BUSINESS
2010: The year smartphones get smart
01-01-2010
by Ralph Averbuch
This year will be crowded, with players vying to be in the smartphone game.
In the world of mobile, the noughties will perhaps be most notable for the way Apple gate crashed the party at the start of 2007 with a device which was clearly heads and shoulders above anything else on the market. By the time the incumbent phone manufacturers realised that the iPhone was not simply a flash in the pan, Apple was already building momentum by providing a mobile platform which let developers reach a rapidly growing user-base with low cost, easy to install apps.
But the key was that there were incremental revenue opportunities to be made in not only selling smartphones at premium prices, but in the chance to generate new cash streams with downloadable software. (See 'There's an app for that' in our companion year in review article here.) For the networks the advent of the iPhone also meant there was finally a handset which could exploit all the investment that had been made in developing 3G networks; data usage shot up as people began to embrace the mobile web, email and social services such as Facebook and Twitter.
Apple's master stroke provided a massive boost to its fortunes and catapulted it to the top of the tech stocks. However, the iPhone will certainly lead to the demise of most of its iPod business (who wants an iPod if you have an iPhone full of music?). The iPhone also gave other manufacturers the impetus to raise their game. That began to bear fruit in 2009 with some increasingly impressive smartphones attempting to outdo the iPhone.
The problem was, apart from RIM's Blackberry and the iPhone, smartphones (a small but rapidly growing market segment) were heavily reliant on Microsoft's Windows Mobile. In its current form WM has struggled to adapt to a finger-driven capacitive touch screen world, its heritage being that of pen-driven PDAs. Manufacturers such as HTC have attempted to overcome this with additional interface tweaks and Microsoft claims it will release a major reworking of the OS, Windows Mobile 7, in late 2010. But the question many will be asking is whether it's too little too late, with Google Android now beginning to make waves.
More power to your Android
Android was announced in late 2007, backed by Google and 47 other hardware and network partners which formed the Open Handset Alliance. The OS clearly has a lot of appeal for handset manufacturers as it comes sprinkled with Google gold dust and provides an open platform which mobile makers can customise. That's why at launch the Open Handset Alliance had HTC, Samsung, Intel and LG on board as well as a number of other big-hitters such as Intel, Qualcomm and T-Mobile. Yet early attempts at producing phones with the new OS were less than stellar. The Motorola G1 was one of the first and failed to impress. Towards the second half of 2009 that lacklustre first showing changed with the launch of Android-driven phones: from HTC with the Hero, and recently Motorola's Droid or Milestone in Europe.
Going into 2010 a growing band of mobile makers plans to launch handsets driven by the latest releases of the Android OS. It's widely expected that Google will launch its own branded phone built by HTC.
Whilst the momentum will continue to build behind Android during 2010, the jury's still out on whether Palm can revive its fortunes with its Pre handset and WebOS. Despite wide acclaim early sales haven't been great. Then there's the question of what Nokia plans to do to address its faltering momentum as market leader. Nokia has struggled to reinvent itself since the iPhone heralded a new era in smartphone development. The Symbian OS will not be the software Nokia uses to fight for its share of the sector during 2010 and beyond; it's instead pinning its hopes on a new OS specifically developed for smartphones.
Called Maemo, the OS is also being developed in an open community, along similar lines to the Open Handset Alliance behind Android. Given Nokia's heritage and current market strength, Maemo stands a good chance of establishing a foothold, but Nokia's new OS certainly heralds the beginning of the end for Symbian on Nokia smartphones.
And just to confuse matters further there's also the LiMo Foundation, another consortium of manufacturers aiming to make yet another open Linux based smartphone OS, currently only to be seen on a few Samsung handsets sold by Vodafone.
Fat margins quicken the smartphone pulse
And why all this activity in the first place? Quite simply, it's down to margins. Handset makers know there's greater profit in selling a smartphone than chasing a mature market where margins have been cut to the bone. Networks know there's more revenue to be made when someone has instant access to web-enabled services on their phones. Google wants to protect its massive online business by being as ubiquitous on the mobile web, which will be far larger than the existing PC-based web we've grown up with. Microsoft meanwhile doesn't want to lose its dominance in the enterprise/corporate sector and simply can't afford to leave the market open to others as mobile competitors may ultimately undermine its core revenues.
The list goes on but the upshot of all this frenetic activity will become clear during 2010. This is a battle royal for the next generation of the web in your pocket and no network, chip maker, manufacturer of software developer wants to be left out in the cold.
By the end of this year it will become pretty clear who the winners and losers are likely to be. But here's betting that both Android and the iPhone will be the players with the most to crow about when 2011 comes around. Let battle commence.
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