As we’re about to launch the latest Developer Economics survey [UPDATE: we’ve launched the new survey – you can take it here!], we’d like to present you with an infographic with some key stats and figures from the latest, Q3 project, to whet your appetite. This infographic holds just a sample of the dozens of insights from the Developer Economics Q3 2013 report ([vm_form_download link_text=’full report available for free download’ product_id=’4062′]), tracking the state of mobile ecosystems, developer mindshare, monetisation trends, revenue models and developer tools. Insights from this infographic: – Android and iOS lead in terms of mindshare, HTML5 comes third: 71% of mobile developers use Android, 57% use iOS, 52% use HTML5 – Most developers go straight to the browser: The largest share (38%) of HTML5 developers develop mobile websites with another 23% developing mobile apps – There are more iOS developers also using Android than vice-versa: 69% of iOS developers use Android, but just 40% of Android developers use iOS as their second choice, just ahead of HTML5 mobile (29%) – iOS leads in average monthly revenues – but Android is closing the gap: At $5,200 per developer per month on average, iOS continues to be the most revenue-generating platform for developers, ahead of Android by a margin of 10% – The global app economy was worth $ 53Bn in 2012, and expected to rise to $ 68Bn in 2013: The mobile segment corresponds to 12.6% of the global developer population. In other words, 1 in 8 software developers is involved in mobile development in 2013 – Creativity (53%) and the fun of building an app (40%) are the top motivators for developers Can’t wait for more Developer Economics? Our new survey is just around the bend [UPADTE: new survey is live]- stay tuned and take the survey (if you’re a developer), or help spread the word (if you’re not)! For the moment, enjoy this great, new infographic! #ios #mobiledeveloper #Android #windowsphone #Blackberry

The battle for app ecosystems is over – iOS and Android have won. However, this is not the end of the war for mobile users. VisionMobile’s Senior Business Analyst Stijn Schuermans and Strategy Director Michael Vakulenko discuss how leading ecosystem players like Amazon and Facebook are competing for users without building operating systems. The mobile industry is buzzing with new mobile operating system initiatives. Microsoft is betting big on Windows Phone. Intel and Samsung are cooperating on Tizen. Telefonica and Mozilla are leading the Firefox OS effort. The Jolla team (ex-Meego) is touting Sailfish OS. Ubuntu is extending its popular Linux distribution from desktop to mobile. Hundreds of crazy-smart engineers around the world are losing sleep as we speak to create the next big OS. As it happens, operating system technology no longer matters that much in mobile. Today, the smartphone competition is about ecosystems that connect app developers and users. OS technology alone cannot help you to win this battle. Operating systems are needed but by themselves they are a low-value component of ecosystems. Apart from the OS, the ecosystem value stack contains the app platform, taking care of the monetization, distribution and retailing of apps, as well as a tools ecosystem of 3rd party vendors (from analytics and push notifications to ad networks and cross-promotion networks). All of those things together create the value proposition to both users and developers on which ecosystems compete. iOS and Android are the only ecosystem contenders who have a strong presence across this entire value stack. As such, their lead is firmly established. [tweetable]Android and iOS have won the app ecosystem war[/tweetable]. Challengers like Blackberry 10 and Windows Phone have spent much energy in creating the next generation of their respective operating systems. Yet both are failing to make big headway despite all the resources they have committed. So how can you compete in the face of this duopoly? Does this mean that Apple and Google are unassailable and will gobble up all the value in mobile? Of course not. There is another way to add value for mobile users, and already some companies are leading the way. Amazon, for example, has borrowed Android OS technology – a commodity. It has then leveraged Amazon’s existing user base (215 million active users with credit cards on file) to build layers on top of the OS that matter to Amazon. In the process, they’ve created a valuable new source of revenue for Android developers. Likewise, Facebook didn’t entertain the rumour mongers’ call for a ‘Facebook phone’. Instead, they are building a meta-platform on top of existing mobile platforms. The acquisition of back-end service companies Parse and Spaceport.io earlier this year show that Facebook is adding value to developers with tools. Facebook App Center helps users find great apps, but it’s not an operating system. There is a clear lesson in this for any company that wants to play big in mobile. Don’t fight a battle that’s already decided; don’t reinvent the wheel in order to compete head-on. [tweetable]To win, leverage ecosystems instead of competing with them[/tweetable]. To win, focus on the parts of the value stack that matter most for winning users. Like Facebook, who is adding value by improving app discovery. Like Amazon, who is improving app distribution and monetization. Like Adobe, who is adding value by improving cross-platform app development. We discuss these topics and many more in detail in our Mobile Innovation Economics workshops, in which we reveal the hidden mechanics of ecosystem business models and the new basis of competition in mobile. With this perspective, we can help you launch, grow, and defend your business in a world of mobile ecosystems and cross-industry competitive arenas. Sign up now to the next workshop to discover opportunities that others miss. #workshop #ios #amazon #telcoeconomics #ecosystem #facebook #Android

Mobile business models are disrupting just about every industry. Mobile carriers felt pretty comfortable, but while they were working on next-generation unified communication suites, companies like WhatsApp, KakaoTalk, Line and WeChat bypassed them at full speed, making their investments irrelevant. In a very short time, those messaging apps amassed hundreds of millions of users each and are now eating away substantial chunks of SMS revenues. At the other side of the mobile telephony industry, leading incumbents like Blackberry, Nokia, Motorola or Microsoft got the rug swept from under them by two unlikely newcomers: a computer vendor (Apple) and an online advertising company (Google). How about you? Is your business safe from digital disruption? (Hint: the answer is probably no.) What makes mobile so powerful – powerful enough to up-end decades-old, firmly established industries – is more than technology. The challengers use a new approach to business models to create profitable growth. Apple created a new mobile computing market by connecting app developers with smartphone users. Google opened up the smartphone market for a large number of participants and changed the basis of competition for handset makers. Amazon’s Kindle and Xiaomi turned the device maker business model on its head entirely, making hardware a distribution channel instead of a profit center. VisionMobile research has “cracked the code” underpinning  the strategies and business models of the world’s most successful technology companies. Today, VisionMobile helps its clients re-apply the lessons learned from the telecoms shake-up to other industries that are shifting as a result of rapid mobile adoption. On November 14 and 15, we’re holding an Mobile Innovation Economics workshop in London, where you too can discover how to launch, grow, and defend businesses in a world of mobile ecosystems and cross-industry competitive arenas. [UPDATE: Registrations for this workshop have been closed.] In the workshop, we will discuss what we can learn from the success of leading companies such as Apple, Google, Amazon and Facebook that leverage ecosystems to create sustainable competitive advantage. We will show how can you use these patterns to compete and win in your rapidly changing market. We’ll touch on topics like how you can use developers to off-load risk and uncover value, and which ingredients technologies like HTML5, WebRTC or M2M are missing in order to grow into full-blown platforms. After this workshop, participants will… Understand the business models and the key motivations of the leading ecosystem players Understand the competitive landscape and success patterns of ecosystem competition Have a common language of innovation that you can use in your ongoing strategy discussions See how to prepare your organisation to compete in the ecosystem era Register now to learn from the experts and see opportunities that others miss. #iot #strategy #webofthings #workshop

Are you based in London? Join our first-of-its-kind workshop on ecosystem business models (November 14-15) – register now and get a First-Mover ticket (30% off). This 2-day workshop is designed to help you: – understand the rules of the game of ecosystems – understand the business model patterns of leading companies like Google, Apple, Amazon and Facebook – use these patterns to compete and win in your rapidly changing market – be part of the cutting edge discussion on the future of digital business models Get in touch with us if you want more info.

The rise of app ecosystems has put the US in the front seat of the mobile industry, a place once held by Europe with its strong pedigree in mobile technology. However, Europe continues to be a major force in mobile app ecosystems, with its contribution to the global app economy being second only to the US. With competition from high-growth markets rising, Europe needs to become a global hub for mobile startups in order to maintain this position. The economic crisis that has plagued Europe for the past few years, has had and continues to have a major impact on the labour market, particularly in the South. Unemployment rates in Southern Europe exceed 25% with youth unemployment surpassing 50%. Yet, the app economy has been expanding rapidly; as indicated in our latest report, the European App Economy 2014 commissioned by ACT4apps and co-authored with Plum Consulting, Europe is a major force in the global app ecosystem and is directly responsible for over 500,000 jobs in the EU28 region. The report was hailed as a “wake-up call” for the EU by European Commission vice president Neelie Kroes, who is responsible for the EU digital agenda. Europe responsible for over a quarter of the app economy While the EU economy has been under pressure since 2008, the EU app economy has been growing exponentially over the same period. We estimate that global revenues from the app economy reached $56B in 2012 with over a quarter of these revenues being generated in Europe. We estimate that around 530 thousand jobs that are directly related to the app economy (e.g. in development) have been created in EU28 countries alone while thousands more jobs are being created in adjacent industry sectors such as healthcare, education and finance as a result of mobile apps. Currently, the majority of jobs within the direct app economy are technical jobs (e.g. developers and engineers); however, as the EU app economy matures and startups grow, they add dedicated roles in sales, marketing, customer relations, finance and HR. Verticals are also embracing app ecosystems, which are now at the core of their digital strategies. More than 150,000 people in EU28 are contributing to the app economy as a side project or as a hobby, exploring future opportunities in this space. Several of the existing success stories have started this way, with developers experimenting with new ideas and then developing them to fully-fledged businesses with a positive contribution to GDP and the labour market. Download the report for more info. The wider impact of app ecosystems Apart from the direct financial benefits that apps bring to developers and stakeholders in the app economy, the social and economic benefits associated with apps stretch much further and wider. These include but are not limited to: Productivity gains within enterprises mobilising their assets and workforce Lower friction communication between users and businesses Mobile health services that improve lives and bring healthcare savings Travel services & updates that save time and money Automation and monitoring services at a significantly lower cost to using proprietary software and hardware The list of benefits is limitless. Smartphones and app ecosystems have opened up possibilities and enabled use cases that had not even existed before the first iPhone was launched, driven by increasingly lower barriers to app development. The value of the app economy grows exponentially as more users and services are added to app ecosystems. Driving growth in the EU app economy In our App Economy Forecasts report we estimated that the app economy will be growing at a 28% CAGR between 2012 and 2016. The fastest growth regions are Asia and Latin America where smartphone adoption is still quite low but rising fast. In Europe, smartphone adoption is among the highest globally at around 50%, although there is significant variance between countries, particularly on the East-West axis. Smartphone adoption will continue to create opportunities and generate economic growth in Europe, but there are a number of factors that may affect the growth rate of the European app economy: Capturing market share in the fast-growing regions (Asia & Latin America) Attracting talent and creating the right environment for tech startups to flourish Diffusion of high-speed connectivity such as LTE, enabling new app use cases The European App Economy 2014 report identifies a number of steps that policymakers can take in order to reduce friction points in the app economy: Facilitating access to government data for developers, e.g. mapping, meteorological and real time public transport data as well as information on community level services. Enhancing connectivity by making more spectrum available for wireless services. Advancing the European single market in intellectual property and communications. Embracing app-driven innovation across all sectors, e.g. health, education, enterprise, lifestyle. Ensuring a flexible and supportive business environment for startups and entrepreneurs. The app economy knows no boundaries The app economy is, by its nature, international, crossing national and regional barriers. This fact represents both an opportunity and a threat to regional app economies: the barriers to expand globally are low compared to traditional international trade and allow developers and entrepreneurs to reach globally. At the same time however, competition is also global allowing large incumbents to compete with early-stage startups. The ability of a nation or region to compete globally in the app economy, depends on its ability to create a suitable environment for app businesses, with easy access to talent, funding and mentoring opportunities and at the same time adopting policies that minimise regulatory or legal barriers that may come in the way of establishing and growing tech businesses. Europe has established itself as a leading force in app ecosystems, second only to North America. However, the rapid diffusion of smartphone technology and app ecosystems in developing regions across the world, fuelled by low-cost Android phones, suggests that Asia and Latin America will become major consumers of apps in the future. In order to maintain its leading position, Europe will need to capture a significant share of this demand. Comments? Feedback? We’ll be happy to hear from you – and don’t forget to download the report. – Andreas (@pappasandreas) #appeconomy #apps

With so much buzz around the Internet of Things, many are wondering what will be the platform on which the IoT ecosystem will be built. Stijn Schuermans reviews several interesting developments in IoT hardware modules that make getting ‘Things’ done a breeze, and adds some question marks with the widespread focus on devices. Five years ago, at the onset of the smartphone revolution, no-one predicted a significant latent demand for apps such as flashlights or “Draw Something”. And who would have thought that a game like Angry Birds could create billions of dollars in value; not just for the publisher, Rovio, but also for Apple as the platform owner? So it is in the Internet of Things (IoT). We don’t know which IoT applications will become successful; indeed, it is fundamentally unpredictable. As we argued in our June report “The M2M Ecosystem Recipe”, trying to deterministically control the innovation process is at best ineffective, at worst futile. (To anyone who’s attempting to map the IoT ecosystem and predict which market segments will be winners: good luck!) [tweet_this content=’When you enable people to experiment, they will always find ways to create value’ url=’http://bit.ly/19Xujex’]Luckily, the app economy clearly showed that when you enable people to experiment, they will find ways to create value, often in unexpected places. Paraphrasing Amazon’s Jeff Bezos: empowering others to pursue their dreams and to boldly experiment creates a diversity of improbable, but often successful ideas. Gatekeepers that insist “that will never work”, even when they are well-meaning experts in their field, ultimately slow down innovation. Developers, in other words, are a crucial ingredient of any IoT ecosystem[/tweet_this] Where will IoT developers come from? Before an Internet of Things platform can reap the benefits of a large developer community, however, it first needs to convince them that the platform is worth their time and effort. After all, every platform is ultimately competing for the attention and mindshare of developers. As it happens, lots of exciting technology is being built that enables developers to experiment faster New hardware and operating systems are allowing developers to dramatically cut the costs of bringing IoT products to market. These modules are low-cost, easy to master and allow for quick iterations in the market, even if they are not entirely optimized for large-scale production. This is exactly what’s needed for developers to uncover those killer apps. The first priority is figuring out which products people value; the hardware can always be redesigned and optimized once an application becomes successful. Let’s explore the prowess of five technologies to reduce barriers for developers and, equally if not more important, appeal to their sense of cool The status quo of hardware modules doesn’t look too good in terms of low barriers and coolness. Development modules offered by mobile operators (see e.g. here) or by chipset vendors (mbed, WICED) might be affordable for engineering companies, but certainly aren’t for hobbyists and tinkerers. Mostly, they seem to assume that their users are hardware engineers solving connectivity problems. With all respect for the people solving those difficult technical problems, this is not what’s blocking wide adoption of connected things A bit easier to digest are those modules that appeal to computer programmers. Windows Embedded and variants of Linux have long been established in the world of connected things, e.g. in network security cameras. They are now joined by more accessible components like the Raspberry Pi (a $35 computer originally intended to help kids learn how to program) or the BeagleBone. Raspberry Pi’s and the likes can be great to connect appliances, but they are often bulky and power-hungry, making them a no-no for battery-operated devices The king of low-barrier microcontrollers is without a doubt the Arduino platform (although there are other players in this space as well, like the Electric Imp or the Spark). It is affordable, real-time, easy enough for hobbyists, powerful enough to power satellites, extendible with so-called shields and it exists in literally hundreds of sizes and shapes, due to its open license But why stop there? The latest generation of development modules differentiate themselves on lowering the barriers even further. Espruino is a significantly lower cost Arduino that uses Javascript as its control language, cutting the need for compilation, simplifying the tool chain and lowering the learning curve for developers coming from the software world. The Tessel module leverages the popular node.js framework, with lots of existing reusable modules for interacting over the web and processing streams of data. Will web developers form the basis of the IoT developer community? If familiarity with the development environment can lower barriers for adoption, then what about Android? Can the largest smartphone platform leverage its app developer base to gain the IoT market? While Android certainly solves a lot of the hardware and connectivity headaches that a stock Linux might not, its main power lies in user interface technologies. These are much less relevant in IoT devices and might make the operating system too bloated for many devices. However, its open license might make it appealing not to application developers, but to hardware makers. Android’s popularity means that a lot of hardware components already have Android drivers available for them. This makes getting Android up and running on some new bit of hardware relatively cheap and easy. Let’s not write it off just yet, in particular for more complex IoT devices. Closing thoughts – maybe the device doesn’t matter? Those who want to enter the IoT market, software developers and electronics enthusiasts alike, certainly have a lot more choice of technologies than they did even a few years ago. Cheaper and simpler early-stage devices are surely crucial to enable the “perfect storm” of the Internet of Things. To play with IoT applications, you might not even be a developer anymore. The flurry of user-level IoT platforms is testimony to this: Thinking Things, Makey Makey, ATOMS, Ubi and Twine are just some of the non-techie IoT building blocks that come to mind. Is this a sixth entry-level way to attract IoT solution makers? [tweet_this content=’Connecting things will be about the connections, not about the things’ url=’http://bit.ly/16xASoh’]In the end, IoT devices differ from smartphones in a crucial aspect. They are not the main interface to the human that uses them. Much more than the hardware technology, the value in the Internet of Things will be created by combining and presenting the data that these devices generate. “Connecting things” will be about the connections, not about the things[/tweet_this] – Stijn (@stijnschuermans) #iot #m2m #mobiledevelopers

Presenting our latest report, the Enterpise App Developer Atlas. This is a map of the developer journey, featuring 481 developer tools across 27 tool sectors. The enterprise app developer’s journey is a complex endeavour that must balance corporate security, legacy integration, custom cross platform coding, and emerging API Program business models. This Atlas is the ultimate guide for enterprise app developers who need to mobilise corporate assets across multiple platforms, deploy, test and market their app. The Enterprise App Developer Atlas helps developers make the right tool choices in order to reduce costs, increase revenues and capture new markets. The market is split into six distinct stages: integrate, develop, deploy, measure, market & monetise. The image below presents a selection of the top-ranking tools for each market sector. For the full listings, [purchase_link id=”4190″ text=”download the full pdf” style=”link”]. To get a full size poster of this report mailed to you, courtesy of Intel, visit this page #amazon #developertools #phonegap #enterpiseapp #appcelerator #developer #parse

Microsoft’s acquisition of Nokia’s Devices division is the new beginning for both Microsoft and Nokia. But how does it make sense when both Nokia’s legacy OEM and Microsoft’s mobile software licensing business models are broken? VisionMobile Strategy Director Michael Vakulenko takes a long-term perspective of the acquisition through a business model lens. Most of the analysis on the Microsoft acquisition of Nokia comments on the reasons for the acquisition, whether it’s a good or a bad strategy or attempts to predict how Microsoft products will evolve. The key question however is what is the likely future for the new Microsoft? Looking at the business models in each case helped us accurately predict as early as 2009 the duopoly of Apple and Google, the demise of Palm, the outcome of HP’s foray into mobile with WebOS, BlackBerry’s meltdown and the failure of Nokia’s gamble on Windows Phone – years before the story unraveled. In the analysis from 2 years ago I argued that the [tweetable]paramount challenge for Microsoft and Nokia is the broken business model, not the product features[/tweetable], user interface or integration of software and hardware. This analysis is 100% relevant today and the acquisition of Nokia does not change the fact that the business models of the two companies are broken. [tweetable]A business model describes how a company creates, delivers and captures value[/tweetable]. People tend to focus on the “capture” part, but in reality “create” and “deliver” aspects are much more important. For the purpose of this post I will use business model framework proposed by Mark W. Johnson, Clayton M. Christensen, and Henning Kagermann in 2008. We have extended this framework for the purposes of our research, but I’ll keep the extensions out for the sake of simplicity. At the very basic level, a business model consists of four interlocking elements that, taken together, create, deliver and capture value: Customer value proposition – Value is created by helping customers get an important job done. Profit formula – The blueprint that defines how the company creates value for itself, while providing value to the customer. Key resources – Assets such as people, technology, products, facilities, equipment, channels, and brand required to deliver the value proposition to the targeted customer. Key processes – Operational and managerial processes that allow them to deliver value in a way they can successfully repeat and increase in scale. The key point to understand about the framework is that [tweetable]the power of a business model lies in the complex interdependencies of its parts[/tweetable], where the four elements reinforce each other. Major changes to any of these four elements affect the others and the whole. Steve Ballmer, however, prefers to take the rather limiting, product-centric view on Microsoft’s business model: “I think the right way to think about this is – or the way we think about it is kind of an integrated business model. There’s the device, the operating system, the back-end consumer services, and the extensibility of those – of that offering into enterprise services. And across that entire range, from hardware to, quote, operating system, because in the PC world we participate through our operating system royalty as opposed to through the direct hardware economics like we participate with Xbox. You know, when we bought Skype we were quite clear that a lot of the economic value from Skype would be from Skype and Lync connection and the ability to move people between the consumer and enterprise world and monetize in the enterprise.” There is not a hint at the customer value proposition, just blind hope that somehow recombining different pieces of technology will do the magic. [tweetable]It’s crystal clear that all four elements of Microsoft’s business model are challenged by the transition to mobile computing.[/tweetable] Let’s take a look at the four elements of Microsoft’s business model Customer value proposition of Windows, Office and Server product lines is becoming less and less relevant in helping customers get an important new jobs done. No need to expand – A lot was written in the last year about how mobile ecosystem disrupted PC. Even the very definition of the customer is changing for Microsoft. Microsoft business model emerged in the era when computing was driven by enterprise and the company is still making most of its money by selling Windows licenses to PC OEM and Office and Server software licenses to enterprises. Contrary to personal computing, mobile computing market is driven by consumers and the value is created in a very different way, more on consumerisation shift by Marc Andreessen here. While today’s leaders are focused on the customer, slide 22 of Microsoft’s Nokia presentation is worth a thousand words in exposing the company’s idea of “value creation”. Compare that with Apple’s Jony Ive idea of how to create value: “We are really pleased with our revenues but our goal isn’t to make money. It sounds a little flippant, but it’s the truth. Our goal and what makes us excited is to make great products. If we are successful people will like them and if we are operationally competent, we will make money.” The profit formula for software companies has changed dramatically in the last decade. Instead of the software licensing model that brought Microsoft to prominence, today software is increasingly monetised indirectly. Such indirect monetisation takes multiple forms: Devices, ads, content, services, e-commerce, virtual goods and data. Microsoft tried many of these avenues, but failed to create a profitable businesses out of such attempts as Bing, Azure, Live, Xbox and Zune. Resources like technology, products, channels and brand, which are all the cornerstones of Microsoft’s dominant position in the personal computing market, did not help the company take the leading position in mobile computing. It’s too late for Microsoft to hope for a meaningful position in mobile computing. It’s over. Android and iOS have won. Network effects inherent to the ecosystems business models of the leaders are making direct competition impossible. Processes that form much of the company DNA are shaped by and are optimised to scale Microsoft key business – Selling software licenses to PC OEM and enterprises. Besides, Microsoft infamous “stack ranking” system created internal culture of that motivated brown-nosing and sabotage over collaboration (more here). While it worked for milking the existing market, it for sure won’t help the company reinvent itself. The acquisition of Nokia Devices by Microsoft can bring the company some new resources and processes, but it brings nothing in terms of a value proposition or a profit formula. [tweetable]Nokia’s Devices business model is as broken as Microsoft’s[/tweetable]. In other words, Nokia won’t help Microsoft to get out of its business model dire straits. There are [tweetable]two scenarios for Microsoft: A slow, Dell-style demise or an IBM-style business model reinvention[/tweetable]. The first scenario is the likely scenario as long as Microsoft focuses on direct competition with leading ecosystems. To be successful Microsoft would need to find a new business model that will challenge and render obsolete ecosystem business models of Apple, Google, Amazon and the likes. A very risky undertaking to say the least (more on ecosystem business models in our Mobile Innovation Economics workshops). The second scenario of IBM-style reinvention would require milking the legacy businesses while reinvesting the profits in the discovery of new business models. The recent, massive reorganisation may prove to be a fatal mistake preventing that from happening. Previous divisional structures made much more sense. New businesses need separate organisational space from the legacy operation in order to be able to develop new processes and priorities for their emerging business models. Mobile computing will continue to evolve in the coming years with the emergence of new business models where hardware is not the source of profits but a distribution channel (more in our recent blog post here). Chances are that the new Microsoft together with what’s left of Nokia devices will not be part of this future. – Michael V (@mvakulenko) #businessmodels #microsoft #nokia

Strategy Director, Michael Vakulenko is presenting Developer Economics on 2 September at MobileMonday Tel Aviv. Get in touch if you’d like to meet up.

Marketing Manager Matos Kapetanakis will be presenting Developer Economics on September 6 at Campus Party Europe, London. Get in touch if you want to meet up.

Managing Director Andreas Constantinou will be presenting ‘Developer Economics: How Does Your Business Compare?’ on September 5 at UPLINQ 2013 in San Diego. Get in touch if you want to meet up.

[In The M2M Ecosystem Recipe report, which we published in June, we presented some ideas on how the full promise of the Machine-to-Machine market might become reality. Not all aspects of M2M ecosystem thinking were fully explored, however. In a response to the report, telecom specialist Tsahi Levent-Levi posed several to-the-point questions and counter-arguments. We always welcome debate, so we invited Tsahi to have a conversation about the issue of fragmentation in M2M. In this blog post, Tsahi and Stijn Schuermans, the author of the M2M report, try to advance the thinking on the topic of fragmentation in the emerging M2M market. Read on – and join the debate!] Tsahi: I love what you guys are doing at VisionMobile. Most times I fully agree with the reasoning behind it. The M2M piece? I think there’s a real opportunity here – it is definitely a market that is bound to happen. My main difficulty is in envisioning how this will play out. The use of the analogy you did between smartphones and M2M it is the chart indicating the rapid growth of M2M. In a way, this chart suggest that a similar growth pattern can be achieved in M2M. To me, these businesses are apples and oranges. Where do you see the similarities between the two? Stijn: Rather than focusing on the uniqueness of M2M, we focus on the similarities with past industries. M2M and smartphone businesses are indeed not the same thing. This said, we see many parallels from an economic perspective with other industries that have made the transition from a fragmented vertical structure to an ecosystem-led business model. Smartphones, but also PCs, game consoles, or online retail. The conditions in the M2M market today closely resemble those in other markets before they made the transition to ecosystems. For example: A highly fragmented market, but with a technology that’s becoming more and more modular and affordable. A complex technology and an inefficient market that is mostly only accessible to highly skilled organizations with deep pockets, like utilities or car manufacturers, while a much larger group of small businesses or consumers is not participating in the market (due to the high costs of transacting) and therefore are not innovating or creating value. A focus on a few high-profile, uniform use cases. A lack of diversity that fails to address unexpected customer needs. (Some analysts still strive to map the entire spectrum of M2M use cases. Try that with iPhone apps.) We therefore think that the same principles that caused the flip in those historical examples also come into play with M2M. Tsahi: But what about the differences between these two markets? To me, M2M is about devices. Lots of devices. Varied ones. Each focused on solving a specific problem. Smartphones, on the other hand, are swiss army knives – they can do everything. That being the case, it is hard for me to see a clear single winner of the M2M ecosystem. Stijn: Smartphones were not always the swiss army knives they are today. The predecessors of the modern all-in-one smartphone were described at the time as feature phones (heavily sub-segmented, with very distinct features for distinct consumer groups), email/telephone combos (BlackBerry), but also PDAs (Pocket PCs, as one manufacturer called them), industrial mobile data collection terminals and even digital cameras or music players. A device designed to solve the needs of a Western businessman had a very different design from that of device for Asian youngsters. Of course there were similarities and common features as well, but that’s true of most M2M devices today. The core issue here is fragmentation. You’re absolutely right: it’s a major challenge in M2M and a big point of friction to the emergence of an ecosystem. (And admittedly under-addressed in the paper.) Today’s M2M devices are conceived as purpose-specific, vertical devices, and therefore highly fragmented. In most if not all of the historical examples in the history of computing, however, this situation was a temporary phase, followed by an era of modularization and multi-purpose devices. From computers designed for science or accounting (but not both) to personal computers with scientific and accounting software. From feature phones, email phones and PDAs to converged smartphones with apps. The modular solution was difficult to imagine back then, but looks completely natural today. A multi-purpose M2M device is not unthinkable; it’s actually likely to emerge if history is a guide. Arduino and the likes are early prototypes, if you will, of such devices. (Btw, there are literally hundreds of Arduino-compatible modules out there in all sorts of form factors, including tiny ones, cheap ones and with specific sensors already attached.) There is no fundamental reason why M2M devices must be developed for specific verticals only, just inertia. If you don’t assume that M2M devices will remain extremely fragmented and organized along vertical lines forever, then the presence of multi-purpose M2M devices opens up the possibility for a fundamental rearrangement of the value chain in M2M. Suddenly service and device don’t need to be manufactured by the same vendor anymore, or even sold together as a package. This opens up the market for 3rd party developers to create services based on existing modules, or even on top of an installed base of modules (abstracted as data streams) already deployed. Once multi-purpose M2M devices and/or abstraction layers like cloud services emerge, the road is paved for large service ecosystems, quite possibly with winner-takes-all market dynamics. Fragmentation must be managed, but not completely eliminated, for the benefits of modularity to emerge. Not all smartphones have the same capabilities, features, processing power, operating system version, screen size, quality and price points. Fragmentation is still an issue in smartphones: between OS’s (about five of them are seriously in the running at the moment) and notably within the Android ecosystem. However, we’re now at a much better situation than the “three million platforms with a hundred users each” from 2007-era mobile computing. At the moment there are thousands of incompatible M2M modules. Even reducing this to a few dozens would be a major breakthrough; one that could enable the transformation of the value-chain. Tsahi: I beg to differ. Smartphones are all alike. They come to solve the same job. They are personal. You carry them in your pocket. You do things with them. They might have some different types of accelerometers or different resolutions, but can you really distinguish between them? M2M? How does a toaster similar to a UPS package? How can a refrigerator behave like a humidity sensor on a farmland? Can you really say that these are only fragmentation scenarios of the same device? Sure – put an Arduino in all of them, but then you will see that the service being developed must come from the company that designs the hardware, as the use cases for each is extremely different. A refrigerator vendor might publish an API (or extend a baseline API), but that API has nothing to do with the people counter at the entrance to a shopping mall. Stijn: Smartphones are not just personal, though – they’re also personalized. While the devices might all be similar (nowadays, not in the past), the ways they are used are not. Users install apps to tune the device to their own needs, and apps cater to just about every need imaginable. Smartphones have commonalities (personal, pocketable, connected) but fundamentally cater to thousands of use cases. That’s what differentiates them from feature phones in the first place. M2M devices and services cater to many different use cases, but they also have commonalities. They all collect data, turn that data into actionable insights or automated response, and through actuators allow you to drive that response. The technologies needed to do that will be very similar across a very wide range of specific use cases. Farming, home automation, logistics, fleet management, and foot traffic measurement are the equivalent of apps that can be built on top of a common platform. Attributes like ruggedness, range or battery life are the counterparts of smartphone screen sizes or build quality. The co-design of hardware and service for every distinct use case, historically, is unlikely to last. It’s like saying that computers are mostly use-case specific devices, and therefore the motherboard, processor, memory, peripherals and software must all be co-designed by the same manufacturer. That was actually true at some point, but then minicomputers and PCs came along. Once the performance of a device becomes good enough for most use cases (in M2M that might mean lifespan, battery life or processing power, for example), modularization ensues and general purpose devices emerge. This is because once performance becomes good enough, the flexibility and “mix and match” possibilities of a modular design becomes more economical and more valuable than the expensive full co-design. You might argue that jet engine monitoring (the industrial internet), for example, will never use the same platform as say home automation. That might be true. The way it typically unfolds is that “easy” applications will start using the new technology (in casu the M2M platform) first, and then will suck in more and more advanced use cases. The industrial, high performance ones will be the last to succumb (if at all – people are still buying mainframe computers). However, are home automation, in-car connectivity, smart metering, etc so disconnected in people’s lives that they warrant different technologies? Tsahi: You gave the example of the app store and apps as a way to drive an ecosystem in smartphones, and the explosive growth we see there today. What do you think will happen in the M2M business? Can apps be the prevalent driving force as well or will there be a different ecosystem? Stijn: Digital ecosystems as we understand them emerge when separate groups, e.g. developers, consumers and device makers, are empowered to interact and transact with each other efficiently. In smartphones, the catalyst to this interaction are apps and app stores. Apps are where the value is created in smartphone ecosystems (but not necessarily where it is captured). Where will value be created in a possible M2M ecosystem? It could be devices, but that’s unlikely as devices by themselves don’t solve user needs. It’s rather the services which will be the focal point (fed with data by said devices). Services might be closely tied to devices, or not. If you’re monitoring a jet engine, then they likely are. If you’ve monitoring pollution or traffic conditions with thousands of sensors owned by a community of people rather than a single organization, then the link is more tenuous. Services can include centralized software components in the cloud, APIs, device management systems or managed services (i.e. involving actual humans). If you think about services as a focal point for the ecosystem, then the diversity in devices might become less important, as well. The ecosystem winner(s) could emerge on another layer, like cloud services. What are your thoughts on the M2M ecosystem? Join the debate! – Stijn (@stijnschuermans) – Tsahi (@tsahil) #digitalecosystems #internetofthings #iot #m2m

What motivates developers? Is it fame or fortune? Our new Developer Segmentation 2013 report addresses this questions, presenting a needs-bases segmentation model that focuses on developer goals, not just demographics. Based on data from our latest Developer Economics survey (6,000 respondents from 115 countries), this article gives you some insights from the report, discussing how the sense of achievement, not money is the prime motivator for developers. Forward-thinking businesses today realise that developers are their innovation engine, their most promising affiliates, their evangelists or their fastest growing resellers. Businesses are discovering that developers are modern-day channels that help them reach new consumers, discover new use cases and propel their growth. The millions of dollars in developer marketing efforts serve one purpose: to persuade developers to use a specific platform, network, tool or API set. Yet, in 2013, mobile developer attention is becoming extremely scarce, and dominated by the three leaders of developer marketing: Apple, Google and Facebook. Competition for developer attention is intensifying month by month, with players bombarding developers with promotions, organising developer events and preaching the advantages of their APIs or toolsets. The scarcity of developer attention has to do not just with skepticism to marketing. Learning a new platform takes months. Learning a new SDK can take weeks. Learning a new API can take days. It’s a serious investment of resources. As a result, developers take the decision to invest in a platform, tool or API seriously. Most business are resorting to traditional, textbook marketing techniques to segment developers – by technology (web, Java, Windows, Android, Apple), job function (coders, designers, architects, team leads, IT managers, CxOs), by company size, app category (games vs enterprise developers), by audience (B2C vs B2B) or by demographics (age, income, education or location). Yet all these segmentation models are bound to fail, as they fundamentally neglect to address how developers make investment decisions in a new platform, API or SDK. In other words, it’s not age, job function, audience or technology background that influences how a developer chooses between Apple, Google, Windows Phone, BlackBerry or Tizen. To understand the complex mosaic of developer personas we segment developers in terms of their outcomes, or what developers are trying to achieve. This is based on the Jobs to Be Done methodology, popularized by Harvard Professor Clay Christensen and which constitutes today’s cutting edge in segmentation techniques. We have backed this model with unprecedented statistical rigor and hard data, from the largest-ever mobile developer survey of 6,000+ developers. Building on our earlier Developer Economics 2012 research work, we extracted hard data on thousands of developers in terms of their aspirations, motivations, challenges and plans in app development. We produced a unique model of eight developer segments – the Hobbyists, the Explorers, the Hunters, the Guns for Hire, the Product Extenders, the Digital Content Publishers, the Gold Seekers and the enterprise IT developers.] How do these eight segments and three clusters contribute to the app economy? More importantly, when do these segments interact with platforms? We find that Explorers and Hobbyists, those seeking to learn, have fun and self-improve, make up 33% of the mobile developer population but only 13% of the app economy revenues. These segments prefer – more than average – BlackBerry 10, Windows Phone as a platform, as these are more often associated with experimentation and learning. The Hunters and Guns for Hire, those seeking revenues from the app economy, make up 42% of the developer population and 48% of the app economy revenues. These segments prefer – more than average – iOS as a platform, due to the consistent revenue-generating opportunities of the platform. Product Extenders, Enterprise IT developers, Digital Content Publishers and Gold Seekers, aiming at extending a business, make up 29% of the developer population, and a whopping 39% of app economy revenues. These segments prefer – more than average – Android and HTML5 as a platform – due to the reach that these platforms offer across the entire smartphone and feature phone installed base. Our data also shows, that contrary to popular perception, money is not the only motivator for mobile app developers – in fact, far from it. Revenues – in some form or other – are the goal for only 50% of mobile developers, which challenges the assumptions of developer marketing programs that use money as the main developer incentive. The hierarchy of developer motivations on the next chart shows some surprising findings. At the base of the pyramid, the majority (53%) of mobile developers are motivated by creativity or the sense of achievement, making this the most popular among motivators. The fun of making an app, is a motivator for 40% of mobile developers – which is important to many more developer segments than just Hobbyists and Explorers. Our Developer Segmentation Q3 2013 report drills deep into each of these developer segments. We map developers in terms of their goals (“what” they are trying to achieve), their success metrics (“how” they are trying to achieve it) and more importantly the personal motivations behind their choices (the “why”). We further profile each segment across 5 dimensions: who and where they are, which markets they target, what choices they make, how they make money, what platforms they select and what challenges they face. These unique insights into developer segments can provide a strong competitive advantage for organisations for which developer outreach is a key element of their strategy. Want to know more about the Developer Segmentation 2013 report? Check out some of the key insights and contents. #developerneeds #developersegmentation

The evolution of the PC and mobile handset industry have been mirror images of each other, as both saw two distinct disruptions: a new market disruption, followed by a low-end disruption. Sameer Singh and Michael Vakulenko, VisionMobile Strategy Director explain how the shift from integrated companies to modular competitors will pressure hardware profit margins across the industry, leading to the emergence of a new business model, i.e. hardware-as-distribution The mobile handset industry has already seen two waves of disruption: A “new market disruption”, led by Apple, and a “low-cost disruption”, driven by Google and its Android platform. Each wave created distinctly different business models that completely realigned competitive dynamics in the industry. Where do we go from here? We believe that the coming, third wave of disruption will again reshuffle the deck for all industry players. We will see growth in a new class of business models, where handset hardware is no longer seen as a source of profits, but is treated as a distribution channel for digital products and services. Let us explain why this is the next natural step in the evolution of the mobile handset industry. Dual Disruption Patterns in Computing As industry observers are keenly aware, Android and iOS currently dominate the smartphone landscape in terms of shipments as well as developer mindshare. This duopoly is a result of two major disruptions that the mobile industry saw in rapid succession. The first was a “new market disruption”, caused by the iPhone, which introduced the paradigm of mobile computing. The second was a low-end disruption, caused by the Android operating system, which reduced barriers to entry to the smartphone market and caused deep commoditization. Clay Christensen defined a “new market disruption” as one that changes the basis of competition in the marketplace and initially competes against non-consumption. In the mobile industry, the iPhone brought the concept of mobile computing to the mainstream market and initially did not have much of an impact on incumbents. Over time, performance improvement enabled a wider range of tasks to be performed on the iPhone, which pulled in customers from competing legacy mobile platforms (such as Symbian, Blackberry, Windows Mobile, etc.) and personal computing platforms as well. In contrast with this dynamic, a “low-end disruption” takes root in low-end segments of an existing market which may be overserved. Improved technology enables new business models to emerge that are based on lower cost structures. Low-end disruptors with extendable business models then move up-market by offering “good enough” products at lower price points. The Android operating system was a classic “low-end disruption”, as it introduced a modular platform and ecosystem that allowed less experienced handset makers to build compelling products without major investment in software. Source: Jeremy Reimer, Arstechnica Curiously, this dual disruption pattern was also seen during the early days of the PC industry. Apple Computer caused the first “new market disruption” by introducing the personal computing paradigm, while the second, low-end disruption was caused by clones of the IBM PC, running Microsoft operating systems and productivity applications (for example, Compaq, Gateway, Olivetti, Dell, HP and later numerous Asian OEMs). Of course, the time frame between these disruptions and the resulting evolution was much longer in the PC industry. This was because mobile adoption was driven by the consumer market (“bottom-up” diffusion or “grass roots” adoption). In the PC industry, high acquisition costs ensured that adoption was driven by the enterprise market followed by smaller customers as costs reduced (“top-down” diffusion or “trickle down” adoption). Mark Andreessen explains the idea here. There are some very interesting patterns that emerge when we compare the evolution of business models in these two industries. The first disruption was created by a product that offered integrated hardware & software, while the second was caused by the introduction of a platform that removed entry barriers for OEMs and hence, increased competitive intensity and reduced margins on hardware. Let’s take a look at the evolution of computing business models from the perspective of value chains. Impact of Value Chain Integration on Business Model Evolution The chart above compares the evolution of business models and value chains in the personal computing and mobile computing industries. Underserved sections of the value chain need proprietary architectures or vertical integration to maximize performance, while modular architectures can provide more cost-effective solutions in overserved sections of the value chain. “New market disruptions” created product categories that faced early technological challenges, especially at the hardware & OS layers. In the PC days, Apple became the dominant (and most profitable) player in both industries, as it was integrated at those underserved layers. This was followed by the entry of modular players, led by Microsoft in PC and Google in mobile. The initial modular competitors were inferior to Apple’s integrated approach, but were relatively less expensive and were aimed at less demanding customers. As hardware performance improved, the industry began to get more crowded with the entry of IBM PC clones and low-cost smartphone vendors like Huawei, ZTE, etc. At this point, the focus began shifting to the next point in the value chain that was underserved, i.e. the applications/services layer. The reason that Microsoft was extremely successful is that it was vertically integrated across the operating system and applications layers. Similarly in mobile, Google has successfully integrated across the operating system (Android), browser (Chrome) and services layers. The clear pattern that emerges here is that profits should accrue to those companies that offer proprietary solutions at the layers of the value chain that are still underserved. Once the segment is overserved, price competition from inferior, modular competition proceeds to destroy margins. The impact of value chain evolution on profitability was very clear in the personal computing industry. According to McKinsey’s estimates, the share of industry profits captured by integrated computing companies dropped from 80% in 1986 to just 20% in 1991. During the same time frame, the suppliers of components, software & services increased their share of profits from 20% to 31%. The remaining 49% of value generated by the industry evaporated in the form of consumer savings. This “profit share” structure mirrors the current state of the mobile industry, where Apple and Samsung (the two most integrated hardware companies by most measures) have captured nearly all of the industry’s operating profits. Apple’s products are integrated from the software to the retail interface, whereas Samsung’s products are integrated across components and hardware. The industry balance will continue to change as the present-day leaders will see growing competition from companies with lower cost structures. Vendors like Huawei, Lenovo and various regional OEMs are already very strong in ”less demanding” markets (like India, China, Africa) and are highly motivated to move upmarket. The Third Disruption: Hardware as a Distribution Channel As there will be fewer profits left in the handset industry, a third wave of disruption is a certainty. In the PC industry, once the dominance of modular architectures led to deep commoditization, hardware just became a distribution channel for software (the operating system and applications). The evolution of the mobile handset industry works out slightly differently. Google essentially destroyed the software licensing business model by giving the Android operating system away for free. Consequently, the cost of owning a proprietary operating system became unviable for most players (like Motorola, Sony Ericsson or Nokia) because hardware margins became severely pressured. This ensured that industry focus and profitability would accrue to the next layer of the value chain that was underserved, i.e. Google’s core business – online services. In the PC industry, OEMs like Dell and Sony used the “hardware as distribution” approach to charge software vendors to pre-install applications on their devices and boost margins. In the mobile industry, we have seen already numerous companies follow this model to create a competitive advantage by leveraging established ecosystems. Many service companies like Baidu, Dropbox, Opera, Facebook and Whatsapp have attempted this strategy by partnering with OEMs to pre-install or use their services by default. Another variation of this strategy, followed by services and content companies, is selling relatively high-end hardware at cost, in order to enable deeper penetration of the company’s core services. Companies like Amazon and Xiaomi compete asymmetrically with true hardware vendors in order to expand their consumer base. Both strategies have been quite successful – Amazon has expanded Kindle Fire availability to numerous countries based on strong sales and Xiaomi expects to double its handset sales to 15 million this year. Many more services companies like Evernote and Spotify are contemplating the low-cost, “hardware as distribution” strategy in the future. We have already seen a smartphone called SmartNamo dedicated to an Indian politician, Narendra Modi. Will we see a “Justin Bieber phone”, “Shah Rukh Khan phone” or even a “Real Madrid phone”? Rapid commoditization will only make it easier for companies to convert hardware into a distribution channel. The tablet industry has seen more price competition than the smartphone market in the absence of carrier-driven price distortions. As a result, commoditization has been much more rapid and the “hardware as distribution” model has come to the forefront in a very narrow time frame. Low-cost tablet hardware has allowed companies like Newscorp to enter the industry with preloaded, education-focused content. We have seen similar models emerge in South Africa, India, China and many more countries. As price competition increases, commoditization pressure in the smartphone industry, variations of “hardware as distribution”, could become one of the primary drivers of profitability. The expected shift in handset business models will reshuffle the deck once again. Companies that catch the trend early will find plenty of opportunities to create competitive advantages and thrive in the new environment. Those who miss it will be destined to fight the losing battle of “competition to the best”, which Prof. Porter calls “the granddaddy of all strategy mistakes”. #mobilebusinessmodels #google #Apple #marketdisruption #handsetmarket