This has been the month of the handset. First, Google's (NAS: GOOG) acquisition of Motorola Mobility, then HP's effective exit from the handset business, and finally the sad news about Steve Jobs. These recent events kick off what I believe will be an accelerated pace of developments and reshaping of the mobile device/platform ecosystem. Within the next 6-12 months, we will have a much clearer picture of the next-generation strategy and long-term viability of Research In Motion (NAS: RIMM) , Nokia (NYS: NOK) , and Microsoft's (NAS: MSFT) mobile businesses. More broadly, expect additional acquisitions, partnerships, and participation of new players, thus further defining what the mobile platform world will look like, circa 2013-2015.
Let's remind ourselves that there have never been more than two viable advanced phone platforms in the history of this industry. For most of last decade, it was Nokia and Blackberry. Neither Palm nor Microsoft gained meaningful traction (i.e., more than a 10 percent market share). The next phase was marked by the rise of iOS, initially in the consumer market, and more recently, in the enterprise. Android has become the second platform of the moment, for three reasons:
Much skill. Continuous improvement has significantly narrowed the delta with iOS.
Some luck. Verizon needed a counter to the iPhone for three years. Blackberry wasn't up to the task, so VZW helped "make" Android.
Unforced errors. RIM, Nokia, Microsoft, and Palm showed a sloth-like pace of product development compared to Apple (NAS: AAPL) and Google, along with institutional arrogance, and organizational malaise. This provided the opening that Android needed, and then exploited.
The numbers that tell the story most vividly are the past several quarters' installed base vs. new sales. The shift of market and mindshare in the enterprise space is especially startling. CIOs' heads are 60 percent iOS, 25 percent Android, and 15 percent Blackberry, based on my own informal survey. WebOS was never a contender and Windows Phone is the "keep an eye on it" job of a junior member of that CIO's team. Call it handset climate change: we've gone from cold and rainy (Espoo, Waterloo, Chicago, Seattle) to warm and sunny (Cupertino, Mountain View).
So, what now?
The next 12 months will be critical to the future of the handset business. Apple's iOS has a firm hold in the consumer and enterprise space. Google's focus with Android has been on developing product for multiple market segments, as it sees an opportunity to capture smartphone market share on a global basis, particularly from Nokia. Enterprises are starting to take Android seriously, but there's still important work needed to meet key requirements, before enterprise decision-makers start buying Android or approving Android BYOD in large numbers. This leaves an opening for RIM to regain its luster and possibly for Microsoft.
In my view, the next few years of the smartphone/platform game will be decided by the answers to the following four questions.
1. How many OSs can be viably supported?
All the talk about "open" is great, but ultimately there are iOS developers, Android developers, Blackberry developers, Symbian developers, Windows developers, and WebOS developers. At best, a developer "majors" in one OS and "minors" in another. Perhaps they'll be American-style multi-lingual, but they won't be Europe-style multi-lingual.
There are twin forces at work here: pace of product development and relative scarcity of developer talent.
2. Will there be a game-changing product experience?
Take ANY high-end smartphone that has been introduced in the past six months: Android, Windows, Blackberry, WebOS, Symbian. Know what? They're all pretty good. They all do the basics, and them some, pretty well. So why has success been so elusive for those outside the Apple and Google ecosystems?
Apple was initially successful because of its game-changing user interface (though I'd argue they perfected what Palm started with the Treo). More recently, however, I'd argue that Apple's success has been more about its unassailable "ecosystem" -- iTunes, app store, physical store, other Apple devices, marketing heft and prowess.
From Android, we see continuous innovation. Handsets get better and better, and notable improvements occur across categories of functionality, seemingly on a daily basis. There are no cult-like media events or blockbuster announcements. Your maps, voice search, mobile web page display ... they just get steadily better, and you don't have to run out and get a new handset every three months to benefit from these improvements.
Between Apple being in its own league, and the incredible selection of Android devices, consumers feel that they can get the state of the art from those two platforms. Blackberry, Nokia, and Windows phones are all pretty good, but what is the compelling case for a customer to buy one of those devices?
In order for one of the other platforms to remain viable or grow share, there's got to be something game-changing. In Nokia's case, I believe they are working on a very different type of user-interface -- a highly evolved way in which the user interacts with their device. They're not going to win in hardware (Apple), or software (Google), so their best chance is to return to their original UI roots and try to do something different, then leverage their global supply chain and still strong brand.
3. Is there still room in the enterprise?
I believe there's still room to capture share in the enterprise. Even though iOS has huge momentum in the enterprise, the Apple "ecosystem" is still more of a consumer phenomenon. Android is gaining traction too, but important gaps (security) and lack of vertical integration has CIOs hedging their bets. I believe the enterprise piece is an under-recognized reason for Google's Motorola purchase.
In RIM's case, every month that goes by where we don't really know what the next major, QNX-based phase of the Blackberry will look like (not just the device, but the whole ecosystem) causes further erosion of market share and credibility. In my opinion, they have to get on the road in Q4 and visit the CIO of every major North American corporation, and show them something (under NDA) that reinstills confidence. Or it could be game over.
One area where RIM could change the game is defining what mobile messaging is going to look like over the next several years. Competitive mobile email solutions, both consumer and enterprise, exist across all platforms. But RIM has unique assets: Blackberry Enterprise Server installed at hundreds of thousands of companies; its Fort Knox-like Network Operation Center(s); and highly successful Blackberry Messenger service. The rate of growth in traditional forms of messaging (voice mail, email, and SMS) is being both subsidized by and supplanted by the growth of social networks (Facebook, Twitter, LinkedIn) and private messaging networks (BBM, the forthcoming iMessage, Jive). This leads to two significant opportunities:
Drive the discussion of the next-generation messaging, leveraging unique assets and putting a great UI wrapper that ties all of these disparate services together, with the right personal/business sandboxing controls.
Re-capture share in the enterprise with private messaging networks (such as what Jive is doing), tied into public business-centric social networking services (such as LinkedIn).
And what about Microsoft? Well, everything about the most recent Windows phone devices has been about the consumer space. I believe it is going to be awfully difficult for them to gain meaningful share. After all, the latest devices are pretty competitive, but have not sold well. Microsoft still has huge share, across so many products, in the enterprise. If they can put some of these pieces together (Office, Outlook, SharePoint, Live!/Cloud) in a unique and differentiated mobile play, there might be an opportunity to finally gain more than a token share of the mobile OS market.
4. Who will lead in the cloud?
So much of the discussion about the "post-PC" world has centered on the tablet, which to this point is 85 percent about the iPad. But what about the smartphone's role in the cloud?
I personally believe that Android market in its current form is a placeholder for Google, and that content and apps will become increasingly Web-based, adjusted for context (device, connectivity, etc.). Example: Amazon's redesign of its website for an improved experience on mobile devices is tilted more toward the browser than the app. At Apple, the initial iteration of iCloud is focused on media, but the longer-term bet is for a post-iTunes framework, across the breadth of content and apps, accessed from multiple devices.
There is a great opportunity for somebody to define what mobile in the cloud is going to look like. Cloud services assume almost constant connectivity. But we all know that assumption breaks down pretty quickly in mobile. Neither wireless networks nor pricing models are architected with a constantly connected, multi-GB/month consumption model in mind.
So what is going to be the interplay between mobile devices, and content/apps/media in the cloud? There's certainly a need to define how content will be accessed when off-line, in a zone of sub-par connectivity, or if you are counting your gigabytes. For the wireless historians among us, RIM designed its successful mobile email service within the constraints of a 2G world.
This is an area where non-traditional players in mobile might play an instrumental role. Think Amazon, HP, Dell, Oracle, IBM, Cisco. This could spell further acquisitions or consolidation in the handset space. Or at the least, some meaningful partnerships.
June 2012 will mark the fifth anniversary of the introduction of the iPhone. The iPhone and its impact have largely driven the discussion during this period. And though I expect Apple to be a hugely important player over the next several years, there is opportunity for others to define what the next-generation device/platform framework might look like.
More from Xconomy.com:
Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem. Subscribe to his free Lens on Wireless monthly newsletter at www.m-ecosystem.com, or follow him on Twitter at @marklowenstein.
At the time thisarticle was published The Motley Fool owns shares of International Business Machines, Microsoft, Oracle, Research In Motion, Google, and Apple. The Fool owns shares of and has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Microsoft, Dell, Apple, Cisco Systems, and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.