Quick Takes: Nokia's culture, RIM's interface, and living in the paradigm of engineers

This post is an experiment.  I sometimes run across information that I think is worth sharing, but that doesn't fit into my usual publishing tools.  Generally it'll be something too complicated to tweet, but too simple for one of my usual long blog posts.  I've decided to try compiling those tidbits into an occasional post, which I call "Quick Takes."

Please let me know if you find this useful.

This time I want to talk about the aftermath of the Nokia-Microsoft deal, Android on BlackBerry, wireless insecurity, and WikiLeaks as a model for the future of human society.


More aftershocks from the Nokia-Microsoft deal

In the flood of commentary about Nokia's deal with Microsoft, I ran across three items with interesting perspectives on the deal.  They helped me understand how much work Nokia still needs to do.  If you're interested in the deal, or just in organizational change, I think they're worth checking out...

The engineering-driven culture.  Adam Greenfield, a former Nokia employee, discussed Nokia's culture and explained how it produces wonderful mobile phone devices but poor user experiences (link).  The key sentence:

The value-engineering mindset that’s so crucial to profitability as a commodity trader is fatal as a purveyor of experiences.

When I've written in the past that Nokia needs to learn how to do real product management, this is what I was trying to say.

This is how it feels to have an alliance dumped on you.  Meanwhile, if you want to get a sense of how corporate alliances get built, check out Engadget's interview with Aaron Woodman of Microsoft (link).  Aaron is a Microsoft spokesman and a key player in the Windows Phone team, so you might expect him to know chapter and verse about the plans for the alliance with Nokia.  But he doesn't, and you can feel his discomfort as Engadget tries to pin him down on some details:

Q:  There will be no preferential treatment given to Nokia in terms of the level of customization that they can apply to their devices. Is that correct, or no?
A: So it's an interesting question -- you say, like, preferential treatment, so say more about that. Is that like oh, they can modify...

The reality is that a big corporate alliance is created from the top down.  Senior management negotiates the broad outlines, and then announces the deal (because it's material to both companies and has to be announced to prevent insider trading).  Then the mid-level employees have to painstakingly work out what the agreement actually means.  I believe that's happening as you read this, and that process will probably continue for some months.  Meanwhile, Aaron can't answer most of Engadget's questions because the answers don't yet exist.  I give him a lot of credit for not trying to make up something to make himself sound better.

Anyway, if you see some vagueness from Microsoft and Nokia in the next few months, don't be alarmed.  It's how these things are done.

When is an installed base not an installed base?  I've been delighted to watch the rise of Horace Dediu, a former Nokia employee who has built himself a huge online following through very cogent analysis of Apple, and now the overall mobile market.  Although I usually find myself agreeing with everything he says, I thought he was a bit off base in some recent commentary about Nokia (link).

Dediu plotted the installed base of every mobile platform, and pointed out that Symbian has a far larger installed base than any other mobile platform.  He said Nokia has decided to throw away that installed base:

The disposal of such a large installed base must count among the largest divestitures in technology history and, when coupled with the adoption of the least-tested alternative as a replacement, elevates platform risk-taking to a new level. It may seem bold, but there is a fine line between courage and recklessness.

If all of those Symbian users understood that Symbian was their OS, had purchased applications for it, and felt that Symbian added value to their devices, then Nokia would indeed be taking a huge risk.  But virtually the only people who were even aware of Symbian were the people reading and writing blogs about the mobile industry.

Try this -- go look at a typical Nokia Symbian phone.  What is the brand you see on it?  Start the software, launch some apps.  Do you see the word "Symbian" displayed prominently?

Have you ever seen an ad for Symbian?  A billboard perhaps, or a big glossy ad on the back cover of the Economist?

Maybe a teensy little text ad inside the Economist?  Anything?

Indeed not.  Because Nokia didn't want the name Symbian to be prominent.  Heck, it didn't even let Symbian create its own user interface, let alone advertise its brand.  Nokia made Symbian into anonymous plumbing, because Nokia wanted Nokia to be the brand that users bought.  And considering how things worked out, that was something the company did right.

When I was at Palm and we surveyed mobile phone users, we asked Symbian users what OS was on their phones.  Most of them had no idea.  Among the minority who said they knew what their OS was, more of them thought it was Windows than knew it was Symbian.

Let me say that again, more Symbian users thought they were using Windows than knew they were using Symbian.  I guarantee that hasn't changed in the years since we did our surveys.

So, if Nokia executes its marketing properly, it should be able to flip most Symbian users to Windows Phone easily.  Just grin, tell them it's the cool new Nokia smartphone, and move on.  In that vein, the riskiest thing Nokia has done in the past couple of weeks is play up its deal with Microsoft.  It would have been better to play it down, so Nokia customers wouldn't get a message of disruption.

But I doubt most of them are listening anyway.

If there's anything reckless in the Nokia-Microsoft deal, it's the huge number of things that both companies need to execute very well in order to make it work.  But I think there's nothing reckless about the basic idea of ditching Symbian.


Android apps on BlackBerry?

There have been persistent rumors that RIM is trying to get software that will let its PlayBook tablet run Android apps (link).  Now there's some evidence that they may be looking to do the same on BlackBerry phones as well (link).  This seems like a reasonable thing to do, but I'm astounded that they're only working on it now.  The time to plan the app platform for your tablet is when you're creating the software for it, about a year before it ships.  It's not the sort of thing you dink around with a couple of months before shipment.  And you especially don't tell the public about it right before the hardware launches -- all that does is undercut any chance you had of getting native app development on your platform.


Wireless isn't secure (duh)

This isn't news if you've been paying attention.  For years the security companies have been telling us that wireless networks (especially wifi) can easily be snooped.  I'm not sure why the wireless insecurity story has never gotten much traction outside the beltway.  Maybe we weren't using enough web apps to care, or maybe no one listens to the security companies because they're presumed to be alarmists who just want to charge you $49.95 a year for something that'll make your computer run slow.

Anyway, it seems to me that the story is now popping up all over the place.  In December the Wall Street Journal ran a series on the information collected by mobile apps (link), this week The New York Times ran a story on the third party tools available to hack wifi hotspots (link), and a professor at Rice University posted on the types of data his class could sniff from his Android phone (link).  A surprising find -- two apps unrelated to location services were broadcasting his GPS location.

Why is this significant?  The mobile operators plan to offload traffic to wifi to reduce network congestion.  If those networks turn out to be insecure, the operators might be blamed for security breaches that result.  Or if more wifi networks are restricted due to security fears, the operators might find it harder to do that offloading in the first place.  Bottom line -- it is risky to depend on someone else's infrastructure as part of your core product.


WikiLeaks: Human society as designed by an open source engineer

O'Reilly ran a fascinating review of Inside WikiLeaks, a new book describing how WikiLeaks operates (link).  It reminded me of some thoughts I had after I heard a talk by Ward Cunningham, one of the creators of the wiki (link).

Most of the social structures in the world today were designed by two groups of people, religious leaders and lawyers.  The religious leaders gave us governments based on moral codes and hierarchies; the lawyers gave us governments based on laws, property, and checks and balances.  In both cases, the people creating the system built into it their own worldviews, their own assumptions about human nature.  The assumptions were so fundamental that I think they didn't even realize they were using them; they just baked them into the system.

Wikipedia, WikiLeaks, and movements like them are profoundly new because they attempt to structure society around the social assumptions of a third group of people: engineers.  And not just any engineers, but open source engineers.  That culture believes in the rationality of human beings and the existence of absolute truth.  It assumes that if the same information were available to everyone we'd be able to settle all disputes through logical discourse.  And it is intensely hostile to authority structures, because by definition they're assumed to get in the way of free discussion.

WikiLeaks is an attempt by that culture to restructure society.  I know that sounds crazy, but here's a quote from the book:

In the world we dreamed of, there would be no more bosses or hierarchies, and no one could achieve power by withholding from the others the knowledge needed to act as an equal player.

If you want to see this idea taken to its logical extreme, check out the short story "The Ungoverned" by science fiction author Vernor Vinge (it's online here).  I'm not saying that's the world we're headed for, but I think we'd all be foolish to assume that WikiLeaks will be the last attempt at open source social engineering.

I think it's actually just the beginning.

Nokia: An Excess of Cleverness

I'm looking forward eagerly to Nokia's strategy announcement this week.  Although Nokia is not highly esteemed in the US, most of the rest of the world recognizes it as an enormously important company: a brilliant manufacturer, a symbol of status and affluence in the developing world, and a source of great pride to its many fans in Europe and elsewhere.  If Nokia could combine its strengths with better execution in software and smartphones, it could be a formidable force in the computing industry as a whole, not just in mobile.

In anticipation of the new strategy, I wanted to share a few thoughts on why Nokia has struggled with the intersection of phones and computing, and what it might do to fix the problems. 

A couple of disclosures first:
--Several years ago I did a consulting project for Nokia.  I've also met with them, I have had a lot of briefings from them, and I know several people who work there.  No inside information from any of those sources has gone into this note.
--Before someone posts a comment saying so, yes my views are colored by the place I live, Silicon Valley.  Your paradigm may vary.

As is often the case for big successful companies, I think Nokia's strengths are also its weaknesses:


Strength 1: Nokia focuses very well...which can lead to denial of reality 

Nokia has a very intense, delivery-focused culture that has enabled it to pursue strategies with awesome focus and determination.  Over the years, the company has transformed itself from a paper mill to a rubber boots company to a video monitor company, etc, etc.  I can think of very few modern firms that are capable of that sort of huge transformation.

But I think that same determination has also sometimes enabled Nokia to live in denial of reality.  As an outsider who has dealt with Nokia a lot over the years, the company often comes across to me as the opposite of a learning organization.  Rather than getting inquiry and questions, when you discuss an issue with Nokia you tend to find that there is already an official Nokia answer to it: self-assured, hermetically sealed, and often sounding slightly condescending.

When Nokia was on a roll and executing beautifully, that self-assurance was entirely justified.  As somebody once said, "it's not arrogance if you can do it."  But as the company faltered, I think its belief in its own specialness and power led it to resist making changes that would have happened at most other companies several years ago.  This deepened Nokia's problems.

A quick look at the company's financials tells the story.  In 2006, Nokia was on a roll.  Its revenue was growing nicely, and it had operating profits of about 12% before taxes.  But starting in 2007, Nokia hit a wall.  Its revenue flattened and then fell.  Despite the revenue problem, Nokia held its R&D, marketing, and administrative spending almost steady in Euro terms, increasing them as a percent of revenue.  It's as if Nokia believed four years of revenue stagnation were just a temporary glitch to be endured rather than a fundamental problem that had to be fixed.

(Note: Fiscal years, all figures in $millions.  The numbers above and below were restated from euros to dollars.  I also excluded miscellaneous revenue and expenses, and one-time charges, because they distort the trends.)

To give you an idea of the impact of Nokia's slowdown, here are a couple of comparisons to Apple.


First, revenue...


Yes, Apple is now a bigger company than Nokia in terms of revenue.  That alone is pretty astonishing to me, and I'm sure it irritates the folks at Nokia, since they routinely bristle at this sort of comparison (link).


Here are expenses (R&D, marketing, and administration) as a percent of revenue.  Lower is better.


Apple has done a nice job of holding its expense growth below its revenue growth.


And here's the payoff:  Operating income


Financially, Apple has just plain run away from Nokia.


When Stephen Elop was announced as CEO of Nokia, people made a lot of hay about his background as a Canadian.  I think that was the wrong bit to focus on.  To me, the most important element of Elop's background was the ten years he spent in Silicon Valley.  I wondered what a Silicon Valley guy would think when coming into a company and seeing financials like these.  I believe the reaction would be horror: "Why didn't you people panic back in 2008?"  The accepted wisdom here is that you just don't let expenses stay high through four years of declining revenue.  That lets the problems fester.  Nokia is now a bit like a patient who has delayed routine medical treatment for so long that he ends up in the emergency room needing surgery.

Elop's now-famous memo on Nokia's problems speaks volumes about the company's culture (link).  Assuming the memo is real (I am taking the word of the press on this), Elop likens Nokia's situation to jumping from a burning oil derrick into the North Sea -- where, as anyone in the Nordic countries would know, you can die of hypothermia in minutes. 

What does it say about the employees' resistance to change that the CEO feels he has to be this alarming? 


Strength 2: Nokia manufactures wonderfully...which produces sterile, inartistic smartphones

Nokia is one of the most efficient manufacturing companies on the planet.  Very few western companies have ever withstood an all-out assault by China Inc, but Nokia, a company from high-cost Finland, has also been for years the world's lowest-cost major producer of phones.  Elop's memo says that cost leadership is now under threat, but still it's an unbelievable accomplishment that ought to be studied in every business school worldwide. 

But the same manufacturing-driven culture that turns out great, cheap feature phones by the dozen breaks down when asked to craft an intricate smartphone in which overall system integration is the most important feature.  Nokia designs phones using a manufacturing-like process in which different groups create features in parallel.  So (to make up an example) one group might do the user interface, another the mail app, and another the browser.  That's very efficient for creating lots of phones quickly, but it means it's very difficult to integrate all of the pieces together closely so they produce a great user experience.  The best smartphones, like the iPhone, are designed holistically, with all of the pieces coordinated together.  A product manager controls the process and can enforce compliance with the product vision.  This process is much slower and less efficient than Nokia's, but when you're creating a product with a lot of software, it ensures that everything works together well.

Apple can get away with this less efficient process because it produces one phone at a time.  Nokia has 89 different phone models available currently in Europe (link).


Strength 3: Nokia makes fantastic plans...over and over and over again

Nokia has for decades been able to hire the brightest people from a very bright country, Finland.  After meeting a lot of Nokia employees, I can tell you that it probably has one of the smartest workforces anywhere.  But all that intelligence has produced an analytical culture that breeds complicated plans elaborately fleshed out by committees.  Its history in the last decade is a series of wickedly clever, logical strategies that were so complex and took so long to develop and implement that they were often obsolete before they came to fruition.  It sometimes seems as if Nokia has been crippled by an excess of cleverness.

I'm reminded of a short story by science fiction legend Arthur C. Clarke, Superiority.  In it he described a society that lost a war by continually focusing on the new weapons that were about to come out of the labs, rather than mass-producing the ones that it already knew how to build.

To make matters more difficult, Nokia defined almost every major company in computing and telecommunications as its enemy.  At one time or another it has decided that it needed to dominate or defeat Microsoft, Apple, RIM, Google, the entire handset industry, the network equipment suppliers, and of course the mobile operators.  Even the US government tries to fight only two wars at once; Nokia has been fighting at least five.

There are so many examples of Nokia's busted plans that I don't know where to start.  The Symbian adventure, in all of its permutations, is an obvious one.  Nokia has gone through a number of different organizational structures, each of which was supposed to optimize it to compete in the new world of computing and internet.  But the one that sticks out at the moment is Nokia's venture in tablet computing.

Don't get me wrong, I do know the differences between an iPad and an n900.  They are dramatically different devices that reflect profoundly different design philosophies.  But both were designed for a similar high-level goal -- to make computing and web access mobile.  Nokia shipped its product first, more than three years ago.  Apple shipped last year.  Apple is selling seven million units a quarter, while n900 sales are what, a few hundred thousand?  Nice, but not a new industry.  I know Nokia has learned a lot, and has built a lot of infrastructure, but at some point you have to generate revenue rather than just having a great learning experience.


What do you do, Mr. Elop?

I think the biggest challenge facing Stephen Elop is that he needs to preserve the strengths of Nokia even as he undoes their effects.  Expenses have to come down, but at the same time he needs to invest in innovation.  The company must keep its manufacturing strength, even as it adopts a design philosophy that undercuts manufacturing efficiency.  People at Nokia have to be free to innovate independently, but when left to itself the Nokia culture tends to seek consensus and compromise.

I suspect that given all these changes, even motivating the Nokia workforce may become a challenge.  The Nokia people I've talked to love the company and desperately want it to get better.  But nobody could live through the last few years without getting a bit burned out.  Now the CEO says your home is on fire and you need to jump into freezing water.  Would that memo motivate you to work harder, or would it motivate you to work on your resume?  I was discussing the memo with several of my old friends from Apple today, and one of them joked that the message to employees was, "Everybody come to the communication meeting Friday!  Oh, and you might want to pack up your personal belongings and bring them, just in case."  On Friday, Nokia's people will need to see a carrot -- an attractive, plausible vision for the future of the company -- rather than just a stick.

I'll be watching carefully for that vision.  We're hearing rumors that Nokia is planning to shift away from its current operating systems and build on top of Windows Phone 7.  I doubt that's the full story.  For one thing, Nokia can't completely cut off its current software and switch to something else; there would have to be a long transition.  Besides, in the Nokia earnings call last month, Elop dropped some hints about his plans.  He talked about maintaining two platforms, one aimed at the mass market and another at the high end.  He said Nokia's biggest challenge is at the high end, so that's where I would expect a change is most likely.  Elop also went out of his way to praise the QT software layer, so I would be very surprised if it's killed.  If Windows Phone is in Nokia's future, I think we'd see it at the high end, paired with QT.  So we'd get a hybrid OS with Microsoft's plumbing and Nokia APIs. 
   
That would be a bold move, but it's also extremely complicated.  I remember when Palm tried to build its future on Windows Mobile, and gave up in disgust a couple of years later when Microsoft licensed Palm's innovations to other phone companies.  How would Nokia restrain Microsoft from doing the same thing again?  Elop worked at Microsoft, so I'm sure he has some ideas. 
   
Overall, it sounds like a high risk strategy, almost wickedly clever.  Exciting stuff.  And yet I keep remembering how Nokia's other wickedly clever strategies have worked out.

Note:  I've added more commentary on the Nokia announcement here.

Symbian changes everything, and nothing

[With a correction made on June 26.]

The Symbian Foundation announcement today is a fascinating change in business strategy, but I'm not sure if it will help or hurt Nokia in the long run. I think something like this was probably necessary just to clean up the mess in Symbian's ownership structure. If Nokia can make the new structure work, it'll be a milestone in the use of open source by large tech companies, but I'm not sure it helps Nokia win the smartphone war.


What happened

--Nokia is buying Symbian. Everyone currently working at Symbian becomes a Nokia employee after the deal closes. Nokia said it will spend the next six months deciding "how we will use the unique talent we are gaining."

[By the way, the buyout by Nokia is a change I said was possible two and a half years ago when it first became clear that some of Symbian's owners wanted out (link). I am astounded that the change took so long. I looked back at my old post a few months ago and thought, "wow, I really got that one wrong." Now I am relieved to say that I was not wrong, I was merely prematurely correct ;-) ]

--Symbian OS will become free. Nokia's Symbian-related assets, including both Symbian OS and the S60 interface, will be contributed to the new Symbian Foundation, a nonprofit that will control the Symbian platform. So Nokia writes the code and then gives it to the foundation for free.

Founding members of the foundation include: AT&T, LG, Motorola, Nokia, DoCoMo, Samsung, SonyEricsson, ST Micro, TI, and Vodafone. It's very interesting to see some operators in the mix, especially AT&T.

The foundation will open source the new Symbian platform over a two year period. So eventually Symbian will be available for free.

The new Symbian Platform will have a broader scope than the current Symbian OS. It will include:

-An application suite (previously controlled by licensees)
-Runtimes (including Webkit, Flash, Silverlight, and Java; previously licensee-controlled)
-UI framework (formerly controlled by licensees)
-Middleware
-OS
-Tools, SDK, and application signing (previously shared between Symbian and licensees)

--UIQ is dead. SonyEricsson's UIQ technology, and NTT DoCoMo's MOAP, both of which are user interface layers written on top of Symbian, will also be contributed to the foundation, which will incorporate pieces of them into S60. The new Symbian foundation partners said at the press conference, "We will reposition UIQ in the new ecosystem." That's seems to be a face-saving way of saying, "UIQ is dead." Confirming that, UIQ announced immediate plans to lay off more than half its employees (link).

These are huge changes, even though they'll take a couple of years to implement. We won't get the first release of the new merged platform until 2010, although the partners say S60 and native Symbian apps will continue to run in the future, so they hope many more developers will create Symbian apps today in anticipation of future growth.

--Nokia will continue to control Symbian development. This is my interpretation, not something they announced. Technically, control over Symbian and S60 passes to the new Symbian Foundation, with product plans controlled by a managing board and councils made up of foundation members. This makes Symbian sound independent. But Nokia will employ most of the people maintaining and extending Symbian and S60, and could divert them to other Nokia projects if it ever dislikes the direction of the foundation. More to the point, the whitepaper explaining the new foundation says, "device manufacturers will be eligible for seats based on number of Symbian Foundation platform-based devices shipped, with the other board members selected by election and contribution" (link). So Nokia as the dominant shipper of Symbian devices gets the most seats, and can then control the election of additional board members. Symbian contacted me on June 26 with a correction: "Five Foundation board seats will be allocated to handset vendors on the basis of volumes shipped using the Symbian Foundation platform. There will be a maximum of one (1) board seat per company." So Nokia gets one board seat, and does not control the foundation.

The right phrase for this, I think, is puppet strings. But I don't mean that in a bad way; it would have been insane for Nokia to actually give up control over its smartphone OS. Just don't have any illusion that the strings have been cut. They've merely been relocated, and in fact I think Nokia now controls things more directly since it owns the Symbian development team. Added June 26: Nokia has given other companies a formal say in the feature set, with less official control by Nokia than it had when it held about 50% of Symbian, but perhaps more practical influence because it now directly employs most of the people doing the engineering. So I think Nokia gave up the official veto it had over Symbian's actions, and replaced it with a practical one.


What does it all mean?

I don't know.

The announcement is so complex, and so many things are changing in the mobile market, that it's very difficult to predict how everything will turn out. Also, the whole thing depends on crisp implementation. Even the most brilliant strategy fails if you can't execute on it.

You can't say that Nokia lacks guts. The foundation members said at the announcement that it is one of the largest open source announcements ever, and I think that's true. It's a very interesting, aggressive move for Nokia, and I respect that. There are precedents for a big company acting as a sugar daddy for an open source software project, but I don't think it's ever been done with a project that is as central to the parent company's operations as Symbian is to Nokia. It will be fascinating to see if Nokia can really work effectively through the foundation model. I presume they have thought about this a lot and feel the risks are well controlled.

I'm having trouble seeing the big picture of how this changes the world, though. I suspect the announcement is actually half cleanup and half power move. The power move is that it challenges Android, and could help harness the energy of the open source community to support Symbian. The cleanup is that the ownership situation of Symbian was unstable and had to be changed eventually, and SonyEricsson clearly wanted to get out of the UIQ business. The creation of the foundation solves all of those problems at once. My guess is that since Nokia is paying most of the bills, the other foundation partners were willing to go along with it. The Symbian investors get some money from Nokia, and can sit back and wait to see what the foundation delivers.

Here are some other issues and questions that stand out to me:

Symbian gets its UI back. Years ago, Symbian took itself out of the user interface business, allowing Nokia and NTT DoCOMo to develop their own UIs, and spinning out the UIQ interface team. The company declared that it had been a mistake to ever go into the UI business. So it was amusing to hear Symbian at today's press conference saying how disruptive it was to have multiple user interfaces, and how great it is to have them unified.

The reality is that OS companies have traditionally created the UI along with the rest of the OS because they need to be coordinated closely, and because developers want to work with one consistent interface. So the real mistake was getting out of the UI business, and Symbian has now corrected that.

What will happen within Nokia? At the press conference, Nokia was asked what happens to its internal S60 development team (which is rumored to be larger than Symbian itself) once the merger is complete. Nokia said vaguely that it's going to spend six months working out all those integration issues, and what it will do with the multiple geographic locations. It's hard for me to believe that working out process won't result in some layoffs. I hope I'm wrong; I have friends at both Nokia and Symbian, and layoffs would be incredibly painful for the Symbian folks, many of whom have spent most of their careers there.

The fate of the people is just one of the open questions about what the merger means to Nokia. Another is the fate of Trolltech, the development tool that Nokia purchased recently and said would unify app development across Series 40 and S60. Will it be contributed to Symbian? And what does the open sourcing of Symbian mean for Nokia's use of Linux?

How does Nokia differentiate its software? The theory behind S60 was that Nokia would have its own user interface, helping to differentiate its phones from other Symbian vendors. Now that S60 will be given away, how will Nokia differentiate? The Symbian Foundation says licensees will be able to create a "differentiated experience" on its unified UI framework. Lord only knows what that means. Maybe Nokia has decided the UI is not a point of differentiation at all, and plans to focus on something else (web services, perhaps?)

Will the change in Symbian really drive more developers? As the Symbian partners pointed out repeatedly in the press conference, they have already sold 200 million phones. If that's not enough to excite developers, how will adding another 200 million -- or even 500 million -- do it? Although Symbian now has a nicer long term story, I don't think most developers were paying attention to that. They respond to user excitement and the chance to make lots of money. The new Symbian strategy doesn't directly drive either one.

What does it mean to Apple? I think it's probably good news. Although the Symbian partners could theoretically bleed Apple by sharing investments that Apple has to fund for itself, Apple competes on speed and elegance, not cost control. Nokia and Symbian will now spend the next six months sorting out how they'll integrate and rationalize their organizations. No matter how much they try to avoid it, this will slip schedules and force people to revisit plans. And the other Symbian licensees have to wait two years for the new OS. That gives Apple a long, long time to build up its iPhone business. The Register put it very bluntly in its commentary on the Symbian announcement (link):

"Apple must now see a clear road ahead for world dominance...it's now Apple's business to lose."

Wow, from new entrant to industry leader in just a year. That sort of stuff must drive Nokia nuts.

Is Google happy or upset tonight? My first reaction is to say that Google should be worried because there's now another very credible operating system being given away for free in competition with Android (or there will be in two years). What's more, the leading mobile handset companies all participated in the Symbian Foundation announcement. That makes it harder for Android to get licensees. But the new open Symbian OS is two years away from shipment, giving Google lots of runway to get established (that's what I meant about execution determining the real impact of the announcement). Also, the governance system for Android is a lot simpler than Symbian's. While the Symbian committees must debate and agree on product plans, Google can just decide whatever features it wants to add, and toss them out there. In theory, Google should be able to move much faster.

Besides, there is the question of why Google really created Android. One school of thought says that Android was just a tool to bleed Microsoft and force openness in the mobile ecosystem. If that's the goal, then the opening up of Symbian is a kind of a triumph for Google. Nokia is, in many ways, doing Google's work for it. Which brings us to...

What happens to Microsoft? Here's the weird thought for the day: Microsoft is the last major company charging money for a mobile operating system. The throwback. The dinosaur. How many companies are going to want to pay for Windows Mobile when they can get Linux, Android, or Symbian for free? This is Microsoft's ultimate open source nightmare, becoming real.

Nokia and Microsoft, sittin' in a tree...

There's so much hype in the mobile industry that I'm always reluctant to use a word like "shocking," but nothing else fits Nokia's announcement today that it will support Microsoft Silverlight.

If you missed the press release (link), Nokia said that it's going to make Microsoft Silverlight available for all of its mobile platforms -- Series 40 (the low-end phone OS), S60 (the high-end OS), and its Maemo Internet tablet. (It's not clear if Silverlight will be bundled or just offered as a download.) Silverlight is a web app graphics and interface layer, intended to displace Adobe Flash.

The announcement was shocking for several reasons:

--Up until now, Nokia and Adobe had worked together closely. Nokia is one of the few companies paying to bundle Flash on its phones, and Nokia had featured Adobe prominently at some of its developer events in Silicon Valley. So the announcement I was expecting was that Nokia would bundle Air, the next evolution of Flash, rather than its competitor.

--Nokia has generally treated Microsoft as the spawn of the devil. The whole Symbian OS consortium was designed primarily as a way to prevent Microsoft from getting a controlling role in mobile software. Now Nokia gives Microsoft's software layer a huge boost?

--Although Microsoft had hinted vaguely about taking Silverlight mobile, it had given no definite plans at all. So this is a huge step forward for Silverlight.

--Just a few weeks ago, Nokia bought TrollTech and announced that its software was going to unify development across Series 40 and S60. Now Nokia endorses Silverlight, which will also run across Series 40 and S60. Which one are developers supposed to focus on?


What in the world is going on?

I don't know. Nobody from Nokia has explained it to me, so I have to read between the lines. Nokia says in the press release: "Nokia aims to support market leading and content rich internet application environments and to embrace and encourage open innovation. By working with Microsoft, we are creating terrific opportunities and additional choices for the development community." Okay, so I guess what they're saying is that they want to support every platform and development option out there. Presumably the benefit to them is that they can claim their phones support more software than anyone else.

I doubt that's the only motivation, though. By supporting numerous platforms, Nokia reduces the possibility that any one of them can dominate the market and push around Nokia. It also lets Nokia play the sides off against one another. I'm sure the threat of embracing Air made Microsoft give Nokia a very good deal on Silverlight, and no doubt Nokia will now use its Microsoft relationship to get business concessions from Adobe (assuming that Nokia still plans to work with Adobe at all; that's not entirely clear).

Anyway, I can sort of see how this all works for Nokia strategically, although it feels like Nokia is trying too hard to be clever. I'm not as clear on the benefits of all this for mobile developers and users. As was covered in last week's post on mobile apps (link), many developers view the proliferation of platforms as a problem, not a benefit. Microsoft itself said in the Nokia press release:

"We want to make sure developers and designers don't have to constantly recreate the wheel and build different versions of applications and services for multiple operating systems, browsers and platforms."

That's a pretty danged funny quote coming from a company that now offers at least four mobile platforms (two versions of Windows Mobile, Silverlight, Tablet PC, and does .Net CF count as a fifth?), in a press release from a company that apparently wants to support every platform available. If you really think platform confusion is a problem, guys, look in a mirror.

For users, the benefit of all this deal-making is unclear. We're stumbling into a world where you'll need to know details of which platforms are loaded on a particular phone in order to know which apps it can run. I can't think of a better way to discourage use of mobile applications.

Mobile applications, RIP

Summary: The business of making native apps for mobile devices is dying, crushed by a fragmented market and restrictive business practices. The problems are so bad that the mobile web, despite its many technical drawbacks, is now a better way to deliver new functionality to mobiles. I think this will drive a rapid rise in mobile web development, largely replacing the mobile app business. This has huge implications for mobile operators, handset companies, developers, and users.


The decline of the mobile software industry

Mobile computing is different from PC computing.

For the last decade, that has been the fundamental rule of the mobile data industry. It was the central insight of Palm Computing's "Zen of Palm" philosophy. Psion came up with similar ideas, and you can hear echoes of them from every other successful mobile computing firm: Mobile computers are used differently from PCs, and therefore must be designed differently.

We all assumed this also meant mobile devices needed a whole mobile-specific software stack, including an operating system and APIs designed specifically for mobility, and native third-party applications created from the ground up for mobile usage.

That's what we all believe, but I'm starting to think we got it wrong.

Back in 1999 when I joined Palm, it seemed we had the whole mobile ecosystem nailed. The market was literally exploding, with the installed base of devices doubling every year, and an incredible range of creative and useful software popping up all over. In a 22-month period, the number of registered Palm developers increased from 3,000 to over 130,000. The PalmSource conference was swamped, with people spilling out into the halls, and David Pogue took center stage at the close of the conference to tell us how brilliant we all were.

It felt like we were at the leading edge of a revolution, but in hindsight it was more like the high water mark of a flash flood. In the years that followed, the energy and momentum gradually drained out of the mobile applications market.

The problem wasn't just limited to Palm; the level of developer activity and creativity that we saw in the glory days of Palm OS hasn't reappeared on any mobile platform since. In fact, as the market shifted from handhelds to smartphones, the situation for mobile app developers has become substantially worse.

That came home to me very forcefully a few days ago, when I got a call from Elia Freedman. Elia is CEO of Infinity Softworks, which makes vertical market software for mobile devices (tasks like real estate valuation and financial services). He was one of the leaders of the Palm software market, with a ten year history in mobile applications.

I eventually moved on from Palm, and Elia branched out into other platforms such as Blackberry. But we've kept in touch, and so he called recently to tell me that he had given up on his mobile applications business.

Elia gave me a long explanation of why. I can't reproduce it word for word (I couldn't write that fast), but I've summarized it with his permission here:

Two problems have caused a decline the mobile apps business over the last few years. First, the business has become tougher technologically. Second, marketing and sales have also become harder.

From the technical perspective, there are a couple of big issues. One is the proliferation of operating systems. Back in the late 1990s there were two platforms we had to worry about, Pocket PC and Palm OS. Symbian was there too, but it was in Europe and few people here were paying attention. Now there are at least ten platforms. Microsoft alone has several -- two versions of Windows Mobile, Tablet PC, and so on. [Elia didn't mention it, but the fragmentation of Java makes this situation even worse.]

I call it three million platforms with a hundred users each (link).

The second technical issue is certification. The walls are being formed around devices in ways they never were before. Now I have to certify with both the OS and with each carrier, and it costs me thousands of dollars. So my costs are through the roof. On top of that, the adoption rate of mobile applications has gone down. So I have to pay more to sell less.

Then there's marketing. Here too there are two issues. The first is vertical marketing. Few mobile devices align with verticals, which makes it hard for a vertical application developer like us to partner with any particular device. For example, Palm even at its height had no more than 20% of real estate agents. To cover our development costs on 20% of target customer base, I had to charge more than the customers could pay. So I was forced to make my application work on more platforms, which pushed me back into the million platforms problem.

The other marketing problem is the disappearance of horizontal distribution. You used to have some resellers and free software sites on the web that promoted mobile shareware and commercial products at low or no charge. You could also work through the hardware vendors to get to customers. We were masters of this; at one point we were bundled on 85% of mobile computing devices. We had retail distribution too.

None of those avenues are available any more. Retail has gone away. The online resellers have gone from taking 20% of our revenue to taking 50-70%. The other day I went looking for the freeware sites where we used to promote, and they have disappeared. Hardware bundling has ended because carriers took that over and made it impossible for us to get on the device. Palm used to have a bonus CD and a flyer that they put in the box, where we could get promoted. The carriers shut down both of those. They do not care about vertical apps. It feels like they don't want any apps at all.

You can read more of Elia's commentary on his weblog (link).

Add it all up, and Elia can't make money in mobile applications any more. As he told me, "Mike, it's time for you to write the obituary for mobile apps." More on that later.

Although it's a very sad situation, if Elia's experience were an isolated story I'd probably just chalk it up to bad luck on the part of a single developer. But it mirrors what I've been hearing from a lot of mobile app developers on a lot of different operating systems for some time now. The combination of splintering platforms, shrinking distribution channels, and rising costs is making it harder and harder for a mobile application developer to succeed. Rather than getting better, the situation is getting worse.

I've always had faith that eventually we would solve these problems. We'd get the right OS vendor paired with a handset maker who understood the situation and an operator who was willing to give up some control, and a mobile platform would take off again. Maybe not Palm OS, but on somebody's platform we'd get it all right.

I don't believe that any more. I think it's too late.


The mistake we made

We told ourselves that the fundamental rule of our business was: Mobile is different. But we lost sight of an even more fundamental law that applies to any computing platform:

A platform that is technically flawed but has a good business model will always beat a platform that is elegant but has a poor business model.

Windows is the best example of inelegant tech paired with the right business model, but it has happened over and over again in the history of the tech world.

In the mobile world, what have we done? We created a series of elegant technology platforms optimized just for mobile computing. We figured out how to extend battery life, start up the system instantly, conserve precious wireless bandwidth, synchronize to computers all over the planet, and optimize the display of data on a tiny screen.

But we never figured out how to help developers make money. In fact, we paired our elegant platforms with a developer business model so deeply broken that it would take many years, and enormous political battles throughout the industry, to fix it -- if it can ever be fixed at all.

Meanwhile, there is now an alternative platform for mobile developers. It's horribly flawed technically, not at all optimized for mobile usage, and in fact was designed for a completely different form of computing. It would be hard to create a computing architecture more inappropriate for use over a cellular data network. But it has a business model that sweeps away all of the barriers in the mobile market. Mobile developers are starting to switch to it, a trickle that is soon going to grow. And this time I think the flash flood will last.

If you haven't figured it out yet, I'm talking about the Web. I think Web applications are going to destroy most native app development for mobiles. Not because the Web is a better technology for mobile, but because it has a better business model.

Think about it: If you're creating a website, you don't have to get permission from a carrier. You don't have to get anything certified by anyone. You don't have to beg for placement on the deck, and you don't have to pay half your revenue to a reseller. In fact, the operator, handset vendor, and OS vendor probably won't even be aware that you exist. It'll just be you and the user, communicating directly.

Until recently, a couple of barriers prevented this from working. The first was the absence of flat-rate data plans. They have been around for a while in the US, but in Europe they are only now appearing. Before flat-rate, users were very fearful of exploring the mobile web because they risked ending up with a thousand-Euro mobile bill. That fear is now receding. The second barrier was the extremely bad quality of mobile browsers. Many of them still stink, but the high quality of Apple's iPhone browser, coupled with Nokia's licensing of WebKit, points to a future in which most mobile browsers will be reasonably feature-complete. The market will force this -- mobile companies how have to ship a full browser in order to keep up with Apple, and operators have to give full access to it.

There are still huge problems with web apps on mobile, of course. Mobile web apps don't work when you're out of coverage, they're slow due to network latency, and they do not make efficient use of the wireless network. But I believe it will be easier to resolve or live with these technical drawbacks in the next few years than it will be to fix the fundamental structural and business problems in the native mobile app market.

In other words, app development on the mobile web sucks less than the alternative.

Here's a chart to help explain the situation. Imagine that we're giving a numerical score to a platform, rating its attractiveness to developers. Attractiveness is defined as the technical elegance of the platform multiplied by how easy it is for developers to make money from it. The attractiveness score for native mobile app development looks like this over time:



This is why mobile app developers are in trouble. Even though the base of smartphones has been growing, and the platforms themselves have become more powerful, the market barriers have been growing even faster. So attractiveness has been dropping.

Now add in mobile web development:



Based on what I'm hearing from mobile developers, the lines just crossed. The business advantages of mobile web development outweigh its technical limitations. More importantly, if you look at where the lines are going, the advantage of mobile web is going to grow rapidly in the future.

I'm not saying all native mobile development is dead. In fact, we're about to see the release of Apple's native development tools for the iPhone, and as Chris Dunphy just pointed out to me, they are sure to result in a surge of native development for that platform. But I think even a rapidly-growing base of iPhones can't compare to the weight of the whole mobile phone market getting onto a consistent base of browsers.


What it all means

If you're a mobile developer, you should consider stopping native app development and shifting to a mobile-optimized website. That's what Elia did, and he said it's amazing how much easier it is to get things done. Even mobile game developers, who you'd think would be the last to abandon native development, are looking at web distribution (link; thanks to Mike Rowehl for pointing it out).

See if you can create a dumbed-down version of your application that will run over the mobile web. If the answer is yes, do it. If the answer is no, try to figure out what technology changes would let you move to the web, and watch for those changes to happen.

There are exceptions to any rule, and I think it makes sense to keep doing native development if your app can't work effectively over the web, and it's a vertical application so popular that you can get about $50 or more in revenue per copy. In that situation, you probably have enough resources to stay native for the time being. But even you should be monitoring the situation to see when you can switch to the web, because it will cut your expenses.

If you're a mobile customer, make sure your next smartphone has a fully functional browser that can display standard web pages. And get the best deal you can on a flat-rate data plan; you'll need it.

If you're an operator or a handset vendor, get used to life as a dumb pipe. By trying to control your customers and make sure you extract most of the revenue from mobile data, all you've done is drive developers to the Web, which is even harder to control. You could have had a middle ground in which you and mobile developers worked together to share the profits, but instead you've handed the game to the Google crowd.

Congratulations.


Oh, about that obituary...

In loving memory of the mobile applications business. Adoring child of Java, Psion, Palm OS and Windows Mobile; doting parent of Symbian, Access Linux Platform, and S60; constant companion of Handango and Motricity. Scared the crap out of Microsoft in 2000. Passed away from strangulation at the hands of the mobile industry in 2008. Awaiting resurrection as a web service in 2009. In lieu of flowers, the family asks that you make a donation to the Yahoo takeover defense fund.

Nokia, the OS company

Nokia bought Trolltech for about $150 million, and there's all sorts of speculation online about what it means. Before I get to that, let me quickly summarize what Trolltech does:

Trolltech is a Norwegian company that makes development tools and Linux software. Its best-known products are Qt (a software layer and development tools for writing applications that run across multiple operating systems, including Windows, Mac, and Linux), Qtopia (a user interface and applications layer for Linux), and Qtopia Phone Edition (a Linux software environment for mobile phones).

In the mobile world, Qtopia Phone Edition has been the company's best-known product, although it hasn't exactly been a commercial success. Motorola uses a version of Qt in its Linux mobile phones, but not all of Qtopia. The Sony Mylo mobile device uses Qtopia, as did the Sharp Zaurus PDAs. But Trolltech had so much trouble getting a mainstream phone licensee for Qtopia that it created its own hardware prototype, the Greenphone. (Out of fairness, I should add that Trolltech has a lot of other tiny licensees you've never heard of; you can see the full list here.)

The obvious assumption would be that Nokia bought Trolltech for its phone technology, but that's not what Nokia says. The company's press release says Trolltech will help advance its "cross-platform software strategy for mobile devices and desktop applications, and...Internet services business. With Trolltech, Nokia and third party developers will be able to develop applications that work in the Internet, across Nokia's device portfolio and on PCs."

All About Symbian reinforced that message, reproducing a slide from the Nokia press briefing that showed Qt layered on top of Nokia Series 40, S60, and a variety of desktop PC operating systems (link). The Guardian quoted a Nokia spokesperson as saying the emphasis of the deal is development tools: "This is about Trolltech's fantastic tools. You can much faster develop programmes which can work on multiple platforms." (link).

Vnunet quoted an analyst saying that Nokia will use Qtopia to help deploy its Ovi Internet services cross-platform (link). I don't really see the Internet connection; Qtopia has not been a contender in the net applications world the way that Flash and Silverlight are. But maybe Nokia wants to build it into a contender.

Other analysts suggested other motivations for the purchase. Some of the commentary on Slashdot suggested that Nokia is investing in Linux to counter Google Android (link). ArsTechnica suggested that Nokia might be planning to replace S60 with Qt (link), while others suggested that Nokia plans to use Linux instead of Symbian. Richard Windsor of Nomura pointed out in an e-mail analysis that the purchase of Qt rips the guts out of Motorola's Linux plans, although he guesses that's more of a happy side effect for Nokia than the primary motivation.

But an unsigned article on ZDNet UK had the most sweeping interpretation, basically saying that this spells certain death for all proprietary operating systems (link):

Nokia's bet is that the sheer size of the Qt 4-based market will be a decisive inducement for everyone else, handset makers, operators, and pure applications players alike, and that the explosion in compatibility will amplify the market for everyone much as happened on the desktop when MS-DOS anointed the PC architecture. But unlike then, Qt 4 will break forever the idea that one part of the market can seal itself off as a profitable mini-universe, an idea as archaic in the 21st century as the feudalism it so closely resembles.

As we say here in California, I want some of what he's been smoking.


What does it really mean?

We're all assuming that Nokia actually has a coherent master plan here. Although $150m is a lot of money to me personally, it's mouse nuts to Nokia. Maybe Nokia bought Trolltech just as an experiment, or to keep it from falling into some other company's hands. The fact that Nokia's going to continue to develop its Maemo version of Linux, which is not based on the Trolltech technology, suggests a certain amount of incoherence.

If you want to be really Machiavellian, you could speculate that this purchase is the Nokia mobile phone organization's answer to Maemo -- "you tablet guys keep your version of Linux, now we have our own."

But let's assume there really is a plan, and it's aimed at competitors. About six months ago, I wrote about Nokia's ambitions to be a computer company (link). Now we see them dealing themselves into the operating system competition as well. No matter what you think Nokia's motives are, the fact is that it's now the owner of a respectable cross-platform software layer that runs on PCs and mobile devices. Nokia is now a software layer company, in very direct competition with other layer companies like Microsoft and Adobe and Sun. The deal also makes Nokia a much more important player in the open source community. And it puts Nokia in more direct opposition to the companies with their own operating systems -- Apple and Google and (once again) Microsoft.

That's a huge potential change. I say "potential" because Nokia has a lot more to do if it really wants to compete. The Trolltech team will need more investment (they have been losing money) and Nokia has a lot of work to do in developer evangelism and support to make the challenge real. But the potential is there.

I think that as the implications of the deal become clear, Nokia may have trouble continuing to partner with some of its new competitors. For example, it has spent a lot of time positioning itself as a partner to Adobe Air, but it's hard to see the evolved Qt as anything other than a competitor. Same thing for Google.

As for how this fits with all of Nokia's other products, I'm having a lot of trouble understanding how Qt will cohabit with S60 and Series 40. What exactly are developers supposed to develop for, and which user interface will the phones feature? If Nokia tries to keep all of them going, its phone software is going to look like a petit four, with layers stacked on layers stacked on layers. That makes for a nice pastry, but in a mobile phone it's a recipe for bad performance and short battery life. It's also a certain way to confuse developers.

So a lot depends on Nokia's next steps. Does Qt replace Series 40 and S60? I don't know which group within Nokia made the Trolltech deal, but I wonder if the biggest competitive battle might end up being the one inside the company, between its competing software standards.

Palm OS on Nokia: Strategy or tactic?

I was stunned today when I saw the press release from Access Company saying that they're giving away a beta version of the Garnet emulator for Nokia's N-series Linux tablets (link).

The Garnet emulator lets you to run most Palm OS applications. So in layman's terms, Access is giving away Palm OS for use on any N-series tablet.

I hadn't previously heard any hints from Access about offering Garnet for other platforms. I thought it was only supposed to be available with Access Linux.

I got excited by the announcement, figuring maybe Access had realized that the real innovation is going to come in the applications layer, not the core OS plumbing. I imagined all sorts of scenarios for what they might be planning:

--How about porting Garnet to some other Linux implementations. Hmm, what comes to mind? Maybe Google's Android? Access would need cooperation from Google in order for the emulator to talk directly to Linux. Would Google help with that?

--There is a need in the market for a mobile application environment that's truly "write once, run anywhere." Might Access intend to use Garnet to compete with Java? That would involve porting Garnet to operating systems other than Linux. How about Windows Mobile and Symbian? How about the iPhone?

--There are several ways Access could make money from this:

• Give away the emulator in beta but charge for the final version.
• Give away the emulator on N-series but charge for it on other platforms.
• Give away the emulator everywhere and make money by selling support software and bundling a software store and taking a cut of the purchase fees for apps (a derivative of the iMode and Acrobat models).

Intrigued by the possibilities, I talked to folks at Access. They shot down most of my speculation. As it was explained to me, this is a tactical move. By porting Garnet to the Nokia tablets they can get some testing for the emulator, and also give a "more interesting ongoing proposition for current developers." (It says something about the momentum for your OS when you feel the installed base of Nokia Linux tablets is an attractive developer target, but I guess you take what you can get.)

Access might try to put the emulator on other standard Linux implementations, but they're very busy working on software for licensees they can't talk about yet, and don't have time to port to anything else, including Android.

That's a shame. In my opinion, there's more of a market for Garnet on other platforms than there is for a Linux phone OS now that Google is giving one away.

But Access believes Google's nonstandard approach to Java and Linux is not going to go down well with the mobile development community. They said Android faces big challenges and a likely backlash.

Okay. I guess only time will tell whether that's justified self-confidence or denial of reality.

Meanwhile, I'll go play with Garnet on my Nokia tablet and wonder about what might have been.

Google's Android revealed: Component software for the mobile world

Google today released a lot more details on its Android mobile operating system, including the software development kit. It looks like it would be fun to write apps for Android. The most interesting news is that Android puts a heavy emphasis on component software, encouraging developers to create software modules that can be shared with other developers and reused across applications. It's similar in spirit to what happened with mashups in the web apps world, although the technology involved is quite different.

If the developers follow through, this could make Android a very attractive and flexible development environment.

Google is offering $10 million in prizes to the best Android applications. That's an astonishing amount of money for the mobile apps space, where developers are used to living on stale bread with an occasional beef jerky chaser. For comparison, $10 million is probably more than the total marketing program budget in my last year at PalmSource.

It must be nice to work at a company that has limitless financial resources.

The price also says something about Google's business strategy for Android: Collect a lot of compelling applications that will generate user demand for Android phones. I think they can get the apps, but whether those will generate user demand remains to be seen. Having a big apps base didn't help us as much as you'd expect at PalmSource.

The other interesting news is that this is an entirely Java-based development environment, with a lot of extensions provided by Google for things like multimedia and font management. Although Android is based on Linux, as far as I can tell it's being used strictly as plumbing; the applications can't access it directly (at least not in this version). Data exchange between apps, and application access to phone features, can be locked out by the operator or handset manufacturer.

This should make Android a pretty secure operating system, although it won't be much fun for developers who like to mess around with the low levels of an OS.

Can Android become a standalone runtime? The reliance on Java raises the possibility that the Android applications layer could be ported to other operating systems. I think this would be a pretty cool strategy for Google, as it would enable it to drive the applications experience on a lot of different phones. But it wouldn't be a lightweight layer -- Google has built a huge amount of middleware on top of Linux that would probably have to be ported as well. Unless Google designed the Android apps layer to be portable, something they haven't mentioned, I think the port would be pretty difficult.

Some other tidbits about the OS:

--Features supported in the OS include a built-in browser, 2D and 3D graphics, SQLite database, video and audio playback, GSM, Bluetooth, WiFi, 3G wireless, camera, compass, GPS, and accelerometer (if the appropriate hardware is included in the phone). That's a pretty standard feature list.

--There's also a set of optional APIs that can be excluded by an operator or handset manufacturer. They include mapping APIs and peer to peer messaging between phones. Google positioned the peer messaging as a way to let two users play checkers, but you could also use it to create an instant messaging application that bypasses SMS. I'll be interested to see if any operators allow it on their networks.

--The development environment is a plug-in to Eclipse, another standard approach. The SDK includes an emulator so you can test your apps before the hardware ships. That's essential, since Android phones are about a year away.

--Core apps included with the OS include mail, SMS, calendar, browser, contacts, and maps. The mapping app is the only unusual one.

--There is support for multitasking threads, and an application can run in the background (this should enable things like MP3 playback while you're browsing).

--Each application runs in a separate Linux process. This helps with security. Apps remain running until they're no longer needed and the system decides that it wants their memory. This feature seemed slightly weird. Windows Mobile also tends to leave code running until the space is needed, and that has resulted in performance and stability problems. Presumably Android will handle things better.

The other thing Google warns you about is that if your application doesn't use the proper calls to explain what it's doing, the OS may assume it's not important and shut it off arbitrarily. That can also happen to a properly-written application if the system runs low on memory. This is kind of spooky, and could result in lost user data, especially if the user loads up a lot of applications.

Call me old fashioned, but I prefer applications that quit only when I push the quit button.

--The security model is heavily sandboxed (meaning applications are isolated from each other). To reach outside the sandbox (to exchange data with another app, read the address book, or access the phone's features), applications have to ask permission at the time they are installed. Permissions are based on "trusted authorities and interaction with the user." In other words, an operator or handset vendor can lock them down, and if not then the user will be asked to grant permission. Users will not be asked again when the application is run; if permission was not granted at install, the app will just fail. I believe this is going to be a serious support problem -- it means the same application may work on a phone when it's on one network, but may not work on that same phone on another network. Good luck explaining that to the user.

Google may be counting on user complaints to force the operators to turn on permissions.

--The user interface needs work. Google says it's still working on the final user interface for Android, and that's a good thing. Engadget nicely posted a bunch of screen shots from the current interface today, and they have problems (link).

The first thing that bothers me is the icon carousel at the bottom of the screen.



I think it's a great design, but it's awfully reminiscent of the interface in Yahoo Go. Maybe that's just a coincidence, but Google lately has shown a disturbingly Microsoftian tendency to borrow ideas from others.

The overall interface design is relatively clean, at least compared to the overdesigned clutter that you see on a lot of smartphones. But it's optimized to look pretty on a computer screen rather than be usable on a real-world phone.

The giveaway is contrast. Most computers are used indoors, in a room with moderate lighting. By comparison, mobile phones are used in all sorts of settings, including outdoors in bright sunlight. In those conditions, subtle differences in contrast between text and background can easily be lost. For a good example, check out the screen shot below:



Looks nice on your computer, huh? But let's reduce that screen image to about what it would be on a real phone:



Already the text gets hard to read. Now take your computer outside into the direct sunlight. Go ahead, I'll wait for you to get back...

Done already? What you saw is that the words "Call Back," "Done," and so on pretty much disappeared because they're written in dark gray on a black background. You can find a lot of other examples like this in the Google screen shots.

A recommendation to everyone who creates phone interfaces: White on black. Black on white. Large fonts. It may not be the most beautiful design, but at least people will be able to use it.


What it means to the industry. I continue to think that the ultimate success of Android will depend on the creativity of the devices built on it, and we can't judge that until those devices ship. But in the meantime, I'll be very interested to see what sort of applications appear. Google can definitely excite developers, especially when it shovels money at them. This is an immediate challenge to Microsoft and especially Symbian, which has struggled to get developers to work with its very complex native APIs. The more that Android sucks up developer activity, the harder it will be for other platforms to get developer support. Android is a much cleaner design than older platforms like Symbian, and the component development model might drive the rapid creation of a lot of interesting applications.

Will Android be limited to the mobile space? That's the other key question. There's nothing in the Android development model that limits it to mobile phones, and in fact Google says openly that it's appropriate for use on all sorts of devices. Let's wait a few years for the Android applications base to mature. If it does well, we might eventually see Android devices that seek to directly challenge PCs.

=====

PS: Thanks to Ubiquitous Thoughts for featuring last week's post on the Android announcement in the latest Carnival of the Mobilists.

Google, the OS company

The bottom line: Google is now an OS company.

The fact that Google's recently-announced OS products are aimed at mobile devices and social networking sites is interesting, and I'll talk about the impact of that below. But it's secondary. I think the big, really important change is that Google has now jumped with both feet into the middle of the operating system world. That potentially has huge implications for the industry.

The impact will depend a lot on how Google follows up. If it pours substantial energy and resources into its OS offerings, it will be extremely bad news for Microsoft and other companies trying to charge money for their own platforms. On the other hand, if Google doesn't make a serious long-term commitment, it will embarrass itself deeply. This isn't like launching a new web application -- an OS has to be complete, and it has to work properly in version 1, or there won't be a version 2.


What they announced

It's kind of ironic. For years after Google became a prominent web company, people speculated about whether or when it would create its own OS. The logic was that Microsoft has its own OS, and Google was challenging Microsoft, so Google would create its own OS too. But then as the years went by and it didn't happen, people moved on to other subjects. The speculation died out. But one of my rules about the tech industry is that "obvious" things happen only after everyone in the industry has written them off. So I guess Google was due.

The company has been creeping toward the OS space for a while. Google Gadgets is an API to create small applications that run in web pages, and Google Gears is code that lets web apps run offline, making it easier for them to challenge desktop applications. But they were both relatively low-profile (or as low profile as anything Google ever does). But in the last couple of weeks, Google made two much more assertive announcements:

--OpenSocial is an effort to create a shared platform for applications that can be embedded within social websites (link).

--The Open Handset Alliance is an effort to create a shared platform powering mobile devices (link).

Although they're aimed at very different parts of the industry, they're both efforts to create a standard platform where there was fragmentation; and they're both alliances of numerous companies, with Google providing most of the code and the marketing glue. I think there's a recurring theme here.


Details on the Open Handset Alliance

Open Social was covered very heavily when it was announced a couple of weeks ago, so I won't recap it all here. If you want more details, Marc Andreessen did an enthusiastic commentary about it on his weblog (link).

The OHA announcement was today, and I want to call out some highlights:

--It's built around a Linux implementation called Android. Android will be free of charge and open source, licensed under terms that allow companies to use it in products without contributing back any of their own code to the public. This will probably annoy a lot of open source fans, but it's important for adoption of the OS, as many companies thinking about working with Linux worry that they will accidentally obligate themselves to give away their own source code.

--Google is creating a suite of applications that will be bundled with Android, but they can be replaced freely by companies that want to bundle other apps, according to Michael Gartenberg (link). There is a lot of speculation, though, that if you bundle the Google apps you'll get a subsidy from Google. The folks over at Skydeck estimate the subsidy could be about $50 per device (link). That might not sound like huge money to you and me, but keep in mind that mobile phone companies routinely turn backflips to squeeze 25 cents out of the cost of a phone. When you sell millions of phones a year, it adds up.

--A huge list of companies participated in the announcement. That's not as impressive as it sounds; when you have a well-known brand, a lot of companies will do a joint press release with you just for the publicity value. But a few stood out:

Hardware vendors. Samsung, Motorola, LG, and HTC all endorsed the OS. HTC and LG gave particularly enthusiastic quotes. The first three companies have all been playing with Linux for some time, so I wasn't surprised. But HTC is another matter -- it is the most innovative Windows Mobile licensee, and Microsoft must be very disturbed to see it blowing kisses at Google.

(A side comment on Motorola: For a company that said it wanted to consolidate down on a small number of platforms, Motorola is behaving strangely -- it jumped all over Symbian a couple of weeks ago, and now is supporting Android as well. I think it has now endorsed more mobile operating systems than any other handset vendor.)

Operators. Participants in the announcement included NTT DoCoMo (a long-time Linux lover), KDDI, China Mobile, T-Mobile, Telecom Italia, Telefonica, and Sprint. That's a very nice geographic spread, and ensures enough operator interest to make the handset vendors invest.

--Google claims all Android applications will have the same level of access to data on the phone. That's pretty interesting -- most smartphone platforms have been moving toward a multiple-level approach in which you need more rigorous security certification in order to access some features of the phone. I'll be interested to see how the security model on Android works.

--We'll get technical information on the OS November 12, and the first phones based on Android should ship in the second half of 2008.

--Although Android's first focus is mobile phones, the New York Times reports that it can be used in other consumer devices as well (link).


What it means to the mobile industry

It all depends on the quality of Google's work and the depth of its commitment. If Android has technical or performance problems, it could sink like a stone. If it doesn't have enough drivers or has poor technical support, the handset vendors will avoid it. If the developers can't create good applications, users won't want it. This is a very different business for Google -- handset vendors and operators will not tolerate the sloppy, indifferent technical support that Google provides for its consumer web apps.

If, on the other hand, Google's platform really works and the company invests in it, I think it could have some very important impacts.

Impact on Windows Mobile: Ugliness. The handset companies endorsing Android are also Microsoft's most prominent mobile licensees. I doubt any of them are planning to completely abandon Microsoft (they don't want to be captive to any single OS vendor), but any effort they put into Android is effort that doesn't go into Windows Mobile. So this is ominous.

The whole mobile thing just hasn't worked out the way Microsoft planned. First it couldn't get the big handset brands to license its software, so it focused on signing phone clone vendors in Asia, thinking it could use them to pull down the big guys. But Nokia and the other big brands used their volume and manufacturing skill to beat the daylights out of the small cloners.

Now Google is coming after the market with an OS that's completely free, and may even be subsidized. This will put huge financial pressure on not just Windows Mobile, but all of Windows CE. Even if Microsoft can hold share, its prospects of ever making good money in the sub-PC space look increasingly remote.

Impact on Access: Ugly ugliness. How do you sell your own version of Linux when the world's biggest Internet company is giving one away? I don't know.

Impact on Symbian: Hard to judge. Symbian is the preferred OS of Nokia. As long as Nokia continues to use Symbian, it stays in business. The question is how much it'll grow. After years of painful effort, Symbian just managed to get increased endorsements from Motorola and Samsung. Now Google is messing with both of them. Japan has been a very important growth market for Symbian, now Android is endorsed by both DoCoMo and KDDI. All of that must feel very uncomfortable. If nothing else, it's likely to produce pressure on Symbian to lower its prices. And Symbian should be asking what happens if Android turns out to be everything Google promises -- a free OS that lets handset vendors create great phones easily. It's not fun competing against a free product that's been subsidized by one of the richest companies in the world (just ask Netscape).

Maybe if Symbian agrees to enable Google services on its platform it can get the same subsidies as Android does. It's worth asking. If not, maybe Symbian should be looking for other places where it can add value in the mobile ecosystem.

Impact on mobile developers: Potentially great. Mobile developers have suffered terribly from two things: They have to work through operators to get their applications to market, and they have to rewrite their applications dozens of times for different phones. If Android produces a single consistent Java environment for mobile applications, that would be a big win. And if it can open up the distribution channels for mobile apps, that would be great as well. We don't have enough details to judge either outcome yet, and the app distribution one depends on business arrangements that may be outside Google's control.

Impact on Apple, RIM, and Palm: Probably none at all. A lot of the coverage of Android is positioning it as some sort of challenger to iPhone and RIM.

I don't buy it.

Apple, RIM, and Palm all make integrated systems in which the software and hardware are coordinated together to solve a user problem. Android, by contrast, is only an operating system. It's plumbing, not the whole house. Unless Google's handset licensees magically develop the ability to design for users -- a feat equivalent to a giraffe sprouting wings -- their products won't be any better as systems solutions than they are today. The OS hasn't been the thing holding them back, and changing OS won't alter the situation.

Android puts interesting financial pressure on Microsoft, but it doesn't directly solve any compelling user problems. If it eventually drives a great base of mobile applications, that might eventually be attractive to some users. But in that case the systems vendors could just add a copy of Google's application runtime (it's open source, they can grab it anytime they want). Or they could host their devices on Google's plumbing. Palm and RIM might both benefit if they could transfer engineers away from core OS and toward adding value that's visible to users.


Impact on the tech industry: This isn't just about mobile phones

I have no access to Google's internal thinking, but even if it sincerely believes it's only doing a mobile phone OS, I don't think it can or will stop there. Technology products often develop a momentum of their own, no matter what was intended at the start. The lines between the computing and mobile worlds are breaking down already, and if Google creates an attractive software platform that's free of charge, that platform will inevitably get sucked into other types of devices. I'm not saying that Android is going to end up in PCs, but if it's functional and well supported I think it could end up running on just about everything else that has a screen.

Besides, if you look across all of the recent Google announcements, I think it's clear that Google has a larger agenda: It wants to break down walled gardens, because they interfere with Google's ability to deliver its services. It has even developed a standard methodology for attacking them: Create a consortium so you don't look like a bully, and fund an "open" alternative to whatever is in the way. They are doing it to Facebook, and they're doing it to Windows Mobile. Google doesn't even have to make money from the consortium, as long as it clears the ground for its services to grow.

Take a lesson from evolutionary history. The most successful animals are not those that adapt to the environment; they are the ones that reshape the environment to match their needs. I think that's what Google is doing. It's going to use open source and alliances to suck the profitability out of anybody who creates a proprietary island that it can't target.

It'll be interesting to see if and how Google applies this principle to the upcoming frequency auction in the US.

Or to anyone else who gets in its way.

The war between Nokia and Apple

"When two elephants fight, the loser is the jungle." --Ancient proverb

And so it begins.

The Apple-Nokia war finally got underway on August 29, when Nokia announced an array of new music-capable phones and an online music store. The two companies had been eyeing one-another like wrestlers outside the ring for more than a year. Apple entered the mobile phone market, but only in the US, where Nokia is a non-factor. Nokia openly declared that it's a computing company (link), but its non-phone products so far have been different flavors of lame.

But the August 29 announcements put Nokia and Apple on a path to direct confrontation. I haven't seen a lot written online about the importance of this conflict. I think that's probably because many of the people who follow Apple's business closely are based in the US and have trouble taking Nokia seriously because it's a secondary player here. Meanwhile, Nokia's most ardent followers are in Europe, and look at Nokia's actions in light of its regional conflicts with SonyEricsson and the European mobile operators.

But when you stand back and look at what's happening in the industry worldwide, it's clear that Apple and Nokia both want very badly to be the dominant mobile computing company for young adults. That makes a huge, relentless conflict between them inevitable. They're like two armies trying to take the same hill. One's coming from the west, the other from the east, so there's not a lot of fighting at the moment. But as soon as they reach the hill, there's going to be an explosion.

I don't know who will win, but I'm pretty sure that the main losers will be all of the other device companies and mobile operators who happen to be hanging around on the hill.

My advice to them: Run.


What Nokia announced, and why it matters

On the 29th, Nokia announced four phones, two new data services for its phones, and a new brand. Let's start with the services.

The Nokia Music Store is just what the name says, an online music store run by Nokia. It'll be accessible by both PC and selected Nokia phones. The N81 and N95 will be able to talk to the store directly, while for a number of other Nokia phones you'll be able to buy music on your PC and sync it to your phone (Nokia calls this process "sideloading").

Nokia will offer more purchase options than iTunes does. You can either buy and download individual titles (for one euro a song, a euro cent above iTunes), or you can subscribe to the store and stream all the music you want to your PC (but not save it) for ten euros a month.

Nokia positions the streaming service as a way to discover new tunes, after which you're supposed to buy and download the ones you want to keep. I can understand the practical reasons for not streaming from the store directly to phones -- there would be issues with data charges, network capacity, latency, and so on. But I don't know how users will feel about that. If I had a streaming account on my PC, I think I'd expect to have the same service on my Nokia phone. And why wouldn't you want to discover new music while you're on the go?

The bigger problem is that the 120 euros you pay a year for a streaming service is 120 songs you could have bought and kept forever. That's one new song every three days. For comparison, the average iTunes user buys three songs a month. A music subscription service is a great way to get access to a lot of music quickly, but unless you want a colossally large music collection, it's a huge financial drain in the long run (I wrote more on the economics of it here). No wonder the music industry loves the idea of subscriptions (link).

The re- rebirth of nGage. The other new service Nokia announced was a mobile game store. You'll be able to try games for free on your Nokia mobile or PC, and then after purchase you can use them on the PC or sync them to your phone (curiously, Nokia calls this process "installation.") Nokia also promises multiplayer and community features.

Price per game will be six to ten euros, and Nokia says you'll be able to pay by credit card or through your phone bill if the operator enables that. No word on what the revenue split is.

The service sounds pretty interesting to me. The most confusing thing about it is the name. The nGage service won't work with all of Nokia's N-series phones. I know there's no official tie between N-series and nGage (the names were apparently chosen separately), but try explaining that to a typical customer in a store. Nokia has struggled and failed for years to explain to customers the S60 platform that it uses in a lot of its phones; picture adding yet another layer of confusion on top of that (link).

I think the other important challenge to nGage is flash. There's a huge supply of free flash-based games on the web, and a lot of them are the sort of quick-reward, easy to use games that seem to do well on mobile devices. The biggest barrier to using them on mobiles is that Adobe charges for the mobile flash player, and so relatively few mobile phones have it installed. A small installed base of phones means that most developers don't target mobile flash. If Adobe ever drops the charge for the flash player, or if a free flash-equivalent comes along (perhaps a mobile version of Microsoft Silverlight), it might become very difficult to convince people to pay for nGage games.

I know nGage provides a higher-quality gaming experience than flash, but I'm not sure most mobile users will care enough to pay.

Ovi is a new brand that Nokia will use as a wrapper for all of its mobile services, including games, music, maps, photo sharing, and presumably more to come (link). I guess that makes sense from a convenience standpoint -- there will be one website (ovi.com) where you can go to discover all of the Nokia services (Nokia employees say that it will also be a gateway to the services of other companies as well ). Unfortunately, Ovi apparently won't work as a compatibility mark: the phones that can use one Ovi service can't necessarily use another. For example, many of the phones that can run nGage games can't directly connect to the music service. A brand is most effective when it represents a coherent idea or consistent product. I think Ovi creates an expectation of coherence but doesn't deliver it. It just says that Nokia's in the service business, which Nokia cares about but is not something that concerns users

If Nokia doesn't make all the Ovi services work on all its data-capable phones quickly, I think the varied incompatibilities between the Nokia services and devices are going to be a nightmare to explain at retail.

The four new phones
The N95 8GB adds more memory to Nokia's flagship Swiss army knife phone, which includes a 5 mp camera, improved 3G, WiFi, and GPS. This is the one that online reviewers always compare to the iPhone. It works with both nGage and the music store, and its base price is 580 euros before subsidy.
The N81 is a slider phone with WiFi and 3G, and has dedicated buttons to access both nGage and the music store. It'll sell for 430 euros pre-subsidy.
The 5310 is a slimline candybar phone that can play music synced from the Nokia music store. It cannot access the music store directly. It has dedicated music controls next to the screen, and its base price is 225 euros.
The 5610 is similar to the 5310, but adds a slider and built-in camera. Its base price is 300 euros. A lot of online reviewers have been comparing this and the 5310 to the SonyEricsson Walkman phones, and I think that was probably Nokia's thinking. But hold that thought because it's not necessarily how things will work out.

What's the impact? A huge amount depends on execution. How well will Nokia's new services integrate with the phones? How easy will it be to play songs and games? How many titles will be in the Nokia stores, and how good will they be? Services and mobile devices often live or die on the little details of usability, and we can't judge that for Nokia yet because we can't play with the new products and services.

But Nokia's direction is very clear. It wants to be in the mobile Internet services business, as both a developer and publisher of content and services. It's going to tie those services directly to its phones. And knowing Nokia, it'll keep iterating on both the phones and the services until it gets them right.

That's why Apple and Nokia are now at war. Even if Nokia's current products turn out to be lame, it's going straight into the territory that Apple has been pursuing ever since the first iPod shipped.

Apple's new products. I should add a little context on Apple's recent product announcements. In September, Apple made a lot of changes to the iTunes and iPod lineup. The move that got the most attention was the price cut of the iPhone from $599 to $399. I'll write more about that below. The other changes that stood out to me were:
--iTunes can now be accessed via WiFi on the iPhone and iPod Touch. This corrects a glaring weakness in the original iPhone. It's interesting that Apple apparently hasn't enabled the iPhone to talk to the store over a cellular connection. That may be because the network the iPhone uses in the US is too slow to easily download music, or it may be that AT&T doesn't want a lot of data traffic going over its network when the phone's data plan is flat-rate.
--The video version of the Nano, starting at $199, is a heck of a lot of technology in a very cute little package.
--The iPod Touch is basically an iPhone without the microphone and cellular radio. It makes a really interesting PDA for people who want to buy a basic voice phone and carry their entertainment separately. It's priced at $299.

(As an aside, I have a request: Once the iPod Touch starts selling like gangbusters, would someone please go find the person at Sony who decided the Clie handheld business was a dead end, and kick them in the shins?)


Relative strengths of the competitors

Or, how to piss off both Apple fans and Nokia fans in the same post.

Apple and Nokia are very different companies. Here are their relative strengths:



Resources. No contest. Although Apple is a very successful company, Nokia has vastly more financial resources.

Logistics. Nokia is one of the greatest logistics companies on the planet. It churns out hundreds of millions of phones, changes models frequently, and almost everything works properly. If Nokia were running the US Federal Emergency Management Agency, New Orleans would be 20 feet above sea level by now. Apple, by contrast, does a very competent job of managing contract manufacturers in Asia. Advantage Nokia.

Telephony experience. Another huge Nokia advantage. Designing phones and getting them qualified on networks is really tricky, and Nokia knows how to do it better than anyone else.

System design skill. This is Apple's core competence; it knows how to design hardware and software together to create a beautifully integrated system. Nokia's phones often appear as if their hardware and software were designed by completely different groups and slapped together at the last minute (because, in many cases, that's exactly what happened). This works great in commodity phones, but if the competition is for who can create the most elegant data experience, Nokia is at a huge disadvantage.

Brand power. Wow, this is a tough one. Apple has one of the coolest brands on the planet. Nokia's brand is beloved in Europe, and in most of the world it personifies upward mobility (except in the US and Japan). I call this one a tie.

User interface. Apple knows how to design these. The kindest thing you can say about Nokia's interface designs is that they're better than many other phone manufacturers. But that's like comparing a three-legged dog to a two-legged dog. Nokia's trying to get better -- at the announcement event, it showed video of a forthcoming device with an iPhone-style touchscreen (link). But for now, this one's clearly a strong Apple advantage.

Cleverness. Hey, it's Steve. Nokia's management is extremely smart, but you look to them for great operational execution, not brilliant strategy. After all, this is the company that brought us the original nGage.

Industrial design. I'm going to get flamed by the Nokia fans for this, but Apple has a clear advantage in design. The comparison: Nokia sometimes creates a great design. Apple rarely creates anything less than a great design.

Music solution. You'd think this would be an overwhelming advantage for Apple, but its arrogant handling of the music companies has made them even more desperate to tear Steve Jobs' throat out. They're anxious to work with someone like Nokia. Apple still has an advantage, but it has opened the door to competitors more than it had to.

Breadth. Nokia can fight on more fronts, and might be able to outflank Apple. For instance, Nokia's revived nGage game service gives it a second interesting offering for young people, whereas Apple is limited to just music and video. This is why I think Apple's decision not to open the iPhone to third party app developers is a huge mistake. If Apple had the help of third party developers, it could more easily fill out its software portfolio.


How they'll fight

Nokia wants a war of attrition. It will try to force Apple to compete on more fronts than it can afford to cover. I think we should expect to see a broad array of services added to Ovi quickly, aimed at enticing young adults in all sorts of different ways. Nokia will probably also launch a blizzard of media and entertainment phones with varied features, in the hope that a couple of them will hit sweet spots in the market.

Apple's game is to keep Nokia off balance and grab the most important opportunities. Think of a fencing expert: dodge, feint, and then stab the other guy in the heart. Apple currently has a product advantage -- its music service is already working. So it will try to capture as many customers as it can before Nokia gets its act together.

Apple can also use Nokia's size against it. Nokia has a huge product line and has to position each product carefully within it. Apple has only one phone, so it doesn't have much to protect. That's where the iPhone price cut comes in. The iPhone had been positioned against the n95, at the top of Nokia's product line. With the price cut, the iPhone is now looks much closer to the middle of Nokia's line, the phones that were supposed to be aimed at SonyEricsson.* Nokia can't slash the pricing of the n95 without screwing up the prices of its entire line, so with one price action Apple accomplished two things -- it can reach a lot more customers, and it forced Nokia to go back and rethink its competitiveness.

We should expect more surprise moves from Apple. It's more important for them to keep Nokia off balance than it is to please every customer. I think that's why Apple was willing to piss off the iPhone loyalists with a sudden, large price cut.

*Because of varying subsidies, it's hard to tell what the actual street price comparison between the new n95 and iPhone will be. The current n95 sometimes gets subsidized down by several hundred dollars if you buy a multiyear service contract. Maybe the new n95 will be subsidized down below iPhone prices. Maybe the iPhone will be subsidized too. Or maybe now that Nokia's offering its own services the operators will refuse to keep subsidizing the n95. We need to wait until the iPhone and Nokia's new services premiere in Europe this fall.


Impacts of the war: Alas, the innocent bystanders

The common denominator between Apple and Nokia is the imperative to move quickly. Nokia wants to broaden the competition fast, Apple wants to keep surprising Nokia with new features, products, and other changes. That's going to accelerate the pace of change in the mobile industry. And the accelerating pace of change, rather than anything in particular that Apple or Nokia have done today, is the biggest challenge to the rest of the industry. The other players have been struggling to keep up with the current rate of change; what will they do when Apple and Nokia step on the gas?

I've seen these situations before. You think you're just about keeping up with a competitor, and suddenly they disappear in a cloud of dust. I believe that's about to happen in mobile phones.

A shift from hardware design to systems design. Let's look at which companies have been most successful in smartphones: RIM creates e-mail phone systems that combine hardware, software, and services. DoCoMo and the other Japanese operators drive systems designs that combine hardware, software, and services. The iPhone does the same. Previously, those competitors were confined to particular countries or relatively small vertical markets, but now the world's biggest phone company is trying to do the same thing. That raises the competitive bar for everyone else in the industry.

What are companies like Samsung and Motorola supposed to do? They don't know how to create their own services, let alone integrate one well with a phone. In the music market, there are a lot of third party services out there, but none of them have been effective so far at challenging iTunes. I think they're not strong enough to change the competitive situation. Same thing for the operator services.

So the music phone market looks ugly. What's worse, if Nokia and the systems companies extend their new design approach to other data markets, the traditional mobile phone companies might be cut out of most of the big growth opportunities. They need to learn a new set of skills instantly, and they're far behind the curve.

The interesting potential exception to this situation is SonyEricsson, the leading vendor of music-enabled phones in Europe. Their hardware's nice, and they have a clean user interface that looks inspired by the iPod. Because I'm in the US, I don't have a good read on how smoothly the SonyEricsson phones integrate with operator and third party music stores. Is the experience as easy as using iTunes?

The Register says that Omnifone's Music Station is a promising possibility (link), but it's a subscription service costing 3 euros ($4.11) per week. For that same price you could buy 216 songs on iTunes per year, and at the end of the year you'd actually own something.

I really have trouble seeing the long-term economic benefit of a music subscription service for a user. If you subscribe to one, please post a comment and educate me.

SonyEricsson's management hinted to Time Magazine that it may create its own music service (link). If so, it had better hurry up. I have a lot of respect for SonyEricsson's hardware designs, but if it's limited to music stores with weird business models and ones that don't integrate seamlessly with its phones, it's going to have a very hard time outcompeting an accelerating Apple and a Nokia that's learning to integrate solutions.

Microsoft: Reverse course, again. This is the situation in which Microsoft could have stepped in to offer a music service to the phone companies challenged by Nokia. But in an exquisitely ironic move, Microsoft basically shot its licensed music store initiative last year in order to support the proprietary Zune. Now it can't step up to the opportunity.

Oops.

Microsoft is probably too late to recover in music, but as Nokia adds new services there should be a lot of opportunities to license equivalents of them to Nokia's competitors. Microsoft should focus less on selling its own OS, which scares the phone companies, and more on delivering services they can build into their phones.

And oh by the way, it's time to bury Zune. The iPod Touch just lapped it. If Microsoft wants to lose money on proprietary hardware, it should focus on Xbox. At least there it's buying market share for its money.

The operators lose control. They were struggling to establish their own services suites back when things were moving slowly. Now that Apple and Nokia are shifting into high gear, I don't see how the operators can keep up.

You can find very different scenarios online for where this will lead. Andrew at the Register predicts that the operators may strangle Ovi by refusing to sell any phones that support it (link). He has a good quote from someone who knows both Nokia and the operators:

The operators own the relationship with the customer. They're not going to allow Nokia to own it.

On the other hand, Richard Windsor, the excellent telecom analyst working for Nomura Securities in London, said in an e-mail brief that the operators are doomed:

Through their inaction, mobile operators have squandered the opportunity to be the service integrator for mobile and are left with the prospect of offering nothing to users except commodity data packets.

Who will be right? It depends on Nokia's ability to generate user demand for its services. If the users want the services, the operators will have to go along with it. I assume Nokia understands this and is prepared to do a big marketing push. Unlike Nokia's previous efforts to set up content portals, this time it has to succeed or it surrenders the future to Apple. So the conflict with Apple also locks Nokia into a war with the operators.

Isn't this fun?

If I were running a mobile operator, I'd stop trying to create my own services bundle, and focus on enabling as many Internet companies as possible to deliver services on my network, in exchange for a small cut of their revenue. An operator with the innovation of the open Internet behind it might be able to keep up with Nokia and Apple. But an operator working alone will be very lonely indeed.

What does it mean for users? You'd think that all this new competition would be good for users, and in many ways I'm sure it will be. But Apple and Nokia are both showing a disturbing tendency to keep everything proprietary. The iPhone is not open to third party developers, and at this point Ovi appears to be about marketing Nokia services, not opening up the richness of the Internet. (To be fair, Nokia employees say that will change, but I'm not sure if they mean that they'll offer access to any Internet service, or just to some selected ones that they cut a deal with. I suspect it'll be the latter.)

Welcome our new Apple and Nokia overlords. There's a disturbing possibility that we may end up exchanging one set of walled gardens for another. They'll be lavish, beautiful gardens, far better than the operators' truck farms for data. But we may not get the open data marketplaces that a lot of people have been hoping for.

If you want to read other perspectives on Nokia vs. Apple, check these out:
-A confident view from Finland (link)
-A cautious view from Jupiter Research (link)
-An outstanding article by Mark Halper at Time, with quotes from Nokia and SonyEricsson (link).