Category Archives: Google

A Perfect Storm in Barcelona

At the Mobile World Congress last week in Barcelona, three companies dominated the show.  The mobile industry is on fire, yet two of those companies weren’t there, though their presence was felt everywhere.

Apple – doesn’t do shows like MWC – but what they have done to the industry is provide a tremendous catalyst for innovation.   Apple’s iPhone, introduced only three years ago, has transformed how handhelds look and function.   They have given the industry a kick up the backside and smartphone innovation has accelerated.  LG’s 3D Optimus phone is an example.  No Blues Brothers glasses needed to view stunning 3D videos.  Apple’s iPad, introduced just 8 months ago, has legitimized the tablet, and though the Far Eastern manufacturers had plenty of tablets before, suddenly there was a buzz on their stands as punters were eager to get their hands on the latest tablet wares.  Tablets stand astride the traditional PC channel and the mobile channel and the two industries have now collided.

Google.  Though Android was only released as an open source license mobile operating system just over two years ago, Android smartphones now have the largest share of all smartphone O/S’s.  Smartphone and tablet demand is driven by whether or not the latest version of Android is supported on devices.  The Android section off Hall 8 was heaving. It was by far, the noisiest, most crowded area of the entire show, and that buzz didn’t let up until the final whistle.  Apple should take note.

Facebook wasn’t there, though Google’s YouTube was.  Both have transformed the mobile industry.  It doesn’t matter whether you are a service provider, a phone manufacturer, a backhaul equipment vendor or a manufacturer of power equipment. You are feeling the effects of consumers capsizing the capacity of networks .  YouTube is boosting data traffic and Facebook and IM are driving signalling traffic as well as data traffic.

Whether you are a farmer in Kenya or an executive in the City, few would argue that mobile communications is transforming lives and the mobile industry is being transformed faster than ever.

 

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Filed under Apple, Google, Social Networks

Fragmentation in the mobile market

At last week’s Web 2.0 Summit in San Francisco, Morgan Stanley’s Mary Meeker gave an insightful talk on the economy and internet trends.   She asserts that the mobile internet will be bigger than most people think.  Her slides are here with the ones on internet trends beginning on page 28.  Let’s look a little more closely at the complex, rapidly morphing telecoms market – where the action is now largely in mobile devices.   For a pithy overview of the telecoms industry, allow me to copy from that industry’s changes as cited by the eComm conference in Amsterdam that is concluding today:

• Telecom is becoming software
• Today’s model of the telephony and SMS cash-cows will significantly dry up long-term
• “Phones” are becoming general purpose always-on computers
• A march is underway to change how spectrum is allocated and utilised
• Applications innovation is being democratised
• The media industry is converging with personal communications
• Internet-style ecosystems are starting to pressurise the traditional value chain
• Search engines and computer manufactures are encroaching into the space
• App downloads; media content and even communication streams are increasingly routing-around operator’s billing systems
• The telecom kingdom is fragmenting daily.

What is a supplier to do?   Let’s look at smartphone operating systems and the Symbian operating system in particular, backed by the likes of Nokia, Sony Ericsson and Samsung, and as of this year,  an open source venture.  Speaking on the subject of innovation at a London’s  Symbian SEE 2009 show yesterday, noted author Geoffrey Moore declared that the only recourse for members of the Symbian ecosystem  is to copy as fast as they can the innovations made by Google and Apple, commoditize those innovations, and use Symbian’s huge installed footprint to turn the tables on its competitors – or lose share to Google and/or Apple.  In other words, copy Microsoft’s strategy when faced with the upstart Netscape and use its platform to commoditize and integrate its competitors’ functionality. His slides are here.

Moore also predicts that there will only be one winner amongst smartphone mobile operating systems.  He expects that within two or three years we will see which one will reach a critical tipping point. In Symbian’s favour, Google he said is disadvantaged by attention deficit syndrome – it keeps on innovating and has trouble concentrating on anything long enough outside its core advertising/search business.   Apple he claims prefers to occupy prestige brand positions.   Microsoft has problems breaking out of blue collar mobility.

Whilst copying competitor innovations and leveraging a huge installed base may help guard aganst some encroachment, I am not so sure we will see a consolidation in the near term.   I suspect mobile ISV’s will continue to have to port to several OS’s for the next decade if they want to grow from tens of millions of dollars turnover to hundreds.   Mobile infrastructures vary widely between regions and consumer profiles.  Where Japanese demand high sophistication, developing countries need inexpensive basics.   An elderly person is likely to use a different handset to that of a much younger facebook, YouTube addict.  The sheer size of the smartphone market, diversity in use types and supporting infrastructures have made it possible for different mobile business ecosystems to thrive, unlike the simpler and smaller early PC era that Moore often cites.  There is room in the mobile market for diverse approaches, devices and ecosystems – so fragmentation will probably continue for at least a few more years.

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Filed under Apple, Google, Microsoft, Sony

Microsoft’s Business Productivity Online Suite and Partners

Yesterday I attended a partner briefing at Microsoft UK for their new Business Productivity Online Suite (BPOS) which goes live in a few weeks in Europe and Japan.  The service has already been up and running since November in the US.  I was particularly impressed by the level of investment Microsoft is putting into their data centres – with a primary one in Dublin, a secondary centre in Amsterdam as well as installations in Virginia, Washington State and Singapore with plans for more in APAC.   BPOS is Microsoft’s online offering of Live Meeting, SharePoint, Office Communications Server and Exchange Server with a minimum of 5 seats and around 13,000 seats max for standard (their multi-tenanted version) and a dedicated version intended for larger installs that is also finding favour amongst small customers.  At $15/user/month it is more than three times the price of Google Apps. The types of clients interested in BPOS cluster at the low 5 to 50 seat end, and surprisingly for Microsoft, the very high end blue chip clients. 

It is plainly evident that the company has put a lot of thought and effort into this. It has clear competition from Salesforce.com and Google and is determined to get SaaS right.  It is important to note that the service is not Microsoft Office online (yet) nor does it offer full telephony (yet) or CRM (yet)  but it doesn’t take a crystal ball to predict that they will soon flesh out their offerings.  Their sales projections are, on the other hand, relatively modest.  That is the issue I have with many new Microsoft ventures.  The company is huge and experienced sales hands know how to game the system.  They know to sandbag and slightly over-achieve.  An ambitious sales target presents higher risks – and lower individual rewards.  But that can also mean a new venture fails to find support in the company, and it flounders through lack of investment. That does not seem to be the case here as Microsoft feels the hot breath of competition and still retains much of the DNA that drove them to strive for share and seek choke points. 

By extending BPOS down to 5 users, and offering 5G of mail storage per user, they are competing squarely against their own SharePoint and Exchange hosting partners.  It must be said that if you add up all the company’s hosting partner’s mailboxes it doesn’t amount to more than 20% of the total number of Exchange seats, so though significant, partners have been at that game for a number of years and haven’t grown as quickly as Microsoft or they had hoped.   And that is because hosting Exchange technically isn’t easy – as Microsoft is finding out, because these partners started small and have been  growing organically, and because, importantly – most customers mid tier and up are loathe to give up their data.  For small companies, who don’t have an IT person, there isn’t a choice, so the data issue is not significant – but those small companies can be as difficult to service as ones 10 and 100 times their size – and can have the same cost of sale.    

It looks like there are significant teething problems for Microsoft at the low end. Microsoft needs partners in that segment. Their infrastructure software out of the box needs integration and support.  And it needs a sales force, so it can’t afford to alienate its partners.  By offering partners an 18% finder’s fee the first year and 6% thereafter and pledging not to offer end user help desk support, it is hoping to sweeten the medicine.  But by transacting directly with the end customer, the company is asking the partner to become an agency, and that is a point to which many partners are openly hostile.  Partners hate to lose control of their customer and a vendor transacting is a threat.  Microsoft tried to spin it, saying it was taking the credit risk, but it wasn’t sufficient to disperse the unease in the room. Yet many partners haven’t been transacting for on-premises Microsoft licenses anyway for years. There is no margin in it and they leave that to license specialist resellers.  Microsoft point to a 7:1 partner services vs license revenue ratio of opportunity for partners.    But that is also a problem. If you have to spend another $7 to get value out of $1 of software, that is an opportunity for a competing SaaS vendor to embed value in the service directly,  lower cost of ownership and time to value.  However, if there is one thing I have learnt from 25 years of competing against and working with Microsoft, it is this – they are extremely tenacious.  Eventually, they get things right. It may take five years, it may take ten, but they are determined.  And partners, as they have always done, will first bob and weave, then adapt or close shop.

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Filed under Direct, Google, Indirect, Microsoft, SaaS