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Year 2009

Open Always Wins

That may be. Open only wins when the underlying service is a commodity for which improvements (other than price) will not be valued.

In my way of speaking, openness is semantically equivalent to “modular” and that is in contrast to “integrated”. Integrated is the only way to develop systems when they are not good enough. Modular is the only way to cheapen systems when they are more than good enough. Figure out where the technology is on the “good enough” trajectory and pick the winners and losers by the level of integration. It’s that simple.

There were hundreds of companies backing Windows Mobile for half a decade. And it made all the promises that Android is making now (non-phone devices, millions of developers, source code, Intel backing, contractors ready to build to order.)

The Android fan counter to this is (I’m guessing) that Microsoft could not execute! Google hired swathes of WinMo people into their mobile efforts. It’s the same crowd. Is execution some sort of magic pixie dust only available to Google?


The Symmetry of Google and Microsoft in Mobile

The question of Android viability goes deeper than the app ecosystem. In fact the ecosystem is itself dependent on the network effect of the platform. That effect is weak because the platform is not “tight” and is prone to fragmentation and its value cannot be communicated to end users. That is due to the lack of integration and consistency of purpose.

Bottom line, the problem with Android was always that it was a reaction to Windows Mobile. It was symmetric in its approach to the market with the added value of being free. In that sense it’s very successful. It might even gain all the share that WinMo used to have (about 14% of smartphones at its peak). But it will never rise above the nicheness of WinMo.

I’m always amazed at the technocrati babbling classes’ inability to spot causes. They go on and on about execution and never understand that execution is a resource not a strategy. Resources are fungible.

I for one do not “hope that Android succeeds”. It’s a foregone conclusion that it will not. It’s not a matter of hoping.


Serving the Needs of IT

An interesting note in the latest Canalys Smartphone quarterly summary (http://www.canalys.com/pr/2009/r2009112.htm):

“…in our October study of 600 European decision makers in medium and large enterprises, more than 20% said they expect the iPhone to be the dominant smart phone platform for running business applications in their organisation within the next 3 to 5 years. In France, the iPhone was ahead of Windows Mobile and RIM in this regard – a remarkable result.”

This short quote brought back to mind the recently formed partnership between Nokia and Microsoft to deal with RIM. One fruit of this relationship is a recent job posting atcareers.microsoft.com which seeks Symbian developers to work for Microsoft:

Job Category: Software Engineering: Development
Location: India, Hyderabad
Job ID: 702365
Division: Microsoft Business Division

The Office team is looking for a self-motivated and highly passionate Developers to contribute in building a new team and drive discipline excellence in the delivery of Office Mobile and Communication experiences for Nokia’s Symbian smartphones.

Microsoft and Nokia have formed a global alliance to design, develop and market mobile productivity, communications and collaboration solutions.

Under the terms of the agreement, the two companies will begin collaborating immediately on the design, development and marketing of productivity solutions for the mobile professional, bringing Microsoft Office Mobile and Microsoft business communications, collaboration and device management software to Nokia’s Symbian devices. These solutions will be available for a broad range of Nokia smartphones starting with the company’s business optimized range, Nokia Eseries. The two companies will also market these solutions to businesses, carriers and individuals.

This project builds on the existing relationship with Nokia who is optimizing access to email and other personal information with Exchange Activesync. Next year, Nokia intends to start shipping Microsoft Office Communicator Mobile on their smartphones, followed by other Office applications and related software and services in the future.

(related job description)

While the iPhone wins hearts and minds in IT through sheer brilliance Nokia tries to become a supplier to IT departments through a strategy deeply rooted in the 1980s: the manipulation and exertion of control over file formats. As IT has diminished in importance (to the point of ceasing to matter to some) it’s hard to understand this misplaced alliance with Microsoft over something so inconsequential.


It looks reasonable on a log scale


Is Mobile Computing Good Enough?

This new “mobile computing” use case that smartphones try to serve is not going to be satisfied with solutions that are built from modular components.

The reason is simple: as the solutions are not good enough (because it’s early days), they need to be improved. If they are to be improved, competitive pressure will compel those who try to do so as rapidly as possible. The fastest climb up the trajectory of performance will get the bulk of the benefits. Modular implementations are simply not fast enough in cycle time of iteration in comparison to the integrated approaches.

This is why Apple will grow faster than Google, Nokia and Windows Mobile.

How does this relate to the ecosystem?

Many have been commenting that Google’s (or Nokia’s or Microsoft’s) ecosystems are more “open” or “flexible” with respect to Apple’s. And that in the long run that is the right architecture. That may be, however implementing loose ecosystems coupled loosely to modular devices and operating systems and services as a whole will not be competitive. They will be too late, too slow and too hard to use. They will be awkward to position and the benefits will be impossible to explain to end users. They will be sold through a distribution channel that is too long and with poor information feedback. Too many “vested” interests will dilute the product’s reason for being. The pricing of the integrated player will cause poor economies for the modular cohort. I could go on but it suffices to say that the modular approach will fail to be competitive.

Footnote: the arguments for the imminent explosion of Android are all based on a forecast from Ken Dulaney at Gartner. It was also Ken who in 2004 forecast that Windows Mobile will dominate business devices and that RIM would never gain share leadership. Here is why he is wrong now as he was wrong then:

Ken and his peer group are implicitly and explicitly owned by the customers he tries to serve. What I mean is that Ken is hired by those who have the money but not the competence to think by themselves. His clients are the incumbent device vendors who are signaling to him that they will increasingly license Android (as they signaled that they will license WinMo before). He adds up all the signals he gets and multiples by random numbers to get a forecast. It’s a supply-side forecast assuming “Porter’s five forces” is still at work. In that sense, he is selling back to his clients what they’ve already told him. He is hired to validate their assumptions and that’s what he delivers. Rinse, repeat.


Motomojo

Motorola shipped 13.6 million handsets in the quarter, compared with 25.4 million in the same quarter the year before.

Android will not save them. Not least of all because HTC makes better Android devices.


Apple: It’s all about the “marketing”

“In fact, as a percentage of revenue, Apple has actually been decreasing its ad spending every year for the past eight, from nearly 5% in 2001 to 1.37% today. That’s about half the 3.6% Research in Motion’s spends advertising BlackBerries.”

http://brainstormtech.blogs.fortune.cnn.com/2009/10/28/apples-2009-ad-budget-half-a-billion/


App Store Statistics


Apples vs. Nokia in North America

Comparing US sales of iPhones vs. Nokia’s NA device business.

AT&T iPhones activated in Q3: 3.2 million

Nokia phones sold in North America Q3: 3.1 million

(obviously, Nokia’s figures include Canada and Apple might have sold a few more phones in the US than AT&T activated so Apple outsold Nokia by a significant margin in units in the US.)


Market Caps

For reference, some selected current market caps:

  • Microsoft (MSFT) – $236.76B
  • Apple (AAPL) – $183.40B
  • Google (GOOG) – $173.97B
  • IBM (IBM) – $159.93B
  • Cisco (CSCO) – $138.60B
  • Hewlett-Packard (HPQ) – $114.26B
  • Intel (INTC) – $109.85B
  • Disney (DIS) – $54.31B
  • Nokia (NOK) – $48.24B
  • Research In Motion (RIMM) – $37.43B
  • Amazon (AMZN) – $40.34B
  • Dell (DELL) – $29.63B
  • Sony (SNE) – $29.10B
  • Yahoo! (YHOO) – $24.78B
  • Motorola (MOT) – $18.82B
  • Adobe (ADBE) – $18.23B
  • Palm (PALM) – $2.51B
  • RealNetworks (RNWK) – $564.74M

The top 10 world-wide:

  1. Exxon Mobil Corporation 352.31B
  2. PetroChina Company Limited (ADR) 240.47B
  3. Microsoft Corporation 237.58B
  4. Petroleo Brasileiro SA (ADR) 220.19B
  5. BHP Billiton Limited (ADR) 204.30B
  6. HSBC Holdings plc (ADR) 199.98B
  7. China Mobile Ltd. (ADR) 199.09B
  8. Royal Dutch Shell plc (ADR) 195.76B
  9. Wal-Mart Stores, Inc. 195.27B
  10. Apple Inc. 183.57B

Steve Ballmer is not worried, Apple is just a rounding error.