INPR needs to devote energy to this arena. I kick ass tool builder for the new universe of handhelds would be huge, not to mention the uses for ORBS.
The Future Is at Hand
Jeff Hawkins and Donna Dubinsky started a revolution with their PalmPilot. Now, a
newer generation of handheld devices is about to create the Net's second gold rush.
By Mark Frauenfelder
Thanks to the internet, the small, handheld computer – known as the personal digital
assistant, or PDA – is ready for prime time. We're at the threshold of a new era in
Internet communication, and a new crop of companies is helping to transform handheld
computers from glorified day planners into universal-access devices, able to ferret out
essential information wherever it happens to be stored – on the desktop PC, the
home-office server or the Internet. New business opportunities abound, and the people
who stumbled during the first Net gold rush are scrambling to make sure they don't miss
the second one. If you think Net biz is moving at the speed of light now, get ready for
warp factor three.
The new crop of handhelds will use wireless modems to gain instant access to the
Internet, opening a gusher of opportunities for market players. Hardware manufacturers
will build new devices, and operating-systems companies will revise their platforms to
work with these new gadgets. Application developers will create programs for people
on the go, and content providers will make their news and information handheld ready.
Wireless-telephone-service companies will sell their bandwidth to mobile ISPs. Entirely
new categories of business will spring up – content repackagers will reformat data for
handheld microbrowsers, and data synchronizers will make it easy to exchange data
between your handheld, your desktop computer and your office's central server.
Handhelds won't replace desktop computers, but they will be the medium of choice in
which business people will reschedule appointments, get directions and access inventory
and sales data. They will also be the preferred means for people to order tickets; buy
books, software and CDs; check weather reports; and access stock portfolios, bank
accounts and travel itineraries.
Exciting, but in the future. There are still many problems to solve. The Web took off
because the infrastructure to support it was already in place, and the same needs to
happen for handhelds to reach escape velocity. Before people start logging on from their
palmtops, the ISPs, cable companies and telcos will have to offer the equivalent of a dial
tone, making connecting easy every time. Then there must be agreed-upon standards for
data delivery and formatting, so content and application developers don't have to create
multiple platform versions of a product. And perhaps the biggest challenge to connecting
handhelds to the Net is delivering high bandwidth, wirelessly, at an affordable price.
Until recently, pdas weren't much more than electronic calendars and address books
with tiny keyboards and murky displays. After several false starts (including that $500
million flop called the Newton), the PDA hit pay dirt with the arrival of the PalmPilot, a
handheld device with an elegant user interface and a character-recognition system that
actually worked. Introduced in 1996, the Pilot became a runaway success, selling a
million units in 18 months. By way of comparison, it took Sony (SNE) three years to sell
a million Walkmans. By early 1999, more than three million Palm computers had been
sold. With a sleek operating system, over 15,000 third-party software developers and a
cultlike customer base (Palm creator Jeff Hawkins is mobbed at events by Palm owners
who want him to autograph their handhelds), Palm has a considerable head start on its
nearest competitor, Windows CE.
Last year, nearly 3.9 million handheld computers were sold in the United States. That's
not a lot compared to the 36 million PCs that will be shipped in 1999, but handheld
sales are increasing every year. Meanwhile, PC sales are slowing, from a giddy 35
percent annual increase in the mid '90s, to less than half that today. Frost & Sullivan, a
technology-industry research firm, projects that $1 billion worth of PDAs will be sold in
1999, nearly twice the 1998 number, chiefly due to lower prices. By 2000, there could
be nearly 15 million PDAs in use, and two years after that, handhelds will start outselling
PCs, predicts Forrester Research (FORR) . (Dataquest forecasts that 21 million
handhelds will ship in 2003.) As prices drop, as displays become crisper and more
colorful and as handhelds gain access to the Net, sales will surge.
Today's handheld market, says Jeff Hawkins, "is a shadow of where it will be." After
Hawkins and Donna Dubinsky developed the Palm, the two left 3Com (COMS) in
1998 to cofound handheld developer Handspring, a Palo Alto, Calif.-based startup
backed by Kleiner Perkins Caufield & Byers and Benchmark Capital. Hawkins sees
parallels with the cell-phone business, which has been doubling globally each year. "And
that's the kind of growth we were seeing at Palm," he says. "While Palm will sell a few
million units this year, 200 million cell phones will be sold in that same period. The
market potential for this category is in that number."
The real action in the pc world these days isn't in hardware, but in software and
services. The same goes for the Internet handheld market. Jill House, a research analyst
at International Data Corp., says once handhelds are in the hands of a critical mass of
people, "the biggest market wave will then be for the content and service providers."
For anyone who doesn't spend all day in front of a computer, handhelds could become
the most frequently used method of connecting to the Net.
But before that happens, many obstacles must be surmounted, the most daunting of
which is bandwidth. Today's wireless handheld consumers – which includes owners of
the Palm VII and Palm III with Novatel Wireless' clip-on Minstrel Modem, as well as
cell-phone owners that use the Palm OS and other handheld operating systems – mainly
use cell-phone networks for Internet access. People who use the Minstrel can have
unlimited access to the Web, using one of several browsers written for the Palm, if they
buy an unlimited service plan from an ISP. But the existing mobile ISPs are too costly,
even for the type of person who can plunk down $600 for a Palm VII. For example,
GoAmerica, a wireless ISP, charges $60 per month for flat-rate wireless-modem
access, and doesn't offer nationwide coverage.
Alternatively, Palm VII uses a $10- to $25-per-month "clipping service," which takes
selections from the Web. "That's why the clipping service that the Palm VII uses makes
sense," says Hawkins. "There's no real room for open surfing today. No one is going to
pay for those connection charges." With this format, "you don't 'surf' the Web," says
Dubinsky, "but you can get info like a stock price, an airline schedule or traffic
information."
The folks at Hawkins' old stomping grounds claim to have the answer to the
wireless-access problem. In late June, 3Com execs announced that the firm would form
a new company, to be called OpenSky, with Aether Technologies. OpenSky will offer
"affordable" wireless Internet access to consumers and business customers. Patrick
McVeigh, CEO of OpenSky, says the company will partner with telephone companies
to offer the wireless service, which will provide e-mail and Web clippings. With a Palm
product scheduled for the fourth quarter of 1999 and a CE product down the road, the
OpenSky service will be bundled with wireless modems. But when asked how
OpenSky's service will differ from GoAmerica's, McVeigh gives the classic vaporware
answer: "Wait and see. We will be very aggressive." So wait and see.
Naturally, Microsoft (MSFT) isn't waiting around for 3Com to build the infrastructure.
In May, it handed over $600 million for a 4 percent share in Nextel (NXTL) , a wireless
service provider. And together with Qualcomm, it founded Wireless Knowledge, which
develops technology to synchronize handheld, notebook and smart-phone data with
Microsoft Exchange servers. And in June, MSN announced another service, MSN
Mobile, to send short news items to cell phones and pagers.
The other ingredient for handheld infrastructure – standards for content delivery and
formatting – is still in the early stage. Right now, there are at least a dozen different
approaches for making Internet data available on handhelds. For example, ProxiNet,
based in Emeryville, Calif., has a system that provides Internet and intranet access to
handheld devices using proxy servers. ProxiWare grabs content from outside Web
servers, reformats it and sends it to Palm and CE devices that have the ProxiWeb
browser installed. The company hopes to make money in two ways. First, it will license
the technology to firms that want to provide ProxiWeb services to employees and
clients, and second, it will seek revenue-sharing partnerships with wireless-infrastructure
providers. An online retail brokerage in France, Fimatex, is using ProxiWeb to enable
clients to access their portfolios, trade securities, obtain quotes and transfer funds using
Palms with wireless modems. On other fronts, Oracle (ORCL) is devising a product –
code-named "Project Panama" – to convert HTML and XML (Extensible Markup
Language) to handheld-ready format. Ericsson's WebOnAir is a proxy server that strips
Web pages to their bare essentials.
The closest thing the handheld market has to a standard for communications protocol
and markup language is WAP (Wireless Access Protocol).With a great deal of
momentum behind it, WAP looks as though it could become the markup language of the
handheld world. Initially designed as a microbrowser for the four-line displays on
wireless AT&T phones, WAP is now being touted as a one-size-fits-all method for
connecting pagers, cell phones and handhelds to the Internet. WAP can be built upon
any operating system, including Palm OS, EPOC, Windows CE and JavaOS. Lucas
Graves, an analyst at Jupiter Communications, says WAP, "is the only player in town,
because their specification could end up being a subset of XML." As more Web content
providers reorient their backend systems around XML, WAP could make translating
Web content for various devices a trivial task.
Despite WAP's momentum, Hawkins doesn't believe it will continue its dominance. "I
don't think there will be a single access method or a single standard," says Hawkins,
"because unfortunately, the wireless networks are so different and fractured and offer
different opportunities." But, as we've seen in the PC arena, one standard typically
gobbles up most of the pie, leaving a sliver for the other players to squabble over.
Meanwhile, Microsoft is working hard to infiltrate the handheld market in the area it
knows best: operating systems. Although the company has been courting hardware
makers to license its Windows CE operating system, so far, it can be found in only 15
percent of all handhelds. The company entered the market much later than Palm, and
the relative bloat of CE makes it more difficult for hardware companies to match Palm's
reputation for elegance, slender size and excellent power conservation. "As it is now,
CE is unreliable," says Eduardo Guerra, research analyst for Frost & Sullivan. "They're
going to have to simplify or, if they want to stay with the complex model, wait for
version 3.0 to have hammered out all the bugs, and market it to people who require all
those advanced functions."
Nevertheless, Microsoft will slowly but relentlessly filch market share from Palm, year
by year – to the point, predicts International Data Corp.'s Jill House, that by 2003 Palm
and Windows CE will each have around half the market. It will happen for two reasons.
The first is volume. Microsoft is aggressively signing on vendors and OEMs (Original
Equipment Manufacturers, the companies that actually make the hardware that other
companies slap their brands on) to use CE in handhelds and smart-phones. "And when
you have that many people pushing out that many products you gain market share," she
says.
The second reason is catch-up. "What people sort of forget when they look at this
market is that Microsoft's palm-sized PC is a second-generation device," compared to
the fourth- and fifth-generation Palms, House says. But, she continues, "as Windows
catches up along the development curve, things will start to become more compelling."
And don't count on Microsoft to overhaul and strip down CE. "I don't think they're
going to strip much out, frankly," she says. Instead, Microsoft will wait for Moore's Law
– which states that processing power doubles every 18 months – to kick in to boost the
oomph of its handhelds.
The winner of the OS war will probably be the company that finds the right mix in
opening its hardware and software to third parties. Palm's model is a lot like Apple's:
closed hardware but very open software. The upside of this model is that it has resulted
in an enthusiastic developer community that has provided tens of thousands of
shareware programs for the Mac – which is what a successful platform needs.
Meanwhile, Microsoft has opened competition on the hardware side, resulting in lower
device prices, while maintaining control over CE's core applications. "There's not that
garage-development mentality that really drives a lot of enthusiasm around the Palm,"
says Graves. So the challenge for Palm is to generate competition quickly on the
hardware side to bring down prices and produce a mass-market winner.
Along with the battles for dominance on the infrastructure and OS fronts, content
providers are gearing up to create appealing handheld services and applications. "Portal
people like AOL, Yahoo and Microsoft are looking to be your front face on your
device," says House. The usual suspects, as well as new handheld portals, are focusing
on offering abbreviated and aggregated content for small screens. Some are leaving the
challenge of repackaging and reformatting Web content to the new infrastructure
companies; others are doing the job themselves. "I think that you will see different types
of content emerging, just the same as new media generates new content in the physical
world," says Dubinsky. "TV created new content, but it didn't mean that radio
disappeared."
One of the new players, 2-year-old startup AvantGo of San Mateo, Calif., has set itself
up as an information portal for handhelds, collecting and reformatting content from
providers such as the New York Times, the Wall Street Journal, CNN, Wired News
and The Industry Standard. So far, AvantGo is one of the few places handheld users
can go to download name-brand content on their devices. "There's no one else out there
and there's no standard that sites can use today on their own to provide content, so it's
easier to partner with AvantGo," says Graves. In June, AvantGo took $14.7 million in
third-round funding from Microsoft, 3Com and several other companies.
The established Internet brands – AOL, Yahoo, Excite and others – have rolled out
strategies for delivering content for handhelds. So far, AOL has made the most
significant strides in the wireless Internet market. Its "AOL Anywhere" campaign is an
initiative to move AOL onto phones, TV screens and PDAs. 3Com and AOL have
already announced a partnership to begin offering AOL e-mail to Palm users. Palm
computers will be bundled with AOL e-mail software, and AOL will offer a special deal
on a Palm III, packaged with modem, to its members. Later, AOL will develop a Palm
version of AOL, including chat and other tried-and-true AOL content.
Yahoo is calling its initiative "Yahoo Everywhere." In June the company bought Online
Anywhere, a company that reformats and repackages Web-based content for
handhelds and other Internet appliances, for $80 million in stock. In addition, Yahoo is
delivering Web clippings to Palm VII users and has partnered with PageNet to beam
information to pagers. Yahoo execs have also announced a plan to offer e-mail, an
address book, calendar services and other Yahoo content to Sprint PCS phones.
Excite offered up its Net-appliance catchphrase in January, promising to deliver "All
Band, All Device, All the Time." The company developed a homepage application for
the Palm VII, letting users retrieve stock quotes, weather, news, sports scores, local
movie show times and driving directions. Excite, too, has formed a partnership, pairing
with Starfish to enable handheld users to synchronize datebook and contact information
between Excite and handheld devices.
Synchronization has been a problem ever since computers got disk drives. For example,
how do you know which are the current sales figures: the ones on your laptop or the
ones on your desktop machine? Now that handhelds have entered the mix, the problem
has gotten worse. It's time, say some people, to return to the idea of a centralized
database, in which one server keeps all of a company's data, and everything else –
laptops, PCs, handhelds – is a thin client (a computer that depends on a network for
storage, also known as a network computer). This move toward "infocentric
computing," in which information devices take frequent real-time sips of data from a
centralized source, offers tremendous opportunities for synchronization companies.
Puma Technology, based in San Francisco, makes Intellisync software, which enables
handheld users to synchronize their devices to PCs and servers. With Puma's
technology, companies can keep the contact and datebook information in every
employee's handheld up to date. If an address changes on one employee's handheld,
that change will propagate to every other employee's handheld, by way of the server. In
addition to offering corporate in-house solutions, Puma supplies site-specific versions of
Intellisync (free to end users) to the four biggest Web-based address book and calendar
services – PlanetAll.com, Jump, Visto and When.com.
PlanetAll, owned by Amazon.com, is the most infocentric of the four sites. When people
transfer the contact data on their handhelds to the PlanetAll server using Intellisync,
PlanetAll searches the data for other PlanetAll members. If it finds any, it creates links to
them, so that whenever those members change their contact information, it's shared with
everyone else. The other sites synchronize data between PCs and handhelds, but not
between people.
Wireless handhelds are just the first wave of new devices that will include network
connectivity. With pervasive computing technology like Sun's Jini and MIT's Oxygen,
homes and offices will begin to look more like the environments our grandparents lived
in, as smart technology retreats into everyday devices. Clocks, automobiles, appliances,
televisions, even packaging, will sense what you and other devices are doing, and adjust
their behavior accordingly. Hewlett-Packard's Donald Norman, author of The Invisible
Computer, has long believed that the personal computer is far too complex, and that
one day in the future, people will come to depend on task-specific, unobtrusive,
pervasive devices that communicate with each other across a vast wireless network.
Although an infrastructure capable of supporting thousands of items in a single house
and securely connecting them to the outside world is at least several years out by even
the most optimistic stretch of the imagination, when it happens, personal computers, and
even the Internet as we know it, could get scrapped like scaffolding that's no longer
needed.
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