AS SMARTPHONES PROLIFERATE, WILL ONE COMPANY EMERGE AS THE CLEAR MARKET WINNER?

1호 (2008년 1월)

A version of this article was originally published by Knowledge at Wharton
 
Just as computer operating systems vied for dominance back in the late 1970s and early 1980s, smartphones these days are jostling for market share, hoping their mix of capabilities -- ranging from Web surfing to e-mail to calendar management -- will ensure them a critical mass of customers. The makers of mobile devices such as the BlackBerry, iPhone and Treo are all scrambling for position.
 
As is usually the case when the competition gets fierce, consumers are reaping the benefits: The smartphone marketplace is full of increasingly clever devices offered at steadily falling prices. Yet, at the same time, the tight integration between the cellular networks, device manufacturers and operating system vendors also serves to limit consumer choice. Want an Apple iPhone in the U.S.? You'll need to select AT&T for your cellular service. Interested in Palm's forthcoming Pre? You'll have to switch your service to Sprint.
 
According to research firm IDC, while mobile phone shipments overall fell 15.8 percent worldwide in the first three months of 2009, the smartphone segment of those shipments gained 4 percent -- even in a declining economy.
 
Industry observers generally agree the smartphone market is at a tipping point -- moving from the realm of niche product to game-changing, mass market item. Less clear is how the industry will evolve. Will the variety of mobile operating systems -- the software that is the foundation for all the devices can do -- be winnowed down to one or two, or will the Balkanization of mobile software hamper the growth of the industry?
 
So far, Balkanization has proved the rule.
Apple announced the third version of its iPhone operating system in March and demonstrated some of the new phone's capabilities earlier this month at the company's annual developer conference. Palm just launched the Pre, a device that has earned rave reviews for its slick operating system, dubbed "webOS." BlackBerry maker Research in Motion, or RIM, and Nokia, the world's largest mobile phone maker, are also vying for consumers with a barrage of new devices.
 
Apple has achieved a degree of lock-in -- the practice of requiring users to use harder and software from a prescribed set of vendors -- with its iPhone and App Store; its customers can use only those applications available from Apple's online market. If the new Palm Pre includes a must-have application, iPhone users who want it would have to switch devices and even their wireless phone service providers from Apple's only U.S. provider, AT&T, to Palm's partner, Sprint.
 
Other firms are adopting a more open strategy in which they develop an operating system that can be used in phones from a variety of manufacturers. Examples include Nokia's Symbian, Google's Android and Windows Mobile from Microsoft. They hope to win through ubiquity -- gaining market share by being installed in multiple brands of smartphones.
 
It's far too early to declare any winners.

Research firm Gartner reports a jumble of operating systems vying for the mobile market. For instance, Nokia's Symbian operating system ended 2008 with 52.4 percent of the global smartphone market. But its share of the market in 2007 was 63.5 percent. For 2008, RIM's BlackBerry operating system had 16.6 percent market share followed by Microsoft, with 11.8 percent; Apple's iPhone at 8.2 percent; and Linux, which had 8.1 percent.
 
Fierce competition is to be expected in the early stages of a growing market.
What will ultimately decide the fate of these multiple mobile operating systems? "The main differentiator will be the availability of applications," says Wharton operations and information management professor Karl T. Ulrich. "The devices seem to be converging on two basic approaches: larger touch screens and keyboard-based devices with smaller screens. The best devices in these categories are substantially similar. The number of iPhone applications makes it the favorite in the touch screen category."
 
Still, many wireless carriers, such as T-Mobile, and device makers, including Motorola, are betting on Google's Android operating system, which is intended to be used by smartphones from a variety of manufacturers, just like Windows in the PC world.
 
Smartphone vendors believe if they can win developers, customers will follow. That is why smartphone operating system makers have all launched application stores to compete with Apple's App Store for the iPhone. According to the Washington Post, Nokia's first download -- WorldMate, a travel assistant -- was purchased in Singapore while in Spain, the first download was the free Flashlight app. In the U.S., it was the AP news app.
 
These stores allow software developers to distribute programs and get a cut -- 70 percent, in most cases -- of the revenue. The goal: emulate the success of Apple's store. This spring, Apple announced that more than a billion applications had been downloaded from the store in its first nine months.
 
How the smartphone battle is resolved may also depend on the evolution of the devices. For instance, if smartphones evolve to become more like laptops -- or their smaller cousins known as netbooks -- issues like interoperability and the selection of applications will become more important.
 
No matter how the technology evolves, it's likely consumers will have multiple operating systems and devices to choose from for a while. Although the current number of operating systems may consolidate, choice is likely to rule the industry because no one platform has proven it can satisfy everyone.
 
Wireless carriers and device makers want as much operating system choice as they can get because they are fearful of becoming too reliant on any one company, notably Microsoft, says Gerald Faulhaber, a business and public policy professor at Wharton. "For the wireless guys, having a plethora of operating systems is a way to keep out of Microsoft's clutches. Symbian and Android were developed, in part, as a response to Microsoft's dominance in the PC."
 
And that's fine with Faulhaber, who says that smartphones have no particular need to follow the PC model. "They are a much more personal device. Consumers will simply choose the one that fits best."
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