[In part 2 of his predictions for MWC 2009, Research Director Andreas Constantinou talks about M&As amongst Linux vendors, OHA devices, enterprise UIs, the challenges for Modu, and the unstable future of UIQ]
Check part 1 for learnings from MWC and predictions on a new Trolltech, the evolution of widget solutions, the relicensing of Qt, acquisitions of WebKit vendors and Danger devices.
Prediction 6: M&As in the Linux vendor landscape Analysis: Mobile Linux has gone through two phases; the first phase (2000-2006) was the OEM in-house efforts from Motorola, NEC and Panasonic who developed their own middleware and applications on top of MontaVista (and Qt/E in the case of Motorola). The second phase (2004-now) has been the emergence of for-license Linux-based software stacks from MontaVista (the incumbent), WindRiver, OpenMoko, Mizi, Access ALP, Azingo, A la Mobile and Purple Labs. Many of these vendors also offer integration, customisation, productisation and certification services on top of their software stack, as shown in the next diagram. (note that Qt/Qtopia are missing from this chart because it is still not known whether they will be offered under commercial license terms following the Nokia acquisition).
In practice the above taxonomy of mobile Linux vendors is rather simplified and the devil is in the details; OpenMoko is six months late and probably six more months before being mature enough for v1; Mizi has recently announced a re-developed version of a low cost stack and is looking for customers beyond Korea; Access ALP still has teething problems and its MWC demo was unimpressive; Azingo is well funded and has a quite stable & complete stack incl. WebKit, but has only started to build a services arm; A la Mobile is underfunded for its claim as the ‘Red Hat of Mobile’, while WindRiver appears to be taking on that role; and finaly Purple Labs is already on three European phones and has a single-core Linux stack ready for licensing.
Naturally, ten mobile Linux vendors is far too many, while financial challenges will be setting in this year and OEMs will be making hard decisions about which stack/integration vendor to choose. MontaVista had a surprisingly small stand at MWC this year, while it has been losing many head-to-head bids to WindRiver. A la Mobile has publicly only been funded with $3million, a far cry from the $30million that Azingo (ex Celunite) has gotten to date. It is likely that MontaVista or A la Mobile would be looking for another financing round or for an exit. [update: A la Mobile secured a second round of 6.75 million from Venrock in February. That’s enough to power a startup for 2 years, but is it enough to build a services organisation?]
On the other hand Purple Labs has been under the radar until recently when its ownership structure changed with the majority ownership moving from Vitelcom (Spanish ODM) to Sofinnova Ventures (altough details of the deal are sketchy). Interestingly, Purple Labs has a mature software stack already in three European Linux-based phones and claims to have the first single-core Linux stack already on a soon-to-be-commercial phone. Yet despite the strength of its technology (and the hardware design expertise of its team) PurpleLabs is lacking the professional services arm that will aid OEMs in integration and productisation projects (any takers out there?). [update: PurpleLabs has a proportionately-sized pre-sales team, but most importantly has a strong management team incl. the ex-head of Openwave prof. services].
Exits, IPR acquisitions and company acquisitions are therefore likely for mobile Linux vendors by MWC 2009.
Prediction 7: OHA devices; cheap but ugly Analysis: The Open Handset Alliance and master-chef Google have been cooking the Android SDK for quite some time and the first development boards were shown running Android ‘officially’ at MWC. There are no counter-indications that Google will be able to hit its 2H08 promise for the first Android devices; several chipset vendors have been integrating the Android stack and HTC (followed by Samsung) has significant expertise in bringing up a ‘virgin’ OS into a mature phone software, as it did for Windows Mobile in 2002-4.
The well-architected stack that is Android (incl. plug-and-play core apps and J2SE-like environment) will likely be targeting mass-market devices; having a US-based company as master-chef and HTC as the host, this probably means low-BOM devices with a PDA-like form factor. In other words, a low price and data-first design will be very much a priority compared to the looks and phone-first design (very much like Windows Mobile devices thus far).
Prediction 8: Enterprise UIs emerging Analysis: The enteprise segment has traditionally been seen as completely contrary to consumer segment from a functional requirements perspective; consumer devices have to be fun and sexy, whereas enterprise devices have to be function-first and stripped down of most aesthetic features. But wait.. who said enterprise people are boring?
I believe that some innovation on the user interface and the plastics of enterprise devices is in order. And while plastics innovation is too much of a gamble, UI innovation isn’t (you can change UIs easily with many of today’s UI frameworks). Therefore, I foresee that at least one vendor will be offering enterprise-targeted UI frameworks which provide both eye-candy and functionality such as word/Excel/PPT/PDF document viewing and rich email (Picsel comes to mind). This also means that the boundaries between enterprise-targeted mobile OSes and consumer-targeted OSes will be bluring, which is also the direction taken by Windows Mobile 7 featuring a customisable UI layer (a major functional delta from all previous Windows Mobile versions).
Prediction 9: The challenges of Modu Analysis: Modu made big headlines at MWC, not only because of its huge marketing spend, but also the innovative nature of its connected device offering. Modu offers a mobile (cellular) building block which is at the center of a connected personal area network of mobile devices. Like many previous attempts at creating a distributed devices environment (most notably IXI), Modu is based on moving cellular connectivity into the centre of a connected devices framework and thereby making it much easier to design, develop and market mobile devices. In principle, the paradigm of a distributed devices environment is a win-win-win for operators, manufacturers and users (as I advocated on this 2002 IEEE paper on this very subject). However, the challenge is in bootstrapping the ecosystem of operators, device and services vendors to invest in this new paradigm of building connected devices.
What Modu has done is quite clever; Modu did not develop just an OS for powering this connected device ecosystem (like IXI) or just the connected devices prototypes (see Motorola’s wearables distributed devices collection designed by Frog agency). Modu created the physical building block (a nano-phone, so to speak) that can form the nucleus of the distributed devices system, making it easier to bootstrap an ecosystem around it.
However, Modu is still facing a major challenge; convincing OEMs to build devices around its building block. That means putting its money where its mouth is and funding (or at least part-funding) several handset projects, which is clearly a very expensive exercise. More importantly today’s handset OEMs are more keen to invest in services rather than over-innovative handset designs. To convince OEMs to build on top of its building blocks, Modu therefore has to create a framework for delivering services around it.
There are a handful of service companies who are today creating service frameworks; Google, Yahoo and Nokia come to mind. Service frameworks are inherently a loss leader; there’s no money to be made by designing, developing and supporting the service connectivity framework (see Android, widgets/Go 3.0/OneConnect and Qt, respectively). However there is money to be made from enabling service delivery and access (see Google ads, Yahoo ads/services and Ovi, respectively).
Therefore Modu’s challenge is in creating a loss-leader framework for delivering connected services around its cellular building block and convincing OEMs that this should form part of their service investment strategies.
Prediction 10: The unstable future of UIQ Analysis: Motorola invested in a 50:50 ownership of UIQ alongside Motorola back in October, in what amounted to a diversion for the company’s Linux strategy. UIQ’s expansion (now 400+ people in Ronneby and Budapest – almost a tripling in numbers within a year) means that the venture has much higher costs than revenues. If you do the numbers, it turns out that UIQ must ship at least 6 million devices annually (at $3 per-unit royalty) in order to sustain its workforce OPEX. This is a far cry from the 1.2 million it shipped in 2006 but close to the 7.7 million estimated for 2008 (both figures from Nomura). UIQ must therefore ramp up volumes very fast in order to sustain its OPEX.
The real challenge with UIQ however comes with sustaining the underlying Symbian OS strategy. With UIQ’s ownership transfered out of the Symbian, Sony Ericsson and Motorola are now arch-rivals for Nokia, who controls the majority of Symbian shares (and in practice most of the decisions taken by the Symbian board). It has for long been rumoured that Nokia has been working on a new-generation OS, but rumours aside, UIQ should have continual challenges in driving the features and strategic agenda for Symbian OS towards favouring UIQ. Moving UIQ to a different kernel support package (some Linux flavour) is a very expensive 2-year operation that UIQ would not easily venture into, given its financial state and the instability of its parent Motorola.
Clearly a lot to look forward to until Mobile World Congress 2009..
– Andreas
(while on the topic of predictions, make sure to check out our hugely successful Mobile Megatrends 2008 series. Full presentation below.)
[slideshare id=209579&doc=mobile-megatrends-2008-vision-mobile-1198237688220186-3&w=425]