No Changes in Mobile

Today’s announce­ment by Nokia that it would acquire all of Sym­bian rep­re­sents an impor­tant move in the upcom­ing bat­tle for next gen­er­a­tion mobile devices (to call them phone seems unfair as they tend to do more than just make calls). In this entry, I’ll take a quick look at how the dif­fer­ent play­ers are cur­rently approach­ing the mar­ket and what it might say about their poten­tial mov­ing forward.

Strat­egy: Hard­ware? Soft­ware? Ser­vice? Partnership?

Let’s take a look at the play­ers in the “smart phones” mar­ket: Apple, Nokia, Microsoft, RIM (black­berry),  Linux Mobile, and Palm. Sun used to have a Java Mobile but it seems to have dropped off the mar­ket, in terms of device mar­ket share. And then, there’s the new pre­tender to the crown in the form of Google, with its Android OS offering.

How do they stack up in terms of Hard­ware? Oper­at­ing Sys­tem? Ser­vice Offer­ing? Well, here goes:

A first glance at this table seems to reflect some of the player’s pre-existing biases. Microsoft is known for its soft­ware busi­ness so that’s where it put the most weight; Google is all about free soft­ware to power their ser­vices; RIM and Palm do a hard­ware soft­ware combo; Apple throws its weight behind a fully Apple con­trolled experience.

How­ever, there are a few caveats: For exam­ple, while Microsoft is in the space pri­mar­ily as a soft­ware provider, it also owns Dan­ger Inc., mak­ers of the Hip­top. And while Palm has its own soft­ware, many of its devices are pow­ered by Win­dows Mobile.

But apart from those excep­tion areas, it appears that strate­gies are orga­nized across four busi­ness models:

• OS only: This strat­egy is pre­ferred by Sun and Linux. The model here is to pro­vide an oper­at­ing sys­tem that can be used by oth­ers. For Sun, this strat­egy has largely failed as sub­stan­tially less than 1% of all hand­sets around the world is pow­ered by their OS. Linux, which really was the first open source mobile OS has cap­tured about 4 per­cent of the global smart phone mar­ket to date. Microsoft is the big leader in terms of that strat­egy, with its Win­dows Mobile OS cur­rently pow­er­ing about 12 per­cent of all smart­phones around the globe.
• Soft­ware + Ser­vice: All this leaves us with Google and their Android offer­ing. Much of the com­ment­ing today is that the move Nokia just made was aimed at the fact that Google had an “open” oper­at­ing sys­tem. But what Google is really try­ing to do is pro­vide an oper­at­ing sys­tem that melds OS and ser­vices. Either that or they are in the OS only camp. Either way, they are not play­ing in the same space as the iPhone or Nokia (see triple play below).
• Hard­ware + Soft­ware: This model is pre­ferred by RIM, mak­ers of the Black­berry, and Palm (espe­cially with their inex­pen­sive Palm Cen­tro line). This strat­egy works best if you want your device to be focused on few use sce­nar­ios: The black­berry is first and fore­most a portable email sta­tion; Palm devices are first and fore­most PDAs. This ori­en­ta­tion comes from a past where the device wasn’t ini­tially intended as a phoe but mor­phed into one.
• The triple play (ie hardware/software/service): This is the strat­egy cur­rently used by Apple with the iPhone: they pro­vide the hard­ware, the soft­ware, and a set of ser­vices (me.com, iTunes, Soft­ware store) on a com­plete pack­age.  Through recent acqui­si­tions, Nokia has been mov­ing in this direc­tion: while they were tra­di­tion­ally a hard­ware player, they started adding ser­vices to their devices. With today’s announce­ment, they’re also get­ting some con­trol over software.

So look­ing at this, it becomes appar­ent that while many are point­ing to Nokia going after Google, it may not be the tar­get. Since Nokia does ser­vice and hard­ware already, get­ting more con­trol over its own OS is prob­a­bly an impor­tant move.

Open Sourc­ing

I can already hear some read­ers snick­er­ing: Symbian’s been open-sourced so Nokia does not have con­trol. Let me make some­thing very clear: the gold rule (“he who’s got the gold makes the rule”) applies to Open Source as it does in other areas. While it won’t get exclu­siv­ity, Nokia, hav­ing paid $400+ mil­lion to open source Sym­bian will be con­sid­ered “more equal than oth­ers” by the Sym­bian foun­da­tion, I’m sure.

But why open source? If we look at the play­ers men­tioned above, their posi­tion on open source and their mar­ket share, the pic­ture becomes clearer:

Look­ing at the mar­ket share date, Nokia’s move doesn’t seem to make sense: They cur­rently con­trol 65 per­cent of the mar­ket, why would they bother? But here’s the thing: There’s this new­comer called Apple and they didn’t exist 18 months ago: they now have 7 per­cent of the mar­ket and are growing.

If I’m a Nokia exec­u­tive and I’m look­ing at this data, I start wor­ry­ing. So what do I do? I look at com­pet­i­tive advan­tage: ini­tially, I try to com­pete with cooler devices (the Nseries) and while it stops some of the bleed­ing, it doesn’t appear to fully halt the com­pe­ti­tion. So I start look­ing at ser­vices as a way to sta­bi­lize rev­enue (Maps, Music, Games) but that doesn’t stick. Then I real­ize that my prob­lem is the oper­at­ing sys­tem: I’m stuck with that alliance of part­ners I have but they’re slow­ing me down. So I have to take over. But I can’t do that by just kick­ing all of them out. So I acquire and open source.

The open source move fills three strate­gic objectives:

• I get to keep part­ners still involved but get them to agree to my tak­ing charge.
• I get other peo­ple to improve my code and/or devel­op­ing FOR it, thus allow­ing me to counter a poten­tial Google threat if it ever materializes.
• I get to look more “open” than Apple and will use that in my messaging

The Future: Col­lat­eral Dam­age Then Sta­tus Quo

Of course, while it works out great for Nokia, there is a lit­tle bit of col­lat­eral damage:

• Sun’s offer­ing, while inter­est­ing had already sunk largely into irrel­e­vancy so they’re no longer a player.
• Palm OS, was tee­ter­ing on the edge but now it’s pretty much cooked.
• Linux, while still hav­ing teeth, will prob­a­bly see its mar­ket share dwin­dle as its unique sell­ing propo­si­tion (more open than oth­ers) is gone.

So that’s unfor­tu­nate but what does it do to the rest of the mar­ket. Well, in fact, it looks like today’s events wont’ have much impact: Palm, Linux and Sun rep­re­sent about 5 per­cent of the mar­ket. With Apple at 7%, RIM at 11%, Microsoft at 12% and Nokia at 65%, it looks like the mar­ket will stay pretty con­sis­tent. The remain­ing 5% will be carved out by the exist­ing play­ers and by Google’s entry into the mar­ket. Nokia will remain at the top for now.

Poten­tial events that could have a more dis­rup­tive effect: a Microsoft/RIM part­ner­ship (or out­right acqui­si­tion) which, when inte­grated would give Win­dows Mobile a 23% mar­ket share. But short of such a move, it looks like the sit­u­a­tion will mostly stay at sta­tus quo for the time being.