[ever thought how hard it is for mobile software companies to penetrate the mobile space? guest blogger Morten Grauballe introduces the ‘100 million unit club’ of successful mobile software firms and spins a tale of myth and reality for making it big in the mobile phone industry]
2007 became the year when mainstream Silicon Valley decided to attack the mobile phone market head-on. With over 1 billion mobile phones shipped every year and the market moving towards 3 billion mobile subscribers, you can understand why.
Apple started the year by announcing the iPhone. Half way through they started shipping and quite successfully too. The incumbent players took notice believe me. Then to make 2007 a real year of change, Google announced Android a new platform meant to change the dynamics of the value chain. It is free (in a royalty sense) and with a strong focus on allowing internet applications and services (to make money). Apple has also announced that it will open up the iPhone for native applications in 2008. It is a complete onslaught on the mobile phone market.
So, if you are a large software player in the PC or internet space, then 2008 seems like the perfect year to penetrate the market and get onto those 1 billion units. You can easily envision the following conversation taking place in well-establish software players from San Francisco down to San Jose:
CHoM (Clever Head of Marketing): Over 1 Billion mobile phones every year that is too good to be true!….How do we penetrate this market? How do we get to the biggest installed base of users? RAG (Resident Architect Genius): Not sure CHoM: Java seems to be a good option there are millions of java-enabled phones in the market A little later . RAG: I had a look .Java ME does not give good access to a broad set of APIs. Also .there is significant Java fragmentation across handsets complete nightmare, if you ask me! CHoM: I got it! We will move to native programming – Smartphones are taking off! RAG: Hmm .Symbian OS, with the largest installed base, is on single digit percentage market share. CHoM: But if we add Brew we will get a few more percentage points! [in denial!] RAG: We are still nowhere near 1 billion units! CHoM: What about adding Windows Mobile? Or the new Android thing? [Now completely in denial!] A few hours later CHoM: So in summary, we need to port to 8-12 different operating systems to be successful! RAG: Yep and most of these operating systems do not have publicly available SDKs! [clearly enjoying himself] CHoM: What ? [Almost crying!] RAG: Finally….you should know that there is no distribution method for getting software onto phones! [Big grin!] CHoM: ..! [in tears] A few more hours . CHoM: So what you are saying is ..we need a relationship with the handset manufacturers to get the SDKs and to get our software embedded into their phones! [with a hardened sense of realism! RAG: Spot on, boss!
In a world like that, it might be surprising to newcomers (like CHoM and RAG above) that there are successful software players in the mobile phone industry. There are in fact quite a few. When your software is on 100 million phones globally, then you have joined the 100 million unit club . Some of the leading members of this club are: – Adobe (formerly Macromedia) provides the Flash Lite execution environment – Access provides a successful mobile browser – Beatnik provides the polyphonic ringtone engine on most mobile phones – Packet Video provides the audio and video technology, i.e. for the Verizon V-Cast music service – Opera provides a successful mobile browser – Red Bend Software provides the majority of Firmware updating Over-The-Air (FOTA) software – T9 provides the predictive text engine found on a lot of phones – The Astonishing Tribe (TAT) provides the graphics engine that drives a lot of UIs in the wireless industry
By studying the approach of these companies, newcomers can learn a lot about how you tackle the world of mobile. What do they do right?
First of all, they all have excellent products that excite not only the mobile operators, but also bring true value and benefits to the consumers around the world. Without this, you should not even try to enter the mobile phone market.
Secondly, these companies embrace complexity, rather than trying to ignore it or wait for it to disappear. Most, if not all, members of the 100 million units club have ported their software to the 8-12 leading operating systems in the industry. Where applicable they will have a Java version (like Opera Mini) and a native version (like Opera Mobile). They have also invested in the art of software optimization (something not always needed on a PC), which allows them to move into the mid-tier and low-tier segments of the market. They also understand the complexities of software distribution. When appropriate they will have relationship with the handset manufacturers. At other times, the will use the portals for the mobile operators or independent service providers to distribute their solution.
Thirdly, these companies understand the market dynamics of the global mobile phone market. Some markets are operator-led, while other markets are more OEM-led. If, for instance, you have managed to get your software embedded on some of DoCoMo s MOAP-S based handsets in Japan, then your next port of call should probably be the S60 or UIQ licensees in Europe. If you manage to get on these handsets, then you have an opportunity to move to the proprietary operating systems of these licensees. Gradually you expand your market to more and more platforms across the various markets in the global mobile industry.
Finally, all of the above companies have participated actively in standards work. To get acceptance for your solution, it important for all the players in the value chain (mobile operators as well as handset manufacturers) that your software or service is based on open APIs and protocols that other people can add value to and support.
(In coining the term the 100 million unit club , I have ignored web programming. In our brave new world of web 2.0, that is admittedly a crime which I am sure web 2.0 fanatics will nail me for. The fragmentation and appropriateness of web programming for mobile phones is however a big topic in itself and is probably better left for a separate blog posting).
Lessons in a changing market Basing recommendation on extrapolations from the past is always dangerous in a dynamic market. Let’s therefore also look at some of the changes taking place right now. These trends could determine who will and who will not be members of the 100 million unit club in the future.
Open operating systems are definitely gaining market traction. Linux, Windows Mobile, Symbian, and a few others are now responsible for close to 10% of the market. There is still an ongoing debate in the market as to whether they will make up 20% or 50% of the market someday. Whatever your view point, it is not going to happen overnight, and in the short term, Apple’s OS X and Google s Android platform are two new operating systems that need to be taken into consideration. Platform de-fragmentation is clearly not a trend to bet on in the next 2-3 years. In the 5 year time horizon, it might be.
The good news about the increased competition in the platform market is that SDKs, tools, and support from the large platform providers are improving rapidly. It is therefore becoming easier for the software players to embrace the complexity as described above. Software is becoming more portable.
If we move from the world of software platforms to the world of software distribution, there is more help to be found. The Open Mobile Alliance ratified the specification of Device Management (DM) in early 2004. At the heart of the OMA DM standard, there is a well-designed protocol which enables the service provider to query any handset for its basic characteristics (like model number, firmware version, and settings). According to Ovum (Nov 2007), there is now an installed base of 235 million handsets with OMA DM support. This will grow to 50% of all handsets by the end of 2008. With both handset manufacturers and mobile operators actively using this protocol to provision settings and new software to handsets, it is becoming possible to distribute software post-launch. All of a sudden, you know which handsets are attached to the network and you can offer new features and services. For those software players who are already comfortable with the complexity of the platform market, this is an opportunity to accelerate time-to-market and up-sell new software or services once you are on the handset. The completion of SCoMO (Software Component Management Object) with in the OMA will further accelerate this trend.
2007 was a very exciting year for software providers in the mobile market. Players, who understand how to navigate the new world of mobiles have a lot to gain. Good luck and Happy New Year to all new candidate members of the 100 million unit club!
– Morten
[Morten Grauballe is EVP Marketing at Red Bend and ex VP Product Management at Symbian, and has been in the mobile industry long enough to boast both scars and medals]