re: Ovum on Microsoft's Entree into Handsets
>> The Ovum View: Future Wireless Devices - Why Microsoft Won't Clean Up
Jessica Figueras
Ovum
Jessica Figueras, analyst at Ovum, asks whether today's handset giants end up being tomorrow's box-shifters?
There's an interesting idea, currently doing the rounds, which says that soon the mobile handset industry will become like the PC industry of today: a horizontal industry based on standard platforms, where vendors specialise in particular tasks rather than trying to do everything themselves.
More cynically, it could become an industry where manufacturers assemble others' technologies for razor-thin profits and the platform owners make all the money.
Perhaps unsurprisingly, this idea is equated with a wholesale takeover of the handset market by Microsoft - in an extension to its PC platform ownership. Certainly the handset market will become more horizontal but there are many reasons why history will not repeat itself in Microsoft's favour.
Two reasons why the early PC industry went horizontal were a pressing need for interoperability and to cut costs. The days when PC manufacturers could design and build most of their own hardware and software components certainly led to some technically superior, resource-efficient platforms but this model was also very expensive.
High build-costs and low volumes meant high prices. There was also little or no interoperability between all of those technically superior platforms, which critically restricted growth in the embryonic PC software market and severely limited what PCs could do for end users.
So in the early PC market, the process of horizontalisation and platform standardisation became inextricably linked. As PC manufacturers opted to dump their own platforms in favour of licensing them from third parties, horizontalisation helped to cut costs and standardisation helped solve the interoperability problem. Some resource efficiency and robustness was sacrificed but as memory became cheaper and microprocessors faster and cheaper, this became increasingly irrelevant.
Unfortunately for the manufacturers, some of these third parties - particularly Microsoft - ended up owning the sweet spots of the PC value chain.
Manufacturers found it increasingly hard to differentiate and add value because all of the value was in the features provided by the platform. But as prices continued to fall and Windows provided more and more features, consumers really didn't care - they were all too busy playing Doom.
There are four reasons why this pattern won't inevitably repeat itself in the mobile industry.
* First, the interoperability problem is just not the same as it was 30 years ago. Mobile phones can already support a range of industry standards that make them interoperable at various levels - for example, GSM and SMS. As long as the device can support the critical content formats such as MMS and WAP, it will be open enough for most. This does not require platform standardisation.
- The second reason is to do with resource efficiency and robustness. A low power, restricted size environment makes efficiency critical for any mobile device - particularly for phones which must maintain a constant network connection.
Moore's Law may have saved PC vendors from the tedious need to worry overly about resource efficiency but the mobile phone breaks Moore's Law all over again by adding new parameters to the price/performance equation: power and space.
Throwing more processing power and memory at a phone destroys the battery and takes up space. So, since pretty much the only improvements that we have seen in mobile phones over the last five years have been longer battery life and smaller size, adding a faster processor could be seen as a backwards step. 3G will make these problems even worse by imposing huge additional demands on scarce resources.
* The third reason why we will not see top-to-bottom standardisation is that this model cannot deliver the best performance in a mobile device. In a resource-constrained environment, there will be huge pressure to optimise performance towards certain applications, whether they are games, streaming video, imaging or (radical thought) even voice.
So, although handset vendors might license technologies from third parties rather than build their own, there will still be many proprietary platforms. Such platforms may include open layers, such as the Symbian core OS, J2ME or the Windows CE core OS but they will still be more or less custom-built to suit the particular needs of the device.
* The most compelling reason why mobile phones will not become empty vessels for Microsoft platforms is sheer force of will on the part of the major device manufacturers.
Motorola, Nokia, Samsung, Siemens and Sony Ericsson own nearly the entire market between them. These vendors are not stupid and have no desire to become box-shifters. They intend to own the big brands. They also intend to keep selling products which can easily be differentiated from the competition on the basis of design, functionality, look and feel, quality, style, ergonomics, personality, ease of use - all those things which PC manufacturers lost control of long ago.
Yes, the major device manufacturers want to cut costs but they think they can do this without full-scale platform standardisation. We have already seen vendors moving to exploit their strengths and partner to overcome their weaknesses - the Sony Ericsson deal was a perfect example. Horizontalisation should mean that device vendors can find the role in the value chain that is right for their skills.
The Microsoft model does have a big opportunity with the smaller players - yesterday's new entrants, who never managed to get a serious foothold.
These smaller players, who already have weak brand recognition, will get the most benefits from working with the company. Microsoft makes it very easy to build devices on its platforms by providing reference designs and good toolsets, which reduces the costs and makes a low volume business more viable for these players.
Such players may never be able to compete with the mobile giants but there are many other options. Ovum predicts that the corporate market, for example, will become increasingly important for wireless devices of all kinds. A standard platform is much more important for this market, to simplify business application development and device management.
The other possibility for the smaller device vendors is building devices for mobile operators, some of whom are keen to reclaim lost brand-share from Nokia. We've already seen mmO2 do this with its xda, and others will follow.
The handset market can and will accommodate diversity. <<
- Eric - |
