Nokia's non-Android Android phone

At Mobile World Congress Monday in Barcelona, Nokia introduced its Nokia X series — three hybrid quasi-Android phones. The phones combine the Android kernel with Windows-style tiles.

The Nokia phones are as much (or little) Android as is Amazon’s Kindle. Like Amazon, Nokia eschewed Google’s proprietary layers and added its own proprietary layers on top of the Android Open Source Project. The new phones have Nokia’s Store, with Nokia’s maps, radio and in-app payments.

According to Nokia

Nokia Store testing has shown that approximately 75% of Android apps will run properly without any modifications; they’re ready to be published in Nokia Store.

For the remainder:

If your app uses Google services for push notifications, maps or in-app payments, you’ll need to make a few changes, but it won’t take long (usually less than 8 hours). Nokia services have been designed to minimize porting effort from apps using corresponding Google services and allow developers develop and distribute a single APK targeting multiple stores.

Nokia even offers a service for testing apps to see if they are compatible. If not, Nokia is doing a road tour (the “Nokia X Porting Bus”) across Europe to help developers to port their apps to provide dual-platform support.

Either way, developers will need to submit their apps to the Nokia Store to have them made available to customers.

The news sites are speculating about how Microsoft feels about this signal undercutting Nokia’s devotion to the Windows platform, in anticipation of the handset business being swallowed by Microsoft.

Microsoft can keep or cancel the platform once it takes control. In the meantime, Nokia and Android developers can attempt a low-cost experiment to see whether app makers will pay the porting costs, and whether Nokia’s hardware competencies are valuable for Android customers in third world countries. Still, it’s hard to imagine a scenario under which this platform is still available for sale in three years.

For me, what is most interesting is what this experiment means for the future of non-Android Android devices. The Nook was first, then the Kindle. Will this encourage other experiments? Will these experiments create a demand for non-Google Android devices? Will developers make dual-platform applications? Will it undercut the market power of the Android compatibility program?

So will this reduce Google’s control of the platform by moving demand to lower layers? Will it promote further dominance by Android? Or will it be the tree that falls in the forest, that no one ever hears?

In the real world, Android is a proprietary platform

Since Android was first released, many of us have wondered how open it really is. Last week, we learned more about Google’s tight control over Android through documents released as part of an European antitrust investigation.

The story was first reported by the Wall Street Journal, based on an analysis by Harvard professor Ben Edelman. (The WSJ said that Google declined to comment). The meat of the revelation were copies of the 2011-2012 “Mobile Application Distribution Agreement” (MADA) that was signed by Android licensees Samsung and HTC. The agreements were exhibits in the Google-Oracle (née Sun Microsystems) Java copyright lawsuit in the Federal District of Northern California.

Ties That Bind

Rolfe Winkler of the WSJ summarized the (MADA) agreements as follows:

The Samsung and HTC agreements specify a dozen Google applications that must be "preinstalled" on the devices, that Google Search be set as the default search provider, and that Search and the Play Store appear "immediately adjacent" to the home screen, while other Google apps appear no more than one screen swipe away.

The terms put rival mobile apps, like AOL Inc.'s MapQuest and Microsoft Corp.'s Bing search, at a disadvantage on most Android devices. Mr. Edelman, who is a paid consultant for Microsoft, said the terms "help Google expand into areas where competition could otherwise occur."
…
Google has successfully promoted its own apps on Android. Four of the top 10 most-used apps on Android smartphones in the U.S. during December were Google's, according to comScore. On Apple's iPhone, only one Google app—YouTube—was among the top 10.

Calling Edelman a Microsoft consultant seems like a red herring. More relevant is that he embarrassed Google by noting that it tracked user browsing even when users disabled it. Edelman seems an equal opportunity Internet activist, having spent his entire adult life at Harvard (earning an AB, AM, JD, and PhD in econ before becoming an assistant and associate professor at Harvard Business School).

In his own analysis, Edelman shows how Google’s activities constitute tying:

If a phone manufacturer wants to offer desired Google functions without close substitutes, the MADA provides that the manufacturer must install all other Google apps that Google specifies, including the defaults and placements that Google specifies. These requirements are properly understood as a tie: A manufacturer may want YouTube only, but Google makes the manufacturer accept Google Search, Google Maps, Google Network Location Provider, and more. Then a vendor with offerings only in some sectors—perhaps only a maps tool, but no video service—cannot replace Google's full suite of services.

I have repeatedly flagged Google using its various popular and dominant services to compel use of other services. For example, in 2009-2010, to obtain image advertisements in AdWords campaigns, an advertiser had to join Google Affiliate Network. Since the rollout of Google+, a publisher seeking top algorithmic search traffic de facto must participate in Google's social network. In this light, numerous Google practices entail important elements of tying:

If a wants	Then it must accept
If a consumer wants to use Google Search	Google Finance, Images, Maps, News, Products, Shopping, YouTube, and more
If a mobile carrier wants to preinstall YouTube for Android	Google Search, Google Maps (even if a competitor is willing to pay to be default)
If an advertiser wants to advertise on any AdWords Search Network Partner	All AdWords Search Network sites (in whatever proportion Google specifies)
If an advertiser wants to advertise on Google Search as viewed on computers	Tablet placements and, with limited restrictions, smartphone placements
If an advertiser wants image ads	Google Affiliate Network (historic)
If an advertiser wants a logo in search ads	Google Checkout (historic)
If a video producer wants preferred video indexing	YouTube hosting
If a web site publisher wants preferred search indexing	Google Plus participation

Not all tying is illegal. But tying by a dominant firm is legally suspect — even more so in Europe, where the competition policies are more aggressive (especially for US firms like Google).

Technically Open, Commercially Not

From a practical standpoint, phone makers have no choice but to comply with Google’s terms (with the exception of China’s domestic market, where Google’s services are blocked). As OSS IP maven Florian Mueller wrote:

Technically you can take the free and open parts of Android (in terms of the amount of code, that's probably the vast majority, though the share of closed, tightly-controlled components appears to be on the rise) and build a device without signing any individual license agreement with Google, and some have indeed done so. If that is so, why did Samsung and HTC sign those agreements that have now come to light? For commercial reasons.

If you want your Android device to sell, you normally want to be able to call it an Android device. To do that, you need a trademark license from Google. Open source licenses cover software copyright, they may come with patent provisions, but licenses like the GPL or ASL (Apache) don't involve trademarks.

The trademark -- the little green robot, for example -- is commercially key. In order to get it, you must meet the compatibility criteria Google defines and enforces, which are mostly about protecting Google's business interests: the apps linked to its services must be included. And those apps are subject to closed-source, commercial licensing terms. That's what the MADA, the document Samsung and HTC and many others signed, is about.

Even if you decided that the trademark isn't important to you, you would want at least some of the apps subject to the MADA. What's a mobile operating system nowadays without an app store? Or without a maps/navigation component? Google gives OEMs an all-or-nothing choice: you accept their terms all the way, or you don't get any of those commercially important components. And if you take them, then you must ensure that the users of your devices will find Google services as default choices for everything: search, mail, maps/navigation, etc.

This “free” software comes at a price. Even if Google doesn’t charge royalties to use its applications, the London Guardian estimated last month that it costs $40k-$75k to test a new handset for compliance with Google’s standards and thus be allowed to ship Google’s applications.

Google Isn't Open About Not Being Open

Most troubling for me has been — since the beginning of Android — the gap between Google’s rhetoric of openness and the reality; for example, see “Open source without open governance” (June 2008), “Perhaps someday Android will be open” (July 2008), “Sharing in faux openness” (October 2009), “Google’s half-full glass of openness (January 2010), “Andy wants you to buy his openness (June 2010) “Semi-open Android getting more closed” (October 2013).

While these agreements have been in place for at least three years, Edelman notes that Motorola redacted the most important provisions of the MADA when it disclosed excerpts in a 2011 SEC filing. Google’s lack of transparency about its non-openness helps it be more successfully non-open:

MADA secrecy advances Google's strategic objectives. By keeping MADA restrictions confidential and little-known, Google can suppress the competitive response. If users, app developers, and the concerned public knew about MADA restrictions, they would criticize the tension between the restrictions and Google's promise that Android is “open” and “open source.” Moreover, if MADA restrictions were widely known, regulators would be more likely to reject Google's arguments that Android's "openness" should reduce or eliminate regulatory scrutiny of Google's mobile practices. In contrast, by keeping the restrictions secret, Google avoids such scrutiny and is better able to continue to advance its strategic interests through tying, compulsory installation, and defaults.

Relatedly, MADA secrecy helps prevent standard market forces from disciplining Google's restriction. Suppose consumers understood that Google uses tying and full-line-forcing to prevent manufacturers from offering phones with alternative apps, which could drive down phone prices. Then consumers would be angry and would likely make their complaints known both to regulators and to phone manufacturers. Instead, Google makes the ubiquitous presence of Google apps and the virtual absence of competitors look like a market outcome, falsely suggesting that no one actually wants to have or distribute competing apps.

With some irony, the WSJ article quoted Google’s former CEO:

"One of the greatest benefits of Android is that it fosters competition at every level of the mobile market—including among application developers," Google Executive Chairman Eric Schmidt wrote to then-U.S. Senator Herb Kohl in 2011.

Peeling Back the Layers of Openwashing

While the most specific and conclusive, this latest revelation is not the only evidence that Android is more openwashing than open source.

For example, in October Ron Amadeo of Ars Technica listed all the cases where “open source” Android once came with a key application available in open source, but then Google orphaned the open source app when it brought out a fully-featured closed-source replacement. This includes the Search, Music, Calendar, Keyboard, Camera and Messaging apps.

At the same time, Google (with great success) sought to convince app developers to use the Google Play APIs rather than the official Android APIs — thus making these apps incompatible with devices that use only the open source part of Android (e.g. Amazon’s Kindle). If you want to use apps from the Google app store, you have to use the Google APIs.

Finally, there’s the matter of the Open Handset Alliance, the organization nominally leading Android development. Amadeo makes clear that OHA is more like the Microsoft Developer Network than the Eclipse Foundation (emphasis in original):

While it might not be an official requirement, being granted a Google apps license will go a whole lot easier if you join the Open Handset Alliance. The OHA is a group of companies committed to Android—Google's Android—and members are contractually prohibited from building non-Google approved devices. That's right, joining the OHA requires a company to sign its life away and promise to not build a device that runs a competing Android fork.

Google: Partly Open and Opening Parts

In the early 2000s, open source was a paradox. When I began researching my second open source article (which I used as a job talk in December 2001 and was published in 2003), it was not clear how firms could make money from something nominally open. Based on a study of Apple, IBM and Sun, I concluded that firms made money off of openness with strategies that were open in one of two ways: they opened parts (leaving other parts close) or they were partly open (granting some rights, but not enough to enable competitors).

Google is clearly doing both. Amadeo emphasizes that with Android, Google is only opening parts — leaving key components under tight control. Meanwhile, the latest news points to Google being only partly open: rights to use the “open source” (actually, a mixed-source) system depend on complying with a series of Google restrictions.

In 2011, mobile analyst Liz Laffan studied the openness of eight mobile-related open source communities. Building on a 2008 study I did with Siobhan O'Mahony, she developed a 13-factor openness score for firm controlled open source communities. In her report (summarized in a 2012 journal article) Laffan assigned scores from 0-100% open. Android was lowest at 23%, and in fact the only project less than 50%. At the other extreme, Linux was 71% and Eclipse (designed to be open from the start) was 84%.

Conclusion: Real World Android is a Proprietary Platform

In the 1980s and 1990s, Microsoft won commercial success by widely licensing its PC operating system to all comers. However, after the initial licenses (with its launch customer IBM), Microsoft largely dictated the terms of these licenses.

When people buy an Android phone, they are not buying the Android Open Source Project but (as Amadeo makes clear) the Google Play Platform. This platform — call it Real World Android — has the following characteristics

• Like Apple’s OS X (or IBM’s WebKit), it combines open source and proprietary elements.
• Like Windows, it is licensed to a wide range of hardware manufacturers.
• Like both OS X and Windows, much of the value comes from bundling a wide range of proprietary, closed-source applications

In short, Real World Android is a proprietary platform: proprietary in that it is a mixture of open source and proprietary elements, but the complete platform (including application functionality and access to the Android app ecosystem) requires licensing proprietary technologies under a restrictive proprietary contract. (For a true open source system, the open source license would be enough).

A few market experiments (notably Kindle and the Chinese market) have been made using the Android open source project (which Amadeo dubs AOSP). For the remainder, as Florian notes, commercial success requires agreeing to Google’s terms to use its proprietary platform. If it was ever accurate to refer to Android as an open source platform, it’s clearly no longer true today.

Yes, by using an ad-supported (two-sided market) approach Google doesn’t have to charge royalties, but that doesn’t make it free (as in speech or as in beer). With 42% of the US mobile ad market — and Android accounting for the majority of US smartphones — Google makes billions off of Android users. Google’s preloaded apps command choice real estate, and if Google didn’t control this real estate, handset makers could sell this real estate to the highest bidder.

So despite all the rhetoric, Google is just another tech company that wants to rule the world and make zillions for its founders and executives. It controls its technology to gain maximum advantage, and (like many firms nowadays) uses openwashing to render spotless its proprietary motivations. This shouldn’t be surprising. It won’t be a surprise for anyone who reviews the how Android evolved (and the strategy emerged) over the first five years.

The ignominious end of Nokia's handset hegemony

On Tuesday morning (Finnish time), Nokia announced that it was selling its handset business to Microsoft for €5.44b. The payment includes €3.79b for the division and €1.65b for a 10-year (non-exclusive) license to the Nokia patents necessary to operate that business. The deal is funded by Microsoft’s offshore profits that (as with most US-based multinationals) it has been unable to repatriate due to the US tax law.

A PDF published by Microsoft summarizes the deal:

• Microsoft acquires Nokia’s phone business
• Microsoft acquires Nokia’s Qualcomm, other key IP licenses
• Microsoft licenses Nokia’s patents for use across all Microsoft products
• Microsoft licenses ability to use Nokia HERE broadly in its products
• Nokia retains NSN [Nokia Siemens Networks], HERE, its CTO Office, and its patent portfolio
• Nokia and Microsoft cement original partnership with this deal before 2014 recommitment date

As a Microsoft shareholder, this seems like a final failed effort by Steve Ballmer to make big strategic moves to distract from the failure of his efforts to execute on the core businesses he inherited when becoming CEO in 2000.

Want proof? In the same PDF, Microsoft projects in 2018 an “assumed market share” of 15% for the Nokia (or Windows Phone) business. Microsoft hasn’t had 15% share since 2005, and its most recently quarterly share (like Nokia’s) was under 4%. As with all of Microsoft’s mobile strategy since then, the deal is more about hope than feasible strategies.

About the only good news is that the troubled Microsoft is acquiring the even-more-troubled Nokia for a song. Three years ago, Nokia’s handset division was grossing more than €6 billion per quarter; two years ago, Microsoft paid 20% more to buy Skype, a company without a business model.

Meanwhile, what about Nokia? Basically, its current and previous CEO have panicked as they have driven the company into the ground. Since the 2007 introduction of the iPhone, bought full control of Symbian Ltd. (and then killed it), switched from the once-dominant Symbian to the also-ran Windows platform, and now is exiting the business. All this from the company that was the world’s largest handset maker from 1998 until 2012.

The urgency of the deal for Nokia is evidenced by the key financial terms. Microsoft is “immediately” advancing Nokia €1.5b so it can keep the doors open until the deal closes — and Microsoft presumably assumes the salaries of 32,000 Nokia employees in the money-losing division.

It’s hard to see how losers buying losers (cheap) creates a winner. Yes, the mobile market is growing as Microsoft’s core business is dying. Yes, having a captive† handset manufacturer will justify keeping open the Windows Mobile division. But how will having a distant third place product with single-digit market share solve Microsoft’s numerous growth and profitability problems?

† Microsoft claims other licensees will continue, despite decades of failed licensing efforts by vertically integrated platform owners. Licensing didn’t work for Nokia with Symbian, didn’t work for Palm with Palm OS, didn’t work for Apple with Mac OS 8, and didn’t work for IBM with OS/2.

Google gets the competition it deserves

At this week’s Mobile World Congress, the conference is focused on what happens next, now after Android has captured the majority of the world’s smartphone sales — and continues to gain share. Some distant clouds are on the horizon.

The WSJ this week asked whether the leading Android vendor, Samsung, is going to assert its buyer power against Google.

Google executives worry that Samsung has become so big—the South Korean company sells about 40% of the gadgets that use Google's Android software—that it could flex its muscle to renegotiate their arrangement and eat into Google's lucrative mobile-ad business, people familiar with the matter said.

The story said “Android head Andy Rubin … said Samsung could become a threat if it gains more ground among mobile-device makers that use Android.” The WSJ followed up with a blog posting asking “Can Samsung’s competitors catch up?” while Fierce Wireless reported a Samsung VP’s denial that Samsung’s success threatens Android.

The original WSJ story speculated that Samsung might ask for better terms, e.g. preferential access to technology.

In some ways, we’ve seen this story before. Symbian was supposed to be an open multi-vendor platform, but when Nokia accounted for 80%+ market share, it transformed both the Nokia-Symbian relationship and the level of interest and commitment by other vendors to Symbian. Yes, Google’s much richer and more independent than Symbian ever was, but it faces some of the same pressures that Symbian did. As it is, Samsung is making more profit from Android phones than Google is (an interesting reversal of the Microsoft-Dell exemplar).

(Google’s downstream vertical integration into Motorola is offered as an insurance policy, but since Motorola has been slowly dying for a decade, it’s not clear how credible a bargaining chip that is.)

Similarly, Samsung continues to support Tizen (the embedded Linux successor to LiMo, Moblin and Maemo), and plans on offering a new phone based on Tizen this summer. Samsung is using Tizen as an upward compatible replacement for its homegrown Bada, but it’s unclear how credible a bargaining chip Tizen will be — since it hasn’t offered a new Bada phone in two years.

The other challenge to Android comes with the introduction of the Firefox OS. Since handset OS makers — Google, Apple, Microsoft — are promulgating their own browsers, apparently the Mozilla Foundation figures they need an OS to put their browser into people’s hands.

The Firefox OS won support from LG, ZTE, Huawei and Alcatel, as well as serious interest from Sony (née Sony Ericsson née Ericsson) — but not from Samsung. It’s expected to ship from 18 carriers in nine countries, but not the US until at least next year.

There’s of course the question whether the world needs another smartphone OS, let alone another open source OS (remember webOS). After Android (69%) and iPhone (22%) together have 81% of the market, no other platform has more than 5% — with Tizen and Firefox starting behind Blackberry, WinMo and Symbian. But there’s no guarantee that the most popular OS in the US or Europe will be the most popular OS in China, particularly when China’s two largest handset vendors are supporting both Android and Firefox OS.

So based on recent history, Google’s concern in developed markets should be Samsung throwing its market power around (either within Android or to a rival platform), rather than having Firefox (or BlackBerry or WinMo) catch it any time this decade. It needs monitor Tizen or Firefox in the BRIC countries, but that could just be a matter of providing extra tech support engineers for Huawei and ZTE.

Time for Nokia to replace Microsoft?

An article from the Oct 19 edition of Talouselämä, a leading Finnish news magazine:

Tutkijat: Android toiseksi kärjeksi Nokialle

Talouselämä

19.10.2012 09:22päivitetty 19.10.2012 09:26

Nokian olisi otettava Microsoftin rinnalle tai sen sijaan parempi kumppani, kirjoittavat tutkijat Timo Seppälä ja Martin Kenneyperjantaina 19. lokakuuta ilmestyneen Talouselämä-lehden Tebatti-palstalla.

The Google and Microsoft translations are a bit iffy, but here are some excerpts:

Nokia should take into Microsoft alongside, or instead of a better partner, write the researchers Timo Seppälä and Martin Kenney on Friday the 19th October edition of the magazine Talouselämä Tebatti column.

Timo Seppälä is a subsidiary of Etlatieto Ltd, a researcher at Etla, and Martin Kenney, Professor at the University of California (Davis).

The following post is part of a larger BRIE-ETLA research project.

Apple's iPhone revolutionized the mobile use of the Internet. In response, Google developed the Android operating system and offered it to phone manufacturers for free use.

In the past five years has led to a situation where Apple, as well as Samsung and other Android phone manufacturers utilize dominate the smartphone market. Nokia's "burning platform" has shrunk Symbian to insignificance and Microsoft Windows is still the underdog role.
…
Early last year, however, Nokia chose Microsoft's Windows [as its] only smartphone [platform]. In poker terms Nokia played all in, when the hand was a pair of jacks. Microsoft has no immediate risk at all.

The translation (from Finnish from the original English) is a bit hard to follow, but basically tells Nokia (in its home town) that it would have been better either with Meego or Android, and encourages Nokia to drop Windows (or at least choose a second parallel platform) rather than stick it out "until death do us part."

Nokia: bad news without end

Like other CEOs of struggling companies, Stephen Elop has an unenviable job. He took over Nokia in 2010 when his predecessor had been unable to arrest the company’s decline.

Still, let’s not put too fine a point on it: Elop’s gamble to bet the company’s future on switching to the Windows Phone platform has been an absolute disaster.

In quarterly earnings announced Friday, the company lost €4 billion for the first 9 months of 2012 — nearly a billion of that in the 3rd quarter — versus €0.4 billion lost in the same period of 2011. This is not a one-time blip: here months ago, Nokia also lost money and announced massive layoffs.

Smartphone sales have been falling since 2010, but the major collapse came this year as the company phased out its Symbian handsets. AllAboutWindowsPhone.com (née AllAboutSymbian.com) published the damning chart:

Nokia has been more successful at killing Symbian — by starving new releases — than getting people to buy Windows Phones. In fact, as late as Q2, Nokia was still selling more Symbian than Windows phones.

The only uptick in smartphone sales in Q3 came because during Q3, the company has rebranded its S40 (now “Asha Touch”) as a “smartphone” platform. Whether or not the new classification is accurate, it doesn’t reduce in increased sales and highlights how far the company has fallen since its 2010 peak.

It seems like the assumptions behind the Windows bet were flawed. Nokia (or at least Elop) hoped that being the big fish in the Windows pond would be better than slugging it out in the Android market.

Yes, Nokia (at least for now) has the majority of WP sales, but that's not much. The assumption was that Windows Phone would be competitive with Android and iOS, but so far it isn’t. Q3 numbers won’t be out until next month, but in Q2 WP was #5 at 3.5%, after Android, iOS, BlackBerrry and Symbian. Meanwhile, the transition has been managed in such a way to kill its Symbian cash cow before the customers embraced its new products.

For years, Nokia was the world leader in both smartphones and handsets. Now Samsung is selling almost 3x as many Android smartphones as Nokia is selling for WP, Symbian and S40. If Nokia isn’t ready to compete with Samsung, maybe it should just close the handset business and focus on infrastructure.

More realistic is the advice from former Apple Europe president Jean-Louse Gasée: fire Elop and switch to Android. If Nokia’s board believed in accountability, they’d lower the axe after the end of the Christmas quarter, but more likely they’re going to limp along until they can no longer deny the reality of Elop’s failed platform strategy.

Microsoft gains powerful Windragon ally

Once the co-owner of the powerful “Wintel” monpoly, in the past decade, Microsoft has been suffering an increasing slide towards irrelevance. The onetime brash PC pioneer has looked more and more like a legacy software company protecting an installed base.

Nowhere is this trend more painful than in the mobile world. Since 2006, it has never held more than 15% of the global smartphone market and in fact — under the twin onslaught of iPhone and Android — its market share has been in a freefall, giving up more than three-fourths of that share. To add insult to injury, 2011 was the year when more smartphones shipped than PCs, a trend that’s only going in one direction.

To save its mobile strategy, Microsoft’s put all its money on its Nokia alliance in hopes that would save Windows Phone 7 from the same ignominy as its predecessors. Given that Nokia’s share has also been in freefall, this has the potential of extending Gary Hamel’s “two drunks” analogy from acquisitions to joint ventures.

On Tuesday, Microsoft landed a public endorsement from one of the mobile industry’s most powerful players: Qualcomm. To me, this has the potential to be the most powerful ally that Microsoft could attract, as a net positive for both firms and a negative for their respective rivals, Apple and Intel (and to some degree, Google).

At the company’s annual shareholders’ meeting, Qualcomm CEO Paul Jacobs bragged a little about the company’s successful shift of its semiconductor business from radio modems (“basebad processors”) to its Snapdragon all-in-one process — which include an ARM-compatible CPU, radio, graphics, multimedia and other features. Based on its Snapdragon success, Qualcomm has continued to gain market share, passing TI last year to become the leading supplier of cellphone CPUs (“application processors”), according to Strategy Analytics.

(By not making its own cellphones or infrastructure, Qualcomm also had a unique position in the mobile phone value chain. Instead, it devotes its $3 billion/year R&D budget to developing components and basic technologies that it sells to all comers among the various handset and platform providers).

Qualcomm has two reasons to throw its weight behind Microsoft. First — unlike Android — it’s only game in town, as the sole CPU supplier for WIndows Phone products thus far. Secondly, Qualcomm sees Windows-on-ARM as opening a whole new market — allowing it (and other ARM licensees) to take CPU market share away from Intel in the PC and tablet space.

In Jacobs’ view, the Windows-on-Snapdragon (or — as I put it, “Windragon”) combination will merge the office productivity options of Windows with the mobility, power saving and performance of the Snapdragon CPU line. Part of the shareholder meeting was devoted to demonstrating the Snapdragon S4 processor designed for the Windragon market.

This sort of tight alliance would seem to me to accelerate the estrangement of Apple and Qualcomm in the handset world. A shareholder asked when (or why) Qualcomm can’t provide more chips to Apple, which appears to be limited to its baseband processor (in the iPhone 4 and iPhone 4S) to complement Apple’s own A5 ARM cpu. If Qualcomm is going to help Microsoft gain share against the iPhone, iPad and perhaps reverse the OS X gains against Windows, then the Apple of Steve Jobs (and perhaps Tim Cook) is not likely to be too friendly or dependent on the San Diego chip giant.

Certainly success of Windragon would accelerate the shift from Mac to iPad sales and Apple’s expected phase-out of OS X.

The other interesting implication is what it does to Intel. There’s no love lost between the firms, particularly in the WiMax vs. LTE 4G wars (that Jacobs alluded to Tuesday). At the same time, Intel is suffering from the same shift away from PCs that threatens Microsoft.

Will Intel make ARM-compatible CPUs, as it once did? Will it try to more aggressively win Android allies to counter the Microsoft-Nokia-Qualcomm alliance?

RIM: we've seen this movie before

Research in Motion this morning promoted COO Thorstein Heins to be the new CEO. The two co-CEOs, Mike Lazaridis and Jim Balsillie, stepped down from any executive position but remain on the board. (Lazardis, a co-founder and the only remaining original director from 1984, becomes vice chairman).

The FT reported:

Thorsten Heins jokes that as a German, he knows something about discipline.
…
“Once I decide on building an idea, or on building a product or a service or a network, I do this very rigorously,” Mr Heins told the Financial Times. “Discipline in the development process, flawless execution, quality [and] accountability in the system.”

The analyst reaction was mixed; this comment from RBC (via the WSJ Deal Journal) seems representative:

On the one hand, this appears a positive step, as Messrs. Lazaridis and Balsillie are stepping away from the Co-Chairman, Co-CEO structure which some investors have highlighted as one source of RIM’s current problems… On the other hand it’s unclear to what extent the new CEO will be able to materially impact the vision and direction of the company in light of rapidly changing competitive conditions, and correct RIM’s seeming inability to navigate these challenges. CEO Heins, while a seasoned network executive, has never been a public company CEO, and lacks deep consumer marketing and software experience.

When I heard the news, two words immediately came to mind: Michael Spindler.

Spindler was Apple Europe president, promoted to Apple CEO after John Sculley was ousted in 1993 (and before Spindler was ousted for Gil Amelio three years later). Spindler was a notoriously operations-oriented executive (nicknamed the “Diesel”) who sweated every detail in sight.

I’ve never met Heins, so I don’t know if he has the Spindler stubbornness and lack of imagination. However, in most companies the COO (contrasted to the VP of R&D or the VP of marketing) tends to focus on implementation rather than generating great new ideas.

Certainly RIM could use to ship better products sooner, so improving execution is a good idea. But in the end, will it change RIM’s eventual fate? I doubt it, any more than Spindler’s (or Amelio’s) execution was ever going to save Apple. RIM has still to solve its fundamental problems.

RIM had a great run, bringing email to the cellphone, solving key ergonomic and battery life issues. However, like Nokia (and unlike Samsung, LG and even Motorola) they underestimated the impact of the iPhone and the desire of cellphone owners to access the open Internet. Pursuing the same strategy (even with better execution) and expecting better results is the very definition of insanity.

RIM doesn’t need new execution: it needs a new strategy. Nokia made a bold move — which may or may not work — but at least licensing Microsoft’s platform provides an ally, newer technology and perhaps the badly needed economies of scale.

RIM clearly lacks the scale to support its platform alone, in the face of the Android onslaught and Apple’s continuing success in controlling the industry’s wallet share. It was rumored to be trying to license its platform to other firms, but who would want it now? That’s the problem with most proprietary platform leaders: they open up when it’s both too late to hurt the company and also too late for any potential partner to care (NB: DEC, Sun, Sony).

One strategy for RIM would be to concentrate more on the server side, providing BlackBerry push e-mail to handset makers, network operators and business users who don’t have BlackBerry hardware. The problem I can see is that the traditional BlackBerry business model is dying because most of the differentiation is gone: why would I pay $10/month for BlackBerry services when I can get gmail (or hotmail) for free? (This is exactly the Windows 95=Macintosh ’89=Macintosh 2000 problem.) Or, as one analyst quoted by the WSJ put it, “Our discussions with carriers suggest declining relevance and increased pushback on BlackBerry fees.”

Another strategy would be to sell the company for the value of the patents, as Nortel (the oldest of Canada’s onetime telecom giants) and Motorola (the creator of the cellphone) have done. Obviously the RIM management has little interest in this as long as there’s any other alternative.

Absent a partner, RIM is going to go the way of DEC, Sun and Motorola, sold for its residual value. Even after the management change, RIM appears no closer to forestalling that seemingly inevitable outcome.

Steve was right and so was I

Danny Winokur, Adobe vice president of interactive development, posting at blogs.adobe.com, Wednesday 6am:

Over the past two years, we’ve delivered Flash Player for mobile browsers and brought the full expressiveness of the web to many mobile devices.
However, HTML5 is now universally supported on major mobile devices, in some cases exclusively. This makes HTML5 the best solution for creating and deploying content in the browser across mobile platforms.
…
We will no longer continue to develop Flash Player in the browser to work with new mobile device configurations (chipset, browser, OS version, etc.) following the upcoming release of Flash Player 11.1 for Android and BlackBerry PlayBook.
…
These changes will allow us to increase investment in HTML5 and innovate with Flash where it can have most impact for the industry, including advanced gaming and premium video. … Flash developers can take advantage of these features, and all that our Flash tooling has to offer, to reach more than a billion PCs through their browsers.

Steve Jobs, Apple CEO, April 29, 2010:

Flash was created during the PC era – for PCs and mice. Flash is a successful business for Adobe, and we can understand why they want to push it beyond PCs. But the mobile era is about low power devices, touch interfaces and open web standards – all areas where Flash falls short.
…
New open standards created in the mobile era, such as HTML5, will win on mobile devices (and PCs too). Perhaps Adobe should focus more on creating great HTML5 tools for the future, and less on criticizing Apple for leaving the past behind.

Back in February 2008, I wrote about how Apple was trying to discourage Flash on the iPhone and finding work-arounds to having it pre-installed: “Apple is gambling that Adobe needs the iPhone more than the iPhone needs Flash.”

Steve Jobs has won last battle. RIP.

Smartphone vendors learn: commoditization is hell

As previously noted, the major goal of Android was to commoditize smartphones, to make them widely available from a wide range of sources. Consumers like open standards because they bring, entry, competition and lower prices — a point I made in a 2007 book chapter.

As any first year strategy student can tell you, low entry barriers that bring high rivalry and high buyer destroy industry profit margins. Assuming the major cellphone makers each employed one MBA graduate, this should have been utterly predictable.

But apparently this is news, at least according to a report by John Paczkowski in All Things D that quotes analyst Trip Chowdhry:

He says that Sony [i.e. Sony Ericsson], Motorola and Samsung are growing disillusioned with Google’s Android OS. They feel there’s too much fragmentation and too little differentiation among Android devices and that companies producing low-end handsets are collapsing the premium market they’d most like to play in.

“They’re starting to realize that their Android devices [are no different] in the eyes of the customer [than a] $20 Android Phone from Huawei,” Chowdhry says. “They’re worried that Android may dilute their global brand as customers put them in the same bucket with Acer, Asus, ZTE, Huawei, and MediaTek.”

Uh, yeah, we’ve seen this story before: it was called the Wintel PC (or for oldtimers, the IBM PC compatible.) Cellphones are worse, since the carriers control distribution and have an interest in selling the cheapest phone they can.

To prevent this lack of control and divergence of interests, these three branded vendors were co-founders and shareholders of Symbian. In the end, only Sony Ericsson took Symbian seriously.

Today, Chowdhry suggests that the big three should license webOS from HP. Two aspects of the report makes sense. One is that webOS is a modern, high quality smartphone OS. The other is that HP has negligible share and isn’t competing with them.

Still, the major handset makers are no more interested in sharing a standard with webOS than they were with Symbian. And the high royalties ($50-75/device) that Chowdhry proposes are not going to fly with companies that pride themselves on hardware designs.

WebOS and its (former) owner Palm are really a US brand. I think HP’s best shot would be to approach either Motorola (which is still US-centric) or Sony Ericsson (which is even more seriously in trouble) to see if they’re interested. HP could continue to use webOS for tablets and other devices.

Samsung is a lost cause. They put small bets on every open platform (Symbian, Windows Mobile, Android) while still hoping their proprietary bada platform will catch on outside Korea.

After two years of negligible sales, whatever window webOS has as a smartphone platform has just about closed. It takes more than a better mousetrap to get traction in a platform market: it also requires developers, hardware vendors, distribution and end users.

Nokia and Microsoft: winners and losers

There is plenty to say about Nokia’s decision to phase out Symbian in favor of the-operating-system-formerly-known-as-Windows-Mobile.

Nokia CEO (and Microsoft veteran) Stephen Elop had already prepared the troops with his “burning platforms” memo, lambasting his new employer for how it failed to respond to the iPhone and Android challenge.

Nokia’s problem is that it never got software. It created Symbian so that it Microsoft would never take over handset profits the way it did on the PC. It outsourced key software development to Symbian and then continued to peddle its cursor-key S60 platform the in the face of Apple’s groundbreaking GUI phone.

Now it has partnered with Microsoft, a company that certainly is competent at software, but has yet to prove that it can execute on mobile software. Elop has jumped off the burning oil platform into a ship that’s adrift and has a hold filled with water. (Today its stock fell 13% in response to the news.)

Who are the winners and losers?

Winners

• Microsoft. Even if Windows Phone never goes anywhere, it gets a user base for Bing on the handset.

Losers

• Nokia. Despited hundreds of millions in side payments from Microsoft, it transitions from the world’s most popular smartphone platform of the past decade (albeit one in sharp decline) to the 5th most popular platform. It adopts Windows Phone 7, which has a 2% share in the US smartphone market, half that of the older Windows Mobile 6.
• Symbian and MeeGo developers. After following Nokia in its QT-everywhere strategy, they are now officially orphaned.
• Current Windows handset vendors. Presumably Windows Phone becomes a captive Nokia platform (the only kind it likes) and Samsung, Motorola and Sony Ericsson abandon their limited sales of Windows phones into US enterprises.
• Research in Motion. The distant and long-rumored hope of a Microsoft acquisition as an exit strategy is now gone.
• European network operators. Instead of key mobile Internet decisions — APIs, apps, app stores, search, bundled apps — being made by two American companies, they now will be made by (at best) three American companies.

Meanwhile, the Silicon Valley duo will continue their march forward to displace all comers — Apple with a plurality of profits and Google eventually achieving a majority of the market share.

The sign of a troubled company is multiple Hail Mary passes in a row. Nokia bought Symbian and made a half-hearted effort to establish an open source project (three years too late). It told developers to abandon Symbian APIs in favor of QT APIs that could enable a transition to MeeGo. And now it declares its future to be a platform that many have already written off.

All this because it doesn’t want to join the commodity free-for-all that is Android? In his memo, Elop told his troops

Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, “the time that it takes us to polish a PowerPoint presentation.” They are fast, they are cheap, and they are challenging us.

Nokia needs to fix its execution rather than throwing more Hail Mary passes than even Doug Flutie ever completed.

Update 9am: Michael Mace sees the Nokia-Microsoft tieup as like the Apple-IBM alliance 20 years earlier to create Taligent: similar in that execution will be the key, but different in that today Nokia has bet its future on the success of the alliance.

Flash! Android is bringing commoditization!

the major goal of Android was and has always been commoditization: before Android smartphones were hard and now they’re easy. This is a point I’ve been making for a while, including August 2009, January 2010, March and earlier this month.

Now Forbes, its CIO network and the NPD consultants at PRTM have figured this out. To quote their article:

In 2007, Android looked like an experiment as well as a great and cheap way to challenge the extraordinary success of Apple and its iOS-iPhone-iTunes combination. But the success of the venture has unleashed a tiger, and now the handset companies are starting to look like its lunch.

More importantly, the PRTM consultants have put numbers to the trend:

• From Android 1.6 to 2.1, cycle time for new handsets dropped from 8 months to 4.5 months
• Most vendors bring new handsets to market within 16-20 weeks of a new Android release, eliminating any temporary OS exclusive.

To quote the report by David van Oss and Huw Andrews of PRTM, gross handset margins will shrink to the 8-10% common for commodity PC makers.

They encourage handset makers to find other sources of differentiation or perhaps look for a second handset OS. Perhaps they can use their custom Android UIs to create brand loyalty — I find this highly doubtful, but they may create gratuitous switching costs.

Van Oss and Andrews predict Google will charge a royalty for Android. Yes, the company’s got conflicting goals — promoting its mobile platform vs. promoting mobile search use. But I don’t see a scenario in the next 3 years that has Google trying to extract royalties from the Android platform. (Fine print: I won’t rule out it offering new “must have” royalty-bearing technology like voice recognition).

A lot could happen in three years. By then, Nokia could be making Android handsets, or the Chinese could be shipping the majority of the world’s smartphones. Or smartphones could be on their way out, replaced by tablets. So anything beyond then is pure speculation.

Android leads inevitable march towards commoditization

Had meant to write Tuesday about the latest quarterly market share data for Android, but it got buried in between grading, meetings and of course watching the election.

Perhaps more significantly, what can you say? Android market share is monotonically non-decreasing, so every quarter the Google-controlled alliance gets more good news.

Still, the Canalys Q3 estimates were impressive:

Platform	US	World
Symbian	n.r.	33%†
Android	43.6%	25%
iPhone	26.2%	17%
BlackBerry	24.2%	15%
Windows	3.0%	3.0%
Other	3.0%
Total		80.9m

† “Nokia”, not “Symbian”
Apple’s smartphone share has clearly peaked. The iPhone is losing to Android despite its obvious advantage on two key metrics — ease of use and variety of applications. Instead, all that matters are product proliferation and distribution — there are dozens of Android phones at various price points from all the major carriers. You want a keyboard? Or no keyboard? Big screen or small screen? Android has offers these choices and iPhone doesn’t.

Adding Verizon someday isn’t going to change this. And as the dumbphone dies and every phone becomes a smartphone, Android will gain share in the segments Apple is ignoring. Android has made the smartphone a commodity — an adequate OS is no longer an entry barrier — consigning the iPhone to the top 10% niche of buyers willing to pay a premium for better quality.

Meanwhile, Nokia has knifed the Symbian baby by sacking most of the engineers it hired after losing the allies that once vowed to support it (before Android caught on.) Its current path seems to be using its proprietary QT APIs to migrate developers off Symbian to Meego, its proprietary Linux that competes with Google’s slightly less proprietary Linux.

In the near term, the story for Apple on tablets is much more promising, as latest estimates show it with a 95% worldwide market share. (The figures are misleading since it excludes e-book readers, and the Nook Color shows there is no clear boundary between the two categories.)

In Apple’s favor is that unlike cellphones, there is no need for the needless variants and pseudo-differentiation that we see because network operators control nearly all the cellphone distribution. As with the iPod, Apple could conceivably keep a 50+% market share in tablets, assuming it overcomes its irrational (and Newton-like) aversion to smaller tablets and aggressively engages in product proliferation as it does with the iPod.

iPhone OS everywhere

This week Apple is going to unveil various updated iPod models and probably some other consumer media devices. Around our house, the new iPod Touch is eagerly awaited by someone who is too old to believe in Santa but still thinks he has an account at the Apple Store.

Ryan Kim of the SF Chronicle has a great article summarizing Apple’s shift away from Mac OS X and towards iOS everywhere:

"I think the iOS operating system is so powerful for Apple, it's generating most of their revenues, between the iPod Touch, iPad, iPhone, iTunes and the App Store," said independent mobile analyst Brian Hall. "Clearly, I think Apple realizes that they want to continue down this path."

Some speculate that Macs will eventually run iOS, and Kim quotes Steve Jobs himself:

Steve Jobs has acknowledged the shift, saying the future of Apple is in lighter, non-PC devices, which he likened to cars, comparing computers to old trucks used during the country's agrarian past.

"PCs are going to be like trucks," Jobs said at the D8 conference in June. "They're still going to be around, they're still going to have a lot of value, but they're going to be used by one out of X people."

The article concludes with a quote of Jean-Louis Gasée, the former Apple VP of R&D whose stubbornness (along with John Sculley’s cluelessness) nearly killed the company:

Jean-Louis Gassee, a partner at venture capital firm Allegis Capital and a former Apple executive, said he's doubtful Apple will bring iOS to the Mac because it will add too much complexity, something Apple traditionally avoids. But he said iOS, combined with iTunes, has given the company a system it never had with the Mac.

"It's obvious from Apple's actions they believe in the future of iOS," he said. "They're putting a lot of resources behind it. With iOS and iTunes, Apple has an ecosystem with no equal."

The article is must reading — it’s about as complete a job as you could expect for pre-announcement speculation, and I can’t really add to it.

Eclipse mobility

Ian Skerrett, marketing director for the Eclipse Foundation, stopped by SJSU for coffee this morning to catch up. Ian is in Silicon Valley for tomorrow’s “Eclipse Day at the Googleplex.” (registration closed July 26)

I’ve known Ian since 2004, but haven’t seen him face to face since our honors students studied key success factors for projects in the Eclipse community.

While Ian has stayed in the same job the entire time, Eclipse remains on the move. We talked about how mobile (along with cloud) is the current big thing in software development, and so far Eclipse is doing pretty well.

Eclipse has three of the big four smartphone platforms (five if you count Microsoft): Symbian, BlackBerry and Android. Apple (like Microsoft) has its own tools that for strategic reasons parallel its PC-centric tools.

It also also is used by all five of the traditional Big Five handset developers — Nokia with Symbian and Samsung, LG, Motorola and Sony Ericsson with Android. Motorola distributes its own MotoDev Studio, which includes both a custom package of Android tools and an Eclipse-based IDE for writing Java apps. Even Samsung's proprietary bada smartphone platform uses Eclipse tools.

In response to the increasing focus on mobile, Eclipse has created yet another TLA for yet another project: TMW (Tools for Mobile Web).

All is not sweetness and light. Since Nokia has decided to create its own tools to emphasize QT APIs on top of all its mobile platforms, this means that Nokia is moving away from a shared Eclipse platform towards its own proprietary one (like Apple and Microsoft).

Also, Eclipse is not a silver bullet (or life preserver) for companies with a failed business model or struggling to survive in a commoditized market segment. (Exhibit A: Borland). So there will be a certain amount of turnover inherent in both the composition of the Eclipse community and the sponsor-members who pay the bills to keep the Foundation running.

Still, Eclipse remains the exemplar for a fully open open source community — still comparatively rate, as companies find letting go is hard to do.

HP's curious acquisition

I’m still not sure why HP spent $1.2 billion to buy Palm, other than it can. Yes, it has a minimal presence in mobile phones and other mobile devices, leading MarketWatch’s Therese Poletti on March 2 to predict an HP purchase of Palm:

Surely numbers-driven Chief Executive Mark Hurd is looking for ways for H-P to take advantage of the boom in smartphones. Buying Palm could be a way for H-P to get into the market for lower cost devices. It might have to abandon Windows, or offer two families of devices. H-P has often juggled competing product lines, diverse chip architectures and operating systems.

With its cash and global reach, HP can certainly do more with Palm’s technology that Palm has been able to do. And yes, Palm was available cheap, losing 73% of its market cap since its recent peak stock price of $17.07 last October.

It was a great victory for Palm and its investors, which despite good technology has been given up for dead for nearly two years. Elevation Partners, which took 25% sake in Palm three years ago, cashed in its (now) $460 million investment for an estimated $485 million — suggesting that it was worried about further deterioration rather than optimistic about a future upside. (Wednesday, Palm revealed Q2 revenues were expected to be 40% below analyst expectations, which would have punished the stock further.)

Obviously HP has been looking forward to the day when smartphones and other devices start to eat away at the Windows-based PCs that account for a nearly a third of the company’s revenues.

HP claimed the acquisition is even about the post-smartphone world:

"Smartphones are a part of this, but this is really about the Web operating system," Shane Robison, HP's chief strategy and technology officer, told Forbes. "It's a change in our business model to a connected device model." HP, he said, is assuming a world in which almost everything needs at least the potential to connect to the Internet.

But by taking on Palm and its webOS, HP is going down path it’s almost completely avoided during its 40+ years as a computer maker — as a sponsor of a proprietary computing platform.

Yes, it sold proprietary 16-bit mini computers in the 1970s, and it also bought two leading proprietary minicomputer companies: Tandem and Digital Equipment (when it bought Compaq).

However, its PCs have been DOS and Windows, and its servers Windows, Unix and Linux. The Unix (HP-UX) had its own development group, but the recent trend by HP and its customers has been away from HP-UX to Linux.

Of the world’s top five PC makers — HP, Dell, Acer, Lenovo and Toshiba — all have made mobile devices based on Windows Mobile (now Windows Phone) and Android. HP now seems to be abandoning this model and casting its lot with the leading proprietary vendors: Apple, Nokia and Research in Motion. (Yes, the operating system Nokia controls is open source, but its competitors are largely ignoring it.)

This also means that HP hopes to use webOS to differentiate its mobile products, rather than merely shave pennies off of operating costs as CEO Mark Hurd loves to do. Perhaps the thought of competing against commodity Taiwanese and Chinese firms in the mobile segment prompted him to do something different.

It’s really too soon to say whether HP will have any luck here. However, in the short-term, I think the biggest negative is for Google. A lot of people have been assuming that Android will take over the world, coalescing all the various carriers, vendors and users into a single platform. Instead, fragmentation of mobile phone platforms — as well as tablets — will continue.

It‘s also bad for Microsoft and Dell. Perhaps this will be the nudge that gets Microsoft out of the handset OS business, or it may cause it to more aggressively ally with Dell (which previously aligned with Android.)

But in a perverse way, I think in the short-term it will be good for the other proprietary platform vendors. Together, Nokia, RIM, Apple and HP will be able to hold off Android, and may cause the other phone makers to reconsider whether they want to hand control of their future to Google.

The one sure thing is that the number of webOS applications is going to explode. The iPhone (nearly 200,000) and Android (around 40,000) application stores are already crowded, while webOS only has a few thousand. Developers looking to get noticed will flock to webOS, hoping to get in on the ground floor now that its survival is no longer an issue.

Because of this demand — and because the webOS tools are very friendly — I predict that HP/Palm will have more than 5,000 apps by the end of the year, and perhaps closer to 10,000 apps.

Microsoft hosts Android platform

Earlier this month, Microsoft Research in Silicon Valley hosted a seminar on Android. I tweeted live from the event:

Serious irony: here at Microsoft Research (Mountain View) waiting for talk on Android, using the Internet via GoogleWiFi (free in Mtn View).
6:53 PM Apr 13th via Tweetie

At Android event http://bit.ly/dym6ff local IEEE CompSoc vice chair installed Android on his AT&T Tilt phone (originally Windows Mobile).
6:58 PM Apr 13th via Tweetie

This is not to say that Microsoft and Google can’t find occasional common ground in their fight for Total World Domination. (For example, Microsoft said Wednesday it will license patents (under royalties) to its customer HTC to defend against allegations that HTC Android phones infringe iPhone patents.)

However, in this case the seminar — “Android: A 9,000 Overview” — was organized by the Santa Clara Valley chapter of the IEEE Computer Society. It had a unique two-part format: a business overview by Mike Demler and a technical tutorial by Marko Gargenta.

Android Platform: An Ecosystem View

Demler is a semiconductor engineer (with a MSEE from SMU) who I met when he was getting his MBA at San Jose State. He summarize his own talk on a blog post that includes his slides:

This presentation provides a quick overview of the participants in the rapidly expanding Android ecosystem; from software to semiconductor companies, wireless providers, handset manufacturers and app stores, to the numerous opportunities in consumer electronics beyond smartphones.

He was seriously limited for time, but Mike provided a very clear overview of the ecosystem, complete with information about recent trends (part of a his planned update to his $200 report on Android trends.)

To readers of this blog, some of his basic points were familiar: Android has won support by all four US carriers, the rate of new devices is increasing, and it’s going to have an impact beyond cellphones. Because (unlike the iPhone), all four carriers are carrying multiple Android devices, Mike is among those who are very optimistic about its future US/global market share.

Two tidbits were specifically interesting to me:

• Cellphone manufacturers and carriers are mobilizing their developer support organizations to back Android, through programs like MotoDev and third party tools like DeviceAnywhere.
• In products beyond mobile (to use Bill Weinberg’s phrase), Android licensees are pushing the platform in an area that’s not a priority for Google. Examples include not only the Nook (and an e-reader rival named Alex), and various notebook-type computers from HP and Acer, but also settop boxes on at least two continents.

Android Platform: Technical Overview

From both his talk and website, Marko Gargenta clearly spends a lot of his life helping programmers understand the Android platform. He posted his slides to his LinkedIn profile which points to SlideShare, but similar earlier talks (particularly “Android Internals”) can be found as PDFs via Google.

Marko’s tutorial looked fun to this former programmer, including the Eclipse tools that make it (relatively) easy to target multiple platforms: Android 1.1, 1.5, 1.6, 2.0, 2.1. It was also fun to see that Android adopt a 25+ year old Apple concept of resources, both to hold program data and also to support a non-procedural definition of user interfaces and other program structure.

Marko identified two aspects of the technical architecture that provided insight into Google’s business strategy.

First, Java fanatics were excited to hear that the programming APIs are in Java, but Sun was disappointed that Android doesn’t use its standard Swing or other J2ME (Java ME) libraries, but instead has its own unique user interface APIs. The equation Marko put on the board was:

Android Java = Java SE – AWT/Swing + Android API

and he got a few laughs for his Trumanesque newspaper headline.

On a related note, Google didn’t want to pay royalties (in its free OSS distribution) for Sun’s Java Virtual Machine, so Java code is translated from Java bytecode into .dex files to run on Google’s own Dalvik Virtual Machine.

Secondly, the message-based Android APIs allow a third-party application to handle any function that an Android-supplied one can: browser, email, calendar, mapping, etc. Like Windows (or the iPhone), the Google code cannot be deleted from an Android device, but unlike the iPhone (or other platforms) the third-party software can supplant the built-in application, fully integrated into the phone operations and the user experience.

Finally, from a technical standpoint, Google is allowing native development of C/C++ source code using its NDK. Unlike Java, this code is no longer processor independent (thus requiring bundling separate code for ARM-licensed and Intel processors), but it does allow high performance for things like image or audio processing algorithms.

The availability of such information — and the overflow crowd of programmers eagerly seeking it — shows one of the strengths of Silicon Valley. With nearly 40,000 Android apps available, we in the audience were not exactly the leading edge, but there is a huge pent-up interest in Android here that seems to be approaching that of the iPhone.

The interesting question is: how much longer can new entrants into either ecosystem make money? I think it will play out like the PC, Mac and other software platforms. In a year or two (if not today), the the only ISVs making money on either platform will be either the pioneers (who shipped one of the first 10,000 apps) or the big boys (EA, eBay, Amazon).

Sponsored Communities: Letting Go is Hard to Do

While preparing to teach my Thursday night technology strategy class, I saw a tweet by Santa Clara University professor Terri Griffith (and then by others) reporting that Business Week had posted my column on the difficulty firms have in managing sponsored open source communities.

Entitled “Open Innovation's Challenge: Letting Go Is Hard To Do,” the column was requested by Michael Arndt of Business Week as part of a special report on open source, open innovation and related topics. I used the column to link the research on open source and open innovation to the specific issues that big companies are having in surrendering control in sponsored open source communities.

In my open innovation blog, I enumerated the academic research behind these observations. Here I want to look at the second half of the story: the difficulty firms have in letting go, specifically Google, Intel and Nokia.

I thought it was interesting that there are at least five (now four) firm-sponsored open source communities in mobile platforms: Nokia’s Maemo, Intel’s Moblin, Google’s Android, Nokia’s Symbian and the LiMo Foundation; all except Symbian are variations of embeded Linux. In four cases, there is clearly a single firm driving the process to meet its respective strategic goals.

In this blog, I’ve often commented on this topic, such as Nokia’s tight control over the Maemo community and Google’s over Android. That this keeps coming up over and over again suggests that it’s an inherent problem.

As Siobhán O’Mahony and I found in our research, firms that don’t let go will have trouble convincing outsiders to participate, because they don’t know whether or not they will be able to benefit from their contributions.

Of course, maybe this is just a temporary expedient, of holding the reins tight until the community is up and running, but eventually intending to share governance. An encouraging sign is the decision of Nokia and Intel to pool their efforts (forming Meego), and turning over community management to the Linux Foundation, which is much better situated to build a cooperative open source community.

Still, the inescapable truth is that we really have only one example of a big firm creating a sponsored open source community and then really letting go. In the Business Week column I wrote:

But the best role model is Eclipse, formed through IBM's 2001 donation of its Java development software. IBM executives decided to share control when they realized "they needed Eclipse to become independent to achieve their strategic goal to have the broader Java ecosystem adopt Eclipse," says Mike Milinkovich, executive director of the Eclipse Foundation. Since then, the foundation has been able to attract outside participation not only through its formal processes, but also through new bottom-up initiatives created and led by outsiders.

Due to length limits, other insights from my interview with Milinkovich that ended up on the cutting room floor. Here is a missing paragraph:

Concerned about potential for IBM domination, “a lot of companies watched the operations of the Eclipse Foundation with eye towards “is this organization truly independent?’” said Milinkovich. The foundation was able to attract outside participation not only through its formal processes, but by encouraging new bottom-up initiatives that could be created and led by outside members, independent of IBM.

Another factor that was encouraging was that Milinkovich said that other firms and sponsored communities have come to it for advice. As a consultant to Symbian Ltd. during its final two years, I know that the Symbian (and Nokia) folks spent many months studying and talking to Eclipse in setting up the Symbian Foundation, which earlier this year released 40 million lines of source code as open source. Symbian has done a good job of getting the process right, but still the bulk of the resources are being supplied by Nokia — which then, as now, ships the overwhelming majority of Symbian phones.

Milinkovich said that LiMo also came to Eclipse for advice. However, he did not hear from Google (or Intel) in setting up their communities — whether because they consulted someone else or because they thought they knew everything, neither of us can say.

The fact that Eclipse stands alone is an existence proof that letting go is hard to do. But perhaps two or three years from now, we’ll have other examples of firms dispersing control to build a truly open sponsored community.

Smartphones for the developed and developing world

On Monday morning (Sunday night PDT) I gave a presentation on the evolution of the smartphone market via a videoconference to the Telecom Regulatory Authority of India, that country’s answer to the FCC.

For a half-day workshop organized by Rafiq Dossani of Stanford, I was one of two remote speakers from Silicon Valley (the other being Greg Rosston of SIEPR, talking about a FCC-funded study of broadband adoption). Four other speakers were live at the TRAI headquarters in New Dehli.

The talk drew upon my iPhone study, the Symbian study, and the (currently underway) study of Android. The slides are up on SlideShare if anyone wants to see them.

A few slides might be new to blog readers. I quoted Cisco’s prediction that mobile data traffic is doubling every year from 2010-2014. As smartphone share rises to 65% — according to Tim Bajarin — of new US sales (2012) and global sales (2015), networks will be straining to keep up.

As Irwin Jacobs said at CTIA on October 8, there are no significant spectral improvements coming after 3G, so remaining mobile Internet capacity increases will come from more base stations or more spectrum. The alternative is to shift traffic to Wi-Fi (as European carriers do) or reduce demand by variable-use pricing. (Paul Jacobs wants people to use MediaFLO instead). Still, it’s hard to see how the mobile bandwidth can keep up in the next decade with both the increase in home broadband speeds and the increased supply/use of online video.

In considering the big five cellphone vendors and their attitude towards Android, Motorola (#4) is clearly enthusiastic, Nokia (#1) is opposed, and the other three are in between. For now, I think Samsung’s (#2) infatuation with its own Bada platform makes it unlikely to do more than dabble in Android, while both LG (#3) and Sony Ericsson (#5) could join Motorola (and HTC) as Android promoters if it gets sufficiently popular (or their situation gets sufficiently desperate).

My conclusion was that at least four smartphone platforms will survive for the next five years: BlackBerry, iPhone, Android and whichever platform Nokia uses (Symbian S60 or MeeGo).

While researching the talk was instructive, I learned more from the questions from Dr. J.S. Sharma, and the other TRAI officials and guests. I was asked whether 4 platforms was too fragmented — to which I reiterated my earlier blog post that platform competition is a good thing. Three or four is a good number, providing competition but enough critical mass. Two (and certainly one) is not enough to engender competition.

Another question is about the spread of smartphones to India — which felt really odd, given that I’ve never set foot in the country. (Unlike Japan, China, Germany, U.K. etc.)

However, to me the issue — the open source Android — is the availability of a cheap, high-speed main CPU. The minimum for a decent Android phone seems to be about 600 MHz, so when such CPUs get down to the price of existing featurephone chips, then India-market smartphones should become common. (Will Apple chase this smartphone market? Nokia?)

The last question came from Anil Kripalani, a former TIA chairman and Qualcomm senior VP turned entrepreneur. He asked what would the impact be of the iPad and other devices upon US mobile data demand and capacity.

I had to admit that I’d not considered that. Today’s book readers (e.g. Kindle, the Android-derived Nook) don’t do full-motion video, but the iPad will. Such devices will be much more practical way for teens and young adults (and sports addicts) to watch Hulu, YouTube and other video clips. Perhaps this traffic is even more likely to be shifted to Wi-Fi hotspots. If not, it will further exacerbate bandwidth shortages in the US, given that (IMHO) any further reallocation of spectrum for mobile use is very unlikely in the near term.

Fanciful platform predictions

As a powerful member of the blogosphere, I got an interesting emailed press release Wednesday predicting the 2010 “North American” smartphone market share:

	2009	Share	2010	Share
BlackBerry	23.2M	49.2%	28.0M	43.0%
iPhone	10.9M	23.1%	13.8M	21.3%
Android	4.6M	9.7%	12.3M	18.9%
Microsoft	4.8M	10.2%	4.7M	7.2%
Palm	1.4M	3.0%	3.1M	4.7%
Symbian	1.5M	3.2%	2.1M	3.3%
Others	0.8M	1.7%	1.0M	1.6%
Total	47.2M	100.0%	65.1M	100.0%

The forecast is by Canalys, the London-based mobile phone consultancy. Of course, as for other mobile phone market share estimates, it’s for new sales rather than installed base.

To summarize their forecast: the market is growing rapidly at nearly 38%, but Android’s sales and share will explode while RIM and Apple will lag Android and the market. Android is expected to match the (current) BlackBerry numbers by 2013. (Other numbers are intriguing: For Palm, was 2009 awful or is the broader distribution of webOS going to save Palm? The “other” residual sets a cap on the share for LiMo, Bada and other misc. Linux versions.)

This is not the only prediction for rapid growth by Android in 2010. A Goldman Sach prediction for 2010 global share has BlackBerry and iPhone flat, while Android rises to 12%.

My question: how do you predict market share without knowing the handsets to go with it? Many (including me) predicted the Nexus One would be a great hit, but it (by one estimate) sold only 174,000 units in its first 10½ weeks — 1/6 the rate of a Droid or iPhone. Perhaps it’s because it was only T-Mobile (before AT&T, Verizon and Sprint), or perhaps it’s the expensive unsubsidized price.

Still, like the AppleTV and Windows Vista, major companies do introduce products that turn out to be duds. To me, it seems like a 167% year-on-year growth — going from half the size of the iPhone to nearly the same — requires more than just a proliferation of models. It also relies on some big hits, like the Droid. And it probably relies on smartphones being sold without data plans, which I think is coming but not for another 2-3 years.

I can’t speak to share, but I think Android will do well to crack 10 million “North American” handsets this year. (How many of these in Canada? Obviously less than 10%).

Even at these levels, Android would pass iPhone here in 2011. But I’ll never again underestimate Steve Jobs’ ability to pull a rabbit out of the hat, so it’s conceivable that a 27% iPhone growth is low — particularly if the iPhone makes it beyond AT&T. If Steve doesn’t find that next rabbit, then that would be bad for the AAPL growth multiple — its P/E is around 21, above HPQ & MSFT but behind INTC & GOOG.