Mobile Opportunity

The mobile data apocalypse, and what it means to you

2009-11-23T16:22:00.001-08:00

The mobile industry is now completing a huge shift in its attitude toward mobile data. Until pretty recently, the prevailing attitude among mobile operators was that data was a disappointment. It had been hyped for a decade, and although there were some successes, it had never lived up to the huge growth expectations that were set at the start of the decade. Most operators viewed it as a nice incremental add-on rather than the driver of their businesses.

But in the last year or so, the attitude has shifted dramatically from "no one is using mobile data" to "oh my God, there's so much demand for mobile data that it'll destroy the network." A lot of this attitude shift was caused by the iPhone, which has indeed overloaded some mobile networks. But there's also a general uptick in data usage from various sources, and the rate of growth seems to be accelerating.

Extrapolating the trend, most telecom analyst firms are now producing mobile data traffic forecasts that look something like this:

The forecasts are driven by a couple of simple observations:

--Smartphones produce much more data traffic than traditional mobile phones. Cisco estimates that a single smartphone produces as much data traffic as 40 traditional feature phones. So converting 10 million people from feature phones to smartphones is like adding 390 million new feature phone users, in terms of impact on the data network. The more popular smartphones get, the busier the network becomes.

--A notebook PC generates far more traffic than a smartphone. According to Cicso, a single notebook computer generates the same data traffic as 450 feature phones. As notebook users convert to 3G-enabled netbooks and add 3G dongles to their computers, they dramatically increase the data traffic load on the network.

You can read Cisco's analysis here.

This becomes especially interesting when you look at the forecasts for growth of 3G-equipped netbooks and notebooks. Mobile operators in many countries have started subsidizing sales of those devices if you pay for a data service plan. It's an attractive deal for many people. Say your son or daughter is going off to college. Do you buy them a regular notebook computer and also pay for the DSL service to their apartment, or do you buy them a 3G data plan for about the same price as DSL and get the netbook for free?

The forecasting firm In-Stat recently predicted that by 2013, 30% of all notebook computers will be sold through mobile operators and bundled with 3G data plans (link). Notebook computer sales worldwide are about 150 million units a year, so that's 45 million new 3G notebooks a year -- or the data equivalent of adding 20 billion more feature phones to the network every year.

Jeepers.

These forecasts are producing a behind-the-scenes panic among mobile network operators. The consensus is that there's no way their networks can grow quickly enough to support all that data traffic. There are several reasons:

--They can't afford to build that much infrastructure.

--Even if they could afford the buildout, they won't have enough bandwidth available to carry all that data, even with 4G.

--Traffic-shaping techniques like tiered pricing and usage caps can't restrain usage growth enough to save them, because

--Fear of losing customers to a competitor will force them to continue to subsidize sales of 3G dongles and offer relatively generous caps in their data plans.

There are a number of projections that show the operators losing money on wireless data a few years from now, as costs continue to increase faster than revenue. The danger isn't so much that they will all go broke, but they're very afraid that they'll turn into zero-profit utilities.

Many operators now seem to be counting on WiFi as their ultimate savior. The theory is that if they can offload enough of the data traffic from their networks to WiFi base stations connected to wired networks, then maybe other measures like 4G, usage caps, and aggressive improvements to the network will let them squeak through.

It's an ironic situation. For a long time the mobile operators thought of themselves as the future lords of data communication. All devices would have 3G connections, the thinking went, and the fixed-line data carriers such as Comcast and BT would fade away just like the fixed-line voice companies are doing.

Instead, the new consensus is that we're moving to a world where the fixed-line vendors will be expected to carry most consumer data traffic for the foreseeable future. They'll provide your wireless connectivity at home and work, while the mobile network will fill in the gaps when you're on the move. The area of disagreement, of course, is who will get the majority of the access revenue. We'll let the fixed-line and mobile operators argue over that one; I want to talk about some of the other impacts of this weird new hybrid wireless world that we're heading into.

(I touched on some of this in my post on net neutrality a couple of weeks ago (link), but I want to go into more detail here.)

The brave new world of scarce mobile bandwidth

Built-in WiFi is now good. For a long time many mobile operators resisted selling smartphones with WiFi built in. They viewed WiFi networks as competitors for customer control, and wanted to prevent usage of them. Now that they see WiFi as their savior, the operators are suddenly encouraging its inclusion in phones. Don't be surprised if in the near future it becomes impossible to get a subsidized price for any smartphone that doesn't have WiFi built in.

Traffic shaping is a fact of life, and a likely source of irritation. Many mobile operators are starting to limit the performance of applications that consume the most data bandwidth (today that's mostly video and file sharing). It's already being done today, and in most cases the operators won't even tell you they're doing it, unless the government requires them to. Certain apps will just communicate more slowly, or fail altogether, when the network gets busy.

There are a couple of exceptions where operators have been more public about their traffic shaping activity. The 3 network in the UK recently announced restrictions (link). And O2 in the UK has given details on exactly which applications it restricts in its home wireless data service (link).

Current traffic shaping hasn't generated a firestorm of complaints from the average customer (as distinct from net neutrality advocates), in part because it is very hard for users to tell why a website runs slowly on a particular day. But as mobile traffic continues to increase, operators are going to find that it's cheaper to ratchet up the restrictions bit by bit rather than pay for more capacity. Eventually people will notice, and I worry that we'll end up in a situation in which the operators carefully balance out how much they can piss off their customers without creating an outright revolt. It's a lot like the way the US airline industry operates today, and it's a miserable experience for everyone involved.

What to do. There are better ways to shape traffic. I think operators should give customers more information on how much data they're using at any given time, so they can manage it themselves. Then let them make an informed decision about which apps they'll use their bandwidth on. It would be relatively simple to create an on-screen widget showing how much data is being transferred at any time, just like the signal strength and battery life indicators on today's phones.

It's also possible to create some APIs that would tell a website how much bandwidth is available to it, so the developer could adjust its features accordingly. This idea is being tossed around between web companies and operators, but I don't know how much is actually being done about it.

Combine those changes with usage-based pricing (my next point) and customers will shape their own traffic. Then there won't be any need for covert manipulation of the network.

Say hello to capped data plans. Completely unlimited wireless data plans are not sustainable long term; the economics of them just don't work. And in fact, virtually no data plans today are completely uncapped; there is almost always some fine print about the maximum amount of traffic allowed before surcharges kick in or the user is tossed off the network.

Some people are saying that the operators should go back to charging by the byte, and in some parts of the world (particularly Asia), there is a long history of per-byte pricing. But the experience in most of the world has been that per-byte pricing makes users so nervous about their expenses that they won't use data services at all.

(DoCoMo in Japan has an interesting hybrid approach (link) in which it charges per-packet until the user hits a maximum charge of about $70 per month. Additional usage beyond that cap is free. So that's capped pricing rather than capped usage. This reduces customer fear of accidentally running up a gigantic bill, but I wonder how DoCoMo prevents power users from flooding the network with traffic. Maybe there's a second, hidden cap on total usage.)

What to do. I think the right answer in most of the world is going to be flat-rate data plans in which there's a clearly-communicated cap, with tiered charges beyond that. The cap will need to be set at a level that moderate users won't ever reach, so they don't become gun-shy about data. To alleviate the fear of accidentally running up a huge bill, there will also need to be an on-device meter showing how much of the user's monthly data allocation has been used (just telling them to go look at a website is not enough; it should be on-screen). I'm told that on-screen meters like this are already being offered on netbooks by some European operators.

Today most operators are pretty up-front about communicating the data limits when a computer is connected to a mobile network. But many of them are still deceptive toward smartphone customers. AT&T's Smartphone Personal service, for example, promises the following for $35 a month:

Included Data: Unlimited; Additional data: $0 per MB

Sounds pretty straightforward. No asterisks, no fine print. But if you click on the terms of service (link), you'll find a long list of banned application types, followed by this general provision:

"AT&T reserves the right to (i) deny, disconnect, modify and/or terminate Service, without notice, to anyone...whose usage adversely impacts its wireless network or service levels or hinders access to its wireless network... and (ii) otherwise protect its wireless network from harm, compromised capacity or degradation in performance."

In other words, if the network is getting slow, they can do anything to your service, at any time, without notice.

There is also a hidden 5G per month maximum:

"If you are on a data plan that does not include a monthly MB/GB allowance and additional data usage rates, you agree that AT&T has the right to impose additional charges if you use more than 5 GB in a month."

This is not just an American problem. Orange in the UK calls its iPhone data service "unlimited," but there's a footnote saying that "unlimited" actually means 750 megabytes a month, a surprisingly low cap compared to AT&T's.

If we're ever going to collectively manage mobile network overload, we'll all need to be much more up-front about the way it operates and what a particular service plan will and won't do.

Is residential 3G really a good idea? Especially in Europe, it's common for operators to tell people that they should ditch their DSL or cable modem at home and replace it with a 3G modem. That works out well only when the network has excess capacity. As soon as the networks start to get congested, the operators will need to offload traffic to residential WiFi routers connected to DSL or cable. If those residential fixed lines have been removed, the operators can't offload.

What to do. I think this one is going to be self-limiting. Once 3G bandwidth gets scarce, the operators will realize that they can get a lot more revenue feeding data to smartphones than to PCs. The math works like this: With a given amount of bandwidth, you could support a single notebook computer and charge about $50 a month, or support 11 smartphones at $30 a month each. Hmm, $330 a month versus $50, seems like a pretty easy decision.

But there are two circumstances in which it would make sense for the operators to keep subsidizing PC sales:

1. If smartphone sales plateau. If this happens, eventually the network will catch up with demand and then there will be excess capacity for PCs; or

2. If operators can route most of the actual data traffic from PCs through WiFi connected to landlines. In this case they could sell you data plans knowing that you won't affect their networks much. That brings us to the next point...

Operators have a huge vested interest in unlocking WiFi access points. Most WiFi access points today are encrypted and inaccessible to other devices in the area. I think there's a strong financial incentive for mobile operators to work with fixed-line access companies to get those access points unlocked. The benefit for the wireless companies is clear -- the more WiFi points they can talk to, the fewer cell towers they need to build. But the benefits for the fixed-line operators are much less clear. Why should they help the mobile operators with their bandwidth crunch?

What to do. The ideal situation would be a revenue-sharing deal in which the operators share some money with the fixed-line companies to encourage them to open up access to their networks. In this scenario, your DSL or cable provider would give you a WiFi router that has been pre-configured to automatically and securely share excess bandwidth with mobile devices in the area. Your own traffic would get priority, but any extra capacity could be shared automatically. The benefit for you as a consumer would be a free router, and/or a lower DSL bill as the cable company passes along some of the revenue it gets from the mobile operators.

The effectiveness of this sort of approach is going to depend on the relative cost for an operator of subsidizing a set of WiFi base stations in an area, versus the cost of installing more wireless capacity. I wonder about weird scenarios like a DSL provider auctioning off excess WiFi capacity to wireless operators in a particularly congested area.

Femtocells for the rest of us. Another very logical step for the operators is to start pushing femtocells aggressively. (Femtocells are radios that work like a short-range cell tower, but are the size of a WiFi router. You connect one to your DSL or cable line, and it offloads traffic from the wireless network. Link)

What to do. Today femtocells are generally sold as signal boosters in areas with marginal wireless coverage. But in the future I think it may make sense for operators to give away femtocells, or at least subsidize them, for customers who live in areas where the data network is congested.

What it all means: Fixed-mobile convergence with a twist

If you step back from the details, the big picture is that we really need a single integrated data network that encompasses mobile and fixed connections, and switches between them seamlessly. People have been talking about this sort of thing for years (check out the Wikipedia article on fixed-mobile convergence here), but the focus has generally been on handing voice calls between WiFi and cellular. That's hard to do technologically (because you can't interrupt a voice conversation during the handover for more than a fraction of a second). Besides, it doesn't solve a significant customer problem -- the voice network isn't the thing that's overloaded.

The place where we could really, really use fixed-mobile convergence is in data. I'm worried, though, that the intense competition between the wireless and wired worlds will make it difficult and slow to achieve the coordination needed. This might be a useful place for government to put its attention. Not in terms of regulating the integrated network into existence (that would be the kiss of death), but to grease the skids for cooperation between the mobile and fixed-line worlds.

Just one more thing...

Everything above is based on the assumption that those Cisco and analyst forecasts are correct. But Cisco has a vested interest in hyping fear of the data apocalypse (Emergency! Buy more routers now!!), and my general rule about tech analysts is that every time they all agree on something you should bet against them.

There is a genuine crunch in mobile data capacity going on at the moment; you can read about network outages caused by the iPhone even today. And I can assure you that for every network failure you read about, there are dozens of other failures and near-failures that don't get reported. Many wireless data networks are very stressed.

And the situation will get worse.

But there's no such thing as infinite demand. At some point the growth of mobile data will slow down, and it's very important to try to estimate how and when that'll happen, so we as an industry do not overshoot too badly. The question isn't whether the growth forecasts are wrong, it's when they will be wrong.

I'll write about that next week...

The OS is always greener...

2009-11-19T21:36:00.000-08:00

In a report from a developer meeting, Nokia officials said they're moving to Maemo Linux as the OS for their high-end smartphones. That resulted in an entertaining little obituary in the Register by Andrew Orlowski (link). But then later in the day Nokia clarified that "we remain firmly committed to Symbian as our smartphone platform of choice" (link). That in turn led to a lively online debate about what Nokia actually said, and the challenges that Finnish people face when speaking English (check the comments here).

It's just one more chapter in the long and exquisitely awkward saga of Nokia and Symbian. From the outside I can't tell exactly what's going on at Nokia, and it's possible that Nokia itself doesn't know. It's a very large company, and various groups there can have conflicting agendas.

But I can't believe that there would be all of these repeated reports, leaks, and artfully-worded partial denials unless Nokia were de-emphasizing Symbian in the long run. The most prominent theory, which I believe based on things I hear through back channels, is that Nokia does indeed intend to move to Maemo at the high end. And, as we all know, in computing whatever's at the high end eventually ends up in the mainstream.

I'm sure Nokia has valid technical reasons for moving to another OS. Nokia has said that there are some things it wants to do with its smartphones that Symbian OS can't support. But still the change worries me. Nokia's biggest problem in the smartphone market isn't the OS it uses, it's the user experience and services layer in its smartphones. Moving to a new OS does almost nothing to fix that. It does force a lot of engineers to work on writing a lot of low-level infrastructure code that won't create visible value for users. It also forces Nokia to maintain two separate code bases, which will chew up even more engineers.

All of that investment could have gone into crafting some great solutions, the things that are the only way to pull customers away from Apple and RIM. At a minimum, it's a terrible shame that Nokia spent so much time and money on an OS that couldn't take it into the future.

(By the way, this focus on the OS doesn't apply only to Nokia. I hear a lot of buzz from operators and handset companies who believe that if they just pick the right OS they'll automatically end up with great smartphones. Android is the latest white knight for most of them, but of course Nokia's not going to depend on a technology from Google.)

There's an old joke in the tech industry about rearranging deck chairs on the Titanic. I don't think that applies to Nokia because they haven't hit an iceberg by any means. But I do have a mental picture of a sweet old lady who spends all her time every day cleaning the bathroom while the food is spoiling in the refrigerator.

Which mobile apps are making good money?

2009-11-04T20:41:00.000-08:00

At a conference the other day, several industry executives were on a panel discussing mobile application stores. There were representatives from Yahoo, Qualcomm, Motorola, and an independent application store. Someone from the audience asked a simple question: "Other than entertainment apps, name three mobile applications that are monetizing well." (In other words, apps that have a good business model and are making good money.)

The interesting thing was that none of the panelists had a very satisfying answer. The Qualcomm person cited navigation apps and something called City ID, and had no third app. The app store guy cited search-funded apps (Opera) and apps that are extensions of PC applications (Skype). The Motorola person, who used to work at Palm, cited two cool old Palm OS developers (SplashData and WorldMate, the latter not even available for Motorola's Android phones). And the Yahoo guy talked about Yahoo-enabled websites.

None of them had the sort of answer that the room was looking for -- what categories of smartphone apps are making it, and what are their business models, so other developers will know what to emulate? I started to laugh at the panelists' obvious discomfort, but then I realized that if I'd been on the panel and had been asked the same question, I would have blown it too. I know of a lot of mobile app companies that aren't making steady money, because they send me e-mails asking for ideas, but I don't seem to hear from the raging successes. Also, because I try to focus on what needs to be fixed in the industry, I'm probably guilty of skewing my posts toward what's not working.

So I did some thinking and a bit of research, and here are my three nominations for categories of non-entertainment mobile apps that are making it, and why. Then I'll open it up to your comments -- I have a feeling you'll have much better answers than me.

1. Vertical-market business applications. This was a good category for PDAs ten years ago, and it's a good category for smartphones today. There are dozens of business verticals where information overload, or an excess of written forms, hinder productivity. Find a way to manage that information electronically, and your application quickly pays for itself in increased productivity.

One example is ePocrates, which gives doctors drug reference, dosing, and interaction information. ePocrates has a beautiful business model in which the drug companies pay to get access to the doctors who use it. That helps the company give away its base product. I have to believe there are other verticals where you could create apps that would act as a middleman between suppliers and users.

Another interesting example, which I ran into at a conference recently, is Corrigo. They do work-order management (stuff like managing a mobile workforce and dispatching them to work sites on the fly). I like Corrigo because it makes good use of mobile technology, and scales nicely to multiple vertical markets.

Note that neither Corrigo nor ePocrates is a purely mobile application -- they are business solutions that leverage mobile. That's very typical of the business mobile market. It's not about being mobile for its own sake, it's about solving a business problem and using mobile technology to help do it.

One other cool thing about these businesses is that you can ignore the whole app store hassle and market them directly to the companies. You control your customer relationships, and you can keep 100% of your revenue.

2. PC compatibility applications. Inevitably some people will need to do on a mobile device the same things that they do on a PC -- edit a document, for example, or query a database. There's a solid market for applications to let the user do that. The market isn't enormous (not everyone is crazy enough to edit a spreadsheet on a screen the size of a Post-It note), but the people who need to do that are usually willing to pay for the apps. Or to make their employers pay for the apps. Documents to Go was probably the most successful application on Palm OS, and based on the stats posted by Apple I think it is probably one of the most lucrative non-entertainment apps on iPhone.

Unfortunately, Docs to Go is also a very well-entrenched application, so good luck displacing it. Maybe you can find another category of PC app that needs a mobile counterpart.

3. Brand extenders. There seems to be a steady market for mobile apps that help a major brand interact with its loyal users. A few recent examples:

-The Gucci app lets a customer get special offers, play with music, and find travel attractions endorsed by Gucci. The company calls it a "luxury lifestyle application."
-There are four different Nike iPhone apps: a shoe designer, a women's training guide, a football (soccer) training guide, and an Italian soccer league tracking app.
-The Target store search app lets you find stores, and search for items within the stores (it'll tell you which aisle to look in). (For those of you outside the US, Target is a large chain of discount department stores.)
-Magic Coke Bottle is a Coke version of the Magic 8-Ball. It's one of three Coke-branded apps.

The iPhone is the most popular platform for these apps today, although I expect they'll spread to other smartphone platforms over time.

The business model for this one is simple -- you get hired by the brand (or its marketing agency), they pay you to develop the app, and then they give it away. The more popular smartphones become, the more companies feel obligated to create mobile apps, so this is a growing market for now. (Beware, though -- having an iPhone app is kind of a corporate status symbol right now, like creating a corporate podcast was a couple of years ago. Development activity could drop off when businesses find the next trendy tech fad.)

To create this sort of app, you need to be very skilled at visual design, and you need to be comfortable managing custom development projects. Some developers don't have this sort of project and client management skills, and you can get yourself into a lot of trouble if you sign a contract without understanding what'll really be required to execute on it.

Also, you don't get to change the world creating a shopping app for Brand X. But in the right situation this can be a good way to make money while you work on your own killer app on the side. And if you're not into changing the world, there are companies that have built solid ongoing businesses on custom mobile development.

Other possibilities

There are a few of other categories of apps that I think could be candidates for inclusion, but in my opinion the jury is still out on them. I'm interested in what you think:

Location. Right now there are several location and direction apps selling well for iPhone, but with Google making directions free on Android, I fear the third party apps are at risk. However, the direction-finding business is a lot trickier than you'd expect (I learned that as a beta-tester for the Dash navigation system, which sometimes tried to get me to make a right turn by telling me to make three consecutive left turns). So we need to wait and see how good Google's directions are. But in the meantime I don't feel comfortable pointing to this as a viable category in the long term. What do you think?

Travel apps. There was once a very nice business in city guides for PDAs, but I get the sense that like many other categories of mobile apps, this one is being sucked into the free app vortex. But I suspect that there may still be a paid market for specialized tools like translation programs, and software that helps executives manage trips. WorldMate is an interesting example -- the base product is free, but if you pay you get special services.

Upgradeware. Speaking of free base products, I think this is the most intriguing possibility in the whole mobile app business today. In the PC world, there are a lot of app companies that manage to build sustainable businesses by giving away a free base product and then charging you for the advanced version (this is how most of Europe gets its antivirus software today, for example). In mobile this model worked well on Palm, but was not available on iPhone because Apple's terms and conditions prohibited a free application from offering in-app conversion to a paid upgrade. Apple just changed those terms.

Rob at Hobbyist Software asked the other day what I thought about the change. I think it's very long overdue, and I'm intensely interested in hearing from developers who have moved to that model. How's it working out for you?

Okay, so that's my list. If you're scheduled to appear on a panel somewhere, you're welcome to quote from it as needed. But now I'd like to throw the discussion open to you. Please post a comment -- What do you think of my list? And what non-entertainment mobile app categories, and business models, are making good money today, and why?

A web guy and a telecom guy talk about net neutrality

2009-10-29T19:32:00.000-07:00

It was a nondescript bar in the American Midwest, the sort of place where working men drop in at the end of the day to unwind before they head home. You wouldn't expect to find two senior business executives there, and as I sat in the empty bar at midday I wondered if maybe my contact had given me a bad lead. But then the door opened and a general manager from one of the leading web companies walked in, followed by a senior VP from one of the US's biggest mobile network operators. I hunched down in the shadows of a corner booth and typed notes quietly as they settled in at the bar.

Bartender: What'll you have?

Telecom executive: Michelob Light.

Web executive: I'll have a Sierra Nevada Kellerweis.

Bartender: Keller-what?

Web executive: Um, Michelob Light.

Telecom executive: Thanks for coming. Did you have any trouble finding the place?

Web executive: All I can say is thank God for GPS. I've never even been on the ground before between Denver and New York.

Telecom executive: I wanted to find someplace nondescript, so we wouldn't be seen together. The pressure from the FCC is bad enough already, without someone accusing us of colluding.

Web executive: No worries, my staff thinks I'm paragliding in Mexico this weekend. What's your cover story?

Telecom executive: Sailboat off Montauk.

Web executive: Sweet. So, you wanted to talk about this data capacity problem you have on your network...

Telecom executive: No, it's a data capacity problem we all have. Your websites are flooding our network with trivia. The world's wireless infrastructure is on the verge of collapse because your users have nothing better to do all day than watch videos of a drunk guy buying beer.

Web executive: Welcome to the Internet. The people rule. If you didn't want to play, you shouldn't have run the ads. Remember the promises you made? "Instantly download files. Browse the Web just like at home. Stream HD videos. Laugh at an online video or movie trailer while travelling in the family car."

Telecom executive: That was our marketing guys. They don't always talk to the capacity planners. Besides, who could have known that the marketing campaign would actually work?

Web executive: Don't look at me. I've never done a marketing campaign in my life. I think you should just blame it on A--

Telecom executive: You promised, no using the A-word.

Web executive: Sorry. But I still don't see why this is a problem. Just add some more towers and servers and stuff.

Telecom executive: It's not that simple. The network isn't designed to handle this sort of data, and especially not at these volumes. Right now our biggest problem is backhaul capacity -- the traffic coming from the cell towers to our central servers. But when we fix that, the cell towers themselves will get saturated. Fix the towers and the servers will fall over somewhere. It's like squeezing a balloon. We have to rebuild the whole network. It's incredibly expensive.

Web executive: So? That's what your users pay you for.

Telecom executive: But most of them are on fixed-rate data plans. So when we add capacity, we don't necessarily get additional revenue. It's all expense and no profit. At some point in the not-too-distant future, we'll end up losing money on mobile data.

Web executive: Bummer.

Telecom executive: More like mortal threat. Fortunately, we've figured out how to solve the problem. The top five percent of our users produce about 50% of the network's total traffic. So we're just going to cap their accounts and charge more when they go over.

Web executive: Woah! Hold on, those are our most important customers you're talking about. You can't just shut them down.

Telecom executive: The hell we can't. They're leeches using up the network capacity that everyone else needs.

Web executive: Consumers will never let you impose caps. You told them they had unlimited data plans, that's the expectation you set. You can't go back now and tell them that their plans are limited. They won't understand -- and they won't forgive you.

Telecom executive: First of all, the plans were never really unlimited in the first place. There's always been fine print.

Web executive: Which no one read.

Telecom executive: Off the record, you may have a point. On the record, the fact is that you can retrain users. Look, you grew up in California, right?

Web executive: What does that have to do with anything?

Telecom executive: Once upon a time, there weren't any water meters in California. Now most of the major cities have them, and they'll be required everywhere in a couple of years. Something that was once unlimited became limited, and people learned to conserve.

Web executive: The difference is, I can read my water meter. You make a ton of money when people exceed their minutes or message limits, and you don't warn them before they do it. If you play the same game with Internet traffic, it'll scare people away from using the mobile web -- or worse yet you'll invite in the government. Look what happened with roaming charges in Europe.

Telecom executive: Jeez, don't even think about that. Okay, so we'll need to add some sort of traffic meter so people will know how much data they're using when they load a page.

Web executive: Great, that'll discourage people from using Yahoo.

Telecom executive: Huh?

Web executive: Oops, did I say that out loud?

Telecom executive: Then there's the issue of dealing with websites and apps that misuse the network.

Web executive: Not this again.

Telecom executive: I'm not talking about completely blocking anything, just prioritizing the traffic a little. Surely you agree that 911 calls should get top priority on the network, right?

Web executive: Of course.

Telecom executive: And that voice calls should take priority over data?

Web executive: I don't know about that.

Telecom executive: Oh come on, what good is a telecom network if you can't make calls on it?

Web executive: (sighs) Yeah, okay.

Telecom executive: So then what's wrong with us prioritizing, say, e-mail delivery over video?

Web executive: Because when you start arbitrarily throttling traffic, I can't manage the user experience. My website will work great on Vodafone's network but not on yours, or my site will work fine on some days and not on others. How do you think the customers will feel about that?

Telecom executive: Not as angry as they will be if the entire network falls over. Listen, we're already installing the software to prioritize different sorts of data packets. We could be throttling traffic today and you wouldn't even know it.

Web executive: But people will eventually figure it out. They'll compare notes on which networks work best and they'll migrate to the ones that don't mess with their applications. Heck, we'll help them figure it out. And if that's not enough, there's always the regulatory option. The Republicans are out of office. They can't protect you on net neutrality any more.

Telecom executive: You think you're better at lobbying the government than we are? We've been doing it for 100 years, pal. Besides, we have a right to protect our network.

Web executive: You mean to protect your own services from competition!

Telecom executive: Parasite!

Web executive: Monopolist!

Telecom executive: That's it! It's go time!

They both stood. The telecom guy grabbed a beer bottle and broke it against the bar, while the web guy raised a bar stool over his head. Then the bartender pulled out a shotgun and pointed it at both of them.

Bartender: Enough! I'm sick of listening to you two. Telecom guy, you're crazy if you think people will put up with someone telling them what they can and can't do on the Internet. The Chinese government can't make that stick, and unlike them you have competitors.

Web executive: See? I told you!

Bartender: Shut up, web guy! You keep pretending that the wireless network is infinite when you know it isn't. If you really think user experience is important, you need to start taking the capabilities of the network into account when you design your apps.

Web executive: Hey, he started it.

Telecom executive: I did not!

Bartender: I don't care who started it! Telecom guy, you need to expose some APIs that will let a website know how much capacity is available at a particular moment, so they can adjust their products. And web guy, you need to participate in those standards and use them. Plus you both need to agree on ways to communicate to a user how much bandwidth they're using, so they can make their own decisions on which apps they want to use. That plus tiered pricing will solve your whole problem.

Telecom executive: Signaling capacity too. Don't forget signaling.

Bartender: That's exactly the sort of detail you shouldn't confuse users with. Work it out between yourselves and figure out a simple way to communicate it to users. Okay?

Web executive: I guess.

Telecom executive: Yeah, okay.

Bartender. Good. Now sit down and start over by talking about something you can cooperate on.

Telecom executive: All right. Hey, what's that guy doing in the corner? Is that a netbook?

Web executive: He's a blogger!

Bartender: There's no blogging allowed in here!

Telecom executive and web executive: Get him!

I ran. Fortunately, the bar had a back door. Even more fortunately, the web guy and the telecom guy got into an argument over who would go through the door first, and I was able to make my escape.

So I don't know how the conversation ended. But I do know that I wish that bartender was running the FCC.

Is Apple too powerful?

2009-09-13T16:15:00.000-07:00

The new iPod nano is a tour de force, the Swiss Army Knife of mobile entertainment. I'm sure there's some obscure gadget from Japan that packs more features per cubic millimeter, but I've never heard of it, and chances are neither have you. This one's a major consumer product, just in time for stimulating the economy this holiday season. Speaking as a technophile, I want one of the new nanos for the same reason I want a Dremel with 300 different bits: just because.

I'm also impressed by the new price point on the iPod Touch. Apple frequently overhypes its announcements, but the $199 price point in the US truly is a milestone that should lead to much higher sales. The improvements to iTunes and the App Store look promising as well, and I'm especially intrigued by Apple's effort to make paid apps more prominent. More on that in a future post.

But the thing that surprised me the most about Apple's announcement wasn't the features of the new products, or the absence of a tablet or an iPhone Lite. It was something Steve Jobs said when he talked about the video camera in the nano:

"We've seen video explode in the last few years," he said, showing a picture of a Flip video camera. "Here's one, a very popular one, four gigabytes of memory, $149, and this market has really exploded, and we want to get in on this."

Think about that for a minute. "There's a big new market, and we want in." Not, "we're creating something new" or "we can vastly improve this category." Just, "we want a cut."

It sounds like something Don Corleone would say. Or Steve Ballmer. But it's not what I expected from Apple.

Now, it's logical for Apple to put video cameras into iPods. A friend of mine worked at one of the companies producing cameras-on-a-chip, and he's passionate about the potential for building vision into every consumer product. It's not just an imaging issue; when the device can see the user, you can create all sorts of interesting gesture-based controls that don't require you to ever even touch the device. Instead of point and click, the interface is just...point.

So it's been inevitable that video cameras would eventually be built into things like the nano. For Pure Digital, the makers of the Flip, this ought to be a tough but normal competitive challenge. The first step is to make sure your camera works better than theirs (check). Next, since music players are becoming cameras, you might want to build a camera that can also play music.

But that's where the situation becomes abnormal. Because even though Pure Digital was recently purchased by Cisco, giving it almost limitless financial resources, it's more or less impossible for its products to become equivalent to the iPods as music players. Not because they can't play music, but because they aren't allowed to seamlessly sync with the iTunes music application.

The issue of access to iTunes has already been simmering in the background between Apple and Palm, with Palm engineering the Pre to access the full functionality of iTunes, Apple blocking that access, and Palm breaking back in. To date I've viewed it as kind of an amusing sideshow, and I didn't really care who won. I figured the folks at Palm had plenty of time in the past to build their own music management ecosystem, but they (including me) didn't bother, so there wasn't any particular moral reason why they should have access to Apple's system.

Apple the predator

The situation with Pure Digital is vastly different, in my opinion. Pure Digital pioneered the market for simple video cameras. It identified an opportunity no one else had seen, and built that market from scratch. In a declining economy, it created new jobs and new wealth, and made millions of consumers happy. It's incredibly difficult to get a new hardware startup funded in Silicon Valley, let alone make it successful. For the good of the economy, we ought to be encouraging more companies like Pure Digital to exist.

But there's no way for a small startup like that to also create a whole music ecosystem equivalent to iTunes. Yes, third party products can access iTunes music. But not as seamlessly as Apple's own products, and as we've seen over and over in the mobile market, small differences in usability can make a big difference in sales. So Apple gets a unique advantage in the video camera market not because it makes a better camera, but because it can connect its camera more easily to a proprietary music ecosystem.

In other words, iTunes is no longer just a tool for Apple to defend its iPod sales; it's now a tool to help Apple take over new markets.

In the legal system they call this sort of thing "tying," and it is sometimes illegal. For decades, Apple complained that Microsoft competed unfairly by tying its products together -- Office works best with Windows, Microsoft's file formats are often proprietary so you can't easily create a substitute for their apps, and so on. I was heavily involved in the Apple-Microsoft lawsuits when I worked at Apple in the 1990s, so I know how passionately we believed that Microsoft's tactics were not just unethical, but also harmful to computer users and the overall economy.

So it's very disappointing to see Apple using tactics it once bitterly denounced, and declaring that it's decided to take over a market because "we want to get in." If Apple can use iTunes as a weapon against Pure Digital and Palm, what's to stop it from rolling up every new category of mobile entertainment product? Where's the incentive for other companies to invest?

I saw first-hand the stifling effect that Microsoft and Intel's duopoly control had on personal computer innovation. PC hardware companies learned not to bother with new features, because Microsoft and Intel would insist that anything new they created be made available to every other cloner. And software investments were restrained by the belief that Microsoft would use its leverage to take over any new application category that was developed.

Good fences make good neighbors

There's a danger that Apple's behavior will have the same chilling effect in mobile electronics. So I believe Apple should allow any device to sync with iTunes content, the same as an iPod. But not because it's morally right or even because it's legally required, but because it's the best thing to do for Apple. Here's why:

The two biggest threats to a very successful company are complacency and consistency. Complacency is more common -- a company that's very successful starts to relax and loses the hunger and drive that made it a winner. I think we can safely assume that won't happen to Apple as long as Steve is around. But the second risk, consistency, is more insidious -- behavior that's appropriate and accepted for a spunky startup gets punished when a big company does it.

This is what tripped up Microsoft. The same aggressiveness that served it well against IBM got it a series of lawsuits and intense government scrutiny a decade later. Even though Microsoft eventually won those suits, its execs were distracted for years, and it was forced to dramatically change its behavior. It has never been the same company since. I think Microsoft would have been much better off had it proactively adjusted its own behavior just enough to pre-empt legal action.

That's where Apple is today. It has to realize that it's no longer the underdog. It's the dominant company in mobile entertainment, and the fastest-growing major firm in mobile phones. It's already under a lot of legal scrutiny for the way it manages the iPhone App Store. If it also leverages iTunes to take out small competitors, and especially if it's dumb enough to say things like "we want in," it will guarantee unfriendly attention from government regulators -- a group of people who actually have more power to hurt Apple than do most of its competitors.

The Obama administration in the US is making noises about enforcing competition law more vigorously, and look at how the EU is picking on details in the Oracle-Sun merger, allegedly to protect local companies (link). If they'll do all that to help SAP and Bull, what will they do to protect Nokia?

Apple, you don't need the special connection with iTunes to keep on winning. You've already proven that you're much better at systems design than almost any other company on Earth. The huge iPhone apps base is exclusive to you, and that won't change. By opening up iTunes, you take away an easy excuse for regulators to pick apart your business, a process that would be distracting, expensive, and could result in much more dramatic restrictions on your actions.

Ease up a little on the gas pedal, Steve. It's the best way to keep moving fast.

Four questions about the Microsoft-Nokia alliance

2009-08-13T00:44:00.000-07:00

The Microsoft-Nokia alliance turned out to be a lot more interesting than the pre-announcement rumors made it out to be. Rather than just a bundling deal for mobile Office, the press release says they'll also be co-developing "a range of new user experiences" for Nokia phones, aimed at enterprises. Those will include mobile Office, enterprise IM and conferencing, access to portals built on SharePoint, and device management.

Of those items, the IM and conferencing ideas sound the most promising to me. Office, as I explained in my last post, is not much of a purchase-driver on mobile phones. And I think Microsoft would have needed to provide Nokia compatibility in its mobile portal and device management products anyway.

I understand the logic behind the alliance. Nokia has never been able to get much traction for its e-series business phones, and Microsoft hasn't been able to kick RIM out of enterprise. So if they get together, maybe they can make progress. But it's easy to make a sweeping corporate alliance announcement, and very hard to make it actually work, especially when the partners are as big and high-ego as Microsoft and Nokia. This alliance will live or die based on execution, and on a lot of details that we don't know about yet.

Here are four questions I'd love to see answered:

What specifically are those "new user experiences"?

If Nokia and Microsoft can come up with some truly useful functionality that RIM can't copy, they might be able to win share. But the emphasis in the press release on enterprise mobility worries me. The core users for RIM are communication-hungry professionals. If you want to eat away at RIM's base, you need to excite those communicator users, and I'm not sure if either company has the right ideas to do that. As Microsoft has already proven, pleasing IT managers won't drive a ton of mobile phone purchases.

Will Microsoft really follow through?

Microsoft has been hinting for the last decade that it was were willing to decouple mobile Office from the operating system, but they never had the courage to follow through. Now they have announced something that sounds pretty definitive, but the real test will be whether they put their best engineers on the Nokia products. If Microsoft assigns its C players to the alliance, or tries to make its Nokia products inferior to their Windows Mobile versions, the alliance won't go anywhere interesting.

What does this do to Microsoft's relationships with other handset companies?

Imagine for a moment that you are the CEO of Samsung. Actually, imagine that for several moments. You aren't exclusive with Microsoft, but you've done a lot of phones with Windows Mobile on them. Now all of a sudden Microsoft makes a deal with a company that you think of as the Antichrist.

How do you feel about that?

I can tell you that Samsung is not the most trusting and nurturing company to do business with even in the best of times. So I think you make two phone calls. The first is to Steve Ballmer, asking very pointedly if you can get the same software as Nokia, on the same terms, at the same time. If you don't like the answer to that question, your next call is to Google, regarding increasing your range of Android phones.

Maybe the reality is that Microsoft has given up on Windows Mobile and doesn't care what Samsung does. But that itself would be interesting news.

I would love to know how those phone calls went today.

What does RIM do about this?

It has been putting a lot of effort into Apple-competitive features like multimedia and a software store. Does it have enough bandwidth to also fight Nokia-Microsoft? What happens to its core business if Microsoft and Nokia do come up with some cool functions that RIM doesn't have? Are there any partners that could be a counterweight to Microsoft and Nokia? If I'm working at RIM, I start to think about alliances with companies like Oracle and SAP. And I wonder if Google is interested in doing some enterprise work together.

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

2009-08-11T23:29:00.000-07:00

Multiple sources are reporting that Nokia is hedging its bets on mobile phone software:

-- The New York Times says Microsoft and Nokia will announce Wednesday that Microsoft is porting Office to Nokia's Symbian S60 phones (link).
--TechCrunch, quoting the Financial Times in Germany, claims Nokia is planning to dump Symbian in favor of its Maemo Linux operating system (link).
--Om Malik says he asked Nokia about it, and the company denied plans to dump Symbian. But the company also said, "recognizing that the value we bring to the consumer is increasingly represented through software, there is logically not just one software environment that fits all consumer and market needs." In other words, we have an open marriage with Symbian (link).

In one sense, this is absolutely not news for Nokia. It has been playing the field for years, trying to prevent any single company from gaining control over mobile software (and thereby imposing a standard on Nokia). The change is that in the past, most of that energy was aimed against Microsoft.

Microsoft too seems to be bending its standards. With the exception of the Mac, Microsoft has been extremely reluctant to license Office for other operating systems. In the past, if Nokia wanted Office, it would have been expected to license Windows Mobile.

But now both companies feel threatened by Apple and Google, and all of a sudden that ugly person across the dance floor looks a lot cuter.

The real question that no one seems to be asking is whether most customers will care about any of this stuff. Most Nokia smartphone users are blissfully unaware that their phones have an operating system, let alone whether it's Symbian or Maemo. They just want the phone to work well.

And speaking as a former Palm guy who dealt with the mobile market for years, putting Microsoft Office on a smartphone is like putting wings on a giraffe -- it may get you some attention, but it's not very practical.

Don't get me wrong, I like and admire QuickOffice, which is probably the leading Office-equivalent app in the mobile space today. It's a cool product, but for most people the screens of smartphones are too small for serious spreadsheet and word processing activity. It works, but it's awkward and produces eyestrain. Most people who have a serious need for Office on the go will just carry a netbook.

So Nokia and Microsoft will both get some nice publicity, but the announcements mean very little to the average user. What both Microsoft and Nokia need to do is create compelling new mobile functionality that's better than the stuff being produced by Apple and RIM. Until they do that, all the strategic alliances in the world won't make a significant difference.

=====

Update: The announcement this morning was more subtle and perhaps far-reaching than what was reported yesterday. I think the strategic situation is still the same as what I described above, but there might be more value for users than I expected. More thoughts after I have a chance to digest the announcement.

Google Chrome OS: Opening a vein in Redmond

2009-07-08T00:28:00.000-07:00

I need to study it some more, but here's my first take on Google's Chrome OS announcement (link). I think what they’re really saying is:

"We want to bleed Microsoft to death, and we've decided that the best way to do that is give away equivalents to their products. By creating a free OS for netbooks (the only part of the PC market that's really growing) we hope to force Microsoft into a Clayton Christensen-style dilemma. It can either cut the price of Windows in order to compete with us, or it can gradually surrender OS share.

"By using Chrome to set a standard for web applications, we also help to make the Windows APIs less relevant. So even if Microsoft manages to hold share in PCs, its OS franchise becomes less and less meaningful over time."

That helps to explain why Google would be pushing both Chrome and Android at the same time. If you're really serious about running a logical OS program in its own right, you'd try to rationalize those two things. But if your top priority is to commoditize Microsoft, then you don't mind pushing out a couple of overlapping initiatives. The more free options, the more pain caused.

The next question we should all ask is whether Chrome-based netbooks will take off. I'm skeptical, especially in the near term. Most people buy netbooks to run PC applications. Linux already failed in the netbook market because it can't run PC apps, and Chrome OS won't run PC applications either.

But in the meantime, Google can put more price pressure on Microsoft, and maybe that's the real point.

Two videos for mobile app developers

2009-06-23T23:50:00.000-07:00

Just a quick note to let you know about a couple of informational resources for mobile developers.

--Motorola is starting the online publicity for its upcoming Android-based smartphones. They did a brief interview with me, asking how mobile app developers can distribute their software (link).

--Elia Freedman of Infinity Softworks did a great presentation on his experiences selling through the iPhone App Store, and the lessons he has learned. It’s well worth watching the video here.

It's best to watch both of these, and think about them, before you develop your mobile app.

Symbian: Evolving toward open

2009-06-08T00:05:00.000-07:00

It's fascinating to watch the evolution as Symbian remakes itself from a traditional OS company into an open-source foundation. They've made enormous organizational changes (most of the management team is new), but the biggest change of all seems to be in mindset. A nonprofit foundation has a very different set of motivations and priorities than an OS corporation does. I get the feeling that the Symbian folks are still figuring out what that means. It's an interesting case study, but also a good example for companies looking to work with open source.

Symbian recently held a dinner with developers and bloggers in Silicon Valley, and I got to see some of those differences in action.

The first difference was the dinner itself. About six months ago, Symbian and Nokia held a conference and blogger dinner in San Francisco (link). It was interesting but pretty standard -- a day of presentations, followed by dinner at a large, long table at which Symbian and Nokia employees talked to us about what they're doing and how excited they are. The emphasis was on them informing us.

The recent dinner was structured very differently. The attendees were mostly developers rather than bloggers, and we were seated at smaller, circular tables that made conversation easier. They talked about their plans at the start, but most of the evening was devoted to asking our opinions, and they had a note-taker at each table. This had the effect of not just collecting feedback from us, but forcing us to notice that they were listening. That's important to any company, but it is critical to a nonprofit foundation that relies on others to do its OS programming. And it's essential for a company like Symbian, which has been ignored by most Silicon Valley developers.

So that's the first lesson about open source. The task of marketing is no longer to convince people how smart you are, it's to convince people how wonderful you are to work with. Instead of you as a performer and developers as the audience, the situation is flipped -- the developers are the center of attention and you're their most ardent fan.

It's an interesting contrast to Apple's relationship with developers, isn't it? It'll be fun to see how this evolves over time.

Here are my notes on the subjects Symbian discussed with us, along with some comments from me:

It takes time

Symbian said its goal is to have a lot of developers on the platform and making money, but that can't be achieved in three months. "In three years time," is what I wrote in my notes. That is simultaneously very honest and a little scary. It's honest because a foundation with its limited resources, working through phone companies with 24 month release cycles, simply can't make anything happen quickly. It's scary because competitors like Apple and RIM have so much momentum, and can act quickly. Still, in the current overused catchphrase of sports broadcasting, is what it is. An open-source company, based on trust, simply cannot afford to risk that trust by hyping or overpromising.

Speaking of Apple and RIM, Symbian made clear that it considers its adversary to be single-company ecosystems like Apple, RIM, and Microsoft. I didn't think to ask if Nokia's Ovi fits in that category, but that probably wouldn't have been a polite question anyway. Symbian also took some swipes at Google, citing the "lock in" deals they have supposedly made with some operators.

You get the feeling that Symbian is intensely annoyed by Google. It's one thing for a mobile phone newcomer like Apple to create a successful device; it's quite another for an Internet company to step into the OS business and take away Motorola as a Symbian licensee. I think one of Symbian's arguments against Android is going to be that Symbian is more properly and thoroughly open.

The question is whether anyone cares about that. Although the details of open source governance are intensely important to the community of free software advocates, I think that for most developers and handset companies the only "open" that they care about translates as, "open to me making a lot of money without someone else getting in the way." Thus the success of the Apple Store, even though Apple is one of the most proprietary companies in computing. Symbian's measure of success with developers will be whether it can help them get rich -- and I think the company knows that.

Licensees and devices

One step in helping developers make money is to get more devices with Symbian OS on them. Symbian said phones are coming from Chinese network equipment conglomerates Huawei and ZTE. They also said non- phone devices are in the works.

Licensees will be especially important if Nokia, as rumored, creates a line of phones based on its Maemo Linux platform. Lately some industry people I trust have talked about those phones as a sure thing rather than speculation, and analyst Richard Windsor is predicting big challenges for Symbian as a result:

"It seems that the clock is ticking for Symbian as technological limitations could lead to it being replaced in some high-end devices.... I suspect that the reality is that Symbian is not good enough for some of the functionality Nokia has planned over the medium term leaving Nokia with no choice but to move on."
Source: Richard Windsor, Industry Specialist, Nomura Securities

David Wood at Symbian responded that people should view Maemo as just Nokia's insurance in case something goes wrong with Symbian (link). But the point remains that Nokia is Symbian's main backer today. That is a strength, but also a big vulnerability. If Symbian wants developers to invest in it, I think it needs to demonstrate the ability to attract a more diverse set of strong supporters.

App Store envy

Another way to help developers is to, well, help them directly. Symbian said it's planning something tentatively called "Symbian Arena," in which it will select 100 Symbian applications to be featured in the application stores on Symbian phones. Symbian will promote the applications and perform other functions equivalent to a book publisher, including possibly giving the app author an advance on royalties.

The first five applications will be chosen by July, and featured on at least three Symbian smartphones (the Nokia N97, and phones from Samsung and Sony Ericsson).

The most interesting aspect of the program is that Symbian said its goal is to take no cut at all from app revenue for its services. Obviously that means the program can't scale to thousands of applications -- Symbian can't afford it. They said they'd like to evolve it into a much broader program in which they would provide publishing services for thousands of apps at cost. My guess is they could push the revenue cut down to well under 10% in that case, compared to the 30% Apple takes today.

It isn't clear to me if Symbian will produce the applications store itself, or work through others, or both. If it works through other stores, those stores might take a revenue cut of their own. But still, from a developer point of view it's nice to see an OS vendor trying to lower the cost of business for creating apps.

It's been interesting to see how many of the Palm Pre reviews this week have said that the iPhone application base is the main reason to prefer an iPhone over a Pre. I'm not sure how much purchase influence apps actually have -- at Palm, we had ten times the applications of Pocket PC, but they didn't seem to do anything for our sales. (On the other hand, Palm never had the wisdom and courage to advertise its apps base the way Apple has.)

--"Compared to the iPhone, the real missing pieces are those thousands of applications available on the App Store." Wired
--"Developer courting still seems like an area where Palm needs work. They've got a great OS to work with, but they have yet to really extend a hand to a wide selection of developers or help explain how working in webOS will be beneficial to their business. The platform is nothing without the support of creative and active partners." Engadget
--"The Pre's biggest disadvantage is its app store, the App Catalog. At launch, it has only about a dozen apps, compared with over 40,000 for the iPhone, and thousands each for the G1 and the modern BlackBerry models....It is thoughtfully designed, works well and could give the iPhone and BlackBerry strong competition -- but only if it fixes its app store and can attract third-party developers." Walt Mossberg

Anyway, if applications are the new competitive frontier between smart phones, mobile OS vendors should be competing to see who can do the most to improve life for developers. This is another area where Symbian's motives, as a foundation, differ from a traditional OS company. If you're trying to make money from an OS, harvesting some revenue from developers make sense. But as a nonprofit foundation, draining the revenue streams from your competitors is one of your best competitive weapons. Symbian has little reason to try to make a profit from developers, and a lot of reasons not to.

Driving Web standards

That idea came up again when we talked about web applications for mobile. As I've said before, I think the most valuable thing that could happen for mobile developers would be the creation of a universal runtime layer for mobile web apps -- software that would let them write an app once, host it online, and run it unmodified on any mobile OS. No commercial OS companies want to support that because it would commoditize their businesses and drain their revenues. But if Symbian's primary weapon is to remove revenue from other OS companies, a universal Web runtime might be the best way to do it. I asked them about this, and they said they're planning to use web standards in the OS "like Pre," and said they're interested in supporting universal web runtimes.

I'm intensely interested in seeing how the runtime situation develops. I think Symbian and Google are the only major mobile players with an interest in making it work, and Google so far hasn't been an effective leader in that space. I think Symbian might be able to pull it off, and become a major player in the rise of the metaplatform. But it'll take an active effort by them, such as choosing a runtime, building it into every copy Symbian OS, and making it available for other platforms. Passive endorsement of something is not enough to make a difference.

Other tidbits

Symbian said it's going to "radically simplify" the Symbian Signed app certification program, which may be very welcome news to developers, depending on the details. Many developers today complain bitterly about the cost and inconvenience of the signing program, and unless it's fixed it'll outweigh any of the benefits from Symbian Arena.

The QT software layer that Nokia bought as part of its Trolltech acquisition will be built into Symbian OS in the second half of 2010. I had been wondering if it would be an option or a standard part of the OS; apparently it'll be a standard.

Symbian plans to bring its developer conference to San Francisco in 2010, after which it will rotate to various locations around the world. This is part of an effort to increase Symbian's visibility in the US market. The company is creating a large office here, including two members of its exec staff. That makes sense for recruiting web developers, but it will be hard for the company to have a big impact in the US unless it gets a licensee who can market effectively here. In that vein, it must have been frustrating for everyone involved when Nokia announced the shipment of the N97 and it came in a distant third in coverage in the US (after the Palm Pre and the iPhone rumors).

What it all means

There are a lot of things that could kill the Symbian experiment:
--Nokia could decommit from the OS (or just waver long enough that developers lose faith).
--Symbian licensees could fail to produce interesting devices that keep pace with Apples, RIMs, and Palms of the world.
--Android could eat up all the attention of open source developers, leaving Symbian to wither technologically.
--The market might evolve faster than a foundation yoked to handset companies can adjust.

But still the Symbian foundation is worth watching. It has a different set of goals than every other mobile OS company out there, goals that potentially can align more closely with the interests of third party developers. It's still up to Symbian to deliver on that potential, but the company has an opportunity to challenge the mobile market in ways that it couldn't as a traditional company.

-----

Prof. Joel West of San Jose State was also at the Symbian meeting and posted some interesting comments about it. You can read them here.

Full disclosure: My employer, Rubicon Consulting, did a consulting project for Symbian a year ago. None of the analysis conducted in that project was used in this post. We currently have no ongoing, or planned, business relationship with Symbian.

A quick history of software platforms: How we got here, and where we're going

2009-05-10T23:49:00.000-07:00

Intuit and Stanford recently asked me to give talks on computer platforms and what makes them successful. (By platforms I mean software with APIs that third party developers can write apps on top of; Windows and Macintosh are both platforms, as is Java.) Platforms are a hot topic in Silicon Valley these days. The success of the iPhone app store in mobile, and Facebook on the web, have forcefully reminded people that you can grow a tech business more quickly if you get third party developers to help you. Almost every tech company I work with is trying to expose some sort of API or platform offering in its products.

To explain how software platforms work today, I thought it'd be good to start with their history. But I wasn't sure about many of the details myself, so I ended up doing some research. The information was surprisingly hard to find, and also pretty controversial -- for every person who claims to be the first to have done something in computing, there's someone else who begs to differ. I did my best to sort through all the claims. The picture that developed makes an interesting story, but also has some very important lessons about where the industry might go next.

Fair warning: this is a long post. But I hope you'll feel that the destination is worth the trip.

Here's what I found:

Hardware memory, software amnesia

The computer industry is often criticized for its failure to remember its own history. Supposedly we're so focused on the new thing that we forget what's come before.

In reality, though, we're actually fairly good at remembering a lot of our hardware history (for example, Apple fans are celebrating the 25th anniversary of the Macintosh this year). There's passionate controversy over what was the first computer -- was it Konrad Zuse's Z1 (link), Tommy Flowers' Colossus (link), etc. The answer depends in part on your definition of the word "computer." But it's a well-documented disagreement, and you can find a lot of information about it online, including a cool timeline at the Computer History Museum (link).

The machine most commonly cited as the first fully programmable general-purpose electronic computer was ENIAC, the Electronic Numerical Integrator And Computer. It was completed in 1946 (link).

Here's ENIAC (well, part of it, anyway)

You can find lots of histories of ENIAC online (link). There are multiple simulators of it on the web (link), and the engineering school at the University of Pennsylvania even has an ENIAC museum online (link).

But when it comes to software, our memories are much hazier. For example, I doubt there will be a 25th anniversary celebration in 2010 for Aldus PageMaker, the program that did more than any other to make Macintosh successful. And about a day after I post this article -- May 12, 2009 -- will be the 30th anniversary of the introduction of Visicalc, the first spreadsheet program. Anyone planning a parade?

Today we take it for granted that you can use a computer for a variety of business or personal tasks, but it didn't always work that way. ENIAC and Colossus were government-funded tools for solving military and scientific problems. The US Army funded ENIAC, and in addition to calculating artillery tables, it was also used for tasks like weather prediction, wind tunnel design, and atomic energy calculations.

These nice ladies are programming ENIAC, by moving cables around.

How did we end up using computers for other purposes? The UPenn site says only, "it is recalled that no electronic computers were being applied to commercial problems until about 1951."

Yeah, "it is recalled." This is where I had to start digging. Once again there are disputes (link), but you can make a very good case that business computing started in the UK, and it involved something called a Swiss roll.

The first business computer

I had never heard of Joseph Lyons & Company, but in the 1950s they ran a chain of tea shops in the UK. I have to pause here for a second and explain what the term "tea shop" means. It's not a shop where you can buy bags of tea (which is what I assumed). Instead, it is what Americans call a coffee shop -- a fixed-menu restaurant that people would come to when they wanted to have a quick meal, snack, or meeting. The closest equivalent in the US these days is probably Denny's.

In the 1950s, Lyons had the biggest network of tea shops in the UK. It employed 30,000 people and served 150 million meals a year. The company sold 36 miles of Swiss roll a day (link).

(In case you're wondering, Swiss roll is a flat sponge cake rolled around a filling. Americans call it jelly roll. In India, it's called jam roll. In Sweden, rulltårta. In Japan, "roll cake." But in Spain, for some reason it's called brazo de gitano (gypsy's arm). Don't ask me why. [link] )

A Swiss roll made and photographed by Musical Linguist on 25 June 2006

Like every other company of its day, everything at Lyons was run on paper -- tallying 150 million receipts, calculating payroll, managing taxes, and even figuring out how many miles of Swiss roll you need to make for tomorrow's customers. All of that by hand with adding machines. It was an incredibly expensive and error-prone way of running a business, but it was the best anyone could do at the time.

When the people at Lyons first heard about these new computer thingies, they wanted one immediately to help run the business. But there wasn't any way to buy one. So they donated $5,000 (about $50k today) to Cambridge University to create a modified version of a computer that Cambridge had been working on.

The result was called LEO (Lyons Electronic Computer), and when it started regular operations on November 17, 1951, it was the world's first business computer. It occupied 5,000 square feet of floor space (about 500 square meters), and its 4k memory unit weighed half a ton because it was full of mercury. LEO's lead programmer was David Caminer, who is generally credited as either the world's first business software programmer or the first systems analyst. LEO's software let it handle -- guess what -- the same sorts of tasks we handle on business computers today: payroll, inventory, financials, and so on. It cut the time to calculate one employee's wages from eight minutes to 1.5 seconds (link).

David Caminer

Pause for a moment and think about the courage and vision it took for Lyons -- a catering company -- to build its own computer. There was no guarantee the process would succeed, and indeed the process took two years, with plenty of setbacks along the way.

But LEO was eventually a big success, and Lyons eventually spun it out as a separate computing subsidiary. Caminer went on to have a distinguished career in computing. He died in 2008, unfortunately, so we just missed our opportunity to say thanks to him. If you want to read more about LEO, Caminer co-wrote a book about it (link). Naturally, it's out of print, and the cheapest used copy when I looked it up was $75.

What is software, anyway?

One interesting aspect of LEO is that although Caminer and his team wrote software for it, that software was not available separately from the computer. That's the way the computing industry worked throughout the 1950s. For example, if you bought an IBM computer there was a set of standard IBM programs that ran on it.

In fact, the term "software" didn't even exist until it was popularized by John Tukey in 1958, more than ten years after ENIAC began operation (link). He wrote:

Today the "software" comprising the carefully planned interpretive routines, compilers, and other aspects of automative programming are at least as important to the modern electronic calculator as its "hardware" of tubes, transistors, wires, tapes and the like.

So the whole idea of software as a separate entity, a concept that we take for granted today, did not exist at the beginning of computing. The concept of making computers reprogrammable came along quite early, but it took a couple of decades for software to fully separate itself from hardware as its own distinct discipline.

John Tukey

(Naturally, there's some dispute about whether Tukey was the first to use the term "software." You can read about it here.)

Tukey was an interesting guy. He also created the term "bit," helped design the U-2 spy plane, and did a lot of other fascinating things (link).

If you want to read more about the history of software technologies, there's an essay here. And the best (and just about only) book on the history of the software industry is here.

Software as a business

Once we got the idea of software into our heads as a separate discipline, the next milestone in platform history was the creation of the first independent computer program, the first one you could buy separately from the hardware. As far as I can tell, that idea didn't just spring into being all at once; it emerged as a slow-motion avalanche over a period of 15 years.

Computer Usage Corporation, founded in 1955, is often cited as the first computer software company. It focused on custom programming services (link). Another very early custom programming company was CEIR, founded in 1954 (link). After them, a number of other custom programming firms sprang up. Sometime between 1962 and 1965, California Analysis Center, Inc. started selling a proprietary version of the Simscript programming language as a standalone product (the Computer History Museum says it was 1962 here, but CACI's own website says 1965 here). The 1962 date is the earliest I can find for any sort of independent software product. To my amazement, CACI is still selling Simscript today (link).

Several other programming languages and compilers came to market in the early 1960s, but there's disagreement over how much they actually sold, or whether they were really managed as independent products (link). A file management program called Mark IV, by Informatics, is credited as the first independent software product to generate more than a million dollars revenue. It was published in 1967 (link). That year also saw the first publication of the International Computer Programs Quarterly, the first commercial software catalog, which helped small software companies get to market at low cost (link). Think of it as a paper version of the iPhone App Store.

But if you want to find the first snowball that started the commercial software avalanche, I think it was tossed in 1964 when a contract programming company called Advanced Data Research was jerked around on a business deal by RCA.

The first commercial software product

In the mid-1960s, a cottage industry of contract programming firms did custom software development. When a new mainframe was in the works, its manufacturer would sometimes hire these firms to create software to offer with it. Computer owners could also hire those development houses to write create custom software for them. The idea of off-the-shelf software didn't exist; you got it for free with your computer, had it written for you, or developed it yourself.

RCA, which at the time was a promising mainframe company, approached ADR asking them to create a program to draw flow charts of computer programs (the flow charts were used for documentation and debugging). That may not sound like a big deal today, but in the early days of computing the industry didn't have the sort of automated debugging tools it has today. A flowchart was very useful to help maintain and document a custom software program after the project was finished.

So ADR created a proposal and submitted it to RCA. Fortunately for the computer industry, RCA turned it down, as did every other mainframe company. But ADR believed in its concept, so it decided on its own to develop the product anyway. It spent over $5,000 (about $35k in today's money) and half a man-year on the project.

But RCA was not impressed. Once again they said no.

Now ADR had a sunk cost. In business school they teach you to walk away from those, but in real life companies hate to admit they made a mistake. So ADR decided to try marketing the software on its own. They named it Autoflow, and wrote a letter to all 100 RCA mainframe owners offering them the program for $2,400 on a three year lease. It was three milestones in one: the first commercial software program, the first subscription software, and the first junk mail urging you to buy a software program.

ADR sold two licenses.

That may not sound like much, but somebody at ADR did the math -- if we sold two copies to 100 RCA customers, what would happen if we offered our software to IBM's much larger installed base? So ADR ported Autoflow to IBM mainframes. In the second half of the1960s it sold more than a thousand licenses of Autoflow, and created a portfolio of other independent software programs for IBM systems.

IBM was not pleased. Nobody was supposed to mess with the IBM customer base; that might weaken IBM's control over its customers. The company created its own flow charting software, which it gave away for free to its customers, and started to copy ADR's other programs as well. This became a huge competitive problem for ADR -- even if its software worked better than IBM's, it was hard to compete with free. IBM was also able to freeze the market for ADR by promising that it would in the future offer a free version of something ADR was currently selling. Customers would delay ADR purchases until they could evaluate the IBM product.

ADR and other fledgling software companies complained to the US government. In 1969, the Justice Department, ADR, and several others filed antitrust suits against IBM. ADR collected $2 million in penalties, and IBM agreed to stop bundling free software with its computers.

And thus the independent software industry was born.

Martin Goetz (above) was the product manager of Autoflow. I wrote to him and asked for his take on which was the first software product. Here's his reply:

Autoflow was recognized as the first software product to be commercially marketed. Starting in 1964, ADR licensed its products nationally and through ads in all the major computer publications, started investing in the development of other products and became known as a software products company.

I think that's the right way to look at it: Autoflow was the first software product to be commercially marketed, which is why I call it the snowball that started the avalanche. Informatics' Mark IV also played an important role because its financial success validated the market -- reportedly it was the top-selling software product for the next 15 years (link).

Goetz says Mike Guzik was the lead programmer on Autoflow (link), and he cites ADR President Dick Jones as a strong supporter of the idea (link). I think we should credit Goetz and Guzik as the creators of the first commercial software application, although neither of them has an entry in Wikipedia.

Incidentally, Goetz also holds the first software patent:

Computerworld, June 1968

That has to be one of the most visionary headlines in the history of the computer press: "Full Implications Are Not Yet Known." Here we are 41 years later, and it's still accurate.

Goetz was named the "Father of Third-Party Software" by mainframezone.com (link) and there's a very interesting interview with him here. You can find a much longer interview here and his memoirs are here.

Advocates of open source software will probably view Goetz as a bad guy, since he helped make software a for-profit industry. But he has some pretty strong opinions about the poor quality and slow innovations that happened in software when it was only free. In particular, he says that a completely free software industry was not responsive to the needs of users (link).

An amusing anecdote complaining about Goetz, apparently written by a former ADR employee, is here. I can't verify the anecdote, but if nothing else it shows that ADR was also a pioneer in the practice of engineers making catty comments about product managers.

(I should add that there are some different interpretations of the effect of IBM's unbundling decision. One is in a very interesting interview with the creator of the ICP catalog here.)

The rise of the third party application platform

The next evolutionary step was for computer companies to see their products as development platforms -- for them to actively encourage software developers rather than viewing them as a nuisance. I haven't been able to figure out when in the 1970s this change in perspective happened (please post a comment if you know the history). It may have happened in the era of minicomputers, or it may have been a PC thing. Definitely Dan Bricklin and Bob Frankston's VisiCalc, the world's first spreadsheet program, played a role when it came to market for the Apple II in 1979. It was so revolutionary that reviewers at the time didn't know how to describe it. They just said it was a way to make the computer do things you want it to do, without writing your own program. VisiCalc established the idea of the "killer app," a software program so popular that it drove demand for the underlying hardware.

"Visicalc could some day become the software tail that wags (and sells) the personal computer dog."
--Ben Rosen, co-founder of Compaq, reviewing VisiCalc when we was still an analyst with Morgan Stanley. Nice call, Ben. (Link)

By the early 1980s, software developers were being actively courted by computer manufacturers. Apple had a developer recruitment team for the Macintosh, and apparently coined the term "software evangelism." That's where Guy Kawasaki cut his eyeteeth, although he wasn't the first evangelist. As he puts it:

"Mike Boich started evangelism and hired me, and Alain Rossman worked with me as a software evangelist. Essentially, Mike started evangelism, Alain did the work, and I took the credit." (Link)

I happen to know that Guy did a bit of the work too.

The other critical change in the 1980s was the separation of the OS from the underlying hardware. Most of the new PC software platforms had been tied to hardware, just like traditional computers. For example, you had to buy a Macintosh in order to run Mac software, or an Amiga in order to use Amiga apps. But then IBM created the PC, and through a series of business blunders allowed Microsoft to separately sell the DOS operating system used on its hardware. IBM's brand and marketing power established the PC as a standard, but the company enabled Microsoft and Intel to create a "clone" hardware market, and eventually drive IBM out of the PC business.

So now there were three layers in the industry -- the application was independent of the OS, and the leading OS was independent of the hardware.

The network strikes back

That's where the situation sat until the late 1990s, when Java and web browsers threatened to create another layer in the architecture by separating software applications from the OS. The theory was that instead of writing programs that depended on Windows, programmers could create code that worked on Java, or on the Netscape browser.

Microsoft fought back very aggressively, killing Netscape by giving away Internet Explorer, and crippling Java on the PC. Looking back, it was an impressive use of business muscle, worthy of Microsoft's tutor IBM.

But it was also a pyrrhic victory. Microsoft's actions in the 1990s forced software innovation completely off the PC platform, because investors were afraid that new software apps would just get cannibalized by Microsoft. Instead software innovation moved onto the web, where Microsoft had virtually no control. That's one of several reasons why the next generation of software is being written as web apps.

And that's where we are today.

Where we go next

As I said at the start of the post, I think all of this history is fun in its own right. I also wanted to take this opportunity to thank some of the people who built the tech industry into the fun place it is today.

But understanding computing history is also very important because, if you look across the sweep of it from the 1940s to today, it's much easier to see where we might go next.

Here's what I think that long perspective shows us: The history of software is a history of disaggregation. First the application software gets separated from the hardware, then the OS gets separated from the hardware, and so on.

I think disaggregation is a natural outcome of the maturation of the industry, because multiple companies can move faster than a single one. At the start you need everything coordinated together to make sure the whole thing will work. But over time, no single company can pursue all of the innovation possibilities, so you get a backlog of potential creativity that can happen only if control over the architecture is broken into pieces.

For example, most of the interesting innovation in applications happened only after they were separated from the hardware.

But as the industry continues to grow, each of the pieces becomes its own stodgy monolith, and eventually another subdivision happens.

The fastest growth and the easiest innovation has generally happened at the leading edge of disaggregation, because each change creates new business opportunities.

That doesn't mean that old school companies are dead. IBM still sells mainframes, and Apple still makes PCs bundled with an OS. But to succeed in an old paradigm you have to execute extremely well, and it's much harder to grow explosively. The easiest progress is made at the leading edge.

A common thread among the people working at the leading edge of disaggregation is their excitement as they recognize the opportunities created by the change:

"There was a tremendous euphoria of success. You couldn't lose. All you needed was a group of highly technical people who could create a software product and that was it. And to some degree there was some truth to that. Because you didn't have to be good sales people. You didn't have to worry about the competition. For years I used the aphorism that we were like little boys on the beach each with our sand piles. There was plenty of sand to put in our buckets. We didn't have to edge out the other little boy to get all the sand we needed. We were limited by the size of our pail and our little shovels but not by the amount of the beach that was there or the fact that there was another little boy there with his pail."

That's Walter Bauer, cofounder of Informatics, talking about the birth of the independent software industry in the 1960s (link). But you could find similar sentiments from the people who built the first computers, or the first Mac programmers, or the first web app developers. The leading edge of disaggregation is where the action is; it's where the fun happens.

So, if you're looking to succeed in the software industry, it's extremely important to figure out what's going to get disaggregated next. Which brings us to the point of this article.

Say hello to the metaplatform

Sun's rallying cry in the 1990s was, "the network is the computer" (link). It was an excellent insight that pointed to the emerging importance of the Internet, but most of the industry misread what it meant. We looked at the architecture of the thing we knew best, the PC, and tried to map it directly to the network. So servers would replace the PC hardware, and software on those servers would replace Windows. The PC itself would be reduced to light client, a screen connected to a wire.

What we expected

But instead of a new OS on the network replacing the OS on the PC, what we're seeing is the breakdown of the OS into component parts that live everywhere, on both the client and the server.

In other words, the OS is the next thing that gets disaggregated.

What's actually happening

People have been talking about elements of this change for years, but like the proverbial blind men feeling bits of the elephant, we've talked about individual pieces of it, with each of us assuming that the piece in front of us was the most important. So people producing software layers like Java and Flash say that they are separating the APIs on the device from the underlying OS. And the advocates of cloud computing say they're creating a software services architecture that runs on servers. But in reality we're doing both of those things, and a lot more. The OS is dissolving into a soup of resources distributed across both the network and the local device, with the application in the middle calling on both as appropriate. We need to get off the idea that the network or the client will be dominant; they're both supporting elements in something larger.

You can see this process operating in the evolution of web applications. The first web app companies tried to make applications that were entirely light client, but they didn't work particularly well -- they were slow, and their user interfaces were too limited. Web apps took off only when they adopted an approach in which the platform was split between the PC and the network -- the user interface ran locally through the browser, while back-end calculation and data storage was done on the network.

Mobile computing reinforces the need for this sort of hybrid architecture. Wireless broadband has important limitations that make pure light client computing extremely problematic. Wireless networks are relatively slow compared to wired networks, there's high latency on them, coverage is inconsistent, heavy communication drains device batteries rapidly, bandwidth is expensive, and most importantly, total wireless bandwidth is limited. The most effective mobile application are and will continue to be hybrids of local and network resources, like RIM's e-mail solution.

Companies entering the mobile market often ask me which mobile operating systems are going to win long term. I think that's the wrong question. What we're seeing is the gradual evolution of a super-OS that includes both the network and the device.

Like software developers before the word "software" was invented, we don't have a name for this new thing, and so we have trouble talking about it. It's not just the Network or the Cloud, because those terms are usually understood not to include the software on the client computer. And it's certainly not just the local APIs on the client device.

I'm calling it the "metaplatform" because it subsumes all other platforms. No single company controls the metaplatform. Google obviously contributes a lot to it, as does Amazon Web Services, as does Microsoft. But they're only fragments of the picture. There are thousands of other contributors to the metaplatform, in areas ranging from mapping to graphics to identity.

There's still a lot of work that needs to be done on the metaplatform, especially in the mobile space. But already it's evolving faster than any single company could move it, because the work is divided across so many companies, and because there's competition driving innovation at almost every point in the architecture. Although the metaplatform isn't necessarily elegant (because it's poorly coordinated), what it lacks in beauty it more than makes up for in rate of change and versatility.

New opportunities

The metaplatform helps to solve some computing problems, but creates others. For example, a recurring problem for software in the OS era has been compatibility. Old data files, even when perfectly preserved, can become unreadable if the hardware and software that created them is no longer available. A lot of software is very dependent not just on the hardware, but on the particular version of the OS it's running on. (If you want to see that effect in action, try running a ten-year-old Windows game on a new PC. It may work, it may refuse to run at all -- or it may freeze right when you're about to defeat the boss bad guy.)

The metaplatform is helping to resolve some compatibility problems, through emulators available online. But more importantly, web apps on a PC are less vulnerable to PC-style compatibility breakdowns because PC browsers are relatively standardized, and much of the OS code the web app relies on lives on the same server as the app itself, so they are less likely to get out of sync.

But metaplatform-based software is uniquely vulnerable to a new set of problems. When a user's data is stored on a web app company's server 3,000 miles away, what happens if that company goes out of business or just decides to stop maintaining the product?

Another problem experienced by any website using plug-ins is component breakage. If you've incorporated external web services into your site, the site will break if any of those services stops working. This can happen without warning. On my own weblog, the load time for the site suddenly became ridiculously long. It took me weeks to realize that a user-tracking service I'd once signed up for had gone out of business without telling anyone. My site stopped loading while it tried helplessly to connect to a tracking site that no longer existed.

An old software application from the OS era has some hope of revival if you have a copy of the CD, because all the code that made up the app is together in one place. But an old, broken web app will be almost irretrievably dead, because huge chunks of its code will be missing.

Problems like these are just starting to emerge, but as the metaplatform grows and ages they'll become much more prominent. We don't have any systematic ways to deal with problems like these today -- which means they're a business opportunity for the next crop of software entrepreneurs.

What the metaplatform means to you

Much of the discussion in this post is pretty theoretical. But I think it has important practical implications. Here are a few specifics to think about:

If you're a computer user (and if you're reading this, you must be), keep in mind that the most interesting new software innovations are likely to come from companies that consciously work the metaplatform. If you want to be at the leading edge of software innovation, you should keep yourself open to experimenting with new web applications and plug-ins, and make sure your browser doesn't artificially cut you off from some technologies. This is especially true for mobile devices. The iPhone today gives (in my opinion) the best overall mobile browsing and app discovery experience, but you pay a price for it -- you're cut off from some web technologies (Flash, Java) and your choice of applications is limited by the Apple app police. You pay a serious price for the superior user experience of the iPhone. That price is worth paying today, but in the future I hope there will be mobile devices that are as satisfying as the iPhone but less controlled. Actually, I'm sure that will happen over time. But "over time" can sometimes mean a long time in the future. You can help the process along with what you buy and by the feedback you give to device manufacturers.

Are you working at an OS company? If so, you probably measure success by the number of devices your software controls. You need to rethink that viewpoint. The OS is going to be less and less of a technology control point in the future. It will become commodity plumbing underneath the metaplatform, limiting your ability to charge a lot of money for it. So at a minimum, you need to plan for cost control.

But you should also be asking if plumbing is the right place for your company's creativity in the long term. There will be much more profit opportunity in contributing to the metaplatform by creating APIs and developer functionality that can be used across different operating systems. OS companies have many of the assets needed to build those components of the metaplatform. A successful OS can be a great launching point for technologies that run across platforms, because you already have a big installed base that you can use to jump-start the technology's adoption.

Are you at an application company? Many successful app vendors are trying to create APIs that will enable other developers to extend their products. This is the right idea, but the implementation is often off-target. Many of the app companies I talk to are trying to make their APIs into the business equivalent of an operating system, with developers coming to them and living entirely within their private ecosystem. A warning sign is when a company uses a phrase like, "(insert company name) developer network" to describe its offering.

The wave of the future is not turning an application inward into its own little walled garden; it's opening the application outward so it can be mixed and matched with other functionality in the metaplatform. If you have the best drawing program in the industry, you should be asking how you can also become the best drawing module in the metaplatform. Get used to being a component in addition to a standalone product. You lose some identity in the process, but gain greater opportunities to grow.

And besides, if you don't do it, you'll be vulnerable to someone else doing it and taking your place.

If you're a computing student, or a computing veteran looking to create a new product, think about what role you can play in the metaplatform, and what customer problems you can solve with this new tool. There will be big market openings in both products for users and companies, and infrastructure for other developers in the ecosystem (billing, rights management, security, etc).

As in previous generations of software, the answers are not immediately obvious, and the people who figure them out first will have huge opportunities to do something impactful. Like Caminer, Goetz, Bauer, Bricklin, and Frankston, you're on an enormous beach with a trowel and bucket, and you have a chance to shape the next generation of computing.

Have fun.

====

I'd like to thank Eugene Miya of NASA Ames and Martin Goetz for helping with the research that contributed to this article. They're not responsible for any errors I made, but they definitely corrected some.

I'm sure there are folks out there who have additional information on the history I wrote about here. If you have anything to add (or correct) please post a comment.

Microsoft: What could have been

2009-04-27T20:57:00.000-07:00

Larry King Live
Aired May 1, 2009 - 9:00 p.m. EDT

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

KING: Tonight, people are calling it the most important business transformation in a generation. Bill Gates, the founder, chairman, and CEO of Microsoft joins us live. Bill, Microsoft just announced its quarterly earnings, and for the first time your revenue from personal computers actually dropped.

GATES: The economy is very tough, and that's affecting computer sales, just like everything else.

KING: But Microsoft's revenue and profits continued to increase, right? The stock market sure loved what you said last week.

GATES: I think our strategy's really starting to take hold. We don't manage Microsoft for quarterly earnings, but it's nice to see that investors are recognizing the progress we've made.

KING: You mentioned a new strategy. That started what, about eight years ago?

GATES: Roughly. We spent a lot of time looking at our business, asking where we were going, and we realized three important things.

KING: What were they? Lay them out for me.

GATES: Well, the first was that the biggest danger to Windows was Microsoft itself, and they way we were managing the product. Our philosophy for the last decade had been that whenever there was an innovation in personal computers, we copied it into Windows or into Microsoft Office. If there was an important new application, we built it into Office. If Apple or somebody came up with a new personal computer feature, we built that feature into Windows.

KING: You were trying to compete.

GATES: Yeah, but the effect was that Windows and Office were growing exponentially. If you extrapolated out the growth curve -- the number of lines of code and the number of features -- you could see that within about a decade we'd hit an asymptote...

KING: An assy-what?

GATES: A point of diminishing returns, where Windows would become so complex that we'd have to spend all our time just fixing bugs instead of improving the product. We were destroying our own ability to innovate.

KING: But that wasn't the biggest problem, was it? Your behavior also made Microsoft unpopular.

GATES: Not just unpopular, our aggressive business practices made people stop investing in writing new PC software. The entrepreneurs and the VCs were starting to say, "why should I bother writing a new Windows software program? Even if I'm successful, Microsoft will just take over my business."

KING: How's that a problem? It just means fewer competitors for you, right?

GATES: Not really, because people weren't going to stop writing new software overall. They just stopped writing it on Windows. By competing so hard with our own developers, we were forcing them to innovate on the Internet instead. So here we were, Windows was growing so big that we couldn't innovate, and at the same time we were driving all the other innovators to work on the Internet instead of building on our platform. We were in danger of strangling our own business.

KING: You said there were three things you realized. What was the third one?

GATES: That was probably the most painful one for us to face. We had to admit to ourselves that we just weren't very good at managing things outside the PC business.

KING: But today Microsoft is viewed as one of the best managed companies in the world.

GATES: Today, sure. But ten years ago, we were like the repair guy who has only a hammer. Everything looks like a nail. We thought we were a software company, but actually we were a PC company. To us, everything looked like a PC. We thought we could take what we already knew and apply it to any other technology business. Microsoft had this reputation that the third time's the charm...

KING: Your first two versions stink, but on the third try you'll get it right.

GATES: I wouldn't say stinks, but...you know, ten years ago I would have jumped all over a statement like that. But yeah, people said things like that, and I think at some level we started to believe it about ourselves. So we would enter these new businesses, and our first efforts would be a failure, and we'd tell ourselves that it was okay because of the learning curve. But that wasn't it; the reality was that we just weren't very good at those other businesses. You look at all the new things we were investing in...

KING: Let's make a list, there were video games, smartphones...

GATES: Lots more than that. Tablet computers. Music players. At one point we were even creating an operating system for watches, if you can believe that. And we were developing all of these things in-house, and most of them were very mediocre, very uninspiring.

KING: So let me get this straight, you had three problems at once...

GATES: Our products were getting so big that we couldn't innovate, we had driven away the other people who could innovate, and we weren't good at the new businesses we were getting ourselves into. Now, none of this was totally obvious in 2001. You could still rationalize at the start of the decade that all we needed to do was work a little harder. In fact, in a lot of ways it looked like we were stronger than ever. So the pressure to stay the course was pretty extreme.

KING: But that wasn't what you did.

GATES: No. It was the biggest decision of my career, but right when we were at the peak, we decided we had to remake the company. If we were going to diversify beyond the PC market, we needed to figure out how to manage very different businesses within Microsoft. We had to be more like GE, where they can run radically diverse businesses like jet engines and finance inside one corporate entity. And instead of growing everything ourselves, we'd need to acquire some companies with different DNA.

KING: But acquisitions were a problem for you.

GATES: Right. Because the government had decided we were a monopoly, we couldn't just go out and buy a bunch of companies. We would've drowned in lawsuits. So first we had to change the way we managed Windows. That's why we signed the consent decree with the government, agreeing to open up all the interfaces of Windows at no charge, and to stop copying the features of other software companies. That got the Department of Justice off our backs -- I mean, that made the regulatory authorities more comfortable with our strategy. You know, Larry, I still don't think we actually did anything wrong, but sometimes the perception is just as damaging as the act...

KING: Of course.

GATES: Then we made it clear to the VCs that instead of competing with the best Windows software companies, we were going to buy them. That turned around the whole investment dynamic -- instead of creating new software companies on the web, they started telling all the entrepreneurs to create Windows software, because they had an easy exit strategy. Plus we were able to make our Windows development more focused, because we weren't obligated to compete with everything all at once. It's like what Cisco did in networking. Get other people to do your R&D for you, and just buy the best ones. So that re-ignited innovation in Windows.

KING: It sounds so simple.

GATES: Actually, it is pretty simple, if you let the companies you acquire keep running themselves. We used to acquire a company and then "align" it with our strategy. In practice, that meant it disappeared like a tuna in a school of sharks. That was probably the hardest lesson we had to learn at Microsoft, that our way wasn't always the best way.

KING: Let's open it up to the phones. Peoria, Illinois, you're on with Bill Gates.

CALLER: Hello?

KING: Yes, you're on live with Bill Gates. What's your question?

CALLER: I wanted to ask about the acquisitions you've made in the last decade. Which one are you most proud of?

GATES: Oh, it's hard to choose just one. But the deal that set up Microsoft North is one of my favorites. People said we were crazy to buy those guys. We had to pay almost $3 billion for them in 2002. It was a huge risk at the time; Ballmer almost threw a chair at me when we discussed it. But today they're responsible for the whole Microsoft Blackberry product line.

KING: You mean that wasn't developed in-house?

GATES: People forget about that today, but yeah we bought this Canadian company that made Blackberry, and put them in charge of our mobile strategy. The analysts thought we were crazy -- they said we could just copy Blackberry and build it into our server and PDA products. But I thought about Microsoft Bob, and decided it was better to spend the money than risk missing the market. You know, that one $3 billion investment is probably worth at least $30 billion today.

Then there was the joint venture with Nintendo. God only knows how much money we would have lost if we'd tried to go into video games on our own.

KING: We're almost out of time. Nine years ago, on January 1, 2000, we had you on this program and you said that the biggest danger to Microsoft was that you would become complacent. How did you avoid that?

GATES: By assuming that we were complacent, and attacking it. Here's the rule: If you even suspect that you're at risk of becoming complacent, you probably already are. I mean, we could have just gone along with business as usual. That would have been the safe decision.

KING: If you had taken the safe approach, where do you think Microsoft would be today?

GATES: It's so hard to say. If we hadn't changed, we probably could have muddled through with high profits for about a decade before things would have started to come apart. I might have even gotten bored and retired, or given away all my stock to a foundation. But by the end of the decade, there we'd be, most of our business would still be centered on the PC, and when that market started to shrink, then we'd be in real trouble.

KING: Could you have fixed the company if you'd waited that long?

GATES: I don't really know. I want to say yes, because you know I'm kind of competitive. But when a company starts shrinking, there's huge pressure from the shareholders to cut costs. And logically, the first thing you cut is the speculative new products that might get you out of the mess. If I had given up my stock, I might not even have enough control over the company to step in and say, "ignore the investors for a couple of years while we fix everything." It was hard enough to do back in 2001.

Once you start to shrink, it's very difficult to turn things around.

KING: Instead, here you are. Sure enough the PC market is shrinking, but Microsoft's still growing...

GATES: Because we changed our strategy to use the talents of others, rather than feeding off them.

KING: Thanks, Bill.

GATES: You bet.

KING: Bill Gates, the founder, chairman and CEO of Microsoft.

Tomorrow night: Monica Lewinsky, where is she now?

Thanks for joining us. I'm Larry King. Good night.

The lesson from OQO

2009-04-27T20:38:00.000-07:00

A lot of people online are lamenting the business troubles of the OQO mini-computer. Wired's commentary is pretty typical: "When OQO’s excited developers showed me a prototype behind closed doors seven years ago, it was clear that the company was ahead of its time. Now, its time appears to be up." (Link)

Baloney. OQO's time never arrived in the first place.

I'm always sad to see any startup run into trouble; especially a device company, because they're so rare. OQO did some beautiful things technologically. But in my opinion, they never had a chance as a business. There just wasn't a significant market for a shrunken, compromised PC at the same price as a full-size laptop. At first OQO was supposed to be a horizontal market device, and when that didn't take off the company went after business verticals (the place where struggling consumer technologies go to die). Sometimes that works, but usually it ends up being a gradual way to wind down the company.

But why, if OQO is failing, are netbooks taking off? Two words: They're cheap. It's one thing to ask someone to pay $900 for a less functional notebook. It's quite another to ask them to pay $300.

The lesson: Don't build something just because you can. Make sure there's a real market for your device before you create it. Geeky coolness will impress Wired reporters, but it won't get you a lot of sales from real people.

Checking in on smartphone and Twitter usage

2009-04-26T20:33:00.000-07:00

Over at Rubicon, we just did a quick consumer survey to check the status of a couple of hot topics in the tech industry, smartphone adoption and use of Twitter. I thought you might be interested. Here's a summary of what we found, and links to the full articles:

Smartphone adoption: RIM leads. In the US, about 10%-11% of the adult population uses smartphones. RIM has just under half of the installed base, followed by Apple at about a quarter.

The users of different types of smartphone have different feature priorities. iPhone users rate web browsing as their #1 feature, followed closely by e-mail. RIM users rank e-mail the most important feature, Palm users choose calendar, and Google phone users are partial to mapping. The profile for Windows Mobile users is similar to RIM's, but less enthusiastic about e-mail.

Mobile phone feature priorities of iPhone users compared to all mobile phone users. Percent of US users ranking a feature in their top four.

I think this is more evidence of something that I've been saying for a while -- most people buy phones more like they do appliances than like computers. They decide which functions are most important to them, and then pick the phone that does those things best, rather than looking for the best general-purpose device.

That's not to say that flexibility doesn't matter at all, but it's secondary. For example, adding third party apps is the #4 priority among iPhone users, and close to tied with several other features. It will be interesting to see how the priority evolves as Apple continues to advertise the daylights out of the app store.

For the full article, click here.

Twitter is a form of entertainment. Usage of Twitter is rising very rapidly -- as of April, it gets more daily visitors than cnn.com in the US, according to Alexa.com.

Our survey showed that the Twitter user base has more than doubled in the last six months. About 10% of US computer users have tried Twitter so far, and about a third of those people have stopped using it. You can decide for yourself if that's a big number or not, but a certain amount of churn is inevitable in any new web service.

Twitter awareness and usage among US PC users.

Most Twitter users say they are casual users of the service, and that it doesn't play an important part of their personal or business lives. The most active 10% of Twitter users say it does play an important role in their personal lives, but not in their business lives.

The overall pattern of usage indicates that for most people Twitter is currently a form of casual entertainment. There's nothing wrong with that, but the future of Twitter will depend on how that usage pattern evolves. Will Twitter become as important as e-mail, or will it be a fad like citizens' band radio (link)? It's too early to tell. But it's already clear that it's a separate medium with its own rules. Companies looking to use Twitter should make sure they understand how it's used; it's not the same as blogging.

For the full article, click here.

The ugliest logo ever, but maybe it makes sense

2009-04-04T20:36:00.000-07:00

Logo creation is a thankless task. Almost all of the interesting shapes and doodles were trademarked years ago. Unless you have hundreds of thousands of dollars to spend on artists and lawyers, and a lot of time, you usually settle on using your company name with no artwork at all.

Or you can take the approach adopted by the newly-formed Symbian Foundation, keeper of the Symbian OS:

Yes, that's really the new Symbian logo. I guarantee no one's going to sue them for it, unless it's the producers of the movie Juno:

I've already gone through a couple of stages of reaction to the logo. The first was horror. Not only is the font something out of 1974, but the color is one of the least popular in the world (step outside and count how many yellow cars you can see, or click here or here). I know I've seen uglier logos in the past, but I can't remember where, probably because I tried to block out the memory.

The discussion on All About Symbian has been amusing (link).

Once I got over my reaction, I reminded myself that the folks at Symbian are smart and very deliberate. Let's assume they have a good reason for choosing this logo. What would it be, and what would it tell us about the company and its business strategy?

The new Symbian is an open source software project. They need to appeal to open source developers, many of whom have a reflexive hatred toward slick and calculated marketing. After all, these are the sort of folks who, when allowed to choose their own logos, spontaneously chose a fat, stoned-looking penguin and a drunken ox:

The GNU Gnu Head and Tux the Linux penguin (link)
Tux drawn by lewing@isc.tamu.edu. Gnu head reproduced under the copyleft license (link).

To the open source community, Symbian has historically been kind of an antichrist -- controlled by some of the biggest tech firms in the world, bureaucratic, closed, and incredibly complex. If you're going to win over the open source crowd, you have to overcompensate by being excessively informal, friendly and "childlike." (That's Symbian's word for it, not mine.)

Here's how Symbian explains the logo (link):

It is a brand that’s human and playful and friendly, where you feel the human hand. A brand that enables you to discover unlimited creative possibilities, that wants to share and talk A brand that’s fun, that isn’t fixed, but free to constantly evolve. A brand that’s owned by all the people that create and build with Symbian. A brand that celebrates new ideas and creativity in all forms. A brand that’s truly alive and refreshingly different, because it is! A brand that’s human to the core and that underneath beats a human heart.

In other words, the slick and calculated marketing approach is to give the company the most artless logo imaginable. And from that perspective, I think they succeeded.

I am wondering, though, what they'll do when it's time to use the logo for something other than just decorating a website. OS logos are generally used as compatibility marks. In that role they need to be displayed on screen, and preferably printed on the back of the phone, to let the user know that he or she can run Symbian applications on the device.

Picture a meeting where the folks at Symbian try to convince a product manager at Nokia or Samsung or SonyEricsson that they should print that logo on the backs of their phones, or that it should be displayed prominently on the screen. I don't think it'll go over very well. And even if they did agree to include the logo, the tiny details in the lettering won't show up well when reduced in size. The logo just isn't designed to travel.

So Symbian app developers should ask how they'll be able to market their applications when Symbian OS users don't even know what their OS is. Symbian has never had a good answer to that, and I think the new logo doesn't move them any closer to solving that problem.

Maybe the assumption is that all Symbian phones will have application stores built in, so developers won't need to communicate compatibility. Maybe, but that will still put a big marketing burden on an application developer to explain model by model which phones their apps work on.

The bottom line is that any logo artless enough to please the open source community would be problematic as a marketing tool. As is often the case in marketing, you can't please all your audiences, so you can either be universally bland or you can optimize for one audience. I think the folks at Symbian decided that open source street cred is the thing they need most.

And maybe they're right.

Thoughts on the tech industry bailout

2009-04-01T00:20:00.000-07:00

I presume the big topic of discussion at the CTIA conference this week is going to be the government's emergency bailout package for the tech industry. I was surprised this morning when US Treasury Secretary Tim Geithner replaced RIM CEO Mike Lazaridis at the CTIA keynote to announce the package, and ever since I've been scrambling to sort through all the details. A lot of it's still fuzzy, but here's what I've been able to figure out so far:

--The largest single element in the bailout seems to be the $20 billion in subsidies for Motorola. I think the biggest shock here was President Obama's decision to replace Moto's co-CEO Greg Brown with Steve Wozniak. "We tried to get Steve Jobs, but he demanded control over the Seventh Fleet as compensation," Geithner explained. "So we went for the closest substitute we could find. Besides, Woz was available since he just got kicked off Dancing with the Stars."

Geithner said the subsidies to Motorola were originally designed to protect high-paying phone manufacturing jobs in the United States, but then the government discovered that those were all outsourced to China a decade ago. So the government settled on a requirement that the guy who glues the bat-wing logos onto Motorola's phones has to be an American citizen. He has already been hired, his name is Joey Carbonic, he lives in Wenonah, Illinois, and the crowd at CTIA gave him a nice ovation when he was introduced during Geithner's keynote.

There's a rumor at the show that the government also agreed to buy 500,000 unsold ROKR handsets and give them free to poor countries as a gesture of friendship, but that was denied by a government official who spoke to me off the record. "We're trying to get people in those countries to like us," he explained.

--In the spirit of the forced mergers between failing banks, Geithner announced the combination of Sun, Sprint, AOL, and 3Com. Called 3Sprun and combining the best of all four companies, the new firm will specialize in Java-based 56kbps wireless modems.

--I haven't been able to confirm this yet, but Palm has apparently been offered $2 billion in loans if it adapts the Pre to run on biomass power and merges within 30 days with either Black & Decker, Digg, or SonyEricsson. Ironically, reports from Stockholm say that the Swedish government has offered SonyEricsson 20 billion kronor if it merges with Airbus Industrie, so we may get a three-way deal that would see Treos built into the seat backs of every A380.

--Geithner also said $40 billion in grants have been reserved for use by Yahoo and/or Microsoft. "We like to plan ahead," he explained.

Those are just the highlights. There are apparently a lot more deals being arranged, with venture capitalists and members of Congress competing to get subsidies for various firms. The most intriguing rumor so far is the plan to provide three Twitter accounts to every American as part of the stimulus package, to produce the illusion that the country's population has suddenly tripled. And then there's Cisco's buyout of Six Flags to advance the creation of networked roller coasters (hey, it makes at least as much sense as their purchase of Pure Digital).

I don't know how those will turn out, but things are certainly going to get more and more interesting now that the government has decided that the free market can't be trusted to run the tech industry.

By now you've probably realized that this is April 1, and like the extended iPhone survey last year (link), the Spitr announcement in 2007 (link), and the Google-Sprint merger in 2006 (link), nothing I wrote above is true.

I hope.

Watch out for RIM

2009-03-16T22:50:00.000-07:00

Based on what you read in the press, you'd think Apple had conquered the entire smartphone market, or maybe that they invented it in the first place. But to me the most surprising story in recent smartphone sales isn't Apple, it's the continuing rapid growth of Research in Motion.

Check out the latest numbers from Gartner (link). As you know if you've been reading this weblog for a while, I have very little faith in third party market share numbers. They're compiled from shipments self-reported by the vendors, and are subject to all sorts of inaccuracies (link). But they do give a very rough picture of what's happening in the market, and the picture they've been drawing recently is mildly astonishing.

Nokia is still the smartphone share leader, with about 41% unit share. But that's down 10 points from a year ago, on a shipment decrease of about 17% year over year. RIM is number two, with over 19% share and shipments up about 85% year over year. Apple is in third: 11% share, up 110% year over year.

So, roughly speaking, in smartphones Nokia is about twice the size of RIM, and RIM is about twice the size of Apple.

I have to put a caveat on that. Quarterly share and shipment growth fluctuates a lot depending on whether a company has just introduced a new product or is clearing inventory in preparation for a launch. So you have to look at several quarters:

Unit smartphone shipments, worldwide, in thousands. Source: Gartner.

That gives a slightly less apocalyptic view for Nokia. It had particularly huge shipments in Q4 of 2007, so it's down year over year, but overall its shipments are flat rather than collapsing. RIM and Apple are both definitely growing fast, though, with Apple's shipments fluctuating a lot as it adjusted inventory before and after the shipment of the iPhone 3G.

But let's put this all in perspective. The definition of "smartphone" is very sketchy; the way Gartner uses the term today, it refers to basically any phone that has an externally-programmable OS in it. Nokia deploys the Symbian OS in all of its high-end phones, so they are all classified as smartphones. So RIM's not really beating up on Nokia's smartphones, it is currently out-growing the entire top end of Nokia's product line. Project out the current trends for a year, and RIM would be close to overtaking Nokia in smartphones. No matter how you parse the numbers, that's pretty amazing.

Why don't you just die already?

This situation is all the more surprising considering that conventional wisdom has said for years that RIM was doomed. First e-mail phones were just a fad, an extension of the pager market. Then they were just a vertical product that only a few specialized groups like stock brokers would care about. Then Microsoft was on the verge of destroying RIM (not once, but every time a new version of Windows Mobile came out). Then RIM was fated to fall into irrelevance unless it licensed Blackberry clones. And on and on...

Fortunately, RIM completely ignored conventional wisdom and stuck to its core business. The rewards have been immense. In its most recent quarterly report (in December), RIM had a revenue run rate of about $12 billion a year, up more than 60% year over year, and profit of about $1 billion a year. The company now employs about 12,000 people. For comparison, RIM's revenue is now about the same as Apple's was four years ago.

Companies with $12 billion in revenue aren't supposed to grow 60% a year, especially when the economy is gasping, so I'll be intensely interested to see RIM's next quarterly report on April 2. In this economic climate I won't take anything for granted. But keep in mind that Nokia is already making ominous noises about its sales (link), while RIM says its unit growth has been accelerating (link).

Face reality

I think the big message from these numbers is that the analysts and press have done a terrible disservice to all of us by creating the fiction that there is a unified smartphone market. That hides the real news. For example, IDG's writeup on the Gartner sales report focused on overall growth of smartphone sales and didn't even mention RIM until the sixth paragraph (link).

I use the term smartphone "market" here for convenience, but as I've said before, there really isn't a single unified smartphone market and there probably never will be, because different people want different things from their phones (link).

If you look carefully at the shipment numbers, this is blindingly obvious. The smartphones from RIM (and Apple) are differentiated products that have special features appealing to particular segments of users (RIM for e-mail fanatics, Apple for entertainment-hounds). They solve customer problems in unique ways that people can value, so their sales are relatively resistant to an economic downturn. Not immune, but I think they're likely to fall less than the others.

And since Apple and RIM serve different markets, they can grow rapidly side by side. One doesn't usually steal sales from the other.

But Nokia has never had a strong play with this sort of product. Most of its smartphones are bought as high-end mobile phones, purchased by technophiles and status-conscious people with money. When the overall phone market slows down, they slow down too.

The analyst numbers told Nokia a comforting fantasy that it was the dominant smartphone company, when in fact it was a very secondary player in the markets served by RIM and Apple. I think this let Nokia avoid the agonizing changes in product development that are required to make a truly differentiated smart phone.

Instead, Nokia has gone off on tangents attacking Google, Microsoft, iTunes, and just about every other target I can think of in computing. It's a bit like a guy at his home putting up wallpaper in the upstairs bathroom while out in the yard his car is on fire.

I continue to be intrigued by parts of Nokia's strategy, especially the Ovi services suite. Nokia will be able to push Ovi out to hundreds of millions of mobile phone users. In theory, that might be a very powerful way for the company to build a mobile data business. But it could be crippled if the most data-hungry users have already been siphoned away by Apple and RIM.

What happens to RIM?

The question about RIM is what are the natural limits on its growth. Not everyone wants an e-mail phone, although RIM has already stretched the market a lot more than I thought they could. But I think the bigger threat may actually be within the company. Beyond about $10 billion in revenue, a tech company starts to require different management techniques. There's enough going on that management has to delegate much more than it did in the past, and processes have to be set up to ensure quality work and smart decision-making in the lower reaches of the company. That transition is incredibly hard for the leaders of a startup to make, and I wonder if the bug-filled launch of the Blackberry Storm wasn't a symptom of a company growing beyond its processes.

On the other hand, RIM has such a long history of beating my expectations that I'm not going to bet against them again.

Speech recognition: Almost ready for mobile prime time

2009-02-15T13:06:00.000-08:00

I've always wanted to see speech recognition incorporated into mobile devices. Since you don't have a big keyboard when you're on the go, you ought to be able to just talk to your phone and tell it what to do, or dictate memos to it and have it convert them into e-mails or SMS messages. In addition to being incredibly convenient, this would increase the safety of a lot of drivers. It's a spooky fact, but in surveys I've done more than 10 percent of the US population admitted to sometimes sending text messages while driving.

Not smart, not safe.

So, is voice recognition good enough to let you just talk to your mobile device and then send the converted text as a message?

I first asked myself that question a couple of years ago when I bought a copy of Dragon NaturallySpeaking and a small voice recorder. I tried recording weblog posts and other documents while driving, and then brought the recorded sound back to my computer to convert it into text. The result was a disaster. Dragon was unable to keep pace with the recorded sound in the files, and started dropping sentences, paragraphs, and eventually entire pages of spoken text. I was so disgusted, and so disappointed, that I gave up and went back to listening to sports talk radio while I drove.

Recently a newly appointed product manager at Nuance (publisher of Dragon) sent out a survey asking for feedback on the product. Unlike most product managers, she signed the survey form with her own name and with her own e-mail address. Most product managers wouldn't do that because they don't want to be overwhelmed with feedback. I don't know how much feedback she got in general, or how overwhelming it was, but she got a note back from me describing my problems with the product and explaining why I really wasn't satisfied with it.

I didn't expect to get any reply from the company; Nuance has a remarkably restrictive policy on providing technical support unless you pay extra for it. Usually, companies that do that aren't interested in getting any sort of conversation going with their customers. But to my surprise, I got a note from the product manager not only sympathizing with my problems but offering to send me a copy of the latest version of the software and a voice recorder that she said would work well with the software. I wish my weblog address hadn't been in my signature, so I would know if they do this sort of thing for every frustrated user. But anyway I took her up on the offer.

You can see the results here. I dictated this weblog post using the voice recorder, synced it onto my computer for recognition, and then corrected the (few) errors by hand. There are pluses and minuses to the dictation system. The good news is that the program can now keep up with my dictated speech. I no longer lose sentences or paragraphs of text. I'm also surprised with the way the product recognizes trade names, so for instance when I say Home Depot or McDonald's or Nike or Apple or IKEA or Lowes, Dragon gets the names correct and properly capitalized (I didn't have to fix anything in that sentence).

On the other hand it does make mistakes -- the packaging claims about 99% accuracy, which means that you should expect one word in every hundred to be incorrect. My guess is that I'm getting somewhere between 97 and 99% accuracy. That's not bad. In fact, it's pretty darned impressive. But in practice it still means you have to go back and do a lot of corrections.

The training is close to torture: reading aloud a 20-minute excerpt from a Dilbert book while trying to pronounce every word correctly. Later I tried setting up the program without any training, and it worked exactly the same. So my advice is to skip the training.

The software is not great at understanding where punctuation should be placed in the text. I have learned that I have to give grammatical guidance by saying things like "comma," "period," and "new paragraph" in order to make sure that the text will be reasonably well formatted.

If I just speak naturally the text will come out like this making it very difficult for anyone else to read and even making it hard for me to edit without punctuation inserted it is very hard to get tell where a sentence was supposed to end and another one start add in a few wreck cognition errors by the soft wear and the text is not something you would want to send to someone uncorrected

Speaking with punctuation is unnatural, and could be somewhat distracting while driving. I have to think carefully about the text that I'm dictating, and I believe for some people that could cause them not to pay enough attention to what's happening on the road. I think I can do it safely or I wouldn't do it, but it definitely is an issue to consider.

Overall, I think this approach will make me a bit more productive, so I should be able to produce a little bit more weblog content and maybe get some other sorts of things done as well.

So it's nice for me, and I finally feel like I got my money's worth from Dragon. But is the technology ready for broad deployment in mobile devices?

I think the answer is technically yes, but practically no. Mobile devices are casual-use; tasks that require too much commitment or effort just don't get used. Without careful attention to spoken punctuation, the software produces errors and the sort of run-on text you saw above. Even in a short message, I think it's likely that you'd get more mistakes than you'd find acceptable. Correcting those errors on a small screen with no mouse would be tedious at best (it's an annoying task even on a PC).

More importantly, the software is very sensitive to the quality of the sound file coming into it. I believe most phone microphones and headsets wouldn't produce the required quality. You'd probably get better results with a service that just records your speech and has someone in India retype it (such services exist today).

So, the news from the world of voice recognition is hopeful for mobile users but not yet wonderful. The technology is good enough that you can definitely use it as a substitute for typing if you have physical problems. It's also a useful PC productivity tool for someone who generates a lot of text for a living.

However, I think we're not yet quite at the point where you can just talk to your phone and have it reliably transform all of your speech into text. It's getting better, but it's not all the way there yet. For a mobile device, the dream of just talking is still a dream. But I do think it's a dream that's getting closer to reality.

===========

PS: I'd also like to compliment Kristen Wylie, the product manager at Nuance who responded to my message. Take notes, folks, this is the right way to communicate with customers online -- sign your real name, use an address they can respond to rather than a no-replies mailbox, and when someone has a problem help them solve it.

News flash: Microsoft lied

2009-01-15T22:57:00.000-08:00

"I'm shocked, shocked to find that gambling is going on in here!" --Claude Rains, Casablanca

I'm a little late in getting to this item, but I recently came across James Plamondon's online confession that he lied while working as a technology evangelist for Microsoft (link). Actually, "lied" is probably the wrong word. James systematically misled and manipulated software developers, and enthusiastically taught others at Microsoft how to do the same. Some samples from his work there:

Working behind the scenes to orchestrate "independent" praise of our technology, and damnation of the enemy's, is a key evangelism function... "Independent" analyst's report should be issued, praising your technology and damning the competitors (or ignoring them). "Independent" consultants should write columns and articles, give conference presentations and moderate stacked panels, all on our behalf (and setting them up as experts in the new technology, available for just $200/hour). "Independent" academic sources should be cultivated and quoted (and research money granted). "Independent" courseware providers should start profiting from their early involvement in our technology....

Analysts sell out - that's their business model. But they are very concerned that they never look like they are selling out, so that makes them very prickly to work with....

The key to stacking a panel is being able to choose the moderator. Most conference organizers allow the moderator to select the panel, so if you can pick the moderator, you win. Since you can't expect representatives of our competitors to speak on your behalf, you have to get the moderator to agree to having only "independent ISVs" on the panel....Sounds marvelously independent doesn't it? In fact, it allows us to stack the panel with ISVs that back our cause....

Get a well-known consultant on your side early, but don't let him publish anything blatantly pro-Microsoft. Then, get him to propose himself to the conference organizers as a moderator, whenever a panel opportunity comes up. Since he's well-known, but apparently independent, he'll be accepted....

A Jihad is a road trip. in which an evangelist visits a large number of ISVs one-on-one to convince them to take some specific action. The classic Jihad is one focused on getting Tier A ISVs to commit to supporting a given technology by signing the technology's Letter of Agreement...As in sales, the purpose of the exercise is to close – to get ~~the mark~~ the ISV to sign on the dotted line, in pen, irrevocably.

The Role of ISVs
* Pawns in the struggle....
* Valuable pawns
o We can't win without 'em
o Must take good care of them
* Can't let 'em feel like pawns
o Treat them with respect (as you use them)

Developer Conferences....
* Subvert independent conferences
o Love them to death

Developer Magazines
* Same as developer conferences
* Infiltrate and subvert

You can see the details here. Be sure to skim the comments at the bottom. They're a hoot.

Speaking as someone who led the competitive teams at Apple and Palm for many years, I guess I ought to get worked up about this stuff. But mostly I think it's just old and tired. The whole "Microsoft is evil" theme is kind of pathetic these days, like the trial of an 85-year-old mobster. Yeah, I know, they deserve everything that Google's doing to them. Let's move on.

It's also not really news that a lot of analysts and conferences are on the take. For the record, you should always understand who's paying the bills when any "authority" talks.

I'm usually not moved by someone who apologizes only after being exposed in court and abandoned by his employer (link). But I'll take James at his word that he's trying to make amends.

Apology accepted, James.

That doesn't mean, though, that I agree with his prescription on what the industry should do about the situation. James says the best way to prevent a recurrence of Microsoft's misdeeds is to set professional standards for evangelism:

Microsoft...is this week launching its first public volley in the Mother of All Standards Battles, to control the de facto standards of cloud computing. For Microsoft, this is a life-or-death struggle. When Microsoft's back is to the wall, can it reasonably be expected to refrain from using the TE tactics that it KNOWS will help it win, if its use of those tactics is unrestrained?.... This problem can only be treated, I believe, by professionalizing TE, and thereby inoculating platform vendors against unethical TE practices. That's why I felt compelled to come forward now. Only now have I realized how wrong I was, and by coming forward now, in the opening skirmishes of the Cloud Computing Wars, I can begin to make amends for my past wrong-doing.

James is even writing a book on what he thinks those professional standards should be. That ought to be an interesting read. Maybe Amazon could do a two-for-one offer with the Martha Stewart Guide to Ethical Investing.

But I think the real problem isn't missing standards, it's missing morality. I believe James was able to thrive at Microsoft because the company's hypercompetitive culture condoned dishonesty, as long as you didn't get caught in public. Everybody in the industry believed they worked that way. I think the problem wasn't just in Microsoft's evangelism, it also included the company's marketing, business development, and so on.

Unfortunately, they're not the only company in the tech industry that thinks that way.

The real cure here is not to read a book or professionalize anything. Just take a course in business ethics. Or better yet, save your money and memorize this rule:

Never mislead a customer or partner.

And if an appeal to morality isn't enough to move you, keep in mind that even the cleverest liars eventually get outed. Just ask James Plamondon.

(By the way, James, if you really want to make amends, how about sending the royalties from your book to the stockholders of the companies you damaged or destroyed?)

==============

Thanks to Andrew Shebanow for pointing out this issue, in a cool little essay here.

The Palm Pre: Think Similar

2009-01-12T22:49:00.000-08:00

Palm died. Palm OS died. Get over it.

Now let's talk about this new company, and product, that happens to be named Palm. I don't know if they'll survive or not, but they have a chance, and they're definitely interesting.

That was my overall impression after visiting Palm at CES 2009. The differences started with the meeting room itself. Rather than shelling out for a (very expensive) booth, Palm had an upstairs display room off the show floor. That in itself is not unusual; companies low on money often take a display room at CES so they can have some sort of presence at the show. Usually they get very little traffic, because you have to make an effort to find them.

But there was a short line outside Palm's room. A friend and I got into line, and the Palm folks asked us for our business cards. They went away for about 30 seconds, came back, and pulled us both out of line. "You can go right in."

I'm not sure why they did it, since neither of us are VIPs. But somebody was screening the cards and pulling out anyone whose name they recognized. That was the first sign that I was dealing with a different company -- although the old Palm was pretty well organized, that level of attention to detail would have been unusual.

The second difference came when we entered the room itself. A display room at CES usually is an empty space about 40 feet (13m) or more on a side, with one big presentation screen, some chairs, and a couple of demo stations along the walls. You can take in the whole thing in 30 seconds. Instead, Palm had divided its space into almost a maze, with little meeting rooms (lined with couches) and corridors, all set off by gauze curtains. Along the "corridors" were abundant food carts (with servers, another unusual touch), and small stations where employees were giving continuous Pre demos to groups of up to about a dozen people. You could get very close and intimate with the device, although no touching was allowed.

It felt like a technology harem.

I don't think the old Palm would have decorated quite like that, let alone shell out that much money for exhibit space in a time of layoffs and financial stress.

The presenters were extremely well briefed and disciplined, although they didn't feel robotic. They showed the features they wanted us to see, and wouldn't be baited into going further. The overall impression of the space and staff was extreme design consciousness, a bit of opulence, and intense discipline.

Very un-Palm-like. More like boutique Apple without the rock star CEO.

Think Similar

The theme continued in the product. The Pre does not look like the Treo or any previous Palm product. If anything, it looks like an iPhone with some of its limitations fixed. The design of the hardware, graphics, the fonts, the way things move on screen, and the touchscreen gestures are all elegant, and reminded me intensely of the iPhone. You can even do a pinch gesture to shrink and expand things, which I thought was patented by Apple (this shows why I'm not a lawyer).

Unlike an iPhone, you can run multiple applications at the same time and switch between them. There's a thumb keyboard built in. The battery can be replaced. The APIs are supposedly based on web standards, so many people should be able to program the Pre without learning a new OS. Palm says it will have a software store built in, but the app approval process won't be as restrictive as Apple's. Palm will also apparently allow companies to port other platforms, like Adobe Flash, to the Pre, which addresses another iPhone drawback. (There's a comparison table between the iPhone and Pre here, but it focuses mostly on hardware specs.)

In contrast to all the iPhone references, it's very hard to spot any Palm legacy in the Pre (other than the company logo). The calendar still compresses unused hours, which was one of my favorite Palm features. But literally that was the main similarity that I noticed.

The device won't run current Palm OS apps, although I think Palm is open to someone porting a Palm OS emulator to the device if they want to. But I don't know how you'd operate those apps without a stylus. The browser is based on Webkit, so no more Blazer (yay).

The design of the interface looks nothing like Palm OS. Palm's old design ethic was all about sacrificing beauty in order to produce maximum utility. The result was often extremely efficient but plain (okay, ugly). The new Palm treats aesthetics like Apple does -- the device has to be useful, playful, and beautiful. That's incredibly hard to design, but apparently Palm has imported enough Apple talent to pull it off (or at least to make the demos look good).

Will Palm survive?

Prior to CES, it was fashionable for a lot of people online to predict Palm's imminent demise. That was a misreading of how the world works -- we technology insiders lose interest in a brand long before the public does. Palm still has a strong name, and it will get a good hearing in the market.

So the real question is, is the Pre good enough to make Palm profitable? I think it's too early to answer.

For one thing, we can't touch the product yet. The canned demos were incomplete -- I didn't see the dialer or the software store, for example, and I don't know details of how the product will sync. The SDK hasn't been released, so we don't know what it will be like to create apps for the device.

But my biggest concern is about the strategy, not the product. I'm not sure who the customer is for the Pre. Dr. Rob Enderle took time off from diagnosing Steve Jobs' medical condition (link) to tell a San Jose radio station that the Pre is a better e-mail device than the iPhone and a better consumer device than a Blackberry. Which is probably true, but misses the point -- it's probably a worse entertainment device than the iPhone (because it doesn't have iTunes) and probably a worse e-mail device than RIM (because it doesn't have RIM's server infrastructure). So who exactly is it best for?

Mobile devices that sell well usually have a well-defined market of people who look at them and say, "that one's perfect for me." The Pre is intensely elegant, which intrigues aficionados like me, but there aren't enough of us to make a lasting market. Beyond that, it's apparently perfect for people who want a compromise between a Blackberry and an iPhone, but don't need the best of either. Who are those people? And are there enough of them to make a business for Palm? I honestly don't know.

I guess the old Palm installed base might be a first source of customers, but many of them have moved on. Although there's a lot of enthusiasm on the Palm discussion forums (for a wonderfully detailed article, check here), longtime Palm users don't appear to have a lot of compelling ties holding them to the new device. Their old apps won't work, and they'll have to learn a new interface. Usually when a company makes a transition like this without backward compatibility, the user base reads it as an invitation to consider alternatives. Palm cannot take them for granted -- and even if it could, they alone are not enough to sustain the company.

What it means for the industry

Regardless of whether Palm survives, I think the Pre does some important things to the industry. It's the first smartphone that matches the iPhone on overall UI aesthetics, and it fixes many of the drawbacks of the iPhone. Other smartphone companies will be under pressure to match the Pre's features. Mobile companies like Samsung and Motorola, which lack software expertise, look increasingly vulnerable to gradual share erosion.

I'm very hopeful about the application development model for the Pre. By basing its development model on web standards, Palm apparently will empower the world's vast base of web app developers to quickly create Pre applications. If Palm implements the APIs right, that is a very smart move. It aligns Palm with the forces of the web, and might even make Pre the preferred mobile development platform of the web app community.

I don't know if that alone can make the Pre a success -- mobile devices usually build a base first with a particular function and then branch into apps. But it gives Palm a much better shot than it would have had if it tried to create yet another proprietary platform. The brass ring in the mobile app world is getting the attention of the web app community, and Palm now has a shot at it.

Google, are you listening?

What to do if you're a user

Wait.

We'll learn tons more about the Pre as it gets closer to shipping. Apple's undoubtedly working on new iPhone products (I'm betting on a smaller device, like a Nano version of the iPhone), RIM's getting the Storm debugged, Nokia is finishing the N97, and there are rumored to be more Android devices coming.* If you're thinking about getting a smartphone, you're going to have a great selection later this year. Hold out until you understand more about your choices.

__________

*There are probably some more Windows Mobile products coming too, but does anyone care any more?

Welcome to the real world

2009-01-12T22:40:00.000-08:00

The most memorable quote I heard at this year's Consumer Electronics Show came from a business contact who works with a lot of different consumer companies. "No one knows what's going to happen," he said. "No one has ever been through an economic situation like this, and they honestly don't know what to do. They just don't know what's going to happen."

The reality is that we never know what's going to happen, but most of the time we kid ourselves about it. We think we see patterns and we expect events to follow those patterns, which they always do -- except when they don't.

Recent economic events have rubbed our noses in the basic unpredictability of the world. But don't let that paralyze you with fear. The situation has always been that way; you just had some comforting illusions before. Make the best guesses you can, stay nimble, and when the weather is nice be sure to enjoy the sunshine.

Will the mobile phone really eat the PC?

2009-01-04T20:48:00.000-08:00

It's long been an article of faith for many mobile enthusiasts that mobile phones are going to become the dominant means by which the human race deals with the internet. Lately that idea has been echoed by more mainstream voices:

"There are over one billion people in emerging markets who will never access the Internet using a PC."
-- Adobe CEO Shantanu Narayen, on stage at CTIA, September 2008

"Most new internet users will be in developing countries and will use mobile phones."
--The Economist, September 2008 (link)

"Mobile phones are the future of computing, and they are ideally suited for accessing Web services....(The mobile phone will be:)
-the device most likely to subsume the PC's computing and informational dominance
-the most functional and accessible device for conducting Web search
-the natural gateway to Web 2.0 platform applications and services"
--E-Week, October 2008 (link)

I have a lot of respect for those sources, but in their enthusiasm for mobile technology, I think they have made two big mistakes:

--They've assumed the internet is a thing, and
--They have forgotten about Moore's law.

The internet is not a thing

It's a collection of standards for data transport, storage, presentation and so on. People do an incredible range of tasks that take advantage of the internet, some of them well suited to a mobile phone and some of them not. Creating documents and graphics that you want to share online, browsing content, and writing online comments all are moderately to enormously easier when you're using a PC with a keyboard, mouse, and larger screen. They also benefit from having large amounts of local storage, which you don't have on a mobile phone.

The idea that people in the developing world won't want or need the benefits of a larger screen and keyboard is patronizing. It assumes that they'll be content to be second class citizens for many Internet services permanently.

If they can't afford a PC, of course they'll do what they can with a mobile phone. But that brings us to the second assumption -- who says they'll never be able to afford a PC?

Moore's Law lives

As I've written in the past, some people in Silicon Valley worry that we're starting to run up against physical limits on the growth of computing performance (link). Although that may or may not turn out to be an issue at the high end of the market, at the low end no such barrier exists.

I'm told by friends on the manufacturing side of things that the production cost of a fully-equipped ultra-mobile PC or netbook (what we used to call a mini-notebook) is now around $200. The street price for basic models is $282-299, a drop of about 17% in the last four months (see here, and here). Many of the key components in UMPCs, such as the screens and optical drives, are also used in DVD players, which means they're being manufactured in large volumes, driving rapid price erosion.

UMPCs aren't perfect -- the keyboards are very cramped, and the screens display text so small that they can be uncomfortable to read. But they are far, far better than a smartphone for many computing and internet tasks.

I am not saying that PCs will become affordable for the world's poorest people anytime soon. But let Moore's Law continue to chew on the UMPC, and I think a PC will soon be within the reach of a working-class family in much of the developing world.

The most likely outcome is that most people who can afford a mobile phone and service plan will also be able to afford a small PC if they want one. My guess is that they'll use both devices in the same way you and I do -- the phone will be better for some tasks, the PC for others. The idea of using one to take over for the other will seem silly, kind of like using a hair dryer to cook dinner.

Someday in the distant future, of course, we'll have smartphones with flexible screens and fold-out keyboards that can fulfill all of the functions of a PC. At that point, the line between your PC and your phone will blur, and you'll be able to say that your phone has taken over your PC (you'll also be able to say that your PC has taken over your phone). But after watching the lethargic pace of change in mobiles over the last ten years, I think we've still got a long wait for the merger of phone and PC. Besides, integrating more features generally raises prices, so the merger of phone and PC will happen first at the high end of the smartphone market. PCs will be dirt cheap long before they merge physically with phones.

Nokia: Running in molasses

2008-12-14T17:41:00.000-08:00

Every time I think about Nokia and Symbian, I can't help picturing a man knee-deep in molasses, running as fast as he can. He's working up a sweat, thrashing and stumbling forward, and proudly points out that for someone knee-deep in molasses he's making really good time.

That thought came to me several times during a briefing day that Nokia and the new Symbian Foundation held recently in San Francisco. A recurring theme was a deeply earnest discussion of how big and complex their business is, and how proud they are that despite the complexity they can make forward progress. For example:

Charles Davies, CTO of the new foundation, pointed out to us that Symbian OS has about 450,000 source files. That's right, half a million files. They're organized into 85 "packages," all of which have been charted out in a diagram that will be posted soon on the foundation's website. Davies was proud that the diagram is in SVG format, so you can zoom in on it and see that "this is an architecture that's not just a plateful of spaghetti."

The diagram looks a bit like a plateful of very colorful spaghetti (although in fairness to Charles, that's true of every OS architecture diagram I've ever seen). Anyway, the big takeaway was how huge the OS is.

Davies talked about the substantial challenges involved in open sourcing a code base that large. He said it will take up to another two years before all of the code is released under the Eclipse license. In the meantime, a majority of the code on launch day of the foundation will be in a more restrictive license that requires registration and a payment of $1,500 for access. There's also a small amount of third party copyrighted code within Symbian, and the foundation is trying to either get the rights to that code, or figure a way to make it available in binary format.

Those are all typical problems when a project is moving to open source, and the upshot of them is that Symbian won't be able to get the full benefits of its move to open source until quite a while after the foundation is launched. What slows the process down is the amount of code that Symbian and Nokia have to move. I believe that Symbian OS is probably the largest software project ever taken from closed to open source. If you've ever dealt with moving code to open source, you'll know how staggeringly complex the legal reviews are. What Nokia and Symbian are doing is heroic, scary, and incredibly tedious. It's like, well, running in molasses.

Lee Williams, Nokia's software platform SVP who is moving over to become head of the Symbian foundation, picked up on the theme of massiveness. He said the OS is on 200 million devices, with 200 device types shipped and another 100 in development. With support for five different baseband modems, seven different processor architectures, symmetric multiprocessing, and a broad set of displays, "your options are dramatic and huge."

This sort of infrastructure is needed, he said, because IT, telecom, and the Internet "have merged almost completely.... It's the perfect storm of convergence. There's almost nothing it can't eat or it won't use." He compared its importance to the creation of movable type, color palettes, and the Renaissance.

He noted that some people think the Symbian Foundation is a response to Android and other competitive moves, but said the company can't move that fast, and actually the change was in the works long before Google announced its software.

At dinner, I had a chance to chat with one of the Nokia managers. He was kind enough to let me play around with a pre-release N97 (more on that below), and the discussion gravitated to the iPhone. He told me how excited he is by the many new products Nokia has in the labs but can't talk about yet, and expressed some frustration that people don't understand why it takes time for Nokia to respond to changes in the market. He described Nokia as a giant ship. "It takes a long time to turn it, but when we do..." he said ominously, and then reminded me that Netscape once had a lead over Microsoft before it was crushed.

The problem with talking to the folks from Nokia is that you're never sure what they believe vs. what's the official story they're trying to put out in the market. They're disciplined enough that they can stay on message quite well, and in most conversations they focus on talking about what they're doing rather than asking for feedback or getting into a two-way conversation.

So I'll assume that Nokia was being serious. In that case, let's look at some financials from 1997 (Netscape vs. Microsoft) and 2007 (Apple vs. Nokia):

All figures in millions of dollars.

Don't worry too much about revenue and net income; those are usually tied up by the ongoing operations of each company. The line I want you to focus on is cash. That is your ammunition -- the extra resource available to fund a big marketing campaign, or a new product development program, or an acquisition of an innovative new technology. Microsoft had 46 times more cash than Netscape in 1997, and it wasn't seriously threatened in any of its other core businesses. It could, and did, spend Netscape into the ground.

Apple has about the same cash hoard as Nokia. Much more importantly, Apple can focus that cash on a narrower battlefront. Its situation relative to Windows is relatively safe. Although Microsoft can never be ignored, it is innovating so slowly that Apple can take some profit from its PC business to fund other things. The music player business is also stable; although it's not growing like it used to, no one has come close to matching the integration of the iPod and iTunes. So Apple is free to spend huge wads of cash to establish its new iPhone business. It can pick the countries and vertical usages it wants to dominate, and as long as it doesn't do too many things at once, it can outspend almost any competitor.

Nokia, on the other hand, has battlefields everywhere:
--In mobile phones it's fighting Samsung, LG, and SonyEricsson, and a badly wounded (therefore desperate) Motorola.
--In entertainment smartphones it's fighting Apple.
--In communicators it's fighting RIM.
--In OS it's fighting Google, Microsoft, etc.
--In online services it's fighting Google, Yahoo, Microsoft, etc.

As Nokia EVP Anssi Vanjoki put it recently (link):

There’s a company that says they can index the world; we are going to go deeper - we are going to coordinate the world.

Sweet! He calls out Google and says he'll beat them in their core business. It's a noble effort. I love the company's ambition. But does Nokia have the resources to fight all those battles at once?

If the folks at Nokia really think they are well positioned to crush Apple, they need to go re-read The Innovator's Dilemma. Being big is not a benefit in a rapidly-changing market with emerging segments. A big company can't respond nimbly to that sort of change, and the segments attacked by new entrants are usually too small to justify huge investment by an incumbent. So new challengers like Apple and RIM pop up all around you, you gradually shed little chunks of market share, and you complain that people don't understand how powerful your core business is.

I am not at all saying that Nokia is doomed. They are an outstanding company, with smart people, a great brand, and enormous strengths. But they need to understand that turning the battleship a little faster won't win the war. Nokia's smartphone competitors are not standing in molasses; they won't stay still long enough for the 16-inch guns to be pointed at them. More importantly, the competitors on the services side breed like vampire rabbits. By the time you blow away a clutch of them, three dozen more have hatched and are sucking blood from the other side of the ship.

To succeed in smartphones, I think Nokia needs to start creating the sort of integrated software + hardware solutions that the smartphone winners excel at. And on the services side, it needs to start breeding its own killer rabbits (small entrepreneurial experiments that move fast and die quickly if they fail). So far what I think I see looks like a more design-savvy version of the smartphone business of Samsung (throw hardware at the wall and see what sticks) coupled with an effort to create a 16-inch cannon of services.

That's probably not enough to win in the long run. Nokia still has a lot of time to get it right. But do they really understand what needs to change? I can't tell, because all I usually get from them is monologues on how big their business is and how much cool stuff they have in the lab.

=====

A few other tidbits from the day...

N97: Second cousin twice removed of the Revo. I got a chance to play with a pre-release N97, Nokia's upcoming qwerty phone. The screen slides sideways to reveal a little keyboard underneath.

The look and size of the device reminded me a little bit of the old Psion Revo, although it's a pretty distant echo. The sliding process of the screen has a very nice feel to it; it's the sort of physical detail that Nokia excels at. Even in a pre-release state, the phone felt nice and solid in my hand.

The software needs a lot more work, but they admitted that. It's a pre-release device. No worries at this point.

As for the keyboard, I thought it was mediocre. The keys, and especially the microscopic letters on them, are a little too small for my taste (I have big thumbs). Typing was slower than I expect on a thumb keyboard. I'd put it about on a par with the Blackberry Storm (that's the Blackberry with the on-screen keyboard). The Storm has bigger letters than the N97, and unlike David Pogue I like the tactile feedback when you tap on its screen, although it is not as good as a real keyboard.

So the N97 has real keys but they're too tiny, and the Storm has bigger keys but they're not real. The tiebreaker is the software -- the Storm is notoriously unstable (it took me about 40 seconds to crash it). I think neither product is ready for the market yet. Unfortunately for RIM, the Storm is already shipping.

The destiny of Trolltech. About a year ago, when Nokia purchased Trolltech, I wondered what they were going to do with it (link). Now we know -- Trolltech's Qt software layer is going to become a graphics layer for Symbian. No word on what happens to Trolltech's other products.

That's nice, but what's it good for? Symbian is adding symmetric multiprocessing to the OS. In a session discussing the change, a member of the audience asked what you'd use symmetric multiprocessing for on a mobile device.

Long pause. "Well, some games use it..." Another long pause.

This is the difficulty of taking a technology-only approach when talking to developers. Although software developers are technophiles, what they really care about is what sort of cool products you can enable them to build. If your feature doesn't let them do something cool, they won't care about it.

(By the way, according to an article here, the benefit will be in performance tuning and battery life -- critical to handset vendors, but sanitation issues to application developers.)

Some alternate opinions. Some other people briefed by Nokia are not as worried as me about the molasses thing. In the interest of balance, here are a few examples:

Commentary from SymbianOne (link).

Fabrizio over at Funambol (link).

~~SonyEricsson on the event (link).~~ (Never mind, that was a report from 2003. I am so embarrassed.)

Proposition 8 and community review sites: Everyone loses

2008-12-13T19:04:00.000-08:00

What happens to a community review site when members of the community use it as a weapon against people they don't approve of? Sites like Yelp and Citysearch are finding out, as users target businesses that supported California's Proposition 8 (the state's recently-enacted gay marriage ban). The results so far are not pretty. They illustrate some of the weaknesses of online reviews, and the complexities of managing a community site.

It's a learning opportunity for any company that relies on online reviews or runs a website that allows user comments. I wrote about it over on the Rubicon site (link).

Mobile data: Be careful what you wish for

2008-12-07T21:13:00.000-08:00

The consensus around the industry seems to be that mobile data is starting to take off. Text messaging is still the leading data function, accounting for about 65% of total data revenue, according to Informa (link). But Nielsen reports a steady rise in the number of mobile Internet subscribers (link), and a faster increase in revenue (implying that those who do use the mobile web are increasing their online activity). Young people are apparently important drivers in the increase, with 37% of US adults age 18 to 24 using their phones to access the web, according to the Mobile Marketing Association (link).

The cause is supposedly not just the iPhone and other smartphones; what I'm hearing from multiple companies is that web access and other data usage is rising even on feature phones.

This increased activity is creating an uncomfortable problem for some mobile operators: it's apparently overloading their networks. There have been predictions for years that this could happen -- a report from 2005 pointed out that the typical 3G network would be overloaded if 40% of subscribers used video just eight minutes a day (link). It predicted potential traffic overload by 2007. There have been charges that service problems on the AT&T network in the US have been caused by the iPhone (link).

In the UK, the BBC's popular iPlayer streaming video service is supposedly threatening the economics of even wired ISPs (link -- very interesting article), so it's easy to imagine what it could do to mobile networks if broadly deployed. Supposedly the mobile version of iPlayer for Nokia S60 is set up to stream only over WiFi, but the discussion here (link) points out that restriction is likely to be evaded by enterprising users.

It's very hard to confirm exactly what mobile data is doing to the networks because the operators don't like to discuss this sort of thing in public. But the number of data-capable phones is definitely growing faster than network capacity, so overload is just a matter of time. I've gotten several off-the-record comments from friends in the industry saying that the operators are worried about the problem and are quietly trying to throttle traffic, especially to online multimedia services that consume a lot of bandwidth.

The problem is complicated by the all-you-can-eat data plans that have been adopted by many operators. If you're charging people for the amount of data they consume, their data use becomes self-limiting. But limited plans are unpopular with users, who get practically unlimited data on their PC web connections. When you tell people that they can have the web on their mobiles, they expect to be able to use it like the web they already know.

So the operators are stuck with either throwing out people who use the "unlimited" network heavily, or covertly degrading the quality of their service so they'll stop using so much data. Both practices are very dangerous to their long-term prospects.

The problem is that the people who use a lot of data aren't just the freakish fanatics that the industry would like to imagine them as. They are Internet power users, a group that we labeled the Most Frequent Contributors (MFCs) when we recently researched Internet usage patterns at Rubicon (link). They don't just use a lot of video -- they are generally very involved in all sorts of online activities. Most importantly for the operators, they write the majority of the reviews and user comments posted online.

So, if you kick a power user off your network, or throttle their performance, they are extremely likely to write about you online. Extensively. Where their complaints will be read by most other Internet users. Check out the comments here and here if you want a sample.

Systematically punishing your noisiest customers is not the way to build a sustainable business.

What else can the operators do?

I wish there were some magical formulation that would make users happy and operators financially sound. But there isn't, because the problem is inherent to the way a wireless network operates. And as the installed base of smartphones grows, and video and other multimedia services increase in popularity, the problem is only going to get worse.

The most damaging approach is that one that operators seem to be leaning toward now, covertly throttling traffic. They can probably get away with that for a while, but eventually people online will compare notes, figure out that network performance is being systematically distorted -- and then the class-action lawyers (in the US) and government regulators (in Europe) will be unleashed.

Honesty is the best policy. Ultimately I think there's no alternative to moving to pricing plans that acknowledge the physical limits on the wireless Internet. That, and the operators need to resist the temptation of advertising their Internet as identical to the wired Internet. The MFCs are technically sophisticated, and capable of understanding the need for tiered pricing if it's explained to them clearly and honestly. What causes endless friction is the hypocrisy of calling something "unlimited" and then limiting it.

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Belated thanks to Voip Survivor for featuring my post on app stores in the Carnival of the Mobilists (link).