store, superior services and overall compelling device experience.

– Thucycides Sigs

[Thucydides Sigs – a pseudonym – has many years of experience juggling computing constraints, mobile software and consumers needs. With that said, imagine listening to a violin sonata not know who the artist is or who composed it. You end up having to listen more carefully in order to make a judgment. He can be reached at thucydides /dot/ sigs [at] gmail [dot] com]