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When GAAP and MSM Intersect: Business Catches up to Demand for Software UpdatingBy Lori SylviaEVP Marketing, Red Bend Software We envision a world where software updates occur every second of the day, improving the mobile user experience while generating additional value for mobile providers. The technology is here today to enable this vision, with OMA DM servers adopted widely by tier-1 and tier-2 operators globally and with about half of handsets already supporting over-the-air software updating. Now, the business environment is catching up to market demand for software updates, as reflected by some recent changes to GAAP (Generally Accepted Accounting Principles). In the old days when hardware ruled, consumer electronics manufacturers would sell a device and recognize the sale of that device in that month. Then, software got more sophisticated and more essential to the functionality of a product. If OEMs delivered software updates to the device after it was sold, it meant OEMs had to spread the revenue recognition throughout the device’s lifetime. Years ago, we heard more than one OEM cite the accounting implications if they were to deliver FOTA updates. FOTA technology was used primarily as an insurance policy to prevent a product recall. But soon the leading OEMs and operators realized the strategic value of delivering continuous software updates. Today, FOTA is much more than fixing defects. It’s used to deliver new features as well as to improve a device’s performance. New advancements in the technology enable updating individual software components over the air (SCOTA) on-demand to support consumers personalizing their device with new applications and services. Software updating has become an important way to keep consumers satisfied with their mobile service and loyal to the experience they get from their handset maker. Changes to the GAAP rules now allow manufacturers that are delivering software updates to recognize more revenue sooner, even if they are offering those updates free of charge (otherwise bundled in the original price), and even if the contents of the software updates are unspecified at the time the original device is sold. One of the most vocal advocates of this change has been Apple. The company provides free software updates to iPhone users. Because some of the value of the iPhone is delivered after the product’s initial sale and because the software updates are not sold separately, the former GAAP rules forced Apple to bundle the value of the iPhone with the software updates and spread the revenue over the 24 month AT&T subscription term. Now, Apple and other manufacturers will be able to separate the value of the device from any future software updates. The product’s sales can be recognized in that quarter, while only the value of the device’s future software updates will be deferred. Software updating is becoming increasingly commonplace in mobile phones and is spreading quickly to other wirelessly connected devices. New business models will emerge that capitalize on this powerful capability to meet the increasing demands of mobile consumers. Mobile devices are no longer static products whose functionality is set when the device ships. Mobile Software Management is the key enabler that allows mobile providers to deliver more value to their consumers throughout the entire mobile user experience. Labels: accounting, Apple, ATT, FOTA, GAAP, iPhone, Red Bend Software, SCOTA
Striking the Right Balance with Open Source PlatformsBy Richard KinderVP of Technology and New Business for Europe Red Bend Software Red Bend recently exhibited at Symbian Exchange and Exposition 2009 in London. As expected, attendance was down this year given the economic situation, but likely also in part from the fading excitement surrounding the establishment of the Symbian Foundation, which was big news at last year’s event. In many areas, the Symbian Foundation is ahead of the schedule they set themselves. For example, its kernel has been released under the Eclipse Public License. One should not underestimate the amount of work that has gone into an achievement such as this. As with any “new” platform, a major proof point is the availability of devices running on it. Once this happens, I am sure that there will be renewed enthusiasm for the show, but by then, who knows how far the iPhone, Blackberry and Android devices will have evolved. All is not lost for Symbian yet. It has been successful in enabling delivery of smartphone functionality at increasingly lower device price points, but the industry has shifted its focus to usability and features. As Apple’s iPhone has proven, even in a down economy, consumers will pay for the right high-end smartphone with the right user experience. In the case of Samsung, which already has its own robust midrange solution, Symbian will need to offer something unique and compelling for the manufacturer to build on its platform. For Symbian to be successful, its platform must evolve and offer higher-end features in a way that is easily accessible to consumers in order to close the gap with Android and the iPhone. To do this, they must motivate their contributors to add value in the right areas. The challenges for an open-source platform aren’t limited to Symbian. A key challenge is that of clear and fair governance rules. Each community has different takes on governance, making their challenges unique. Take Google’s Android, for example. Android is available under an open-source license but some do not consider it an open source project. The platform is controlled by Google, and a majority of the contributions are made by Google. While this approach has some advantages, it is difficult for a contributor to make a real difference to the platform and speed its innovation. It’s important to remember that the core ethos of what open source offers is a platform for somebody with an idea to share that idea with other people. Open source brings together communities of like-minded people and should give them a forum to communicate in a way that is natural to them—therefore, lending itself to driving innovation. However, open source has often struggled to shape its “in-the-moment” innovation into cohesive robust projects. To be successful, open-source platforms will need to find the right balance between in-the-moment features and the slow-but-structured development approach of traditional mobile platforms. Key to this is governance rules that shape the community around the platform. So which open source smartphone platform will ultimately strike that right balance? At this point, you can’t ignore the Symbian Foundation. Nokia’s volumes and desire to drive usability and new features into the category previously serviced by S40 should not be underestimated. With Android, we’re seeing a broad variety of devices at various price points, and it is interesting to see Android scale from the very high end to cost-sensitive feature phones. The LiMo platform has had a big boost during recent months with the announcement of Vodafone 360 and the use of that platform to power the lead products from Samsung. Lastly, other efforts like Maemo and Intel’s Moblin may have an impact in the longer term. There will be no shortage of compelling smartphone products, based on varied platforms with differing governance models, usability and features, available in 2010. Coupled with this explosion of platform choice will be an implosion in smartphone average selling prices, with the possible exception of the iPhone. Competitive pressure will drive down smartphone prices as well as consumers demanding more for less. Above all, device manufacturers must consider the technical and commercial impact of their platform choices as never before in order to acquire a new customer base and keep the customers they have. ¡Viva la revolucion! Labels: 360, Android, Blackberry, iPhone, LiMo, Maemo, Moblin, Red Bend, S40, Symbian, Vodafone
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