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[Which are the top app distribution channels for developers? Which platforms offer the highest revenue potential? In this part 2 of our 3-part Developer Economics blog series, Marketing Manager Matos Kapetanakis looks at how app stores have effectively re-written the distribution landscape] App Store Boulevard Since the launch of Apple’s App Store in 2008, developers found a market delivery channel that greatly reduced time-to-market and time-to-payment and provided a direct channel to consumers. The result: users started buying more and more smartphones, accessing app stores and downloading billions upon billions of apps. Today, app stores have become the a one-way street for developers. Over 45% of the respondents in our Developer Economics 2011 report used an app store as their primary route to the market, climbing nearly 30% since last year. At the same time, we found that the use of other distribution channels (own portal/website, 3rd party aggregators, via customers, Telco portals) has greatly decreased since last year’s research. The decline of traditional challenge comes as no big surprise; Telco portals, that once upon a time dominated content distribution in the US and Europe, have now lost their allure. “Downloads through operator portals are still less than one million per month on average per operator. Compare that to one billion per month downloads from the Apple App Store”, noted an executive at a mobile app development house who participated in our research. But why do developers choose app stores over other distribution channels? Reach is by far the most important reason behind developers’ preference for app stores as a distribution channel. More than 50% of developers distributing through the Apple, Google, Nokia or BlackBerry app stores cite the ability to sell to more users as the primary reason for app store selection. (also, see individual app store ratings in the full report) However, the use of app stores as a primary distribution platform varies greatly by platform. As we found in our research, the use of app stores is much more pronounced for platforms that have a native app store. As some of you will be quick to point out, Windows Mobile/Phone developers use their own portal/site to an almost equal extent as their platform’s native app store.  We attribute that to three factors: First, as we discussed in the previous post, Microsoft has tapped into two developers segments (Xbox, Silverlight), which are new to mobile. Second, the Windows Phone Marketplace is rapidly growing, but still lagging behind in terms of app volumes. Third, distributing through the Windows Marketplace has only become mandatory with Windows Phone. The app store duopoly Despite the many opportunities in this accelerating app economy, not all app stores enjoy the same level of success. Out of the 70+ app stores currently out there, only a handful have managed to emerge as winners. Out of those, the Apple App and Android Market are in a league of their own. Together, the Apple App Store and Android Market hold over 700 thousand apps, while their cumulative downloads are somewhere in the area of 20 billion. While other app stores have also enjoyed a level of success, this huge gap means we are in effect witnessing an app store duopoly. Theoretically, the most reasonable approach for developers would be to distribute their apps via multiple app stores. However, in practice, the app store landscape is far more fragmented than one might think; each app store has its own developer sign-up process, app submission process, artwork and paperwork requirements, app certification and approval criteria, revenue model options, payment terms, taxation and settlement terms. This implies that the marginal cost of distributing an application through one more app store is significant, contrary to popular perception. Plus, there are added entry costs to each platform, in the form of time and money spent. Some platforms have a steep learning curve (see full report for each platform’s learning curve), while others have expensive tools or poor documentation. Looking at Android, we see that more and more independent app stores, like Andspot, AndAppStore, SlideME and Amazon, are competing with Android Market for user attention and developer app submission. The same also applies to operator and OEM app stores. There is simply too much app store fragmentation. We believe that the app economy needs a single entry point for application submission (one per platform), along with a million distribution channels: – one app submission process, i.e., a single website, single contract, single approval process, single billing & settlement and a single mix of business models per platform – a million distribution channels, i.e., a million different channels through which to retail and sell apps to consumers with a variety of prices, promos, bundles, and regional access that help developers more effectively market their applications. App revenues and monetisation The single most important aspect of any business is monetisation. But, in this gold rush of apps, not everyone is making money. Around 30% of our respondents make less than $1,000 USD per application in total, which means they’re actually losing money, considering it takes months to develop an app and that some platforms have expensive tools. Which platforms have the largest revenue potential? Monetisation differs from platform to platform, with Symbian having the lowest revenue potential, as our research indicated. Taking Symbian as having a revenue index of 1, we can compare its revenue potential with other platforms. iOS topped the chart, making 3.3 times more money per app than Symbian developers followed by Java ME (2.7x) and BlackBerry (2.4x). Another interesting aspect is how the actual revenues compared to the expectations our respondents had. For example, while Java ME offers relatively high revenues per app, Java ME developers did not necessarily respond positively when we asked about their level of satisfaction with revenues (i.e. whether revenues were above or below their expectations). The previous graph is quite telling. The good news? One in three developers see the level of revenues they expected. The bad news? On average, there are five times more developers who are dissatisfied with their mobile application revenues than there are satisfied developers. To see the top revenue models, download the full report. The big picture What does it all mean? First and foremost, apps have irreversibly changed the way we discover, monetise and distribute content. Second, it’s not Android Market vs. the Apple App Store, but app stores as a whole that have become a one-way street for distributing apps, leaving Telcos, aggregators and OEMs in a diminished role as distribution channels. Third, monetisation may still be a pain point for a significant portion of the developer base, but at the same time 1,000s of companies are after commissioned iPhone or Android work and salaries are on the rise. One last note: We have yet to see the potential of handsets as app retail outlets, but we believe that OEMs will soon be leveraging on their potential to bundle apps anywhere on the handset real estate and to any region. And, as we know, there’s a higher profit margin in real-estate than in the manufacturing business. – Matos For more Developer Economics updates, follow us on Twitter (@visionmobile). …and for those of you who still haven’t done so, download a free copy of the Developer Economics report. #mobileapps #appleappstore #blackberryappworld #ovistore #androidmarket #mobiledeveloper #mobileapplications #appstores #windowsmarketplace

[Who is leading in the platform race – and who’s lagging behind? Marketing Manager Matos Kapetanakis examines the flow of developer mindshare and discusses how success is measured in the app era – in part 1 of our 3-part blog series on our newly released Developer Economics 2011 report.] Developer Economics 2011 – free download here – has been created by VisionMobile and sponsored by BlueVia. Developers driving innovation The role of mobile developers has changed dramatically over the past three years, from a lowly position as back-room engineers to the much-sought-after engine that drives mobile software innovation. Never before have developers, from big development houses to aspiring students to garage entrepreneurs, had such an enormous impact in mobile industry innovation and dynamics. Handset manufacturers, platform vendors and even network operators (or carriers to our American readers) are competing over who’s going to build the biggest developer community, as success today is measured in terms of thousands of apps and billions of downloads. Platform and OS vendors are the most active in this game, trying to steer developer mindshare towards their platform and create a new plateau of innovative services, as well as a whole ecosystem around them. So, which platforms lead the race and which are lagging behind? The platform race In the platform race for developer mindshare, there are some clear winners. According to our research, the developer mindshare is firmly flowing towards Android and iOS, with 67% of developers currently using Android and 59% using iOS. These figures show a considerable increase since last year, with the two platforms climbing nearly 10%. In contrast, the ‘old guard’ comprised of Java and Symbian are leaking developer mindshare. However, the most surprising finding is the adoption of mobile web, i.e. the platform for apps written in HTML or JavaScript, which claimed the 3rd spot in terms of developer mindshare, being used by over 55% of the developers. We do not attribute this to the ease of learning this platform (which has a deceptively steep learning curve, as you can see in the full report), but rather the influx of non-mobile developers to the industry. Also, mobile web is fast becoming the de-facto cross-platform choice for developers, especially now that Java and Flash are waning. In addition, there is a veritable host of HTML-to-native development tools that are helping HTML/JavaScript developers target smartphone native app markets. More on Developer Mindshare in the full report. It’s also worthwhile to take note of the Developer Intentshare, i.e. the platforms that developers are planning to use. Android still reigns supreme, but the surprise comes in the form of Windows Phone, which is fast becoming a developer favourite. Despite lukewarm sales in 4Q10 and 1Q11, the newly revamped Microsoft platform has managed to gain the vote of developers. This can be attributed to a number of reasons: First and foremost, Microsoft has actually released a competitive platform with a strong toolset. Also, the platform’s future seems bright, after the now-famous Finnish Deal. Finally, Microsoft has invested a lot of time (and money) into attracting developers, tapping into the Xbox and Silverlight developer communities to divert the flow of mindshare in their favour. The inclusion of Chrome OS in the top 5 platforms in Intentshare is more a result of curiosity for Google’s dark horse platform – how will it stack up to other platforms? MeeGo also seems to be vibrant, which goes to show that strong developer communities go a long way in this software era. In contrast, BlackBerry has lagged behind in Intentshare, suffering from fragmentation issues (see our full report for the surprising answer to which platforms are the most fragmented), as well as minor fixes to an aging platform. Who’s lagging behind in the platform race? Symbian and Java have suffered the biggest losses in terms of developer mindshare. Nearly 40% of developers currently using Symbian and 35% of developers currently using Java ME are planning to abandon the platforms. No surprises there, especially in the case of Symbian, which carries an expiration date, despite Nokia’s slow transition to the WP platform. Java’s loss of mindshare is less expected, especially considering the platform’s reach as global sales are still dominated by feature phones – but developers are not sticking around for that. Palm’s platforms are also being rapidly abandoned by developers, since Palm is all but dead and HP has still to ship its first webOS handset. What’s in a platform? How do developers make that all-important decision of which platform to select? Well, according to our research, the biggest driver in platform adoption is large market penetration – a sentiment shared by 50% of our respondents, irrespective of the platform they spend most of their time on. But what exactly is market penetration? A platform’s installed base is an important aspect – i.e. just how many actual handsets can run a given app – but that is not all. Penetration is also measured in terms of a platform’s ability to reach users and that is also a factor of how and where that content is available. – a centralised distribution and discovery point, such as an app store, accessible by mobile devices, tablets and PCs goes a long way towards providing developers with a direct access to their customers. Proving that there’s more to market penetration than a large installed base, we present the case of handsets sold vs. apps. There is a large discrepancy between the number of handsets sold and the number of apps available on a given platform. In an app economy with close to 1 billion [Update: million] apps, more than half of those are concentrated on two platforms: iOS and Android. It’s easily apparent from the graph that vastly more pervasive platforms in terms of total shipments, like S40 and Java claim just a fraction of the app pie. Granted, this is a smart-centric game, but even a pervasive smartphone platform like Symbian cannot much app to the two app moguls. Do apps mean money? Not directly, but it’s no coincidence that 2011 marks the first time Apple overtakes Microsoft in terms of revenues and Android rushes past the finally burned-out Symbian platform in terms of shipments. -Matos Want more Developer Economics? Follow us on Twitter (@visionmobile) for updates and stay tuned for part 2. And for those of you who still haven’t done so, don’t forget to download the full report! #meego #ios #flashlite #javame #mobiledevelopers #mobiledeveloper #symbian #Android #windowsphone #Blackberry

[HTML5 has been tipped to be a game-changer, with some predictiving it will take over most mobile platforms. But what is its real impact to the mobile industry? VisionMobile Research Director Andreas Constantinou evaluates HTML5 vs apps and what it means for the mobile industry as part of our newly released report – free copy here] Background: Web vs. apps In today’s world of apps, the web seems to have taken a seat in the back row. But many industry observers are predicting a comeback with HTML5 advancements, the proliferation of smartphones and ubiquitous backing by both telcos and Internet players. Is the web as we know it about to change? First things first: what is the web? Firstly, the web is a language for creating interactive, navigable content, which consists of three main parts: HTML (the language used to define the static text and images), CSS (the language defining styling and presentational elements) and JavaScript (the language describing the interactions and animations). Secondly, the web is a paradigm for open, unfettered access to content that is not controlled by any single entity. In the era where apps distribution is controlled by single vendors like Apple and Google, the web seems to challenge the status quo. There are many ways in which web pages differ from mobile apps today, as shown in the next table. From web 1.0 to the mobile web The web has gone through two major phases: Web 1.0 and Web 2.0. Web 1.0 was the era of the dumb terminals and static web pages. The first generation of the web assumed all intelligence was in the network; the device had to issue a simple request to fetch a page and then present it on the screen. Web 2.0 was is the era of smarter terminals and interactive pages. This second generation was designed around the ‘read-write web’ where the user is not just a consumer but also an editor, curator and producer of content. Web 2.0 helped create today’s phenomena of Wikipedia, Facebook, Twitter, blogs and nano-publishing. Despite starting off as an outsider to the web, the mobile industry has been rapidly catching up since the early WAP days. WebKit, the Apple-born browser engine is now the common ‘circuitry’ behind more than 500 million devices shipped to Q1 2011, by all major smartphone vendors. Opera, the mobile browser vendor, counts over 100 million monthly active users on its Mobile and Mini browsers. In the manufacturer camp, smartphones are expected to reach well into sub-$100 retail price points in 2011. In the operator camp, content delivery optimization solutions from the likes of ByteMobile, Openwave, and Ortiva Wireless are being deployed across tier-1 operators, facilitating efficient use of the network while browsing the web. Mobile industry initiatives such as the Wholesale Applications Community (WAC) are pushing the envelope for web applications (also known as widgets) while EU-funded initiatives like webinos aim to use the web as a medium for deploying applications across mobile, PC, TV and automotive screens. HTML5 as a technology change The hype surrounding HTML5 has peaked in 2011. HTML5 promises to push the capabilities of web applications to the point of making web apps as engaging as Flash applications and as integrated with the device as mobile applications. HTML5 introduces several technology improvements in these domains by adding off-line storage, 2D graphics capabilities, video/audio streaming, geo-location, access to the phone’s camera and sensors, as well as user interface tools. This next generation of web languages in the form of HTML5 is being standardized by the W3C and the WHAT working group who are driving forward web apps as equal citizens to mobile applications. The W3C consists of 51 member organizations, over 440 participants with strong backing from Google, Apple, Opera, IBM, Microsoft, and Mozilla. In parallel the WHAT working group is working closely with Mozilla, Opera and WebKit who are implementing and testing the latest browser features. Yet HTML5 is still work in progress and even standards bodies show fragmented approaches to HTML5 completion. The W3C expects official completion of the HTML5 set of standards in 2014. In parallel, WHAT has taken a different approach to completion and is now working on ‘HTML’ as a continually evolving set of specifications. Despite the adoption of the WebKit engine as a de-facto standard, HTML5 implementation on mobile devices is both fragmented and incomplete. Independent studies by quirksmode.org and NetBiscuits have shown that every mobile WebKit implementation is slightly different. In addition, the leading smartphone platforms show inadequate HTML5 support; iOS, BlackBerry OS and Android devices show partial HTML5 support (at best 2 our of 3 HTML5 features supported), while Symbian and Windows Phone devices are lagging further behind. Much like history has shown with the PC browser wars of the 1990’s and the Java ME fragmentation of the 2000’s, mobile browser fragmentation in 2010’s will be driven by the need to differentiate (’embrace and extend’), and the varying speeds among vendors in implementing the latest WebKit engine. What about HTML5 app stores? Already a number of start-ups such as OpenAppMkt, Openspace and Zeewe have proposed app stores focused on web apps. The key advantages of HTML5 app stores are cross-device portability and a buy-once-use- everywhere application model. Unfortunately, supply does not always imply demand; HTML5 app stores can’t deliver a business model change if demand is not there, for three reasons. Firstly, users care about availability of popular content (see Angry Birds, Skype and Facebook) most of which are not available as web apps often due to HTML technology limitations. Secondly, users care about choosing among hundreds of thousands of apps, which is currently a 2-horse race (Apple and Google) with the web lagging far behind in terms of number of apps. Thirdly, users are becoming loyal to their smartphone platform (Android, iOS or BlackBerry) where the native app store dominates. How to compete in a software world HTML5 introduces several technology innovations. However HTML5 remains a technology change that is not designed to solve discovery, distribution or monetisation problems – in other words it is not designed to change the business model. What *will* be changing the business model of the web are the innovations introduced in the apps economy – where content is created with semantic tagging (description, category, user ratings, etc), discovered via web stores (much like app stores), distributed within walled gardens (much like Facebook), and monetised through micro-payments (much like apps). We call this web 3.0 – and we expand on its implications in the full research paper. The question is: how can the mobile industry leverage on the web, and the native platforms that dominate the apps world?  The trick here is not to compete, but to leverage on the network effects of the Apple, Google and Microsoft platforms where handset OEMs or network operators can position themselves as a new generation of over-the-top players. For example, operators can act as the matchmakers between developers and end-users by helping developers get the right apps in front of the right users through techniques such as featured placements, social- graph-based recommendations and segment targeting. Similarly, handset OEMs can act as on-device retailers, connecting the developers to the right audience, in the right region, through white space across the handset real-estate. This is also where we believe WAC has the best chances of success but helping operators reposition as over-the-top players on top of the Android and Apple app stores – that is by helping developers reach out to users with ubiquitous billing, quality assurance, content curation, local content deals, privacy and security assurance, and help extend app stores away from the virtual and into the physical retail space. In parallel, network operators and handset OEMs can help push the web into a viable alternative for native platforms in many ways. They can push the development of WebKit towards better bandwidth management, and closer integration with hardware multimedia acceleration. Moreover, the mobile industry can sponsor the development of better cross-platform developer tools that allow HTML and JavaScript developers to target multiple native platforms and mass-market browsers. No matter how telecoms players decide to compete in the software world, they need to adopt ‘agile’ development methods and move at software speeds to catch-up the platform players in controlling the last mile to the consumer. One thing is certain; the future of connected web and devices is going to surprise us – much like how applications turned telecoms economics upside down. Like Bill Gates once famously said “we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten”. Web is going to be a game changer, but not in the way we expect it. Read our full report for more. – Andreas you should follow me on Twitter: @andreascon #mobileapps #network #html5 #mobileoperators #mobileweb #webkit #wac #handsetmanufacturers #mobileapplications

[The Netphone is a bold attempt by Smart Communications – one of the top 20 MNOs globally – to bring telco services to the mass market But will the Netphone’s blend of WAC and Android succeed?  Research Director Andreas Constantinou goes behind the scenes into the Netphone project to find out, as part of our latest case study, sponsored by Red Bend Software – click here for a free download] Smart Communications: sophisticated services in an unsophisticated market Smart Communications – the telco behind the first WAC phone – has over 50% market share in the Philippines with 46M wireless subscriptions, which puts them within the top-20 operators globally. Smart has a record of service innovation that is akin to what operators in North America and Europe have achieved in more developed markets. Smart has one of the widest service portfolios among global mobile operators, including mobile payments, mobile banking, money transfer, mobile streaming TV, maps, push email and propositions for niche segments (e.g. MomsClub). Data services currently make up just over 50% of Smart revenues, as of Q1 2011, with the majority coming from the one billion SMS texts being sent each day. Smart Money, a service that allows users to pay for goods by transferring money from their bank account, was launched in 2001, and counts more than 8.5 million customers. However, like many operators in developing economies, Smart is in a low-ARPU, pre-paid market. Some 99% of Smart subscriptions are pre-paid, with the blended, pre-paid ARPU reported at just 169 pesos ($3.9 USD) in Q1 2011. Faced with decreasing ARPU in a competitive market, Smart has embarked on a handset-led strategy to increase its revenues by bringing over-the-top services to the mass market of pre-paid customers. An Introduction to Netphone: The first WAC phone The Smart Netphone presents a new series of mobile phones and tablets developed by Smart, aimed at bringing smart devices and services to the mass market. The first device – expected to launch in July, 2011 – is a rebranded, revamped ZTE Blade. This is the same handset that has been rebranded by Orange UK as the San Francisco and priced at 99 GBP (around $160) without contract, and not dissimilar to the Vodafone Smart handset by Huawei priced at 90 EUR (around $130). Although Smart has not announced pricing, we expect its Netphones to target image-conscious, affluent Filipinos willing to spend an estimated $120-$140. The Netphone comes with a suite of widget-like applications on the phone’s home screen that provide access to Smart and partner services: – Balance Check for prepaid users, which comprise 99% of Smart’s subscription base – Unified Chat, allowing users to message their contacts with emoticons and video animations. Chat integrates with Yahoo Messenger and Facebook – Sender Pays Email, which follows the SMS cost paradigm, but adds richer emoticons and video expressions to the messages – Connected Address Book, which integrates the user’s address book with Gmail and Facebook contacts – Global Directory, which integrates local Yellow Pages, and lists all users who use the Netphone (subject to privacy settings) – Social radio, which lets users share an FM station with a friend and tune into it in parallel – Smart Money, a service that allows users to pay for goods directly from their bank account or credit card – Emergency app, which offers one button calling to a doctor or other contact that can be assigned by the user – Partner apps like Jollibee (the number one fast-food chain in the Philippines), which allows users to browse the food menu, check out special offers, and order and pay for food delivery, directly from their phone. Behind the scenes: the making of Netphone The Netphone is not just an experiment for Smart. It represents a major effort for the operator, with a team 300 staff developing the phone series over the last 18 months, together with an array of tens of partners across six countries. As a phone series, the Netphone hits several firsts: it’s the first phone to be based on WAC widget specifications (see next section); it’s the first fully customized handset from a mobile operator in an emerging economy; and, along with the Orange San Francisco and Vodafone Smart, it’s one of the first attempts to sell smartphones to prepaid users. The Netphone has been designed with tangible revenue goals. Besides increasing own service revenues for Smart, the Netphone generates revenues by enabling partner transactions. For example, Smart gets a percentage of the revenue from every Jollibee fast food delivery transaction. Smart lined up several partners to realize the Netphone concept, including ZTE and Huawei (handsets), Qualcomm (Android chipset platform), IBM, Oracle, Huawei (back-end integration) and Red Bend Software (software management over the air). According to Smart, a key design decision has been using a software update technology that allows the Netphone platform and applications to be updated continually over the air (OTA). With the OTA update technology, Smart can minimize the runtime age of the WAC-based platform runtime, ensuring that its Netphone applications run on the latest version of the platform. This addresses a common challenge faced by mobile application developers, who must port new applications to older runtimes. For example, about 25% of active Android handsets run on platform versions that are more than 18 months out of date, according to Google data released in May 2011. Similarly, 20% of existing Apple 3GS devices had not yet been upgraded to the latest platform version two months after the introduction of iOS4, according to app analytics firm Localytics. Building on WAC technology The Netphone series includes the first phones based on specifications defined by the Wholesale Applications Community (WAC). Launched in February 2010, WAC is a cross-operator initiative aiming to develop a cross-device platform and app store framework to drive operator services. Since its foundation, WAC has amassed 34 operator members and 39 other partners, bringing in a total of over $10 million in annual funding. Smart has a seat on the board of directors of WAC, alongside Vodafone, AT&T, China Mobile, NTT DoCoMo and other major telcos. The Netphone represents an important breakthrough for an industry initiative that has been criticized for its slow device rollout. For Smart, WAC represents an industry-endorsed software platform on top of which its partners can build HTML-based applications (also known as widgets). Moreover, widgets are familiar to a broad base of web developers, who are accustomed to HTML or JavaScript development. On top of the WAC widget specifications, Smart has layered its Looking Glass, a device and network technology umbrella that implements the array of Smart services on the Netphone. On the device side, Looking Glass includes technology that WAC does not yet cover, such as over-the-air software updating (based on OMA DM SCOMO standard) and additional access into device capabilities like FM radio. On the network side, the Looking Glass technology umbrella provides access into Smart’s services, such as connected address book, advanced messaging, email integration, location-based services and Smart Money. Smart’s network APIs extend the GSMA One API specifications by adding XMPP for advanced messaging, billing & payment, and SIM-encrypted (DUKPT) transactions. The agile telco: What other operators can learn from Smart Many telcos have ventured into the world of handset software to deliver their own services and differentiated user experience. The most well-known examples are Vodafone (Live!, VFX, VSCL, 360), Orange, Verizon and, of course, DoCoMo. Smart also has had a tradition of developing services in-house, including Smart Money and its own airtime pre-loading solution. Yet, Smart has taken a different approach from most operators. That approach offers three important lessons for the operator community. Short tail. First, rather than deploying own-brand services exclusively, the operator has focused squarely on business partners with established consumer brands. It has allowed brands to deliver local consumer differentiation, and to share revenue on transactions. In so doing, it has provided brands with an additional channel to consumers. Agile development. Second, the operator has used an agile development process. Rather than set specifications in stone at the beginning of the project, Smart’s featured Netphone applications have been iterating continually through a cycle of development, testing and user feedback. Moreover, rather than use the traditional RFI/RFQ ‘waterfall’ software procurement process, Smart has established joint operational and R&D teams with its many suppliers for Netphone, and has adapted the software specifications during the course of the Netphone project. The project has already cycled through four iterations, averaging once every 3 months. Another iteration is planned before launch. “An RFP or waterfall development process clearly wouldn’t work here,” comments Ibasco, who has been a key proponent of the Netphone project since its inception. Ongoing updates. Third, the over-the-air software update mechanism allows Smart to deploy new features and updates throughout the lifetime of the device. It also allows Smart to extend its addressable market for new services to the entire base of deployed Netphones, not just the most recent line-up of handsets shipped. The future of the Netphone Initial rollout goals are modest, with Smart planning to sell 200,000 Netphones by the end of 2011. Assuming Smart can hit sub-$100 price points in early 2012, it has a chance to rapidly ramp up these volumes, and address a substantial portion of its 46M subscriptions base. For now, the operator community is looking at the Smart initiative with anticipation; Netphone marks the latest telco attempt at innovating in the era of software, by building on both the telco (WAC) and software (Android) worlds. Read the full case study and tell us what you think. – Andreas #redbend #smartphone #wac

[There’s 10s of telco programs targeting developers. But they all lack commercial traction. Isn’t it about time for telcos to question their approach? Guest author Jose Valles argues for a ‘polarity change’ in the telco business model and discusses the need to rethink the telcos’ relationship with developers.] In life, we tend to take many things for granted; the Sun will rise and set every day and a compass will always point North. But we mustn’t forget that things do not, and in some cases should not, remain constant. The Earth’s magnetic poles are known to reverse their polarity every few hundred thousand years and then, the compass no longer points North, but South. In business, we also need to question assumptions and remember that things do change. In the mobile industry, telcos (mobile network operators) have been around for over 20 years – many many generations in telco speak – but their relationship with developers has always been lukewarm at best ; telco APIs haven’t seen any significant take-up by developers. What telcos need to do is to fundamentally question their assumptions about the software world and change their business model towards developers – in other words change the ‘polarity’ of their business model. Here’s why: Some historical context It is widely accepted that telcos desperately need developers; in today’s app economy, developers are a key source of innovation. If telcos want to capture value and innovation, they need to capture developer mindshare. In the past 5 years, we have seen 10s of telco developer programs launch with different end-goals and flavours but with the same result: lack of commercial traction. Why have so many telco investments failed to see significant developer adoption? Failure is not such a bad thing, provided we can understand what went wrong and how we should fix it. I would argue that most telco API programs have lacked two key ingredients; the lack of web mentality and a developer-centric business model. The Web mentality If you go to www.programmableweb.com, you can find thousands of APIs that allow developers to enhance their software and mobile apps with functionality coming from third party businesses. Functionality ranging from Google maps and eBay purchases to Tesco grocery lists, New York Times articles and pizza ordering can be accessed through cloud APIs. For a developer, this is an unprecedented source of content for their apps. How do businesses like eBay, Tesco or NYT make it appealing to developers to use their APIs? How does the web world attract developers? It’s the business model; in the web world APIs are often free (or freemium) so that developers don’t need to worry about upfront costs. It’s about ease-of-use; they’re also plug-and-play so that developers can experiment with functionality and see how it works. It’s also about adaptability; web businesses also adapt and change their APIs based on how developers use them. That sounds easy. But what about telcos? The telco mentality: the developer pays If you go to any of the telco API programs that are out there and check their SMS API specifications, the first thing you will come across is the PRICE LIST. Well, that may work if you have a strong developer brand or if the attractiveness of your APIs are top-notch but, honestly, that’s not the case with telcos. Developers dislike telcos – and I can say that working for a telco. We telcos don’t have a good reputation in the developer space. And what do we telcos do?  We charge developers! That’s not a developer proposition; it’s a wholesale mentality. And how do telcos think we are going to be able to compete in this space when much more agile voice application platforms like Twilio, Teleku, Jaduka or Vivox get fremium pricing and technology right? The business model polarity change If telcos are to grab developer attention, we need to see developers not as wholesalers – that is not a source of revenue but as the missing link between customers and telco services. When developers drive traffic or service usage we need not charge them, we need to thank them. And we need to charge not developers but end customers. We need to let developers focus on finding new ways to innovate with apps using telco capacities, not to worry about whether they have enough cash flow. In other words, we telcos need to change our business model polarity; rather than using a “developer-pays” model, we need to move to a “customer-pays” model. If developers create apps that use telco APIs, they drive traffic or usage which benefit both the user and the telco. It’s not the developer that needs to pay – it’s the user. Consider this; a developer builds an SMS-to-Twitter service; the user sends a new tweet by as a text to a shortcode. The reply, an SMS back to the user, is then paid by the developer. The developer is penalised for generating traffic to the network. This is the “developer pays” model and it doesn’t work. In the “consumer pays” model, a single API allows the user to pay for both outgoing and return SMSes in one shot and the developer gets to use the API for free. The developer can focus on building a viral service and won’t have to worry about success costs. This is a fundamental polarity change; instead of the developer paying for access to network resources, the consumer pays, and the network benefits from increased messaging revenues. APIs like SMS or voice can also be exposed under both polarities. In this case, the developer can choose if they want to use SMS or voice APIs in a developer-pays or customer-pays polarity, depending on the nature of their app or service. Winning with developers We telcos need to experiment with business models. We need to learn from how developers adopt and use APIs and pivot our business model until we get to a proposition that’s truly win-win for both developers and telcos. As the Earth’s magnetic poles shift naturally, telcos also need to question assumptions. We need to reverse the business model polarity for telco APIs in tune with the web and look for new ways to attract developer talent and new ways to satisfy customer needs. We need to fundamentally change the developer perception towards telcos if we are to succeed in helping telcos capture a share of the innovation out there. – Jose Valles Head of BlueVia @josevalles49 [Jose has been working for over 10 years in different parts of Telefonica. Since 2009, Jose has been building a concept under the working name “Open Telefonica”, which ended up bringing BlueVia to life. The BlueVia business model does not just make APIs free, but it also pays the developer. “If developers use our APIs, we pay them back for the usage”. Check it out.] #networkapis #mobiledevelopers #mobileoperators #carriers #mobiledeveloper #networkoperators

[Is telco voice innovation dead? Or will smartphones and LTE deliver a much wider breadth of voice applications? Guest author Dean Bubley argues that ‘voice’ is about to experience several discontinuities as it goes beyond  our limited notion of ‘telephony’.] Telecom operators are facing a huge problem: in developed markets, we are close to the point of “Peak Telephony” – or maybe even past it already. Peak Telephony – inspired by the notion of reaching “Peak Oil” production – refers to the point after which voice revenues will face terminal decline. Already the traditional fixed and mobile telecoms industry is potentially facing a bleak outlook as call volumes stagnate and prices are eroded. While fixed operators have long recognised the threat to their core telephony business, mobile networks are now also facing the inevitable as well. Globally, over 70% of wireless operators’ revenues still comes from voice services and SMS, so this is an existential threat – one which threatens profound change to business models and even extinction of some operators as we know them today. To an extent, many older telcos had a ten-year extension granted to them by the rise of mass-market mobile services. These appeared at exactly the right point, just as fixed voice prices (especially long-distance) started suffering the competitive onslaught from early VoIP players. But at a group level, declines in fixed-line profits were offset by the rise in mobile. The inherent value of mobility, and the convenience of handsets loaded with easy contact-lists and call-registers, postponed the onset of saturation and substitution. But now, finally, a combination of Moore’s Law, devices and the Internet are catching up – mobile voice is about to experience several discontinuities and radical change in coming years. The limitations of “distant voice” For the past 100 years, we have pretty much only had three ways to communicate over long distance between people: letters, telegraph and telephone (from the Greek words for ‘distant sound’). The traditional phone call has been wonderfully transformative and yet, at the same time, very limiting – even in mobile guise. It has enabled revolutions in both commerce and society greater than virtually any other invention since the wheel and printing press. But phone calls do not correspond to the way humans really communicate with each other. We don’t generally think of conversations as “sessions”, or measure their value in terms of their length. In essence, we have surrendered our natural modes of communication to the restrictions of telephony. We have boiled down “distant voice” interactions into Person A calling Person B for X minutes, via numbered identifiers. Compare that to the more normal style of “close voice” of dropping in and out of conversation, with interruptions, breaks in the flow, background tasks, simultaneous interactions with other people and so forth – using our names. Normal in-person conversation is enhanced by non-verbal communications, physical context and a multiplicity of other factors. We use a broad range of volume levels, tonal frequencies and gesticulation. Some conversations are synchronous, some asynchronous – people talking over each other, or speaking in turn, perhaps based on relative authority or another social construct. Some are unique to the specific two people or particular cultures, others are generally accepted universally. In a crowded room, we might hear snippets of other conversations, by chance or deliberately, through eavesdropping. The phone call has been an excellent lowest-common denominator baseline for “distant voice”. Telecom operators have profited immensely from its enablement, especially with the enhancements of mobility and the “wrapper” of a cellphone and its user interface. But in doing so, they have provided us with a single speech product that is intended to span myriad use cases and social/business needs. Only a few other distant-voice technologies have emerged to address niches: push-to-talk, voice messaging, walkie-talkies, CB radio and private radio systems addressing fringe-cases such as taxi dispatch or public safety services. But now, the landscape is shifting. The combination of smartphone platforms, thriving developer ecosystems, smartphones, PCs and the Internet have enabled new communications formats to evolve. These formats can map much better onto natural human communications preferences. We no longer need to constrain our innate ways of interacting, because of the constraints of a piece of wire (or air) and a switch. We can “politely interrupt” with a soft alert or IM before escalating to a call, locate team-mates in virtual worlds with stereo cues, or interact directly with a voicemail for simple tasks, rather than calling back. We already have in-game voice chat between players, remote baby monitors, always-on voice telepresence, audio surveillance and all sorts of other voice applications which really are not calls, as such. Numerous other voice communication modes are evolving, especially those linked to social and messaging applications. In a nutshell, we no longer need to shoehorn all of our “distant voice” communications needs into the unnatural format of a “phone call”. We are able to visualise, contextualise, obfuscate, interrupt, lie, drop in and out, waffle, multi-task, spy, listen, store, mumble, overhear, translate, declaim, announce and recall speech over a network in many, many different ways. Not only that, but the supply of basic “phone calling” functionality has grown much faster than demand. If we do want to make a traditional A-B for X minutes call, we have many modern variants on the theme of a “piece of wire and switch”, now over mobile networks as well as fixed lines. It’s not that hard to do. Sure, numbering is a constraint, and ultimate quality may be a limit – but that is quality measured against the yardstick of the “telephony application”, and not a more general measurement of social communications. We don’t really complain about the QoS of speech in a noisy pub – or pay extra for a quieter venue. Will LTE voice be “old telephony” again… or something new? But the final kicker is the imminence of a major transition point – the adoption of LTE and all-IP mobile networks which are not yet optimised for telephony. Although various initiatives – notably the GSMA’s VoLTE (Voice over LTE) specifications – are developing carrier-grade LTE telephony, the likelihood is that it will take several years to get to the quality, reliability, scalability and cost/power performance of today’s basic GSM. 4G networks have not really been designed with voice in mind – or viewed more cynically, it has always been “someone else’s problem” to solve. Nobody yet knows what happens when we have 1,000 mobile VoIP users in a cell, moving around, handing off to other cells, causing interference, audio glitches and so forth. Experience from fixed VoIP suggests that tuning networks to mass-market perfection takes a very long time, and it seems unlikely that the extra variables of RF and mobility will make the task easier. This implies that smartphones on LTE networks – and, by extension, 3G networks as well – risk creating a vacuum, which could well be filled by other “non-telephony” voice applications, while we wait for “plain vanilla mobile calling” to catch up to the realities of wireless IP. The telecoms standards and market representation bodies (3GPP, GSMA and others) have made little effort to diversify efforts into the more generic “distant sound” world, instead focusing on replicating what we have today. Much-trumpeted enhancements such as “HD” (high-definition) codecs go only a tiny distance towards the more complex human-interaction models discussed above. There is an argument that plain-old telephony (fixed or mobile) can be packaged up and “distributed” through various new “delivery” channels. Linked to the Web and appropriate call-control APIs, many operators are hoping to create new “cloud communications” platforms. But it is unclear whether the underlying telephony control mechanisms and the “session philosophy” of calling really represent the best possible basic ingredient. Add in the usual rigid telco attitudes towards numbering, security, pricing and specific acoustic mechanisms and it seems unlikely that telco-powered telephony will be the best way of creating all of the new “distant voice” applications that will emerge. Filling the voice innovation gap What will fill the gap, becoming the platform(s) of choice for the plethora of innovative voice apps and services? It is still too early to tell. It could be some of the larger VoIP incumbents such as Skype or Google, or an established software-client provider like CounterPath. But it could also be one of the new breed of speech-centric application developers such as Viber, Vivox or RebelVox. Major carrier-voice infrastructure vendors such as Cisco, Sonus, Acme Packet and Broadsoft also have roles to play, with some attempting to become more open platforms – although with an eye to their traditional operator customer base. From a handset standpoint, things are likely to get quite complex. Ordinary phone calls are not going to disappear – but we will start to see multiple voice applications present on each device. This is already happening with Skype and GVoice apps, but looking further ahead, more fragmentation is probable. This will present huge challenges for UI and “contact” applications, as well as a debate about which voice and audio/acoustic components are best installed in the OS, on the baseband or apps processors, in individual apps or even in dedicated audio chips. One thing is certain however; making a clear and careful distinction between “voice” and “telephony” is a critical starting point for understanding the landscape. Telephony is what telcos do today. It’s a closely-defined service, subject to rules and regulations, and billed in a structured way. But increasingly, general voice applications will go beyond homogeneous “calls” – for example, chat between players of an online game. This will require new business models, new platforms, and new forms of user interaction. How the traditional telephony industry deals with these new voice innovations will be fascinating to watch. – Dean Dean Bubley is the founder of research company Disruptive Analysis. He is currently developing a programme of “Future of Voice” master-classes together with communications industry visionary Martin Geddes. Dean can be reached at AT disruptive-analysis DOT com. #volte #pushtotalk #voip #voice #skype #vivox #carriers #innovation #lte #mobile

[Growing competition and price pressures push handset makers to seek new ways to differentiate. This increasingly means services. VisionMobile Research Partner Michael Vakulenko compares service offerings of leading handset makers, explaining why OEMs will struggle to create meaningful differentiation through services.] Remember the Motorola RAZR or the Nokia N95? Long gone are the days when handset hardware was fertile ground for innovation and differentiation. Convergence of device form-factors and equal access to advanced chipset technology pushes the handset market to the brink of deep commoditization. Focus on smartphones can only provide short-term life support for deteriorating margins. Android opened the floodgates to low-cost assemblers to compete in the smartphone market. Aggressive new-comers, like ZTE, Huawei, Acer and Dell, along with a growing list of previously unknown handset manufacturers, push incumbents deeper and deeper into the commoditisation corner. Differentiation based on services increasingly looks like an attractive solution for many handset OEMs. Services, services, services Let’s look at how service offerings of leading handset OEMs stack up against each other. Nokia, Samsung, Apple, RIM, HTC, Motorola and Sony Ericsson (in no particular order) all have service ambitions and will be the subjects of the comparison. State-of-the-art service offerings go far beyond much-hyped application stores. We ‘ll dig into the following service categories: – Content retailing services: App stores, music, premium video and billing. – Cloud services: Cloud-based contact book, cloud synchronization/backup, and device management (i.e. location tracking and remote lock). – Communication services: Email services (e.g. gmail.com, me.com or nokia.com), instant messaging and video conferencing services – Location-based services: Maps and navigation – Advertising: Ownership of an ad network, display ads, multimedia ads and location-based ads. Since many of the OEMs use Google Android and Windows Phone 7 platforms, we ‘ll also compare OEM service offerings with the ‘native’ services of the platforms. The table below compares service offerings of different OEMs, as well as smartphone platforms across the above service categories. The Leader: Apple Apple, as usual, is in a league of its own. Apple has an extensive set of services anchored in the well-oiled iTunes content machine and MobileMe cloud services. One glaring omission is location-based services. For now, Apple has to rely on an uncomfortable partnership with Google Maps. There are persistent rumors that Apple develops its own location and mapping services (here and here). We can expect that sooner or later Apple will find its way out of its dependency on Google Maps, launching its own location-based services. Challengers: Nokia, RIM The next group of companies are the challengers – Nokia and RIM. Both use integrated models similar to Apple’s, combining proprietary software platforms with proprietary hardware (for now I will ignore the big unknowns of the partnership between Nokia and Microsoft). Nokia has a comprehensive service portfolio, even compared to Apple. It ranges from the quintessential app store and music service all the way to location-based services and its own ad network. However, Nokia’s execution was weak and the future of Nokia’s services is up in the air following announced the partnership with Microsoft. In contrast, RIM has a sketchy service portfolio, focused on its best-in-class messaging services. These include push-email, the BlackBerry Enterprise Server (BES) and the BlackBerry Messenger (BBM), in addition to the mandatory app store. It looks like RIM continues to focus on hardware and its new QNX operating system. For now, service-based innovation outside messaging takes a back seat for the BlackBerry platform. Wannabes: Samsung, HTC, Sony-Ericsson and Motorola Finally, Samsung, HTC, Sony-Ericsson and Motorola are OEMs building smartphones based on the Android and, in some cases, Windows Phone software platforms (Samsung also owns the bada software platform). While Motorola is strong in cloud services with its MOTOBLUR service, Samsung leads the way in content. The Samsung offer includes music downloads and movie services, bundled with the popular line of Galaxy smartphones and tablets. Due to the licensing terms of content owners, content services have a limited geographical footprint, being available only in North America and Europe. Overall, the services offering is very mixed for these vendors with piecemeal solutions mostly focused on content and cloud sync services. Platforms: Android and Windows Phone Unsurprisingly, Android and Windows Phone offer a comprehensive set of ‘native’ services across all service categories. Google Android is weak in content services compared to Apple and even Windows Phone, but compensates with leading-edge location-based services and a comprehensive ad offering. Windows Phone ‘native’ services leverage Microsoft’s Bing, Live, Zune and Xbox assets having millions of active users. These ‘native’ services form the basis for platform differentiation and user value proposition for both platforms. OEMs will struggle to make impact with services Out of these handset OEMs, only Apple and Nokia come close to the breadth and scale of service offerings provided by platform vendors. It’s really difficult to see how Samsung, HTC, Sony Ericsson and Motorola can create highly differentiating services on the Android or Windows Phone platforms. For them, services will not become a solution for the upcoming wave of commoditization. Dependency on 3rd party software platforms, lack of scale for making meaningful content deals, conflict of interests with operators and incompatible company DNA will make it extremely difficult for handset OEMs to make an impact with services. In the words of Nokia’s CEO “Devices are not enough anymore”. No, this quote was not one of Stephen Elop’s, taken from the recent “burning platform” memo – it comes from a speechmadebackin 2007, by then NokiaCEO,Olli–PekkaKallasvuo. Nokia realized early that services will play a critical role in handset value proposition. The Finnish OEM has tried hard to reinvent itself and become a hardware+services company. The rest is history. Nokia found it nearly impossible to reconcile the DNA of a hardware company, which “lives” by device release cycles, with the DNA of a service company that “lives” by developing long term relationships with users, developers and partner ecosystems. If Nokia failed to do so with their vast resources and enviable volume leadership, what are the chances that Samsung, HTC, Sony Ericsson or Motorola will manage it? – Michael Connect with us on Twitter for more updates [Michael Vakulenko is a Research Partner at VisionMobile. He has been working in the mobile industry for over 16 years, starting his career in wireless in Qualcomm. Michael has a broad experience across many aspects of the mobile industry, including smartphone ecosystems, mobile services, handset software, wireless chipsets and network infrastructure. He can be reached at michael [/at/] visionmobile.com] #htc #location #rim #nokia #Apple #softwareplatforms #motorola #sonyericsson #Android #Blackberry #handsetmanufacturers #samsung

[2010 was a year of upsets in the mobile industry, as the league of top 5 handset manufacturers saw the inclusion of pure smartphone vendors (Apple and RIM) for the first time. As the rate of smartphone penetration accelerates, Marketing Manager Matos Kapetanakis takes a closer look at the winners and losers of 2010 as part of the latest 100 Million Club]. Welcome to the H2 2010 edition of the 100 Million Club, our semi-annual watchlist tracking mobile software embedded on more than 100 million devices. Click here to download the full watchlist. Key Highlights – WebKit continues to grow, fueled by the accelerated rate of smartphone penetration. Up to the end of 2010, WebKit-based browsers had been shipped in more than half a billion handsets – While smartphone penetration has increased to more than 20% in 2010 globally, featurephones continue to dominate the industry. Indicatively, S40 shipments were almost equal to total smartphone shipments. –  In 2010, Android raced past iPhone’s iOS and BlackBerry, almost reaching Symbian’s shipments despite Nokia’s smartphone woes. While Nokia will undoubtedly push up Microsoft’s mobile market share in the future, we’ll continue seeing Symbian in the smartphone OS top-5 for another year. – Total handset shipments for the second half of 2010 were 780 million, a 25% increase over the first half. A handful of software products, like vRapid Mobile by Red Bend and CAPS by Scalado, managed to tap a sizable portion of this figure, having more than 500 million shipments in H2 2010 alone. – Myriad Group is now the only company to have 3 products with more than 100 million shipments, after Nuance merged two products into one, with T9/XT9/T9Trace. With the products combined, cumulative shipments have reached a staggering 10.5B shipments. Winners and losers: changes in the OEM landscape Who were the winners and losers in 2010? In terms of handset OEMs, we have two clear losers – Sony Ericsson and Motorola have been seeing declining market share for some time now, but 2010 marks the first time that these two traditionally dominant players were toppled from the top 5 leaderboard by pure-smartphone players RIM and Apple (see our latest infographic for more details). At the same time, LG just managed to stave off competition, but without achieving a growth in shipments. Samsung, on the other hand, has effortlessly held its position as the number two handset OEM, having been the most aggressive incumbent OEM in ramping up smartphone shipments. ZTE is the one piece of the OEM puzzle that doesn’t fit. Some estimates place the Chinese company near the bottom of the barrel, while others feature ZTE in a prominent position in the top 5 OEM leaderboard. These upsets in the OEM landscape form the foundation for the OS race in 2011 in both feature phones and smartphones. Feature phones made up nearly 80% of all mobile shipments during 2010. While it’s true that smartphone penetration has accelerated this past year, the days where every phone will be a smartphone are still far. The next chart clearly shows that feature phones are still the driving force for the mobile industry in terms of shipments. However, revenues and profits are an altogether different matter (see slides 8-9 in our Mobile Megatrends 2011 report). If combined, media-favorites iOS and Android barely account for 10% of the total shipments for 2010, which are roughly half the shipments of the lowly S40 OS. Samsung’s strong sales through 2010 have helped the company maintain a sizable piece of both the handset and OS pie. The OS Arena – Smartphones But what about smartphones? Which were the dominant OEMs and OSs in 2010? As always, Nokia has the lion’s share. As a smartphone vendor Nokia claimed more than 34% of shipments for 2010, while RIM and Apple, managed to get around 16% each. The above diagram also shows how Samsung has maintained its lead over immediate competitors, with their smartphone shipments equaling those of Motorola, Sony Ericsson and LG combined. Samsung’s lead in this race of the ‘old OEM generation’ is thanks to reacting very fast to ramping market demand and delivering a highly sought after product; Samsung sold more than 10 million Galaxy S smartphones in 2010 in just 7 months, a figure that exceeds the total smartphone shipments of some of Samsung’s competitors. So, what does it all mean for our favourite smartphone OSs? Symbian. Dead, you say? That might be the case in terms of developer interest and Nokia’s R&D expenditure, but the current smartphone leader has yet a lot of shipments left in it. Perhaps not 150M shipments, as stated by Nokia CEO Stephen Elop, but a committed handset roadmap can’t change overnight which means that Nokia will continue shipping Symbian smartphones well into 2012, well after their much-discussed WP7 devices start coming out. While the Verizon deal has not boosted iPhone sales as much as expected, the operator has the potential to tip the balance of the smartphone scales in the US. The question remains whether the Verizon handsets will cannibalise iPhone sales from AT&T, rather than generating new ones, but that should be little cause for concern. Apple has enjoyed a steady growth in shipments over the past couple of years and that, coupled with an accelerated smartphone penetration rate, should ensure that iPhone sales continue to enjoy a healthy increase. Furthermore, there are indications that the iPhone is starting to replace BlackBerry phones as the ‘executive handset’ and could start growing in that segment as well. This is Apple’s ‘blitzkrieg’ tactics at work, advancing on a market segment not just with a platform, but a thriving ecosystem of app developers and content publishers. The realization of this might be one of the driving factors behind RIM’s sudden adoption of Java and Android apps for its admittedly hurried Playbook release. The biggest smartphone OS surprise has of course been Android. Growing by 100% QoQ for the first three quarters of 2010, the Google operating system shows no signs of slowing down. The biggest contributors to Android’s success have been HTC and Samsung, with Sony Ericsson, Motorola and, to a lesser extent, completing the top 5 contributors. HTC has enjoyed steady growth in smartphone shipments, mainly concentrating on their Android vs. the Windows line. With 60M smartphone shipments forecasted in 2011, HTC seems poised to drive Android sales once again. Samsung will also continue to grow in terms of smartphone shipments, capitalizing on their Galaxy series success. But what of Sony Ericsson, Motorola and LG? These vendors are losing market share, with the latter two having already lost their prestigious position in the top 5 leaderboard. With more OEMs adopting Android (ZTE announced 3 new Android phones at MWC), the Android map still has a lot of surprises in store. The battle of ecosystems and BOMs The demand for smartphones continues to rise, driven by mobile operators and handset manufacturers both of which need to remain competitive and differentiate. In 2011 the share of smartphones and the OEM competitive landscape will be determined by 3 fundamental factors: ecosystems, services and price points. – Price points. Firstly, hardware BOM (bill of material, including screen, chipsets and memory) is the key factor limiting how low smartphones can go in terms of price points and therefore how quickly they will be replacing feature phone projects within OEM roadmaps. Qualcomm has confirmed fears of a price war that is going to be taking place amongst chipsets in 2011 which will should allow Samsung or LG to deliver unsubsidized $100 retail price smartphones this year. – Ecosystems. Secondly, as Stephen Elop eloquently said in his burning platform memo, “our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem”. The three horse race of iOS, Android and Windows Phone is a race of developer adoption. Any new horses (including Qt, MeeGo, BREW and SmarterPhone) will have to show sizeable ecosystem support in terms of 10,000s of applications and 10s of millions of downloads in order to join the race as worthy contenders. – Services. Thirdly, smartphone growth is driven by western markets where mobile operators are dominant. With subsidies and marketing boost for smartphones coming from operators, a key determinant of device sales will be how well OEMs can drive operator services revenues; both in terms of supporting ‘hero’ operator services across regions on day 1 of launch and in terms of offering out-of-the-box white label services with a revenue contribution going towards the operator. This third services battlefront is heating up, too, with HTC buying up service companies, Samsung growing its global services deployments (more about OEM services landscape in a next article). How do you see the future of smartphones in 2011? -Matos #100millionclub #operatingsystem #symbian #windowsmobile #Android #windowsphone #Blackberry #handsetmanufacturers #iphone

In the past 10 years, the handset OEMs landscape has changed dramatically. Companies that seemed unshakable have lost ground and are gradually being replaced by new and agile contenders, borne from the PC industry. The ‘old OEM guard’ is still being driven by momentum, but as one-by-one these giants fall and smartphone adoption continues to accelerate, the battle for a spot in the top 5 leaderboard is getting more and more heated. How has the landscape changed, you ask? Well, just take a look at our latest infographic: Feel free to copy the infographic and embed it in your website. 600 pixels wide version 760 pixels wide version 1000 pixels wide version [sociable_code] #handsetmanufacturers #mobile #mobiledevices

[Open source has been in the limelight for the last few years, but its legal implications have been in the dark. Research Partner Ã…se Stiller sheds some light into the legal precedents of open source, from Cisco to Skype] For those meddling in open source software affairs, compliance with licenses is a very hot topic. In the last 2 years we have witnessed the licensing FUD (Fear, Uncertainty & Doubt) giving way to legal clarity with more and more relevant cases proving the acceptance of open source licenses by legal systems around  the world. The secrets of Copyright Open source software licenses are based on copyright law. The notion of copyright has a long history; some hundred years ago copying was hard to come by and a threat only to a few.  In contrast, in today’s digital world copyright is much more important as communications move around the world not in 80 days but in 8 seconds; and copying is as easy as pressing a button. The story of international copyright starts with the Bern Convention in 1880, while the most prominent copyright law is probably the US Copyright Act from 1978. The Bern Convention was initiated by the French Author Victor Hugo in order to protect the rights of European writers against the illegal copying of books which was taking place on the other side of the Atlantic at that time. In copyright law, the original creator has the exclusive right to reproduce a work by default, subject to certain conditions; firstly the work must reach a threshold of originality, and secondly if the work is created under commission, the person with the chequebook often becomes the copyright holder. The Fair Use doctrine also sets aside some good reasons to copy a work – for example for commenting, news reporting or research – without infringing on copyright. Only the owner of a copyright can license or sell the right to copy the work to others, under terms and conditions of their choice. Violating these terms and conditions is in principle infringing on the copyright. Copyright is also sticky. It will survive the creator by some 50-100 years depending on the application law at a country level. Once the copyright expires, the work enters the public domain and is no longer protected by copyright laws. Whilst open source software is by definition publicly available, this does not mean that it is freely available in the public domain as it is still under a license, be that a copyleft or copyright license. Copyleft vs Copyright Copyleft – one of the main innovations of open source licensing – is a word play on copyright. Copyright law is used by an author to prohibit others from reproducing, adapting, or distributing copies of the author’s work. In contrast, Copyleft allows an author to give out copies of a work with permission to reproduce, adapt or distribute, but requires any resulting copies or adaptations to also be bound by the same license agreement. Copyleft is in reality enforced by copyright. which has been clearly demonstrated by a number of interesting legal disputes, e.g. in the New York District court case of BusyBox v. Westinghouse in July 2010 and by the US Court of Appeals for the Federal Circuit.in Aug 2008 in the Artistic License case of Jacobsen v. Katzer (more on this below). Likewise the German and French courts have provided some good examples that they do accept copyleft licenses as valid and binding for anyone who chooses to make use of the work. Open Source and Legal precedents In researching the legal precedents for Open Source licenses we find that most open source license disputes are with regard to the GNU GPL v2, which was written in 1991 by the Free Software Foundation. It took more 10 years before the license was actually tried by any legal system, but since then there has been a number of highly relevant cases of open source license infringement, brought to court in Europe and in USA. By the end of 2010 a long list of court cases have surfaced which test the validity and legality of open source licensing – the table provides a (partial) list:CaseagainstYearPlaceLicenseaboutRulingImportanceMySQLProgress Software2002District Court  MassachusettsGPLv2TrademarksSettled 2002GPL accepted by courtHarald  WelteDlink2001Frankfurt AMGPLv2GPL Binding?ruled to Welteusing code = accepting GLPFortinet UK Ltd2005MunichGPLv2complianceruled to WelteEarly test of GPLGigabyte Technology Co. Ltd, TomTom2004–GPLv2complianceSettledIliad2007MunichGPLv2complianceruled to WelteFSF France First case outside of GermanySitecom2004District Court of Munich,GPLv2complianceruled to WelteFist case in EurSkype2008District Court of MunichGPLv2Compliance/source code accessruled to WelteGPL must be followed strictlySCOAutoZone, Daimler Chrysler, IBM, RedHatIncl. countersuits2003-2004District Courts in  Utah, Delaware, Nevada,  Circuit Court OaklandGPLv2IP infringements Trade secrets contact breachSettled, dismissed and referred to Novell caseOwnership over UNIX code in LinuxNovell2004US Court of Appealruled to Novel 2010SUSE Linux2003ICC International Court of Arbitrationruled to SuSeAFPAEdu42009Paris Court of AppealGPLv2complianceruled to AFPADownstream rightsBusyBoxAstak Inc, BellMicroproducts, Best Buy, Comtrend, Dobbs-Stanford, Extreme Networks, GCI Technologies, High-Gain Antennas, Humax USA, JVC U, Monsoon, Phoebe Micro, Robert Bosch, Samsung Electronics US, Super Micro Computer, Verizon, Versa Technology, Western Digital Technologies, Xtrasys, ZyXEL Communications.2007-2009NY District CourtGPLv2complianceSettled/undisclosed still open (?)Monsoon was the first case for  GPL in USWestinghouse Digital Electronics, LLC2010ruled to BusyBoxDamages awardedFSFCisco2008NY District CourtGPLv2, LGPL 2 and 2.1complianceSettledCompliance officerJacobsenKatzer2008Federal USThe Artistic Licensecomplianceruled to JacobsenOpen source licenses are for real The most typical violation of GNU GPL arises when consumer electronics vendors, or distributors of embedded devices using Linux (which is licensed under the GNU GPL v2.1), fail to supply the source code, copyright notice or to attach a copy of the license – all of which are required by the GPL license. It´s difficult to identify if this is caused by lack of knowledge, poor version control process, or disregard for compliance due to the perceived high cost for compliance procedures, paired with a low risk for detection. Interestingly, in many cases, it’s not the copyright holder who sues, but a representative like Mr. Harald Welte in Germany or the Software Freedom Law center in USA. The GPLviolations.org project, set-up in 2004 by Mr. Welte in Germany, is one such enforcer of the Open Source adherence. GPLviolations.org has brought more than 100 cases to court (including D-Link, Skype, TomTom, Motorola and Acer), all of which were successfully settled out of court. Additionally the GPLviolations and Harold Welte have won several victories in Europe over large companies such as Sitecom and Fortinet. In the Sitecom case (2004) Welte identified his own source code in the binaries for Sitecom´s Network routers, which Welte had licensed under the GNU GPL v2.0 but Sitecom had not made the source code available or referenced the GNU GPL v2.0, both of which are a requirements of the License.  The District Court of Munich granted Welte an injunction against Sitecom Deutschland GmbH whereby Sitecom was prohibited to distribute the products, until they were compliant with the GPL terms. Sitecom appealed but lost and posted the terms for GPL on their Web FAQ for the router. LikewiseFortinet Ltd UK was banned from distributing their Firewall and Antivirus products by the Munich district court in 2005, until they were in compliance with GPL. GPL-violations.org had found evidence that Fortinet used Linux kernel and other GPL licensed software in its FortiOS product. The Munich court granted a temporary injunction against the company for selling the products, and Fortinet was forced to make their OS available free. Fortinet had been warned by the GPLviolations.org about the violation but attempts to reach an out-of-court settlement failed. The case of Skype Similarly, Skype Technologies SA (a Luxemburg company) was accused of violating GPL in 2008 in the course of selling a Linux-based VoIP phone, through the Skype website. Harald Welte took Skype to a Munich court for failing to provide the source code and the license together with the phone. Skype claimed that a URL to where both license and code could be downloaded was provided in the documentation – however the German court found this insufficient under GPL v2. The license states that offering source code for downloading, is only applicable if and when the binaries are downloadable from the same place, which was not the case here. Skype Technologies eventually settled out of court. D-Link The2006 case of Welte vs D-Link GermanyGmbH, started much like any other open source legal dispute; D-Link failed to provide the source code for Linux Kernel modifications that were used in a network storage device, and failed to provide a copy of the GPL license. D-Link rectified this error but refused to cover the disbursements for Mr. Welte for the trial, claiming that the GPL license was not  binding for the company. The case then became more interesting as the focus thereby shifted from the usual GPL compliance to become a test of the binding mechanism for the license: Was using the software to be considered equivalent to accepting the terms in the license? The Frankfurt-am-Main’s District Court clarified that D-Link was indeed bound by the terms in GPL v2, solely by enjoying the benefits of the free software and therefore also must cover the lawsuit costs for the plaintiff, Mr. Welte. Free Software Foundation; on the tail of license infringements Free Software Foundation (FSF) is another non-for-profit organization that monitors GPL compliance. The FSF was founded in 1985 by Richard Stallman to promote free software, and has since set up regional entities in Europe (2001), India (2003) and Latin America (2005). The organization is dedicated to promoting users’ rights to the four freedoms of Open Source: To Use, Study, Modify, and Redistribute software. The FSF sponsors the GNU project and maintains the GPL licenses as well as the Free Software Definition. FSF’s is known to enforce GPL compliance through closed-door discussions rather than lawsuits, with the aim being compliance rather than monetary damages. Aiding the FSF is the Software Freedom Law Center (SFLC), a US-based law firm founded in 2005 providing free legal services, to nonprofit open source developers. The SFLC has also published a guide on how to comply with GPL and advice on how to act if caught violating GPL. Cisco – a case for the Supply chain manager Assisted by The Software Freedom Law Center, the FSF initiated a case against Cisco for copyright violation under GPL and LGPL in 2008. Like many others, the case was settled out of court in 2009 resulting in a donation to the FSF, a pledge of commitment to the GPL and the appointment of a compliance director reporting to the FSF. Cisco never disputed GPL as such but “bought themselves a lawsuit” through the acquisition of Linksys in 2003. Shortly after the acquisition, complaints started showing up on the Linux Kernel Mailing List and Slashdot on how Linksys was not providing source code for GPL licensed software used in the router firmware (Linksys had bought the chipset from Broadcom who in its turn had outsourced the driver development). FSF took action on behalf of several copyright holders against Linksys/Cisco and other companies using the same 802.11g router chipset from Broadcom, where the issue had originated. BusyBox –  when no one is too big Among the more interesting cases for general acceptance of Open Source licenses are the BusyBox cases which involved major corporations, including Verizon, Samsung and Westinghouse. BusyBox is a set of common Unix/Linux utilities, all packaged in a small executable and typically used in embedded systems. The software is licensed under GNU GPL v2. The BusyBox legal saga started with 4 different cases of copyright infringements, as a result of the distributors failing to provide source code. The first action was against Monsoon Multimedia which became the first GPL copyright lawsuit in US history. The case was settled in October 2007 with Monsoon agreeing to appoint an open-source compliance officer besides publishing the source code. There was also a monetary part of the settlement but the amount was never disclosed. The Monsoon case was followed by High-Gain Antennas and Xterasys in 2007 and Verizon in 2008. Picking up speed and size, since 2009 14 new companies (including BestBuy, Samsung, Westinghouse, JVC) were sued by SFSC for violating the GPL license of BusyBox software. Much like Monsson, Verizon settled in 2008 while it appears that four more defendants (Samsung, Comtrend, Dobbs-Stanford, and GCI Technologies) have also settled with the plaintiffs. The only exception was Westinghouse where a District Court in NY ruled in favor of BusyBox in August 2010. The infringement was considered willful and the damages were tripled by the judge. MySQL, a near-test for open source derivatives One of the reasons for uncertainty around Open source licenses and especially the GPL v2 is the often-discussed question about how to define derivative work, and how to link software to GPL-code without having to license that software under GPL too, a requirement of the GPL. This is often described as the ‘viral’ nature of the GPL and remains a core concern for many companies is the linking of proprietary software libraries to GPL licensed code.  It is generally accepted that if the linking is static then the proprietary code must also be included under the GPL license whereas if the linking is dynamic the linked software is not necessarily a derivative of the GPL and as such not bound to the GPL redistribution terms. Now given that the definition of a derivative work in GPL v2 is unclear, this issue remains a concern, albeit slightly clarified in GPL v3.  For an analysis on the differences between GPL v2 and GPL v3, VisionMobile has published a free paper: The GPLv2 vs. GPLv3: The Two Seminal Licenses, Their Roots, Consequences and Repercussions. In the context of derivative work and legal precedents, it is also worth discussing the case of NuSphere in 2002.  NuSphere produced a database add-on component (called Gemini) to the MySQL engine. As NuSphere’s Gemini component was statically linked with MySQL’s GPL-licensed database, MySQL sued NuSphere for non-compliance with the license terms. The judge however refused to allow the arguments in the case to expand beyond a mere trademark dispute and urged for an out-of-court settlement between the parties, leaving the definition of derivative work still in the dark and unclarified. The Jacobsen case and the Artistic license The now-famous Jacobsen vs Katzer case revolves around a Java software interface for model railroads, made available under the Artistic License (an approved Open Source license) by the developer Mr. Robert Jacobsen. The software was used by Mr Katzer´s company, in a competing solution, but they failed to provide information about the origin of the software – in violation of the licensing terms. The case was first tried in a US District court and the ruling then was that the license was to be regarded as a contract – not a license. However the case was appealed in 2008 to the US federal court, when the judgment was reversed in favor of the Artistic License and Mr Jacobsen, thereby providing a legal precedent for Open Source licenses as valid and legally binding. The SCO Group opera isn’t over yet This is a story about copyright of Linux code, featuring celebrities such as IBM, Novel, RedHat and SGI. In 2003, the SCO Group based in Utah, claimed that Linux infringed their copyright and trade secrets, and subsequently demanded that Linux users needed a license from them, for parts of the Linux code. The SCO Group sued a number of companies for donating UNIX code to Linux. The software donations included code that SCO claimed ownership of and thus the accused companies had violated SCO´s copyright. SCO also argued that GPL would not be enforceable in this case because it was preempted by the copyright law, protecting SCOs rights. (see detailed story on Groklaw). The SCO soap opera of legal precedents has no less than five acts: SCO v. IBM, Red Hat v. SCO, SCO v. Novell, SCO v. DaimlerChrysler and SCO v. AutoZone. It includes ingredients like lawsuits, countersuits, appeals and bankruptcy protection. In 2007 a US federal court ruled Novel to be the owner of UNIX, invalidating the claims from SCO but there is a new appeal from SCO, and a Novel has filed a petition for certiorari* with the US Supreme Court. Meanwhile the final episode in this saga is yet to come. Edu4 and downstream rights In 2009 Paris Court of Appeals set a French legal precedent in favour of GPL, in a typical case of binaries but no source. In this case the lawsuit was not filed by the copyright owner, but by the end-user, which makes it all the more noteworthy. The story goes all the way back to 2000, when Edu4 had distributed a GPL licensed VNC remote access software, for PCs, to a French education organization (AFPA),but refused to provide the source code for its modified version of the program when AFPA, assisted by the French FSF, requested that. Open source licensing gaining legal maturity The number of law suits, rulings and discussions above indicate that Open Source licenses are indeed enforceable under Copyright law, and that the enforcers will not hesitate to take large corporations to court for violations. Giving software away for no monetary charge does not invalidate copyright, and damages will be awarded for infringements even though the price for the code was zero. There is no longer a need to question the legality of Open source licenses.There are enough legal precedents demonstrating that Open source licenses are valid legal documents and binding for anyone who uses the code. Knowing that the Open Source licenses are in fact tested, tried and fully accepted by the legal system may deal with the U (uncertainty) and the D (doubt) in FUD, but for the remaining F (fear) the best remedy is information. The only good way to mitigate the risk of infringements is to ensure that everybody involved in the development process, has a good understanding of the obligations and restrictions of Open Source licenses, and that the an organisation’s Open Source policy is appropriate – assuming of course that there is one.  Many engineers already know a lot about Open Source software and the licensing models, but do their managers know? Keeping track of Open Source software that maybe included in the next software release is crucial for any company, and the best way to start is of course with a thorough review of existing codebase, establishing a solid process and of course a comprehensive training program for developers to CxOs. There is obviously much to discuss besides the narrow focus of this article on court cases. Do you have more examples and experiences to share on open source licensing? – Ase * The U.S. Supreme Court uses the Latin term Certiorari for appeals. [Ã…se is a Research Partner at VisionMobile specializing in software sourcing, policies and training. Ã…se co-delivers VisionMobile’s Open Source Chessboard, a full-day training course on the economics and competitive landscape of mobile open source, covering business models, licenses & patents, governance models, control points, community cultures, plus 10+ case studies on the who’s who of open source.] #opensource

In a surprising move, Nokia and Microsoft decided to enter a strategic relationship for the OEM’s smartphone business. While the marriage appears promising at the outset, Research Director Andreas Constantinou argues that the only way for that marriage to succeed is for Microsoft to acquire Nokia’s smartphone business. The Elop and Ballmer duo on stage on February 11th was the main topic of discussion at this year’s Mobile World Congress. The reverberations of the Microsoft-Nokia announcement were felt even by the huge green robot tucked away at Google’s stand in Hall 8. Following the news of the Nokia and Microsoft tie-up, Stephen Elop’s appointment to the helm of Nokia seems like an arranged marriage – and one whose best men were the carriers who wanted to avoid an all-out Android coup. It was also a marriage of desperation, which Elop memorably described in his memo as ‘jumping into the unknown’ from the ‘burning platform’ that is Symbian. A marriage of desperation Microsoft has been desperate to see its mobile business succeed. After a decade of lacklustre efforts at mobile device sales and severe product delays, Microsoft was getting desperate; it needed to stop the churn of Microsoft users to the Apple ecosystem and plug its $1 billion-a-year operational costs for its mobile phone business. Even having spent most of its $500M marketing budget for WP7 it had only got breadcrumbs in terms of sales, with Microsoft reporting 2 million shipments but no comment on sell-throughs (which leads us to suspect this was not more than 1 million of actual end-user sales). Nokia has been desperate seeing its platform play fail spectacularly in comparison to its newfound competitors; Apple who had amassed a developer ecosystem and operator demand which was second to none, and Android who in 2 short years matched Nokia’s smartphone sales in Q4 2010. MeeGo was trumpeted as the big guns in Nokia’s arsenal in February 2010, but once again Nokia’s software R&D failed to deliver on the promise. More importantly, despite the 10+ acquisitions during 2007-2010, Nokia failed to amass a strong-enough developer and services ecosystem on Symbian, Java or Qt that could compete with Apple or Google. Like Elop said in his now-famous burning platform memo, “our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem”. It was in an act of desperation that led Nokia to befriend the lesser of two evils in the shape of Microsoft. It is ironic how in mobile the least enemy is a friend, much like how carriers backed Android in 2008-9 to fend off Apple, and backed Microsoft in 2003-5 to fend off Nokia. The courtship Despite the surface-level coverage of the Microsoft and Nokia news, not much has been said about the two giants’ courtship and even less on the prenuptial agreement. According to our sources, Nokia asked both Microsoft and Google to bid for its smartphone business, with the help of a small army of McKinsey suits. Following a long negotiation cycle with both parties, Nokia came to a straightforward conclusion; it would back Microsoft who’s total bid equalled more than $1 billion (including patents, licensing fees, marketing support and revenue shares) and not Google who’s bid was about half that. Funny how cash-rich platform vendors are buying their way into the market these days. Nokia announced its decision to Microsoft and Google on February 9th , only 2 short days before the Ballmer/Elop press conference – which prompted Vic Gundotra to pen the tongue-in-cheek tweet “#feb11 “Two turkeys do not make an Eagle”, scornful of both Nokia and Microsoft. #feb11 "Two turkeys do not make an Eagle". — vicgundotra (@vicgundotra) February 9, 2011 The last-minute decision meant that Intel heard the news at the very last minute, and in turn had to ask its MeeGo partners on Friday night (Feb 11th) to remove the mention of Nokia from the MeeGo PR quotes going out on the following week at MWC. This is the stuff industry disruptions are made of. A chemistry mismatch What Nokia announced was not just a marriage; it was a radical change in its business model, from a vertical powerhouse to an assembler – which is what prompted us to question the motivations and the end goal for Elop. We already knew that Symbian had been demoted to an internal-only OS (see earlier analysis – Symbian is dead, long live Symbian). However we were expecting to see Nokia take a more measured stance; for example using Windows Phone 7 in certain markets (especially in North America where carrier handset subsidies are OS-led) or taking a classic dual-supplier strategy by inking deals with both Microsoft and Google. Instead Elop presented a terminal picture for Symbian which would be destined to ship on only another 150 million devices until being completely replaced by WP7.  Elop knew that an all-out replacement of Symbian with WP7 would mean haemorrhaging valuable brainpower as the 7,000+ Symbian staff had spent 15 years on the anti-Microsoft camp. These are the decisions made by boards with long-term strategy agendas, who see organisations made up of ‘assets’ and not ‘people’. Besides the death blow to Symbian, Elop relegated MeeGo to an R&D project with just a single device launch in the horizon, if any at all (which carrier is going to subsidise a platform that’s dead on arrival?). Moreover Qt’s future seems uncertain as it has no place on Windows Phone (Microsoft wouldn’t allow copyleft software to be used with Windows Phone), plus it is too heavy for S40 class devices and MeeGo is too small an addressable market to justify the Qt ongoing investment. Qt (and its 400 thousand developers) need a new home. What appears somewhat suspicious is that Nokia went not for a tactical, but a deep partnership with Microsoft, solidified by the multiple revenue streams exchanged between the two companies, a kind of revenue ‘keiretsu’ that ties the two giants in a longer commitment. More importantly, the marriage to Nokia’s smartphone business seems like it’s lacking in chemistry. For the last decade, Nokia has operated as a vertical silo, owning and integrating all value elements, from software, UI, industrial design, services, app store and developer ecosystem. That silo has now huge holes punched through so that it can accommodate Microsoft’s horizontal software-licensing business model. This situation is somewhat like trying to fit a square peg in a round hole. There are fundamental conflicts here, as both Microsoft and Nokia want to own the developer experience (think APIs, support, tools, developer marketplace, conferences, marketing), and the application discovery and delivery process (think Windows Marketplace vs Ovi Store). This is a chemically unstable mix that won’t survive the test of time. It would be like having Nokia owning Office while Microsoft still runs the Windows business. Yet at the same time Nokia has little value to offer other than design, development, manufacturing and sales of handsets in the picture Elop and Ballmer painted. Something’s not right. Moreover, Microsoft faces a fundamental customer imbalance on its mobile platform. With such a strong endorsement of Nokia, Microsoft has placed too much favour and device sales expectations on a single vendor. Microsoft did not only hurt the feelings of HTC, Samsung and LG (previously committed to launching 50! Windows Mobile handsets) with such an imbalanced endorsement. More importantly, with Nokia volumes likely to ramp up fast, Microsoft will have to deal with a single-customer monopoly and end up financing Samsung, LG or HTC towards ramping up Windows Phone production to balance it up. Windows Phone may quickly end up looking like a platform of unbalanced OEM interests – much like Symbian Ltd or Symbian Foundation were – and we know how these panned out. There are two more troubling clues in the way this ceremony was setup. Despite fundamental changes to the handset business, Elop made no reorganization in the NSN business which is performing at marginal profit (operating margin at only 3.7% vs 11.3% for handsets). As Tomi Ahonen points out, Elop seems to be ready to get rid of NSN. Plus there was no announcement of Ovi plans or clear strategic guidance with regards to the Nokia services business. The acquisition scenario There have been earlier rumours of acquisition discussions between the two companies. We now believe that the only scenario for the Nokia and Microsoft partnership to succeed is an acquisition scenario; Microsoft buys Nokia’s smartphone business, while Nokia gets more resource to play with what it does best – that is creating mass-market phones at unbeatable levels of supply chain efficiency, unmatched supplier bargaining power and customisation to 100s of variants per handset model for distribution to diverse global regions, channels, carriers and retailers. From a financial standpoint, Microsoft capitalisation stands at $220B, more than six times Nokia’s market cap of $33B at the time of writing. Microsoft would also acquire a high-profit margin business that would go a long way in helping the Redmond giant push its Entertainment and Devices division at high profitability levels for the first time. Despite Microsoft being a software business, it has experience in running hardware products, with the Xbox business doing well recently on strong Kinect sales. For Nokia, a joint venture would make more sense than a pure sale of its smartphone business, given that the hardware giant is an important component of the Finnish economy. It would allow Nokia to focus on what it does best and substantially increase its S40 R&D budget (as Elop already announced it would) to rework its aging feature-phone OS. A joint venture would also allow Nokia to make a comeback when they are ready to take on the high-end phone market again. Besides, with shares recently hitting a 13-year low and Nokia being owned by American institutional investors, the Nokia board has little they can do in the face of potential suitors. This makes Nokia a very interesting acquisition target, not just for Microsoft but for anyone with cash at hand and mobile ambitions, including Chinese, Korean and Japanese suitors. The acquisition scenario would allow Microsoft to leverage on Nokia’s accounts with carriers across the world to woo them into moving subsidy budgets from Android into WP7. This is all too important, as the Microsoft brand enjoys little consumer awareness compared to Apple and Android, meaning that Microsoft is more dependent on carrier subsidy and marketing budgets than its nearest competitors. Fundamentally, we believe there is no place for Nokia, an all-in-one integrated handset OEM and services company, in the new telecoms value chain. The old guard of top-5 OEMs are squeezed between leaders (Apple, RIM) who lead in terms of performance & profits, and assemblers (Huawei, ZTE, Dell, Acer) who lead in terms of me-too designs & razor-thin margins (see our earlier analysis on the evolution of the handset value pyramid). Nokia’s business needs to break-up into independent, self-sustained entities, particularly the smartphone business (within Microsoft’s new home) and the mobile phone business as an independent entity that can focus on competing with PC-borne assemblers. The Microsoft-Nokia acquisition might not have been planned from the outset, but it is a scenario whose viability has been ensured from the outset. There are no conspiracy theories here, except that Elop (as the 7th biggest shareholder of Microsoft) would benefit greatly from trading Microsoft shares with Nokia ones, only to see them boost in value after being repatriated. Let the debate begin! – Andreas you should follow me on Twitter: @andreascon Andreas Constantinou is Research Director at VisionMobile and has been working in the mobile software industry since 2001, when he fondly recalls being a member of the team behind the very first Orange-Microsoft handsets which set the world of telecoms software in motion. #meego #comicstrip #nokia #qt #symbian #windowsmobile #windowsphone #microsoft

[How do Nokia’s options look in a post-Microsoft and Google world? Why does Google’s strategy with Android resemble a cuckoo’s routine practice of planting its eggs on other birds’ nests? Guest author Delius Observer examines the similes and shows just how much nature has to teach us] Vic Goduntra, a vice president of engineering at Google, recently tweeted that “two turkeys don’t make an eagle”, echoing an earlier comment made several years ago by a Nokia executive about Siemens and BenQ merging their mobile units. His snipe, was a cheep, premature call as Nokia gets rescued from those icy Atlantic waters by the rich, (white) knight in shining armour. However, in chirping away, Vic would also have known that Nokia’s only other choice to escape from the burning platform would have meant succumbing to Google’s Androidian Cuckoo Strategy, and that would have been a lot worse. What just happened between Nokia and Microsoft should be a wake-up call for the mobile industry. Google’s Androidian Cuckoo Strategy The cuckoo, which at first glance has the appearance of a glamorous, aspiring bird of prey, is in fact a brood parasite – a cunning species that lays its egg in another bird’s nest and, in doing so, tricks the host to raise the chick as their own. In one fell swoop, the cuckoo will turf out one of the host’s own eggs and slyly lay one of its own. Sitting cosily under the warm breast of the host, the parasitic cuckoo egg incubates and then hatches – a little earlier than the rest, naturally. With the egg’s kernel breaking through the shell, its natural reflex is then to immediately dislodge the other eggs from the nest – a well-designed, dominant, first mover advantage. In doing so, it quickly becomes the only chick left resident. Now at the exclusive beck and call of its foster parents, it has the sole monopoly on food supply and attention. The young cuckoo quickly fledges, and rapidly leaves the foster nest in record time. And so it continues, with the cuckoo returning again the next season. This story should be a familiar one, as it is a story that is playing out across the globe where the poor unknowing parents think they are delivering their own beautiful offspring, but are instead just acting as surrogate hosts to a far grander plan. Cuckoos are, as the BBC’s ‘countryfile’ website states: “nature’s hustlers, cheats that have perfected the ultimate long con”. This is the story of Google’s Androidian Cuckoo Strategy and the handset manufacturers who play surrogate host in order to raise Google’s young Andricks. Google started this strategy by designing an ecosystem that it cunningly called “open”. Of course, because the offspring’s eggs are delivered out in the open air, many have drunk the deceptively refreshing ‘Kool Aid’ of “open”. The real story, however, is a far subtler affair. Whilst the egg and bird may be open and free, the point of conception is still very much done on a private branch, with the DNA of the next egg always a closely guarded secret – even to those inside the fuzzy ecosystem. “Run, run as fast as you can! You can’t catch me”, says one new Gingerbread fledgling, as the other birds look on, green with envy, wondering why their offspring have been Froyo’d. The many handset manufacturers that have joined the Google flock are hoodwinked – and they’re all now singing the same repetitive, robot-like call. Now the birds are just the servants of the dominant master cuckoo. Of course, Androidian Cuckoos have ruthlessly quick development cycles and the Andricks are out of the door in no time, but in doing so, the process sucks most of the energy out of each foster parent. Meanwhile, danger lurks in the grasses as the mighty Oracle hisses over the heart of the cuckoo’s Harmonious virtual machine. Whilst a few birds are today flying high, others are bewildered and disoriented, trying to work out what exactly is going on. For some it will end in pathetic, dismal fatality. But, a few will no doubt adapt their defenses to overcome the parasite in more imaginative pathways to survival. For, as Dr Nicholas Davies of the University of Cambridge states, with cuckoos “over evolutionary time, the hosts fight back so that the poor cuckoo has to work incredibly hard to be lazy, simply because it has to overcome all of these defences. What we witness is a fantastic arms race between parasite and host.” And what of Google’s proverbial ‘don’t be evil’? Nicolas continues: “So, we know how the cuckoo pulls off its dastardly plan, but still haven’t answered the question of why. Is it a cruel or evil bird? Of course not; this is just nature at work, and perhaps one of the best examples of Darwin’s survival of the fittest. The arms race will continue with both sides evolving to protect themselves or deceive the other, but our fascination with the cuckoo will remain. After all, everyone loves a rogue.” Indeed we do, and the rogue’s quip about turkeys was typical of its scheming behaviour. From a mountain view they look down and think one should aspire to be eagles, when what they should really be doing is taking a long, hard look in the mirror and owning up to the mobile industry that they are in fact nothing but a conniving cuckoo – albeit a successful one. Microsoft + Nokia: running with four legs In the past few months Nokia realised that in order to halt its slide towards irrelevance, it had to take its head out of the sand and instead take a leap of faith. The brave gamble that Nokia has now chosen is perhaps not the ideal one, but it was the only strategy available for long-term survival and is a bold rejection of the short-termism demanded by short-sighted investors in accepting the call of the cuckoo. In tying Nokia and Microsoft together they have created a rather old-fashioned type of partnership but it will be a partnership of bones not a collection of feathers. Have no doubt about it, Nokia is “all in” with Microsoft and, yes Vic, four legs are indeed better than two to compete in this race. The trick will be to rapidly get those legs working together, and come up with a pedigree that can run the course. Can they do it? The jury is currently out and they need to move exceptionally fast. They need to accomplish two feats rapidly; prove the financials and fix the developer message. Step one is to actually sign the agreement and rapidly prove to both the investment community and the wider ecosystem that they can make the financials work. Indeed, it seems that perhaps one of the reasons why the Capital Markets Day felt like a damp squid, was not because Mr. Elop couldn’t sell the story to investors, but because the guy he’s negotiating the finer details with was sitting right next to him. A complex partnership like this will take time to put together with details of licensing costs, patent portfolios, split revenue shares on search, advertising and mapping as well as marketing contributions, let alone Nokia’s own complex reduction in costs associated with substantial redundancies and the reductions in OPEX that are needed. The other thing to fix is the confused developer message. One thing that I had expected to hear on Friday was that Qt would run on Windows Phone. In hindsight, however, perhaps this doesn’t make sense. Qt is a fantastic technology but, like many others, it hasn’t reached critical mass. What is needed in this battle of ecosystems is a huge ‘network of externalities’, with a wide range of designer and developer tools. Only with Microsoft do you get that. It is all the more puzzling that Nokia didn’t go ‘all in’ from a developer perspective and instead chose to play coy. In choosing Microsoft tools for Windows Phones and Qt for Symbian and MeeGo, it has created yet another confused message for developers. Developers cannot get economies of scope by using Qt for some dying platforms and Microsoft for others. Nokia must be more courageous. Dust off the old Microsoft Silverlight agreement and get that environment up and running again on Symbian and Series 40 as a stopgap over the long harvest season. This will create the bold message developers urgently need. In this battle of ecosystems Nokia’s strategy cannot afford to be half-cocked. What lies ahead As we look ahead to the coming weeks and months, here are a few predictions:- • Nokia is able to get Windows Phones out the door in record time, taking advantage of Microsoft’s Chassis Specification, a strategy which follows the tight, vertical integration of Apple’s iPhone without the overheads. Whatever the perception, it’s faster to build a Windows Phone from scratch than a cuckoo because of the chassis design. • There will be an increase in the use of patents to fight the cuckoo club and the almighty Apple. However, Nokia’s earlier Symbian and MeeGo open source strategies may well come home to roost, as they gave away core assets which many vultures will circle around. • Nokia competes well in the next billion market by using the lower cost base of an enhanced Series 40 platform and creating a smartphone-like experience in the sub $75 market. • In the long-term, Nokia will realise that there is no division between smartphones and mass-market phones, and will combine those two groups together. • Members of the cuckoo club finally realise their long-term future only lies in commoditisation and they seek to either combine with other cuckoos for short term economy of scale, or search for the assets that enable them to co-exist profitably with the parasite. • Someone writes a loving obituary for the truly open, benevolent and well-meaning MeeGo; bless it. RIP. No doubt a resurrection under a different name will happen at a later date. A three-horse race Nokia emphasised during its Capital Market Day that the smartphone business is now a three horse race. As things stand, that looks like wishful thinking. But if Nokia and Microsoft can execute with incredible speed and agility in the coming months (and it’s only months they have), then they’ve a shot at getting a thoroughbred in the running. So which horses do Google, Nokia and Apple have in the line up? Seabiscuit – the real Trojan horse of the race, full of cuckoos. This one’s been leaving fragmented crumbs all over the place but is currently the bookies’ favourite. This is a wild one for sure! It’s been a fast sprinter but will need to be careful it doesn’t split in two or get strained on the third furlong by its supporters pulling out. Northern Dancer – the dark horse in the race with the odds currently against it. It will use the Seattle based white knight to give it the extra feet needed and use a range of betting operators to increase its odds. With thoroughbred development tools, attached to a large existing ecosystem, it now has the combined power for survival. It will need to ensure that its more old-fashioned, deep partnership style has the staying power and agility. They have a lot of catching up to do, but don’t write this horse off just yet! Pegasus – the last horse is not just easy on the eye but is also nothing short of magical. Not only does this white horse have a vertically integrated set of four legs, but it also has wings too and is riding high. This one can’t put a foot wrong. But the dynamics are changing, and how long it can remain so high and mighty remains to be seen. How the mobile race plays out in the months and years to come depends upon how the various parts of each ecosystem and the punters place their bets. But, whatever happens, just beware of the cuckoo. – Delius [Delius Observer is a pseudonym and can be reached at deliusobserver@gmail.com] #Android #microsoft #nokia

[Behind Android’s stellar success is a love and hate relationship with handset vendors. Android is a critical launchpad for PC-borne OEMs like Dell and Acer, but a short-term life support for mobile vendor incumbents like Sony Ericsson and Motorola. Research Director Andreas Constantinou looks at how OEMs can leverage on virtualisation to get the best of both worlds with Android; the burgeoning app ecosystem, but without Google’s lock down of experience differentiation] From an underdog to ubiquitous manufacturer support, the Android platform has come a long way since its introduction in 2008. Almost every single device vendor (except for Apple and Nokia) has launched Android devices, while Sony Ericsson and Motorola are betting their margins and future on it.  The phenomenal rally behind Android is – in a nutshell – due to 4 factors: the operator demand for a cheaper iPhone, the burgeoning Android developer community, Android’s market readiness (3 months to launch a new handset) and the ability to differentiate on top of the platform. A monopolist on the rise? Year after year, Android keeps on surprising industry pundits. Google’s software platform saw 100% quarter-on-quarter increase in the first 3 quarters of 2010. The last quarter of 2010 saw Android go chest-to-chest with Nokia in terms of smartphone shipments, in what CEO Stephen Elop called ‘unbelievable’. With such meteoric rise, analysts are beginning to talk about a potential Android monopoly in the future market of smartphones, contested only by the Nokia-backed Windows Phone. The Google commoditization endgame Is Google the biggest benefactor the industry has seen? Not by a long way. Google runs a hugely successful advertising business and needs to bring as many eyeballs as it can onto its ad network. To this end, Google’s agenda is to commoditise handsets by forcing smartphone prices down (see our analysis on the $100 Android phone) and having its ad network deployed on the broadest possible number of smartphones (via closed apps like GMaps and Gmail). Moreover, Google’s agenda is to commoditise mobile networks by flattening the mobile termination barriers and removing volume-based price plans that telcos have traditionally built. At a 10,000 ft level, Google’s strategy is based on deceptively simple microeconomics principle; to drive up the value of its core business (ad network) it needs to commoditise the complements (devices, networks and browsers). Naturally Google is hermetically closed in all aspects of its core business. The Android Market, GMaps, Gmail, GTalk are ‘closed source’ and the Android trademark is commercially licensed. This means that while Android is open source, Google uses the Android Market and trademark to enforce strict compliance of Android handsets to Google’s CDD and CTS specifications. See our earlier analysis on Android’s hidden control points for how Google runs the show. So Google is by no means a benevolent benefactor. Like any other company out there, it’s in it for the money; a rationally-driven business of the platform era, out to commoditise the mobile handset business with a free-for-all carrot. Winners and losers of the Android game For handset manufacturers, Android is both a blessing and a curse. A blessing because it offers OEMs a low-cost-base, rapid time-to-market platform from which to build differentiated designs. This is manna from heaven for PC-borne assemblers who use Android as the pier from where they can gain firstly a foothold in mobile and secondly global reach. At the same time it’s a curse; Google’s control of Android compliance means that it deprives OEMs of all points of differentiation: user interface, hardware features and industrial design – except for (you guessed it!) price. Which means that with Google defining the Android experience, there’s little differentiating a Sony Ericsson handset from an Acer handset. With Acer happily operating at 3% profit margins, Android is to Motorola and Sony Ericsson just a short-term life support. Nokia too evaluated Android before hoping on an strategic partnership with Microsoft on Windows Phone 7. As Stephen Elop said during the press conference with Steve Ballmer, “we assessed Android […] but the commoditisation risk is very high”. In sight a potential Android monopoly threat operators, too and getting wary of over-supporting Android. Best of both worlds Confronted with Android’s two-faced agenda, major handset vendors have been apparently plotting how can they get the best of both worlds; the burgeoning apps ecosystem but without the Google’s control of the user experience. Three approaches have emerged. 1. The Do-it-yourself approach: By virtue of the open source (APL2) license, any handset vendor can take the public Android codebase, branch it, tweak it and deploy it on handsets. China Mobile has commissioned Borqs to develop the oPhone spin-off while Sharp has released handsets based on the Tapas spin-off also for the Chinese market. However, branching Android means that you miss out on the 130,000+ Android apps as Google won’t give you access to their app distribution system – which is ok if you ‘re targeting China, but unacceptable if you ‘re targeting any other region. Moreover, the Google Android codebase moves faster than any other platform (5 new versions within the space of 12 months) meaning that it’s near impossible to maintain feature parity in Android spin-offs – the same reason why Nokia publically regretted forking WebKit in the past. Lack of feature parity means that an Android spin-off would breaks the developer story and stays behind the competition of Android Experience and Partner phones. 2. The virtual machine approach: Myriad announced Alien Dalvik , a solution it claims can run Android apps on non-Android handsets, including on Maemo.  Alien Dalvik is a Java SE virtual machine designed in Zurich and China by the same ex-Esmertec guys who started off the OHA consortium. Myriad has released a demo of Alien which however hides the real issues behind a pure virtual machine approach: the lack of 100% API compatibility and most importantly access to the distribution of 130,000 apps available through Google’s Android Market. 3. The Virtualisation approach: the third and most promising approach is to run a complete replica of the Android platform within an isolated, ‘virtual’ container using mobile virtualisation technology (from Red Bend, OK Labs or VMWare – see our earlier analysis of virtualisation technologies). The virtualisation approach offers a sandboxed, complete version of Android (including the apps ecosystem) which co-habits the same handset as the OEM-specific core UI and applications. Virtualisation technology is mainstream in cloud and enterprise, but applied only in a limited context in mobile to reduce hardware costs or run enterprise micro-environments (the type Barack Obama enjoys in his virtualized BlackBerry cellphone). The real opportunity with virtualisation is to deliver the best of both worlds for handset OEMs who want to leverage the 130,000+ apps ecosystem, but maintain their own apps experience and signature user interface. A virtualized Android co-inhabiting with the native app experience (think S40, Symbian, QNX, BlackBerry OS 6, Web OS, or Bada) would allow OEMs to resist commoditization while having ample degrees of freedom to differentiate. The question is: will Google allow OEMs access to the Android Market and the Android trademark when the platform is run within a virtualized shell? Such an approach would allow Sony Ericsson, Motorola, RIM, HP and the others not to compete against Android and neither to surrender to Android – but to leverage Google’s network effects and harness the Android innovation wave. Comments welcome as always, – Andreas you should follow me on Twitter: @andreascon #nokia #lg #motorola #Android #handsetmanufacturers #samsung

[We ‘re excited to release our fourth annual Mobile Megatrends 2011 – themed around what else? how software is fundamentally changing the telecoms value chain. In this fourth annual research presentation we take a deep dive into the many facets of change in the mobile industry; the DELL-ification of mobile, the battle for experience ecosystems, apps as web 3.0, the use of open + closed strategies to commodise + protect and how telcos can compete in the age of software.] After many months in the making, we ‘ve released our annual Mobile Megatrends 2011. It’s our fourth and biggest Megatrends research we ‘ve published to date featuring 68 juicy slides with detailed analysis on the future of mobile. [slideshare id=6863232&doc=mobilemegatrends2011visionmobile-110209095522-phpapp01] (want more? Contact us to schedule an on-site Megatrends workshop) We take a deep dive into how software economics is fundamentally changing the telecoms value chain setting new rules for innovation. We ‘ve broken down the 2011 Megatrends into 8 core themes: [poll id=”12″] 1. The DELL-ification of mobile: The world of handset OEMs has been irreversibly changed by software and Internet players. All traditional top-5 OEMs (from Nokia to Motorola) that used to enjoy a combined 80% market share in 2008 are now reduced to below 60%, while Internet players are reaping the majority of industry profits and market growth. The OEM market now seems destined to match the shape of the PC manufacturer market, made up of price-led assemblers (Dell, Asus) and performance-led leaders (Apple). For the old guard of top-5 OEMs, the race is on to innovate or die. 2. Software: the new era for telecoms: Besides Android and iOS headline grabbers, more than 30 software platforms have risen and (mostly) fallen in the last decade; Lesson learned: big bucks and software DNA are critical success ingredients for software platforms. The 10 or so remaining software platforms are battling for mass-market smartphone reach below the $100 retail price barrier. At the same time, every major industry player – from telcos to facebook – are striving to grow their own ecosystem, spanning from UI to social networks. However, in the software era of telecoms, not everyone is born equal. Speed of innovation, addressable consumer income and access to a partner ecosystem are all home turf for Internet players, while telecoms incumbents (from Nokia to Vodafone) are taking small, naïve steps. The new rules are: if you can’t innovate in software, you will be replaced sooner than later. 3. The battle for Experience Ecosystems. Convergence between telecoms, PC and Internet has long been talked about. But it’s not about the all-in-one all-powerful smartphone. Convergence is proving to be not about technology, but about experience convergence; how the user experience can ‘roam’ from one screen to the next (phone, PC, TV, mp3 player, etc). Apple is the poster child of experience roaming by consistently integrating the key experience ingredients – from UI and industrial design to an apps ecosystem – across multiple screens. The next battle in mobile is to build experience ecosystems which create user lock-in and cross-sales – and therefore present a sustainable strategy for both handset vendors and telcos to survive commoditisation pressures. 4. Apps are the new web. Everyone wants to compete with their own app store these days, but only a handful of app stores are above the developer radar. Why is creating an app store so hard? Because a successful app store needs 5 unique ‘genes’ from 5 different ‘species’ across the value chain. And thanks to app stores, apps succeed where the web failed; in discovery, personalization and monetization. Apps are in fact a new information paradigm, which the web is adopting. Supported by web benefactors and technology commoditization, web is becoming mainstream application development platform, in what could be could termed the web 3.0. 5. Open + closed: two sides of the same coin. Android took the mobile world by surprise when it launched a free-for-all software platform. But like Qt, MeeGo, WebKit and many other open source projects, ‘open’ is only the tip of the iceberg, since Google et al are using closed governance models to control the direction of the product. Besides open source, ‘openness’ is used as a business strategy to commoditise product complements while closing off other products to protect core assets; in Google’s case commoditizing handset and networks while protecting its own ad network. 6. Developers, the engine behind telecoms innovation. Mobile software developers have come a long way, from back office engineers to front row success stories. However the mobile developer market is still in its infancy. We present a novel way of looking at the developer journey and reveal how most commercial products cater to just a narrow section of that journey, with opportunities abound for catering to the needs and wants of telecom’s innovation engine. 7. Communities: the new currency. Communities are the new frontier for differentiation in the mobile industry. Everyone has tried creating their own communities – from Nokia to Vodafone – but only companies with social DNA have succeeded. Why is that? while you can buy an audience (eyeballs or subscribers), you can’t buy a community (the user interactions). Building a community is a form of art where tools and techniques are being explored, from game mechanics to religion engineering. One thing is certain; that communities are now a core asset in customer attraction and are expanding into communication networks and handsets, with Facebook leading the way. 8. Telcos: stuck in the telecoms age. Telcos are in the midst of an identity crisis and losing control point after control point – location, discovery, billing and authentication – while having no innovation to show in their core voice and messaging business. Yet the real value of telcos is still untapped with micro-billing, customer insights and retailing channels gone largely unexplored. We present 8 novel strategies for telcos and argue why WAC (the telcos’ answer to competing in the software age) is repeating history mistakes and is ultimately misguided. Want to dive deeper into how software is fundamentally changing the mobile value chain? Contact us to schedule an on-site Megatrends workshop. Want to reuse the slides within your presentation? Feel free to remix, but please provide attribution to VisionMobile. Comments welcome! – Andreas follow me on twitter: @andreascon #ios #opensource #userexperience #Android #handsetmanufacturers