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Reflections on 2008; Anticipation of “the Day After”

Yoram Salinger
CEO
Red Bend Software

Reflecting on 2008, unquestionably the state of the world economy had a significant impact on the mobile ecosystem. As such, mobile technology companies, especially handset manufacturers, are changing the way they conduct business. They will be cautious in the first half of 2009, reducing spending, controlling operations, and preparing to react as the economic crisis continues. They will cut the expectations of phone shipments to the market, as they did in 2008.

Consumers are also changing their behavior. As a result, the replacement cycle of the phones will change; consumers will not be purchasing new mobile phone models or upgrading as often as they have. In 2008, we saw this occur in Japan when the operators abandoned their subsidies. As a result, there was about a 40 percent decline in new mobile phone purchases. Japanese operators are now faced with severe competition to retain customers and acquire new ones. In 2009, they will need to offer new services to boost their revenues and look overseas to grow their customer base.

Despite the slowing pace of replacements, mobile phones are perceived to be essential parts of our lives, no longer a matter of convenience. For some consumers, their mobile phone is their only communication device. For others, it is has become a platform for commerce and socialization.

While some OEMs were especially hit hard by the economy, others flourished. Take Apple and its iPhone. Apple has stayed on top despite the financial crisis. They have done this because they cultivated a great experience. And core to this great user experience is the additional applications that Apple offered. During the summer of 2008, Apple announced it had generated $30 million in one month by selling 100 million downloads from its Apple App Store for its iPhone and iPod Touch devices. The proliferation of other mobile application storefronts like Google’s Android Market, Microsoft’s Skymarket, Nokia’s Mosh and the Ovi initiative is allowing consumers to freely customize their phones with new applications and services. The expected result for these companies is noteworthy. For example, the App Store alone is expected to be a $1.2 billion business by the end of 2009, states investment firm Piper Jaffray. Even though Apple evolved as a significant player with an end-to-end proprietary system, it has several obstacles to confront. How will the iPhone reach Nokia’s level of mass market shipments? How will Apple evolve long term in the industry?

Apple was not the only disruptive force in the mobile industry in 2008. Open source software changed the economics of the mobile platform in 2008. There was the Google Android launch and the birth of the Symbian Foundation. Because OEMs will build more phones on Android and Symbian, these platforms will become more community driven. But the big question is: Will the manufacturers release the code back to the industry, further driving collaboration and innovation while decreasing costs, or will they leverage it to their advantage?

For 2009, both consumers and mobile companies will be careful with their money. But when consumers are ready to make that purchase, they’ll find more compelling options than ever before, specifically increasingly affordable smartphones and new kinds of innovative wireless devices to surf the Internet or read an electronic book. According to ARCchart, by 2013 non-handset devices—everything from data cards to game consoles to ebooks and M2M applications—will account for $93 billion in service revenue generated by operators. This is an exciting area of growth for our industry.

Mobile software management will provide device manufacturers, mobile operators and ISVs greater flexibility and control over managing a device’s software throughout its lifecycle. They will be able to create new revenue opportunities and improve customer satisfaction through personalization. Features can be offered for a one-time fee or through a subscription service.

Further on the bright side, we will see some recovery in 2009 because at the end of the day, the mobile phone is a lifestyle product. By 2010, there will be 4 billion mobile phone subscribers. Their mobile phones have become sophisticated computing devices—equipped with powerful software, enabling rich user interfaces and advanced features and applications, from streaming video to location-based services to music players. And these rich capabilities only serve to further integrate the mobile phone into our daily lives. Have you ever left the house without your phone, and not gone back to retrieve it?

While there is certainly a level of fear, uncertainty and doubt, companies that prepare for “the day after” during this economic downturn will be the visionaries. The first to react will be the thought leaders because they will be able to identify opportunities through partnerships, mergers or acquisitions. These are the companies that will be proactive with feeding the market with new platforms, devices, features and services. And Red Bend Software will be one of those companies.

Labels: Apple, device management, Google, mobile, mobile software management, Red Bend