Tag: mobile phone

Lead, innovate or assemble: three choices for handset OEMs as mobile starts to look like the PC industry

[Android has triggered more changes to the mobile industry than anyone had imagined. Research Director, Andreas Constantinou looks at the profound changes taking place and how the handset OEM market is shaping up].

Mobile industry connoisseurs used to smirk at the notion that the mobile industry was any similar to the PC world. How can the two industries be any similar when the software, services, channels to market, operator control, regional economics, and range of experiences were all so different.

This is so last decade. The march of software has irreversibly changed the economics of value in the mobile industry. Google’s Android and Apple’s iPhone have caused disruptions that threw all analyst predictions off the chart. Industry pundits used to project a linear growth for ‘open’ operating systems (Symbian, Windows Mobile et al) that saw them take over an increasingly large share of mobile handsets sold.

But the evolution of software has been anything but linear in the last two years; Google’s Android, an operating system that was greeted with skepticism in 2008 become a launchpad for just about everyone working within the mobile industry.

Network operators/carriers saw Android as an opportunity to reduce their dependency on two players, Apple and RIM whose stellar sales were depriving operators from any negotiating power. Operators have always tried to divide and conquer amongst their suppliers, for example working in 2002 with HTC and Windows Mobile to reduce their dependency on Nokia, or in 2007 using a three-pronged OS strategy (WinMo, Symbian, Linux) to reduce their dependency on Microsoft. Android allows operators to deliver iPhone or BlackBerry –like devices at much higher levels of customisation and at much lower subsidies.

Handset OEMs saw in Android the opportunity to develop iPhone clones at less-than-iPhone prices for operator customers. In 2008-9 most Android projects were kicked off by operators, while in 2010 OEMs are investing in Android big-time. LG and Samsung, who used legacy real-time OSes for 90% of their high-end phones in 2009 have now 10s of Android projects in the pipeline for 2010-11.

Software developers saw the opportunity to enter the mobile ecosystem of downloadable apps – in the role model set by Apple’s App Store – in the most approachable and developer-friendly platform ever created for mobile.

But the biggest changes are yet to appear.

Android has triggered a mass arrival of 10s of ODMs from China and Taiwan eager to create me-too touch-screen handsets. Qualcomm and Mediatek, the chipset vendors powering the majority of feature phones today have launched or preparing to introduce out-of-the-box Android designs that reduce the time to market for Android handsets to 6-9 months (or circa 3 months once Mediatek’s design hits the market). Platform development for Android has dropped to the $300 per engineer-day mark, while big outsourced development centers are being set up in Asia dedicated to Android handset development. All these developments will allow Android touch-screen handsets to hit the €150 mark retail price.

The new world order: Lead, innovate or assemble.
The developments triggered by Android have made it possible to replicate the economics of the PC industry, leaving mobile industry insiders dumbfounded. Last decade’s rules and role models no longer apply. Instead there are three role models emerging for handset manufacturers in the world of commoditised software: leaders, innovators and assemblers.

Assemblers. Dozens of contract manufacturers can now take Android and deliver fully-featured, high-end handsets at made-to-measure requirements, but at price points and wow-factors only enjoyed previously by top-5 manufacturers. Think iPhone me-too experience at €150 retail price.

Innovators. The price pressure from assemblers will force the top-5 OEMs to innovate-or-die. With the innovation moving out of the pure user interface domain, widgets or touch innovations or no longer the ‘wow’ factor. To claim higher prices at €300 (and a respectable margin above the BOM) the top-10 OEMs will have to innovate.

Handset innovation lies in three elements: firstly, novel industrial design (think Nokia’s ‘listick’ or sports handsets of 2006) that will break the boring mould of today’s form factors and plastics. Secondly, novel use of sensors that will enable user interactions only imagined so far. Thirdly, use of shelf space within the commonly used applications (idle screen, menus, browser chrome, app store) to promote and monetise from third party content. Yet innovation will have to be balanced with application compatibility. Already we ‘ve seen how Android implementations have created fragmentation headaches for developers.

Leaders. To reach the top-tier of handset pricing (circa €500) handset manufacturers have to deliver new product experiences. This is the privilege enjoyed by Apple, RIM (and Amazon Kindle to an extent) who have integrated hardware, software and services under the same roof. You can buy Mediatek-powered iPhone clones in China (Shanzai in local speak) for $75, but the experience is laughable to an iPhone user. Only by controlling and integrating hardware, software and services under the same roof can a manufacturer deliver new product experiences that can command top-tier retail prices.

Mass producers. Naturally, emerging markets where retail prices are at circa €50 make up the majority of the mobile handset market – at least revenue wise. And while assemblers can produce low-cost devices, they won’t have the economies of scale to make a profit at €50 retail price. Mass producers, i.e. companies with the supply chain sophistication and negotiating power of Nokia and Mediatek can do that.

The picture that emerges for the mobile handset market in 2015 (the predictable future) is surprising in many ways. We estimate that the top 5% of the market will command as much revenue as the bottom 50%, but with a higher profit – for example Apple and RIM today bring in around 55% of the industry’s profits. The middle two segments (what some observers call mass-market smartphones) will generate much higher revenues.

The mobile industry is starting to look scarily close to the PC industry, both in terms of business models and profit vs revenue patterns.

What do readers think? Is the PC future for mobile inescapable?

– Andreas
you should follow me on twitter: @andreascon

The Wintel future for mobile: a wake up call for network operators

[The PC-esque commodisation of the mobile industry has been prophesied many times before, but never before has it become so lucidly clear. Research Director Andreas Constantinou uncovers the dynamics of the mobile industry that will lead to a Wintel future, and the impending disruption to the network business model]

We ‘ve all heard this before. The story of the bit-pipe future for mobile networks/carriers and the threat of Google and Facebook to the mobile industry status quo. But this time the facts are clear; the dice has been cast and is pointing to a Wintel future for the mobile industry. Bear with me – this is a long argument.

The virgin years of mobile
The mobile industry has rapidly evolved through two decades:
– 1990s growth: The 1990s was the decade of unrestrained growth, building up huge empires on thin air (a.k.a. radio spectrum). Operators invested on building networks with worldwide reach, on increasing spectral efficiency (more bits per pipe, setting 2G to 3.5G standards) and snapping up new subscribers
– 2000s competition: The 2000s was the decade of competition, reality check and disillusionment. Operators invested in competing with more complex tarriffs, deeper device subsidies, unique devices (custom or exclusives) and bundling fancy services on the device (from mobile TV to myFaves and social networking).

Next up: survival
The 2010s decade is about survival. It’s no secret that ARPU (average revenue per user) has been dropping for the last few years, and the much-promised data services have failed to deliver. Plus networks are threatened by the establishment of over-the-top services like OEM-own services (Apple App Store, Nokia Ovi, Sony Ericsson PlayNow, RIM Blackberry services), the entry of alternative payment providers (Apple iTunes, Paypal Mobile, Google Checkout), alternative voice providers (Skype, Google Voice) and of course the myriad of social networking services (epitomised by Facebook and Tencent).

So, how are operators differentiating today beyond tariff games?

– Investing on device subsidies: Network operators are spending big money to snap high-spending customers away from their competitors; for example investing 300-400 EUR on the top models from RIM, HTC/Google and Apple (case in point: Orange France). The subsidies are recouped back from such customers in around 9 months, but without factoring in the disproportionately high cost to the network, where the cost increases linearly per-MB consumed. All this, for a short-lived advantage, no stickiness to the network. Worse than all – operators are pouring marketing and subsidy investments into the same companies – including Apple, Google and RIM – that aim to commoditise their network.

– Selling broadband Internet dongles and mobile WiFi (MiFi) hotspot devices at flat-rate bundles that aim to drive revenues, but at the same time lead to surging network OPEX costs. To appreciate this irony, consider that operator marketing budgets are never linked to the network infrastructure OPEX budgets; and so marketing groups may spend away into fancy deals, while resulting in alarmingly high network costs, especially for network maintenance and upgrades. Operators are investing into the bit-pipe business without knowing how to monetise it.

– Customising devices (a favourite pastime of operators) like Vodafone 360 and Orange Signature that aim to deliver own services on the mobile, while limiting the experience to high-end devices. Although 360 has some strategic attributes (locking customer contacts into the network), its execution has been inefficient to say the least with a team of 250 people at Vodafone needed to launch the service (which could have been accomplished with perhaps 50 people in a software startup environment). Operators are pushing Internet brands to the forefront of the customer experience (see Skype promos from Three and Verizon) for a short-lived advantage of customer attraction.

To sum this all up; operators are investing in their demise, pouring money into the same Internet companies that aim to commoditise them into bit-pipes. Worst of all is they ‘re drawn into a inward spiral, a black hole that is near impossible to escape from; as an operator, if you don’t have the latest devices and cheapest tariffs, your competitors will.

The loss of control points
The situation is much more dire, as the current balance of power in the mobile industry is about to be shaken up. Operators control around 70% of the mobile industry pie of $1 trillion, thanks to three very important control points:

– device subsidies: operators (with few regional exceptions) pour large marketing budgets into promotions and device subsidies, thereby in effect dictating terms to their handset suppliers. Only Apple has been able to challenge this status quo to date, but on a tiny 2% of the mobile market. Yet, a new disruption is appearing in the form of Android that might extend to well beyond a tiny market share, to significantly drop retail price points and render subsidies meaningless (more on this Wintel phenomenon later).

– mobile termination: by design, mobile operators are the exclusive gateway to reaching any specific subscriber. That’s how operators have been able to charge ridiculously high voice and roaming charges (incl. receiver pays model). However, mobile termination is slowly coming under threat as more and more services are being delivered over the network like social networking and VoIP, while flat-rate tariffs for mobile Internet is becoming the norm. Consider that Google might at some point offer free voice calls amongst Android device users. It’s a question of when, not if. But abstracting the service from the underlying network carrier, the service providers assume the mobile termination gateway role, by acting as the service transport across networks and devices.

– payment broker: The premium SMS boom is the best example of how operators have leveraged their billing relationship outside their network, charging often 50-60% commission for reverse billing, i.e. the ability to charge users for a ringtone, game or televoting from their mobile phone bill. Yet, Internet players are now carving up their niche into the operator-own game in the form of Apple App Store (no doubt to be transformed into a payment gateway for third parties) followed by Paypal Mobile and Google Checkout.

Wintel and the Google game
A very important change in industry dynamics is underway. Google’s Android has morphed from a feared entrant to a loved ally, with all handset manufacturers (except for Nokia) investing in Android-powered handsets thanks to Android’s low cost of creating a differentiated handset. In parallel, chipset vendors led by Qualcomm and Mediatek are rolling out out-of-the-box solutions that pre-integrate hardware + a software platform + applications (e.g. Android Market), that can be easily differentiated in both plastics and UI.

These out-of-the-box solutions will rapidly decrease in price led by the impending price competition amongst chipset vendors (led by Mediatek exports) and the advancement in silicon manufacturing (with sub-40nm chips squeezing smartphone capabilities in feature-phone price points). Combined with Android (low cost of UI differentiation + bundled apps market so incremental revenue) this should lead to a diversity of Android-powered phone at $100 retail price points in the 3-year horizon. This is a game where Asian mobile and consumer electronics manufacturers will gladly play, by creating low-cost, on-demand phone + service solutions for media brands and operators.

This is the Wintel game of the PC industry, making its appearance in the mobile industry; only the title of ‘Intel-inside’ is still up for grabs. What’s more, with smartphone prices at $100 dollars, the operator subsidies are going to become meaningless, in effect creating a handicap for network operators and a sudden loss of negotiating power. The tables are slowly turning.

What about Symbian and Windows Mobile, you might ask? We believe Symbian will become a Nokia-only operating system (more this on a future post), while Windows Mobile is driven by short-lived motivations today (a fresh UI and an operator interest in it), which can easily be delivered by Android, once UI design and technology firms release customisable layers on top of Android (something that Ocean Observations is hinting to be working on with Brandroid = Brand + Android).

What about Apple, Nokia and RIM; the few tier-0 handset OEMs that have developed vertical propositions (from hardware to services) will still be able to command premium prices; making this so very similar to the PC industry where you can buy an Apple computer at premium price or get the same functionality for half the price in a PC clone.

The shock to the operators will be like the shock that the music industry got when they woke up one day and realised that the Internet has disintermediated their brick & mortar business model.

All is not lost
Operators can still get their act together. It’s rare that operators have invested in long-term strategy – see Orange’s investment in mega-SIMs in 2007 (albeit betting at the wrong standard). And there might be the odd operator that has the conviction and foresight at the management level to achieve such long-term planning. We ‘ve long advocated that operators should platformise (read: Network-as-a-Service) while creating new control points and meaningful brand deliverables – for a brief analysis see our Mobile Megatrends 2010 deck, especially the chapter on ‘new smart pipe strategies at the intersection of brands and consumers’. Or drop us a line.

Comments welcome as always,

– Andreas

UI Technologies are trendy…but what are they really good for?

[UI development flow and actors: Graphical Designer, Interaction Designer, Software Engineer, classical technologies: GTK, Qt, next generation: Flex, Silverlight, WPF, TAT, XUL, SVG… guest blogger Thomas Menguy describes what are the main concepts behind all the UI technologies, what the new generation ones have in common, what those modern approaches are bringing to the product development flow…and what is missing for the mobile space].

A good UI is nothing without talented graphical designers and interaction designers: How the plethora of new UI technologies are helping unleashing their creativity? What are the main concepts behind those technologies?Let’s try to find out!

UI is trendy… thank you MacOS X, Vista and iPhone!

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UIQ

S60

iPhone

Put the designers in the application development driver seat!

Here is a little slide about the actors involved in UI design

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UI flow actors and their expertize

What does it mean?

Different actors, different knowledge …. So different technologies and different tools!

Those three roles can be clearly separated only if the UI technology allows it. This is clearly not the case in today mainstream UI technologies where the software engineer is in charge of implementing the UI and the service part, most of the time in C/C++ , based on specifications (word document, Photoshop images, sometime adobe flash prototypes), that are subject to interpretation.

  • The technologies used by the designers have nothing in common with the one used to do the actual UI.

  • The technologies that allow UI implementation…require an heavy engineering knowledge.

  • Big consequence: the software engineer decides at the end!

The picture is different for web technologies where it has been crucial and mandatory to keep strongly uncorrelated the service backend from its representation : Web browsers have different API and behavior, backend have to be accessed by many other way than web representation…and above all data is remote and presentation is “half local/half remote”.

Separating representation, interaction and data has been the holly grail of applications and services development for years. It has been formalized through a well known pattern (or even paradigm in that case) : MVC (Model View Controller)

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MVC pattern / source: wikipedia
From wikipedia: http://en.wikipedia.org/wiki/Model-view-controller
Model
The domain-specific representation of the information on which the application operates. Domain logic adds meaning to raw data (e.g., calculating if today is the user’s birthday, or the totals, taxes, and shipping charges for shopping cart items).
Many applications use a persistent storage mechanism (such as a database) to store data. MVC does not specifically mention the data access layer because it is understood to be underneath or encapsulated by the Model.
View
Renders the model into a form suitable for interaction, typically a user interface element. Multiple views can exist for a single model for different purposes.
Controller
Processes and responds to events, typically user actions, and may invoke changes on the model.

All the UI technologies are offering a way to handle those 3 aspects and, as a consequence, are providing a programming model defining how information and events flow is handled through the MVC.

See below a simple schema I’ve made describing a GTK application: when you look at an application screen, it is made of graphical elements like buttons, lists, images, text labels, called widgets (or controls) .

Rmk: the term “widget” is used with its literal meaning : “window-gadget”, this term is now used a lot in web 2.0 marketing terminology and by Yahoo/Google/MS to represent a “mini application” that can be put on a web page or run through an engine on a desktop PC or a mobile phone, to avoid confusion I prefer the term of “control” over widget for the UI technologies, but will continue using “widget” in the rest of the GTK example as it is the term used by GTK itself.
Widgets are organized hierarchically in a tree, meaning that a widget can contain other widgets, for example a list can contain images or text labels. In the example below the “root” widget is called a “Window”, it contains a kind of canvas which itself contains a status bar, a title bar, a list and a softbutton bar. Then the list contains items, the title bar has a Label, the softbutton bar contains some buttons and so on.

A widget is responsible for

  • Its own drawing using a low level rendering engine, called GDK in the GTK case (GDK offers API like draw_image, draw_text, etc).
  • Computing its size according to its own nature (like the size of the text that will be displayed for example) and the size of its sons.
  • Reacting to some events and emiting some specific ones: the button will emit a “press event” when it is pressed with the touchscreen or when its associated keypad key is pressed.

The widget tree will propagate system events (keypad/touchscreen, etc) and internal events (redraw, size change, etc) through the widgets. The developer will register callbacks (in fact functions, piece of code implementing a functionality) that will be called when widgets will fire events (like the “press event”) .

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GTK Widget tree structure: a phone screen example

The major GTK/gLib formalism is how those events/callback are handled: through what is called a “gloop” where all events are posted in the loop queue, dequeued one by one and “executed” in this loop, meaning their associated user callbacks will be called. This loop is running in one thread. This is what we call a programming model. In nearly all the UI technologies such a loop exists with various formalisms for the queue handling, event representation, etc.

To finish with the above schema the user callback will then access to the middleware services, the various databases and so on.

There is no clear MVC formalism in that case, the controller is mixed with the view …and even the model that is mixed … with the widgets! (so with the view)

Qt Model is really identical to the this one.

One last point very relevant for application development and design: the notion of states. Each application is in fact a state machine displaying screens linked by transitions, like in the example below where in the state 1 the user decides to write an SMS, it will open an SMS editor screen and clicking send will go to a selection of phone numbers.

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Application State Machine: write sms example

Here is an attempt to formalize a modern UI framework with Data binding (for Model abstraction).

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UI engines formalization
Control: equivalent to a widget but where the MVC model is fully split. A Data Model as to be associated alongside with a Renderer to make it usable.
Control Tree: equivalent to the widget tree: aggregation of Controls, association of the controls with a Renderer and a Data Model. Possibly specification of Event Handlers.
Data Model: Object defining (and containing when instantiated) a set of strongly defined and typed data that can be associated with a Control instance.
Data Binding: Service used to populate a Data Model.
Control Renderer: Object that is able to graphically represent a Control associated with a Data Model, using services from a Rendering Library.
Rendering Library: Set of graphical primitives, animations, etc.
Event Handling (and Event Handler): code (any language) reacting to events and modifying the current state machine, the Control Tree, etc.
Standardized Services: Interfaces defined to access middleware directly from the event handling code.
Server Abstraction: Possibility to transparently use Data Binding or any service call locally or remotely.

Ok if you are still there, and your brain is still functional, here is what’s happening today in this area….

In traditional UI frameworks like GTK, Qt, win32, etc the control tree description is done with a C/C++ description … a little niche technology have paved another way: it is called HTML: after all an HTML web page description is defining a tree of controls, W3C use a pedantic term for it : the DOM tree. JavaScript callbacks are then attached to those widget to allow user interaction. It is why all the new UI technologies are based on an XML description for this tree, it is muuuuuch more easier to use, and allow a quicker description of the controls, and above all it allows nice design tools to manipulate the UI….Apart from this XML representation the majority of the UI technologies are coming with:

  • An animation model, allowing smooth transitions, popularized by the iphone UI, but it was already there in MXML (Adobe Flex Format), XAML (MS format), SVG, TAT offer….
  • Modern rendering engines (Flash for Flex, MS has one, TAT Kastor).
  • Nice UI tools for quick implementation: Adobe Flex Builder, MS Expression line, TAT Cascades, Digital Airways Kide, Ikivo SVG…
  • In many case : a runtime, to be able to run a scripting language.

Here are some quick tables, really not complete, of some of the most relevant UI technologies in the PC and mobile phone space.

Just to explain the columns:

  • RIA : Rich Internet Application, delivered through a browser plugin
  • RDA : Rich Desktop Application: delivered through a desktop runtime
  • Runtime: ok, galvoded name here, just a name to represent the piece of technology that allows the UI to run
  • UI: Technology to describe the control tree (you know what it means now!)
  • Event Handling: the dynamic UI part, and how to code it (which languages)
  • Tools: UI tools

 

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RIA&RDA Chart

 

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Embedded rich UI technologies

So its time to answer the main point of this post: How those technologies are helping unleashing designers creativity? By defining a new development flow, allowing each actors to have a different role.

Here is an Adobe Flex “standard development flow:

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Adobe Flex&Air tools flow

In the next schema I try to depict a more complete Adobe Flex flow, adapted to the mobile world, where, for me, a central piece is missing today: it is not possible now to expand “natively” the adobe air engine, this is mandatory for mobile platform with very specific hardware, middleware, form factors.

So I take the adobe flow more as an example to demonstrate how it should work, than as the paradigm of the best UI flow because this is not the case today (same remarks for MS flow, less true for TAT for example)

 

 

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An Adobe UI design flow for embedded

This shows clearly that the “creativity” phases are clearly uncorrelated: different tools are used between the designers, they can do a lot of iterations together, without any need of the software engineer. This one can focus on implementing the services needed by the UI, optimizing its platform, adding middleware features.

  1. Interaction Designer defines the application high level views and rough flow
  2. Graphical Designer “draws those first screens”
  3. Interaction Designer import it through Thermo
  4. Graphical Designer designs all the Application graphical Assets
  5. Interaction Designer rationalizes and formalize what kind of data, events and high level services the application needs
  6. Interaction Designer & Software Engineer are working together on the above aspects HINT: A FORMALIZM IS MISSING HERE once done:
  7. Software Engineer prepares all the event, data services, test it unitarily, in brief: prepare the native platform
  8. Interaction Designer continues working on the application flows and events, trying new stuffs, experimenting with the Graphic Designer based on the formalism agreed with the Software Engineer.
  9. Once done … application is delivered to the Software Engineer that will perform target integration, optimization…and perhaps (hum certainly) some round trip with the other actors 🙂

So this is it! this flows really focus on giving power to the designers…taking it from the engineer hands. Some technologies are also missing to really offer a full Mobile Phone solution:

  • All the PC technologies are about building ONE application and not a whole system with strong interaction between application. With today technologies, the designers are missing this part….leaving it to the engineer: How to cleanly do animation between applications?
  • Strong theming and customization needed for:
    • product variant management: operator variants, product variants (with different screen sizes and button layouts for example), language variant (in many phones 60 languages has to be supported, but in separated language packs).
    • A not well known one: Factory line fast flashing of those variants. It is very long to flash the whole software of a mobile phone while on the factory line … so if you are able to have a big common part and a “customization” part as little as possible but with the full UI…you gain productivity…and big money 🙂
  • Adapted preset of widget or controls (try to do a phone with WPF or Flex…all the mandatory widgets are missing)

Anyway an UI technology is only the way to interact with a user…to offer him a service. Most of the technologies presented above are about service delivery and not only UI…My next post will be about this notion of service delivery platforms.

[Update] Replaced the term “ergonomics specialist” by “Interaction Designer”, thanks Barbara, see comments below.

Thomas Menguy