10 Things You Need to Know About the HP-Palm Deal

 

1. You can now buy a Palm Pre without wondering whether you’re buying into a platform (WebOS) that will go the way of the Apple Newton (yes, Virginia, Apple did fail at its first attempt to enter the mobile space).
2. There are now six (6) viable combatants in the mobile operating  system wars (in alphabetic order): Android (Google), Blackberry OS (Research in Motion or RIM), iPhone (Apple), Maemo (Nokia), WebOS (HP/Palm), and Windows Mobile (Microsoft).  Don’t be surprised to see another one enter the fray before we see consolidation.
3. Five years from now the number of mobile operating systems will be cut in half.  Ready to make a bet on which ones survive?  After iPhone there are no obvious choices.
4. The acquisition of Palm is a strategic move by HP and count on HP putting considerable effort and resources into building a comprehensive mobile strategy around WebOS.
5. If HP creates and executes an effective mobile strategy based on WebOS it will challenge Apple.  The iPhone and iPad are clever implementations of technology but certainly capable of being imitated.  Don’t expect Apple to be too concerned…yet.
6. HP will bring WebOS (or whatever they call its successor) into the enterprise space and put pressure on the main enterprise mobility players including RIM, Motorola, Honeywell, and, most significantly, Microsoft.  Expect plenty of movement in the enterprise mobility space over the next few years.
7. HP’s acquisition will force Dell, Lenovo, Samsung, Sony, and other consumer electronic titans to re-visit and re-design their own mobile strategies.  Their future is dependent on having a successful mobile strategy and right now they look a bit flat-footed.
8. HP’s acquisition of Palm further validates the need to build a mobile strategy from the bottom up.  Are you listening Microsoft?  For more on that subject see here.
9. Consumers are the near term winners.  More choice.  More innovation.
10. More big moves are coming in the mobile space.  RIM anyone?

And What About Nokia?

My European friends accuse me of being Amero-centric by failing to mention Nokia alongside Apple, Google, and Microsoft in the mobile operating system (OS) sweepstakes.  After all, they say, Symbian was one of the original pioneers of the smartphone OS market.  And Nokia’s next generation mobile OS – Maemo –  has been given good marks by independent reviewers.  For instance here.

Nokia is in the same category as RIM.  They are a manufacturer of smartphones who, for historical reasons, developed/bought their own OS.  The primary difference?  RIM is built on a niche market – e-mail optimized smartphones – and has been able to sustain growth in that niche.  Nokia, on the other hand, is built around world domination of the mobile phone market in general and the emergence of the iPhone and Android have put it on its heels.  The question for Nokia – and RIM – is why continue to develop your own OS when everyone else is moving towards a hardware agnostic platform?  [Let me start a rumor here: RIM will announce a Blackberry that runs Android later this year.]

Nokia, as long as they rely on their own mobile OS(s), will continue to lose market share, particulary in the consumer smartphone market.  They will lose share to the iPhone in the high end consumer market, they will lose share to Android in the low to mid-end consumer market, and they will lose share to the Blackberry in the business market (although most likely maintaining share in their European stronghold).  Nokia will not be able to stay ahead of the innovation game against a battalion of multinational competitors who are able to leverage the software strengths of Google…and maybe even a resurgent Microsoft with Windows Mobile 7.

If you’ve standardized on Nokia within your organization you have nothing to fear.  Nokia is going to continue to be a force in the global smartphone market.  In fact, if you represent a large enterprise making a decision today, both Nokia and RIM should be on your short list of smartphone vendors.  Two reasons: (1) you know what you’re getting and (2) they represent cost effective, easy to manage options.

If you’re Nokia, on the other hand, you might want to rethink your strategy.  How about a partnership with Microsoft?  They need you.  And you may need them more than you think.  I know the two of you have talked but maybe it’s time to sit down again and get serious.  It’s not easy for two elephants to dance but maybe by keeping the steps simple you can create something worth watching.

Meet the New Windows Mobile, Same as the Old Windows Mobile?

On Monday Microsoft is expected to announce the availability of Windows Mobile 7.  The debate among the pundits is whether it will be too little, too late or, alternatively, represent the re-emergence of Microsoft as a significant player in the mobile arena.  And, in its war with Google, the success of Windows Mobile 7 takes on added significance for Microsoft.  But let’s take a step back to better understand why Monday is significant in the world of mobile technology.

Let’s start with the premise that the goal of mobile technology is to deliver connectivity and access to information anywhere, anytime.  And let’s layer on top of this the need to make it as convenient, seamless, and user-friendly as possible.  For instance, most of us are not interested in carrying around multiple devices – especially a bulky laptop – to realize this goal.  Yet today most of us still do.

Now let’s look at it from the vendor perspective.  Microsoft still wants (needs?) everyone to buy laptops as well as smart phones.  Google is pushing handhelds because it started with Android.  And  Apple is agnostic.  (I’m not sure how the margins compare between an iPhone and a MacBook but, for the most part, the former isn’t cannibalizing the latter.)  And everyone else – most notably RIM, Palm, and Nokia – are really niche players in the looming mobile operating systems war.

So is it any surprise that Microsoft puts more emphasis on laptops and netbooks (really just a scaled down laptop)?  And it logically follows that Microsoft has – to date – looked at the mobile world from the top down.  Looking at the mobile world from the top down suffers from a number of shortcomings including an inability to step out of the (Windows) box and a predispostion to reuse instead of create from scratch.  Google didn’t start with these handicaps and Apple was smart and disciplined enough to build from the bottom up (iPod to iPhone to iPad).

I suspect Microsoft finally gets it.  But there’s a difference between understanding its shortcomings and executing a strategy to address them.  Microsoft is running out of time.  If Windows Mobile 7 fails to represent a change in how Microsoft approaches mobile technology – bottom up vs. top down – then those in the too little, too late camp will be right.  To paraphrase a refrain from The Who song Won’t Get Fooled Again: Meet the new Windows Mobile, same as the old Windows Mobile.

Apple iPad for the Enterprise?

Apple iPad for the enterprise?  For the most part – no.  But dismissing it as simply a consumer device misses the point.  Apple is paving the way for what we can expect to see in enterprise class mobile devices some time down the road.  Let’s discuss why.

It really comes down to the portable, high resolution display.  There is no shortage of mobile enterprise applications that would benefit from a larger display than currently found in today’s mobile devices.  How about healthcare (doctors, nurses)? Pharmaceutical sales?  Field service (across multiple industries)?  Inspections? Construction?  Real estate?  In no time there will be apps for these and much more.

Unfortunately for most of these industries the iPad is not durable enough and/or won’t meet regulatory requirements.  So two things will happen.  First, third parties will find ways to better seal and make the iPad more rugged.  Second, someone will create a similar device based on the Google or Microsoft platforms but designed for enterprise environments.

But is the iPad really a mobile device?  Are users going to ultimately balk at its bulk (relative to smart phones, that is)?  Time will tell but I think they may have just gotten it right for many applications.  And I have an answer to those ridiculous images floating around the Internet of people holding this large screen up to their ears to make a call.  It’s called a wireless headset.  Combined with increasingly powerful and effective voice recognition technology the possibilities are intriguing.  You can rest the iPad on the nearest hard surface and operate hands free.  At the same time you can be looking at what’s on the screen (which opens up some interesting opportunties for iPad mounting peripherals – think some sort of body harness).  If you don’t need to see the screen you can simply put it back in it’s case over your shoulder as you walk and talk.  It sure beats a netbook in terms of mobility.

And some will complain about its lack of physical keyboard.  My response: It’s time to move forward.  Physical keyboards aren’t going away but they will become less and less important as input devices.  And the fact that the iPad is free of one actually makes it easier to retrofit for enterprise environments that require sealing and a ruggedness.  Finally, if you need a physical keyboard you can simply buy the external keyboard pheripheral that Apple will offer.

But let’s not kid ourselves.  Corporate IT departments won’t be rushing out to buy iPads for their employees.  But you can be sure those employees will be thinking of ways the iPad can help them do their job better.  And some will get lucky and convince IT that they should be given the opportunity to prove its value.  And third parties will create apps for these opportunities.  And other third parties will find ways to retrofit it for different enterprise environments.  And, most significantly, it will become a prototype for the next generation, large screen mobile device that everyone will design towards.  You heard it here first.

The 2010 Anti-Forecast

OK.  Everyone likes to make forecasts.  Me too.  So I could comfortably confirm what you’ve heard elsewhere.  For instance, what a good year 2010 will be for the technology business (I agree).  Or why wireless and mobile technology will be at the forefront (again, I agree).  But it occurred to me that it might be more fun – and useful – to tell you what I think won’t happen.

The world as we know it will not end.  Yes, I read – and enjoyed – Ken Auletta’s new book Googled: The End of the World as We Know It.  But people will still buy newspapers, watch TV, and go the mall.  People like tangible things and can’t live completely in the digital world (although some try).  So, go ahead and invest in some brick and mortar companies.  You might be even get a better return than investing in Google.  Speaking of which…

Google will not become the next great enterprise technology company.  They haven’t even figured out how to sell enterprise software.  Just because, as a cash strapped entrepreneur, I use Google Apps doesn’t make them a viable enterprise software option.  And just because Google is now in the mobile device business doesn’t mean they will displace the RIM Blackberry as the corporate mobile device of choice.  Speaking of RIM…

RIM will not fade away in 2010.  Every year for the last 5+ years someone important has predicted the imminent demise of RIM.  2010 will be a boom year for mobile technology so just about everyone will do well.  And in the enterprise space RIM is still the player to beat.  Apple will continue to dominant the consumer smart phone space but…

Apple will not make significant inroads into the enterprise world.  The enterprise space is cost conscious and Apple doesn’t care to compete on price.  Why would they?  They can continue to have robust growth in the high margin consumer space.  And not just from their devices.  The iTunes and iPhone stores are significant, but often overlooked, sources of revenue growth for Apple.  Which brings me to…

Information technology is not going to get commoditized.  Sure there are elements of IT that are already commoditized and more areas will become commoditized in 2010.  But there are still plenty of innovative products and services being introduced which will command premium prices.  New web-based services and new wireless services will be very profitable.  As will new technologies that enhance mobility and remote sensing.  Which is why…

Highly educated, creative societies – like the U.S. – will not be eclipsed by the developing world anytime soon.  Sure, low cost is important and we can’t ignore its significance.  But creativity and inventiveness will continue to be key elements of our economic success.  As long as the economic environment continues to reward these attributes we will do well.  Conversely,  we need to keep in mind that the same factors that help keep costs down and improve productivity – low taxes and limited regulations – are important to encouraging invention and the small businesses it creates.

So, if you’re in the technology business, get ready for a banner year!  2010 will exceed your expectations.

Free Commerce. An Oxymoron? Or Simply a Paradox?

The advent of the World Wide Web in the 1990s ushered in a rapid expansion of the digital goods economy – the market for those goods and services traded in electronic form as digital bits.  Yet the vast majority of digital goods that change hands today do so without any exchange of money.  Free?  How can that be?  Is it possible that something can be free and still be commercially viable?  Is free commerce an oxymoron, or simply a paradox, in the digital world?  [Ironically, the concept of free sells books witness the success of Chris Anderson’s latest book FREE: The Future of Radical Price.  And in the last several months a mini-industry of rebuttals and counter-rebuttals have been created around this book.]

If you ask the vast majority of digital goods producers or distributors they would say its an oxymoron.  Most are desperately trying new ways to generate revenue because they haven’t figured out how to charge for something that can be so easily copied and shared at no cost to the person doing the sharing.    The local newspaper world is the poster child for this view.  Their business has rapidly eroded because of the growth of free online classifieds, most prominently craigslist, and a decline in advertising revenue on the print side.  And their attempts to sell online subscriptions has failed in the face of other sources of free news. 

The prominent examples of digital goods businesses which have been successful, such as Apple’s  iTunes and the iPhone stores, only prove the rule.  Another example is the Wall Street Journal (WSJ) which has managed to maintain a pay wall on its online site.  But the WSJ Online benefits from having a specialized product which is bought as a business expense by many, if not most, of their subscribers.  In the vast ocean of digital goods the Apple and WSJ examples, while intriguing, represent rare species that can’t easily be replicated.  Free is still the dominant distribution model.

If we’re going to get to the bottom of the dilemma facing the world of digital commerce then we need to understand what makes it unique, aside from the much touted low barriers to sharing.  And we’ll start where others end – with the “buyers” of digital goods.  Buyers get less benefit from the “free” digital economy than is commonly perceived.  The mental transaction costs (or the perceived costs of a decision) are an overlooked cost of the “free” shopping experience.  Too often consumers back out of the layers they’ve burrowed into on the Web (search results – homepage – product page – registration page – back out again – repeat) because they are asked for something (registration information, credit card, money) which they’re not prepared to share without knowing what they will get or who they’re getting it from.  Hence the preference for digital goods which are truly free, without strings attached.

Digital goods are also distinguished from physical goods by their ability to be priced according to value received.  The price of physical goods varies from store to store but at the end of the day the price of each individual item represents cost + profit where the cost is generally some order of magnitude greater than the profit leaving limited pricing flexibility.  In the case of digital goods the cost of the digital good itself – independent of its cost of creation – approaches zero on the Internet.  Or, to look at it another way, when the cost of each incremental unit is zero, profit can be some order of magnitude greater than cost yet, in most cases, the product is given away free!

And, last but not least, there is no return policy for digital goods.  Sure, a provider of digital goods could offer a money back guarantee but what gets returned?  A file?  Which file?  The original?  Or a copy?  And what about the case where a digital good – such as news or information – is consumed online (not downloaded to the consumer’s computer)?  How do you return something that has already been consumed?  Talk about high mental transactions costs!  Better to give it away free and ask for payment after the consumer has determined its value to them.  This eliminates the barrier of the buyers’ mental transaction costs without changing the net revenue opportunity.

So, let’s summarize.  We have a product that costs almost nothing to copy and share, is difficult to assess the value of prior of consumption (high mental transaction costs), can’t be returned for a refund, and has an incremental (x + 1) cost of close to zero.  No wonder the default price is free!  Unless a digital goods producer/distributor can create a world where they control the hardware, the experience, and the digital goods delivery, ala Apple, then they’re caught between the proverbial rock and a hard place.  Better to offer their products free and find some way to extract value post consumption, either through advertising (easy, but often not enough) or through voluntary payments (harder, but more upside).  Free commerce is indeed a paradox, not an oxymoron, in the world of digital goods and services.  Learning to reconcile this paradox is the key to success in this brave new world.

[Full disclosure: I’m a partner in a company building a way for free and commerce to coexist in a mutually beneficial way.]

Size Matters …Changing the Mobile Computing Paradigm

Why does it feel like a paradigm shift to imagine a mobile computer that is simple yet the only computer we own?  After all, a computer is just an input/output device with some intelligence and a display.  Yes, size matters.  Smaller is better except when it comes to the input/output parts that our hands and eyes depend on (don’t go there!).  And simpler is better as long as we don’t sacrifice functionality.  So, why do most companies operating in the mobile computing space miss the mark so often?

Apple got it right with the iPhone…as long as you’re a consumer, not a business user.  Research in Motion (RIM) got it right by focussing almost exclusively on the first killer app – mobile e-mail – but it’s not clear they will successfully get beyond that.  (The Blackberry Storm still appeals primarily to your typical Blackberry aficionado).  Microsoft’s Windows Mobile/CE still dominates the special purpose enterprise device space but is not treated with much respect in the broader mobile world.  And, despite the flurry of new devices being released, Google’s Android is largely unproven…and certainly not making a dent in the others’ market share.

But the biggest shortcoming to all of them is that I still must have – and sometimes must take on a trip – another computer.  I can’t simply put my mobile computer in a cradle and use a larger monitor and a full size keyboard (that size thing again).  In many cases I can’t even use the wireless network in my house or my hotel room to access the Internet.  And, for the enterprise buyer, mobile computers are mostly not designed for enterprise applications or to meet enterprise security requirements.

Here’s what I mean about changing the paradigm.  We need to stop thinking about mobile computers as some limited function device that complements our other (main) computer and start thinking about it as the computer of the future.  How about starting to think about it as the gateway into the Software as a Service (SaaS) world.  How about taking advantage of the tremendous advances in new input/output technologies such as voice recognition, location awareness, thin displays, wireless diversity, biometrics, etc.  In other words, we need to start thinking outside the traditional computing paradigm.

Apple is in a better position than  the others – both technologically and culturally – to make the necessary breakthroughs.  But I wonder if they care.  Why change when you can generate substantial margins by focussing on a subset of the market?  Microsoft has the resources, and market position, but probably not the right culture to make it happen.  And, Google, well who knows what its trying to do in the mobile space.  Sell advertising?  RIM, despite its obvious success, is the black horse.  And maybe its far enough outside the box to make it happen.  Size, after all, is a relative concept.

Mobile Technology Approaches an Inflection Point (An Enterprise View)

For those of us who have been waiting for that moment when the only computing device we carry is a handheld device (fits in pocket and can be held with one hand) we are getting near an important inflection point.  There is a flood of new investment going into the space with more to come.  One only needs to look at a sampling of headlines over the past several months to get a sense of what’s happening.  “Google Eyes Enterprise Market For Android,” “Eric Schmidt (Google CEO) leaves Apple’s board,” and “IBM Allocates $100M for Research in Mobile Communications” is just a small sample.  Major investments are being made and battle lines are being drawn.  In the next year or two every major technology vendor will be involved in one way or the other in the mobile market.  Those already in the middle of it, such as Microsoft and Research in Motion, will double down.  Those on the periphery, such as IBM and Dell, will make major new investments.  And some, even those with substantial mobile technology franchises today, will not make it past the inflection point. 

Vendors will present a vision and ask customers to buy into it.  Google will tout Android as the platform of the future.  But just how committed is the company to an application business not funded by ad dollars?  Microsoft will tout Windows 7 as the platform where the mobile and desktop worlds meet.  But is that even possible?  And Apple will tout the iPhone/iTouch platform as an enterprise platform.  But will it ever be more than just a consumer device?  And then there’s Nokia’s Symbian platform, the Palm Pre, and RIMM’s Blackberry.  Not all will survive.

For those of us that have been through similar paradigm shifting technology inflections in the past it all seems very familiar.  But we still don’t have a crystal ball.  All we can tell you is how it will unfold, not where it will end up.  There will consolidation, there will be strategic alliances, and there will be failures.  For individual buyers it’s all good as the resulting investment and innovation delivers on the promise of the one device.  For enterprise buyers, however, it’s a landscape populated with landmines.

Smart investors hedge their bets (as we all wish we had done with our investment accounts last year) and don’t assume to know the future.  The same philosophy can, and should apply, to a mobility strategy.  Creating a strategy based on one mobile operating system vendor or one platform is limiting at best and potentially costly at worst.  Better to bet on an independent mobile application vendor that provides platform/device flexibility.  The solutions fall into two categories: (1) platform-agnostic front ends and (2) hosted services (SaaS).  Each approach has its advantages and choosing the right one depends on the business and the mobile applications required.

When it comes to information technology there is rarely one right decision; there are multiple choices each with its own trade offs.  The mobile technology world is no different.  Indeed, the changes sweeping the mobile technology world today are creating more choices than ever.  Given that it’s next to impossible to predict the winners and losers the decision process just got more difficult.  Choose wisely.