Reality Check: Ramifications of polarization in the mobile software platform market

Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
As has been well established in this column and elsewhere, the mobile marketplace is undergoing rapid change due to an influx of innovation as well as shifting competitive elements. Mobile is no longer a “strategy” for consumer service providers of all stripes – instead it is a product and market in and of itself. As such, established telecoms market players find themselves challenged from all fronts, while up and coming mobile entrants are learning their way through new terrain.
Amongst the dust and commotion of mobile innovation is a clear trend towards polarization of the mobile software platform market. Mobile operating system providers are moving down one of two paths: 1) a vertically integrated offering optimized for a distinct range of services; or, 2) an open or collaborative source approach that is designed to enable cost mutualisation and foster innovation on a wide range of devices. Both approaches have their merits, as we’ll discuss in this column.
The vertically integrated offering is best demonstrated by Apple, RIM, Palm and (more recently) Microsoft. These companies are unilaterally developing the software platform and operating system, and also specifying the user experience on devices that support the OS. Amongst these providers only Microsoft offers a licensable platform to 3rd party OEMs – something that they are now specifying at a greater detail in devices in order to drive a consistent user experience. It will be interesting to track how the Kin impacts Microsoft’s future platform strategy. The open/collaborative offering is epitomized by Android, LiMo, Symbian and other platforms that are well suited for a wide range of devices and form factors. These platforms are being created partly or completely in conjunction with open source communities and development practices, which bring benefits of greater scale, flexibility, cost efficiency and faster flow of innovation.
In the short- to medium-term, the market will accommodate both models as they are both well-entrenched and integrated with pre-existing business models and market efficiencies. However, in the long term it is likely that we will see considerable consolidation within two main areas of the software stack that ultimately will tilt the market’s competitive balance in favor of the open/collaborative approach. These two areas of consolidation are:
1. The core technology layer (e.g., platform middleware). While middleware used to be a competitive differentiator in device functionality and performance, this is no longer the case as the industry has significantly improved and enhanced baseline functionality for actions such as telephony and messaging. As such, it behoves all participants to standardize upon a common, commoditized core technology. Furthermore, it would make sense for a common open source technology such as Linux to be at the heart of such consolidation.
2. The runtime and/or API layer. The rapid propagation of smartphones has led to great innovation and opportunity for mobile applications developers. While there has been success for some developers in creating apps for specific platforms (e.g., iPhone), the platform-specific storefronts are becoming more crowded – leading to significant challenges in application discoverability and also decreasing margins for the apps. (According to a presentation by Distimo at the recent Mobile World Congress event, only 25% of apps downloaded from the iPhone App Store are paid for and the mean average selling price is $2.65.)
A key to unleashing developer innovation on a broad scale is to have common runtime and API technologies across platforms in order to provide developers with a consistent development and deployment environment. Some examples of such initiatives include Adobe AIR, Nokia Qt and the newly announced Wholesale Application Community – in addition to core mobile widget and Web technology standards such as BONDI and HTML 5.
Middleware and runtime consolidation still allows for competitive differentiation at the service and UI layer of a mobile OS – early examples of service and UI innovation on a collaborative platform include Vodafone 360 on LiMo, and Motoblur on Android. As open mobile devices continue to morph in shape and size there will undoubtedly be further innovation in order to provide superior user experience – and industry consolidation on middleware and runtime technologies will accelerate such innovation. So while in the short term the marketplace will support both the vertically integrated and open/collaborative OS approaches, in the long term the greatest innovation and opportunity will come from an open approach.
As Director of Global Marketing for LiMo Foundation, Andrew Shikiar is responsible for helping develop and articulate LiMo’s vision and market strategy. Shikiar possesses significant strategic marketing and business development expertise in cutting-edge technologies and market-shifting industry initiatives.He served as Membership Director for industry consortia the Liberty Alliance Project and Blade.org. At Sun Microsystems he helped drive the company’s Java and Liberty Alliance launch initiatives. In addition, he was a founding executive at Radical Communication, where he helped raise nearly $20 million in venture financing and drove market adoption of interactive video and email marketing technology solutions.