Theatre of operations

The number of smartphone operating systems is on the increase. With a variety of business and development models, from end to end proprietary to true open source, there ought to be something for everybody. While the smartphone sector as a whole is growing, though, not all of the operating systems will enjoy the same levels of success.

There is a temptation to dismiss the battle for dominance among smartphone operating systems as a competition that has relevance only for the organisations directly involved in OS development. But it is a temptation that should be resisted, because this is not a niche tech-war. In fact it’s the latest iteration of the industry’s abiding internal struggle-that for control of end user relationships and revenue streams.

The most prominent industry trend of 2009 is the mobile application store. Handset vendors are launching them, operators are launching them and software and internet firms are launching them, with all three groups positioning themselves to directly engage the application-buying consumer.

The proliferation of app stores owes its existence to Apple. More than a slick user interface, more than the bar-shifting industrial design of the iPhone, Apple’s legacy in the mobile world will be the fact that it showed users what they could do with their smartphone and showed the industry that money could be made by doing so.

This, according to Malik Saadi, senior analyst at Informa Teleoms & Media, will spark an evolution in the criteria by which end users select their handsets. Apple won’t have the game to itself for ever and, “in the future,” he says, “terminals will be bought because they support good applications.”

If Saadi is on the money then operating systems will become central to the popularity of handsets-even if end users don’t know which OS they’re selecting-because it is operating systems for which applications are developed. Developers-like everyone else in the value chain-follow the money and, the more deployments of a particular OS there are, the more applications will be developed for it. The more applications are developed for it, the more popular it will become-and the more money will be made through the application stores selling products for that operating system.

In short, if Android proves the most popular mobile OS, Google (of the firms backing the various operating systems) will reap the most significant benefits from application sales through its Android Marketplace. If the Symbian Foundation wins out, then Nokia-as the only vendor to ally itself to the Symbian Foundation as its sole smartphone OS-has the most to gain.

A little over a year ago Arun Sarin, then Vodafone’s chief executive, used his keynote speech at the 2008 Mobile World Congress to call for a reduction in the number of smartphone operating systems. The ideal number of OS in the market, he said, would be three. But the tide was already against him; the Apple iPhone had established itself as the darling of the handset space, and sneak peeks at Google’s Android platform were being offered on the show’s exhibition floor.

A year on and Sarin’s desired consolidation shows no signs of arriving; indeed it is more distant. Android handsets are in the market, Apple continues to gain traction and the creation of the Symbian Foundation, partly in response to the open source essence of the Limo Foundation, would indicate that neither grouping anticipates departure. Meanwhile the enterprise specialists of Microsoft’s Windows Mobile and Research in Motion’s Blackberry are widening their scope and the long-dormant Palm has resurfaced with its Web OS. The space is becoming more cluttered, not less.

This is in part due to the fact that the smartphone sector is growing, with Informa Telecoms & Media putting unit sales at 161.72 million in 2008 and forecasting growth to 507.12 million in 2013. As a share of total handset sales, the firm predicts, this will grow from 13.5 per cent to 38.1 per cent over the same period. Adding to the appeal for handset vendors is the fact that smartphones are higher margin products, with Informa estimating that, while smartphones currently account for only 10 – 15 per cent of sales, they represent 40 per cent of vendor profits.

As smartphone sales grow, the handy delineations that were once used to order the market are no longer reliable. While Symbian proponents look to push their OS further into the enterprise space, RIM and Microsoft have set their sights on expanding into the consumer market. Apple and Android, meanwhile, believe they can be all things to all people.

And this is not just a battle for the mobile form factor. Apple and Microsoft herald from the computing space, of course, but Android and Symbian are both being touted as potential notebook operating systems as well.

One means of grouping today’s mobile operating systems is according to the extent to which they are open or controlled. Apple, RIM and Microsoft all control their respective operating systems. The LiMO Foundation-which spearheads the open source Linux movement-is completely open, Symbian is transitioning to a similar state and Google’s Android, also based on Linux, purports to be open but is actually somewhere between open and closed. And it is with this classification that the nature of competition within the mobile OS sector comes into focus.

For the likes of RIM and Apple, the situation is a simple one. As the sole manufacturers of devices that carry their OSs-and sole developers of those OSs-they alone as handset vendors reap the benefits of improved sales of handsets and application revenue. For the open source OS players, the situation is a little more subtle, a little more complex.

Outwardly, the mobile operating system sphere does not seem the most hotly competitive part of the industry. Different OS vendors or groupings seem keen to acknowledge one another’s individual successes and contributions to the overall sector and the importance of the variety that they collectively bring. But dig beneath the surface and the competitive tensions are there.

Perhaps the most frequently displayed of these is the dismissal of Symbian as Nokia by another name. It’s not hard to understand such a perspective. Nokia has by far the largest share of the handset market, and an even larger share of the Symbian market. Symbian, in turn (and because of Nokia’s market share) dominates the open OS market. Nokia itself has clearly taken this perception to heart, with the move to create the open source Symbian Foundation a direct response to these concerns.

The foundation has ten founding board members-AT&T, LG Electronics, Motorola, Nokia, NTT DOCOMO, Samsung Electronics, Sony Ericsson, STMicroelectronics, Texas Instruments and Vodafone- and plans call for the organisation’s platform to be available on an open source basis from mid-2010. Software assets are being contributed to the foundation, including Symbian OS and S60 by Nokia, UIQ technology by Motorola and Sony Ericsson and MOAP(S) by NTT DOCOMO and Fujitsu.

Despite the backing of such a range of companies, the belief that Symbian is at heart a Nokia vehicle remains popular in the industry. “The Symbian Foundation will have to do a lot to dispel that sort of thinking,” concedes Erik Jacobson, a Nokia employee speaking on behalf of the Symbian Foundation. “But when the Foundation is up and running, Nokia will have just one seat on the board, like everyone else. So there will be no formal control by Nokia. Give the Foundation another six months and people will have got out of the mindset that it’s a Nokia-led organisation.”

That could turn out to be an optimistic assessment. Morgan Gillis, executive director of Linux OS collective the LiMo Foundation, clearly doesn’t buy the notion that Nokia will be relinquishing control to a committee. “The industry is not interested in ceding the platform to Nokia and allowing it to take the platform forward,” he says. Gillis does agree, though, that the creation of the Symbian Foundation is a move to a genuinely open source and non-partisan structure-but he points out the caveat that the Symbian Foundation board retains right of approval over membership.

Michel Piquemal, senior vice president for European operations at Japanese software vendor Access-whose Linux Platform v3.0 OS product is based on the LiMo Foundation’s output-backs Gillis’ viewpoint, dismissing the Symbian Foundation’s shift to open source operation.

“Symbian’s move to open source is not going to radically change the game,” he says. “If you are Samsung or LG or any kind of major player in the handset market, it’s unlikely that you are going to source your technology from your number one competitor; Nokia. That has nothing to do with whether the technology is any good, it’s purely strategic.”

Under the proposed governance rules of the not-for-profit Symbian Foundation, as Jacobson is at pains to point out, Nokia won’t be the organisation from which handset vendors source the OS technology. The real issue is that, given Nokia’s market share in the handset sector, any work put into the Symbian Foundation by other handset vendors could be seen to benefit Nokia to a greater extent than it benefits them.

Piquemal raises a similar issue over Android, the Linux-based OS led by Google but developed and promoted by the Open Handset Alliance. Here, he says, it is not the vendors who risk harming their own chances, but the operators. “If you are a carrier you may have a second thought about enabling a new competitor that may take all of the revenue stream from the service. The carriers are afraid of Google because of the revenue Google could take from them.”

Better, say Piquemal and Gillis, for independent-minded players to choose an independent-minded operating system. And this is the central thrust of the LiMo camp’s case; that it is truly open, not beholden to one dominant company, not marked by conflicts of interest.

It can’t really be faulted on this assertion but its independence could be something of a double-edged sword. The absence of a single leader driving the organisation could prove a major obstacle; after all, the LiMo Foundation currently has no heavyweight international backer taking handsets to market.

The founding members of the LiMo Foundation were Motorola, NEC, Panasonic, Samsung, Vodafone and NTT DoCoMo. At the time the LiMo Foundation was formed, in January 2007, Motorola was already a weakening force on the global handset circuit, a trend that has proven to be linear. Panasonic and NEC, meanwhile, were then-and remain today-heavily dependent on Japan generally, and NTT DoCoMo in particular. Samsung is a big name, but has yet to produce a LiMo compliant handset.

To date, 33 LiMo compliant handsets have been produced. Motorola has brought eight models to market, targeted primarily at the US and Europe, and LG, a more recent member, has produced a single phone. The rest, from NEC and Panasonic, have gone exclusively to DoCoMo, a carrier which has been historically unrivalled in the control it has exerted over its handset suppliers.

While membership of the LiMo Foundation has swollen to 65, including 11 operators, of which six are tier one players-and while Samsung and LG were showing demo handsets at this year’s Mobile World Congress-the commercial story so far has been dominated by NTT DoCoMo. And if operating systems will live and die on volume sales of handsets and applications, there is work to be done in the LiMo camp.

What it did do that was vitally important, however, was bring carriers to the mobile OS table, a move that was aped in November 2007 by Google, Android and the Open Handset Alliance (OHA) and later reflected in the new structure of the Symbian Foundation. Sensitive to a shifting industry dynamic, the LiMo Foundation was created in part to give carriers a hand in OS development. Whether or not this will prove a winning strategy depends on which organisations-handset vendors or carriers-prove the most adept at selling applications to their end users.

Egalitarian as LiMo may be, there is a perception-which is in part a hand me down from the development of desktop PC Linux solutions-that committee-led structures like this lack decision making skills. The absence of a majority voting superpower stops choices being made, critics suggest. “The governance model is not obvious yet,” says Malik Saadi. “Who will steer the roadmap?”

Slides from a major, platform agnostic handset vendor seen by telecoms.com which compare and contrast Symbian, Windows Mobile, LiMo and Android contain the following assessment of the LiMo community: “Large open source community, yet progress in the platform is slow.”

Morgan Gillis disagrees: “We have a board of fifteen companies, and all the people who are on the board are very senior and seasoned industry professionals. The great power of that set up is that, as decisions are taken, you don’t then have to go and sell them afterwards to the industry, because the industry has already taken those decisions in collaboration. A one company board can take decisions more quickly, but that doesn’t mean that the decisions are enacted more quickly,” he says.

There are similar issues in the Android camp. That there was only one new Android handset announced at this year’s Mobile World Congress, and that it was from the same vendor that produced the only other Android handset-HTC-was one of the great surprises of the show. Many within the industry had been expecting a rash of new Android handsets, signalling widespread enthusiasm for the operating system.

Just as LiMo has been most successful by taking handsets to market through collaboration with NTT DoCoMo, so Android is relying in the first instance on exclusive carrier relationships. T-Mobile took the debut Android handset, the G1, and Vodafone the second-dubbed the Magic.

Google is more than aware of the suspicions it inspires in the carrier community, despite its partnership with a number of the world’s largest operators. With this in mind it was interesting to note that, while the Magic demo units being shown at MWC sported HTC, Vodafone and Google branding on the front of the hardware, Dave Catt, head of operations for UK and Ireland at manufacturer HTC, told telecoms.com that in the commercial iteration, the Google and HTC brands would be relegated to the back of the phone.

HTC, a brand that has emerged over the last 18 months or so from the shadow of its white label carrier customers finds itself in the somewhat unlikely position of having 100 per cent share in the Android handset space. This cannot be expected to last and, in any case, says Catt, the firm is keen to stick closely to its Windows Mobile heritage.

” Windows Mobile is our DNA, our core business,” he says. “Android is a new platform and it’s very exciting but from our company perspective it’s very important that we keep a focus on the Windows platform. I wouldn’t say that we would never do a Symbian phone, for example, but we’re not interested in getting involved with [application] development communities, we’d rather sit outside of that.”

Catt’s view reflects that of most handset vendors. Nokia aside, manufacturers are not keen to ally themselves to a single operating system, preferring to talk in terms of meeting the requirements of the carriers to which they ship their product. Samsung, present in the OHA, the LiMo Foundation and the Symbian Foundation, is the perfect example of the spread betting approach employed by most vendors.

The carriers, too, need to keep their options open, which is why the same carrier names appear in the various OS alliances alongside the manufacturers. Nonetheless, not all of the operating systems will meet with the same degree of success as we move into the next decade. So which will be the most successful?

In the short term, over the next four years, Symbian looks likely to remain dominant, although its market share, according to the analysts, will begin to dwindle. Informa Telecoms  & Media forecasts that the total Symbian market share (including both Symbian Foundation handsets and legacy Symbian product that remains in the channel even after the first foundation handsets are shipped) will drop from 44 per cent this year to 42.6  per cent by 2013. But it will still be shipping in almost twice as many handsets as its nearest competitor, Windows Mobile, due for a major overhaul in 2010.

The facts of life in the handset space are simply that whatever Nokia does will prove dominant. But, says Eric Jacobson, there is more too Symbian’s future performance than simply Nokia’s patronage. “Symbian is battle hardened,” he says. “There are a quarter of a billion Symbian devices out there now and, while there have been a lot of mistakes along the way, there has been a lot of learning done. And it’s interesting to see other groups now coming to this space and finding out the hard way the answers that we’ve already learned.”

Informa’s assessment of LiMo’s prospects is less rosy, with projections suggesting that the firm’s shipments will peak in 2011, before dropping off fairly steeply. But the Android platform is expected to do well, overtaking LiMo and Apple in 2012, and stretching its lead by 2013. RIM’s growth is predicted to be slow and steady, suggesting that its designs on the consumer market may not be met with huge success.

What the Informa numbers tend to indicate is that a major backer, either as a channel to market or as a high profile branded service like Google sitting at the centre of the application offering is critical to success. Without that weight in the team, it will be difficult to get an operating system to flourish commercially.

Worldwide smartphone sales to end users by operating system, 2008

Company 2008 sales (000s) 2008 market share (%) 2007 sales (000s) 2007 market share (%) Growth 2007 – 2008 (%)
Symbian 72,933.5 52.4 77,684.0 63.5 -6.1
RIM 23,149.0 16.6 11,767.7 9.6 96.7
Windows Mobile 16.498.1 11.8 14,698.0 12.0 12.2
Mac OSX 11,417.5 8.2 3,302.6 2.7 245.7
Linux 11,262.9 8.1 11.756.7 9.6 -4.2
Palm OS 2,507.2 1.8 1,762.7 1.4 42.2
Other 1,519.7 1.1 1,344.0 1.1 13.1
TOTAL 139,287.9 100 122,315.6 100 13.9

Note: The ‘Other’ category includes sales of Sharp Sidekick devices based on the Danger platform.
Source: Gartner (March 2009)

Worldwide smartphone sales projections by operating system 2009 – 2013

Global smartphone sales (millions of units) 2009 2010 2011 2012 2013
Symbian 93.00 126.64 169.25 194.2 216.5
Microsoft 31.14 47.23 70.58 90.34 117.57
LiMo 31.22 38.72 40.32 36.24 23.28
Android 10.02 19.95 32.12 47.64 69.84
Apple OSX 18.60 27.60 33.00 38.30 42.00
Blackberry 24.50 25.70 26.90 27.30 28.00
Web OS 2.50 4.90 7.10 8.77 10.28
Global smartphone sales volume 211.17 290.74 379.28 442.79 507.12

Source: Informa Telecoms & Media

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