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July 07, 2011

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hewbass

I didn't know any Sendo people directly (I'm not actually a mobile comms guy, I just had the desk next to the ones in my company), but many of my closest friends did (some of the engineers that went to form Sendo were from Panasonic IIRC -- some went to Sendo, some came to the place where I worked).

I don't think hardly anyone seriously understands how badly and violently they were shafted up the anal passage by Microsoft. They took them for their IP, their operator relationships, and pretty well hollowed them out.

And because Sendo were already struggling (which I understand was the motivation for the relationship with MS in the first place), they did not have the finances to be able to defend their rights in court. I heard of people whose lives were ruined by this.

The above is all a bit of an aside really, although relevant to what I say below:

Sendo were violated unto death when Smartphones were just taking off. I believe MS just saw mobile as another market in which they should be big -- the potential to earn more money, but with no influence on their existing markets (but mark how they behaved towards Sendo, when this was just another market. It's relevant below). At this time MS wanted to make more money in a new market, but did not particularly feel threatened in their 'home' market the PC operating system.

Apple, however, demonstrated something new - the future (and ironically for Nokia, it was a future they had been promoting for the previous 4 years, they had just failed to execute it in a way that people would recognise). The future in this case was one in which the desktop computer was largely irrelevant to the majority of people.

Until the iPhone, people's choices about the purchase of their PC and their mobile had little influence over each other -- if any influence at all it was mostly towards purchasing a phone that would work with the PC and software one already had.

After the iPhone it became clear that the majority of what most people would previously have considered to be the job of a computer (email, web browsing, viewing Youtube, Facebook, online shopping, etc.) could be more conveniently carried out on your mobile phone. The only thing that can really be done more conveniently on a desktop PC are:

1. Document preperation. There's always a few people that will benefit from a big screen and a fullsize keyboard.

2. actual computing (you know, running millions of calculations a second on something like simulating a microprocessor, or airflow over a supersonic jet)

3. Backend internet things like serving up databases via web pages (most likely for someone to consume on a mobile phone).

Desktop PCs running windows are RIGHT NOW fairly secure on 1., but for 2 and 3 Linux is taking Windows lunch money and giving it wedgies, largely because:

a). for most people the underlying OS does not matter

b). for people where it does matter they care most about it working reliably under load and the fact they can cobble together the glue logic easily themselves (Aside- Windows: Not reliable under load. Fast scripting to glue different applications together is difficult).

If anything- going forwards people's choice of desk top is going to be secondary to their phone. People will be choosing their desktop PC on the basis of whether it works well with their phone, as opposed to the other way round. Right now one of Microsofts nightmares is one where iTunes won't run on a Windows Operating System. Or where one does not need iTunes at all ("Hello iCloud!").

If people choose to buy a desktop PC at all.

The inference from the above is that the platform one chooses for document preperation will be done on whatever is compatible with one's mobile phone (or possibly on one's mobile phone, docked to a big screen and a keyboard)

So suddenly MS have noticed they have an existential crisis.

The play for Nokia is all about gaining a market for Windows Phone, before MS become irrelevant, and Apple become the replacement monopolist.

Microsoft have partnered with Nokia for their their market share as a hardware partner-- but that is dribbling away. Soon MS are going to be more interested in Nokia for their IP and their operator relationships... um... does this sound familiar?

Christian

you write "(where Symbian was free to Nokia and MeeGo was free to Nokia, and Google's Android would also have been free)"

Unfortunately there is no free lunch.

Nokia R&D spending, in 2010 was almost 3 times its peers.
See Engadget:
http://www.engadget.com/2011/02/03/visualized-nokia-randd-spending-almost-3-times-its-peers/

BusinessWeek:
"Apple's R&D was 2.7 percent of sales for the year ended September, while Nokia's 2010 devices R&D was 10 percent of the division's sales."
http://www.businessweek.com/technology/content/feb2011/tc20110214_758033.htm

Android is not free, HTC pays Microsoft $5 for each Android device they make and others are following.
http://www.businessinsider.com/htc-pays-microsoft-5-per-android-phone-2011-5

and now Oracle wants handset makers to pay for each Android device they make:
http://www.cio.com.au/article/392822/oracle_win_would_strain_android_growth/

Kalle

Christian, Nokias R&D didn't go to developing Symbian. If it had world would have been different as we know it.

Matthew Artero

A replacement rate of 18 months means that 66% of phones in use are being replaced every year. The 1.38 billion phones sold last year is only 32% of the 4.3 billion phones in use at the time. A replacement rate of 18 months means almost 3 billion phones will be sold this year after the growth rate is added to the replacement rate.

I think it can be argued that Microsoft did not make a mistake with Skype because they haven't lost market share because of it. Perhaps MS saw the writing on the wall and realized someone is going to do it, and in the long run it may as well be them.

@Christian - Thanks for the links

@hewbass - Thanks for the reminder that MS knows how to structure a deal to make sure it always gets something out of it.

@Tomi - You sure put a lot of time and effort into this blog that we benefit from; Thanks


Harry in Singapore

Now that FaceBook has introduced Skype videocalls and FB is very much in smartphones (where I can see users accessing it on their mobiles everyday in Singapore); Carriers would find it impossible to deny Skype to their FB users.

What are the implications for Microsoft? Just wait it out?

Leebase

Skype certainly has had an impact on international long distance, but it is Mobile Phones that are killing land lines. It is texting that is destroying mobile voice minutes, not Skype. Data is the future of telecom profits and Skype will help sell data.

And really, Tomi, your refusal to provide any evidence for this alleged boycott is undermining your credibility. It's almost as if you desire to foment a boycott due to your displeasure with Elops making a mockery of your analysis of how great Nokia's Symbisn to Meego strategy was going.

Microsoft already has 25000 apps for their platform. Microsoft knows how to foster support for their platforms. You are casting their current sales as if that tells the whole tale.

Lee

cycnus

Tomi,

Great artile.... as always...


@Christian
nokia R&D spending is enormous because they were the LEADER and they need to keep it that way.
Look @ how apple finnally bow to nokia IP.

about Android,
Yes, google is a lame for letting their customer being sued by microsoft

about microsoft, wp7 and so on...
I think microsoft asking for $$$ for android from HTC, sammy and others is really ridicules. and this make them hate MS more, and also user would hate MS more. way to go microsoft....
This is really american way... FUD ... FEAR UNCERTAINTY DOUBT.

And at the end...
I would think that if google could not stand up to defend the manufacture, Meego would win the OS battle in the long run. Because Meego has Nokia backing up the IP. and it's not microsoft the greedy.

symbianlover

@cycnus:
Are you working at Nokia? Do you know, those old fellows who develop and contributed the IP assets are those who have been fired or transferred to Accenture?
To be honest, Apple doesn't really care so much about paying some royalties to Nokia. Their business share and profit are much much higher. With their current cash and liquid assets they are even rich enough to buy Nokia! In fact Nokia spending too much and one of the reason is because they hiring too much sub-contractors and externals to do their (software) RnD projects in last years. Elop should know about this issue and I can see that some actions are progressing now.

Meego, c'mon guys, Do/did you have something to do with Meego (technically or in business)? Or did you just talk about Meego based on some fancy youtube video demonstrating the coolness of Meego? I've been working on Meego and you know what? For every new device, you will need more extra time to adapt the OS and your appl. to work on the new device properly. Since they (Meego developers) are mostly externals, it's hard to find someone who takes the responsible or ownership and finally you who takes over it, you are in big trouble and you will start thinking whether you need to start everything from the scratch.

Patrick

While I think you hit the nail in most cases, there are two subjects I think you are wrong :

1. I never understood your focus on marketshare over profit for the mobile phone market. I always found your comparison with the video (VHS) and DVD (Blu-ray) branch nonsense.
That is a completely different market and not comparable with the mobile phone market. I think the nowadays market-trends prove me right.

2. I don't understand your adversity against Windows Phone 7. Windows Mobile was rubbish : I have had 2 Windows Mobile phones, ... never again.
The only wise thing MS could do, was to completely shift gears.
They did and yes, it's painful, yes, they will lose momentum for some years, but yes, it's the only wise way to go.
Did you ever use a Windows Phone 7 ?
Seriously, it really works and it is fun to use.
The fact that they have now a very small marketshare is quite normal : they are still deploying the guns on the battlefield (Mango update, internationalised marketplace, integration with the XBox world, Nokia ...).
I never believe that telecom operators will boycot WP7 in the future. On this moment, there is not much incentive for them to promote WP7, but that will change with the upcoming updates.

On December 2012, we talk again, and then I will point you to this comment with the words : "I told you so ..."

hewbass

@Matthew Artero MS do not currently have any market share to lose. It will be interesting to see if they actually manage to gain any. Irrespective of how good WP is to end users, MS/Nokia have to sell it to their customers: the networks.

Phones that come preinstalled to make Skype calls over WiFi do not generate revenue for the networks, and those that do Skype over 3G cause massive problems for those networks with unlimited/large data allowances on their plans (ie the sort of plans that it actually make a smartphone useful) - they cost the network bandwidth without earning extra income.

You might find the networks will make exceptions to this rule for "Halo" devices like the iPhone with Facetime, where they are sure they will still generate revenue in other ways, or they are well known "must have" devices that not having would give them a disadvantage (again, like the iPhone), but no one really cares about or is even conscious of WP7 (and that is with the large advertising campaigns currently running).

Do you honestly think the networks are going to look at WP7 and think "I can make more money with this"?

MIP

@ Patrick

WP7 really works? Fun to use?
I beg to differ:

http://www.mobileinfoplanet.com/2011/07/06/a-reason-alone-not-to-buy-wp7-even-with-mango/

symbianlover

@MIP it's fun to use, did you try it by your self?

Matthew Artero

@Christian

I just read those articles you mentioned regarding Android’s patent infringement. Previously I had mentioned how the Ocean Tomo Patent index outperforms the S&P 500. Therefore we should be able to determine the winner in this fight by the value of their Intellectual Property portfolio and their ability to grow it.

If we are going to talk about carriers hating Skype and boycotting and being upset with Nokia pulling the plug on Symbian and boycotting, and companies burning other companies; well then it seems we certainly can’t leave out how Google has just burned all these manufacturers.

Once bitten twice shy. They will never grab another freebee again. This is a golden opportunity for Nokia. Nokia can give access to an OS it owns to any and all manufacturers which will boost Nokia’s ecosystem.

HP should also do this with their Palm OS. They will never sell a single license without an ecosystem to help attract sales. But if they give it out for free, it will help build their own app store.

It seems you need a well stocked app store in order to sell an OS license.

@Tomi and everyone

The article on Oracle suing Google also reveals the two faced nature of Elop. The problem with Android is the many different versions of it which make it difficult to manage and know if an Android app will work on your version of Android.

Elop said he wouldn’t go with Android because it didn’t allow him to differentiate; further fragment the Android app market. But yet he had Symbian with a migration path to Meego that was allowing him to differentiate. If differentiation was the issue he already had that but threw it out anyway.

Patrick

@MIP : I used it, I like it.
A few collegues of mine own a WP7 phone and all are very enthousiastic, even after months of use, while all of them were Windows Mobile haters before that (meaning, they are not Microsoft fanboys).
I find the hub-centered design really refreshing and fun to use.

The only reason I did not yet buy a WP7 phone myself, is because I don't like the hardware that is offered on this moment, like the absence of scratch-resistant screens, to name one thing.

I'm waiting for Nokia to fill that gap and I'm confident they will.

MIP

@symbianlover

http://www.mobileinfoplanet.com/2011/06/12/windows-phone-7-metro-ui-an-unappealing-propostion/.

Seriously, a platform as limited as WP7 currently is can never be "fun" to use, beyond the first 2 minutes of novelty (unless you use your phone simply as a feature phone, that is). The more appropriate term would be "frustrating" given the lack of crucial features (again, if you want to use your phone as a true smartphone/mobile computer). And unfortunately Mango, with its woeful "multitasking" is not proving to be much better (if that article is in fact correct - I still have some doubts...); I struggle with the limitations of the iPhone's implementation of multitasking already, which is still less restricted than WP7.

Poifan

I don't see how one can say that MS was a failure with Windows Mobile and then state that rebooting their platform with no backwards compatibility was a mistake. If you have no marketshare, why bother to try to support difficult legacy applications?

Patrick

@MIP

If you see what most people use smartphones for : reading their email, using the calendar, looking for information on the internet, texting, listening to music, doing facebook-stuff, playing games, ... all of this is already in the WP7 phone and done quite nicely, thank you very much indeed.

For most people, multitasking is not the most important feature on a phone.
If it was, then explain me why the iPhone became such a succes, thoough having no multitasking to speak of, the first years of its existence.

But again, let's wait and see.
I'm quite confident the story will be rather different on December 2012.
For me, Windows Phone 7 + Nokia = bliss.

MIP

@ Patrick

The iPhone was successful because most users came from feature phones:

http://www.mobileinfoplanet.com/blog/blog1.php/dumb-smartphone-or-smart-dumbphone (from 2009)
http://www.mobileinfoplanet.com/2011/07/05/features-vs-eye-candy/

But WP7's success or no success is not what we are discussing here. Rather it is WP7's features (or its lack of features, to be precise); if you can't listen to Spotify or Pandora in the background then that is not "done quite nicely", you're welcome. That is poor, period. And multitasking is just ONE missing/poor feature out of various (though enough for me and many others not to want WP7), so don't get too hung up on multitasking if you don't care about it.

But at the end of the day the question is: would YOU want an iPhone1 only because that is what a large number of users are happy enough with, and it sells well? I.e. your criteria for your own needs/wishes is what others are content with or it sells well?
Since you stated that you haven't bought a WP7 phone only because of the hardware then you obviously would be (but then again you'd also be happy with a S40 phone then...). But let's not act surprised about why WP7 has sold poorly so far - this is not 2007 anymore and the many features missing from WP7 surely has put off more than one potential buyer so far.

symbianlover

@MIP you can copy and paste all of URLs from Google (or maybe you use Bing? Haha) and I bet you I can find similar anti-iphone blogs or similar simply by typing the sentence "reason not to buy iphone". And similar stuff also for Android, Symbian or Blackberry. But at the end, the market share will count.
What I want to say is: Just give Nokia (or I would say us) a chance to do something nice on WP7. I guess as software engineer, you shouldn't love the os that you're working with but you should love your job, right?

Nimetön Pelkuri

@symbianlover

"But at the end, the market share will count."

And WP7's share is 1% in the USA (in the rest of the world it's even worse). Even Symbian is bigger there with 2% share. So when you say that market share will count, we can see that WP7 is a monumental failure. It can't even in it's home and strongest place (USA), surpass the OS it's supposed to replace. Twice as many people prefer Symbian over WP7 in a country that practically don't sell Symbian.

"What I want to say is: Just give Nokia (or I would say us) a chance to do something nice on WP7."

No. I won't give WP7 anything. I prefer MeeGo/Harmattan (or in fact any other OS) over it. WP7 shouldn't even be called a smartphone OS, it's a feature phone OS. Poor in functionality. And it's ugly and very annoying.

If Nokia continues only with WP7, I'm going elsewhere. I've been a loyal customer for years, but Elop has it made sure with his idiotic WP7/MS cr*p that I've had enough. N9 will be the last Nokia for me, unless they continue making MeeGo phones. Making just one powerful nicely featured MeeGo phone per year would even be enough for me. Much like what Apple does with iPhone.

gzost

The WinMo/WP 7 compatibility break was the only thing that Microsoft could do. WinMo was designed to be a Windows for small screens, and to be navigated using a stylus on a resistive screen. WP 7 is for finger operation on a capacitive screen. This was a necessary change. The old software would, in the vast majority of cases, have been completely unusable on the new devices. Just try hitting a 10px x 10 px target on a modern smartphone. Migration paths are nice, but to stay in your DOS/Windows metaphor: this here would have meant a device that dual-boots into WinMO and WP 7, and has both a resistive and a capacitive screen. THis makes neither sense to the user, nor is the latter point even technically feasible.
Once they realized this necessity, it gave them the possibility to start with industry-leading development tools on the new OS, and to radically rethink what a UI on a phone should be.
I personally don't like the result of this rethink, and I disagree with the decision not to allow native code. But the developer reaction shows that the decision made sense to a lot of people. There are now 25,000 applications in the Marketplace, and this for an OS that has sold as close to nothing as is possible with a launch this wide. Should WP 7 sales ever pick up, then I think the apps situation would improve even more dramatically.

And
@kalle:
Nokia had over 6000 software engineers working on Symbian. So yes, a huge chunk of that R&D money went towards Symbian

Matthew Artero

If the replacement cycle is 18 months and there is a Symbian boycott the Ovi store should be in freefall crashing and burning. A replacement cycle of 18 months means that Ovi is losing 66% of its shoppers every year.

Matthew Artero

If someone believes the replacement cycle is 18 months then they believe that 66% of the market is up for grabs every year.

Because the replacement cycle is actually over 3 years, this belief could cause them to spend more money then it is possible to ever get back and make decisions that are impossible to recover from.

The longer actual replacement cycle also means that a manufacturer can not lose more than 32% of the number of phones it has in use per year.

The number of customers of an app store does not reduce by more than 32% per year.

It’s important for owners of OSs and app stores to know what there real options and strengths are.

If one thinks that they are competing against a replacement cycle of 18 months they could become very fearful and nervous, and make decisions that are unnecessarily drastic. They could erroneously see their strength as weaknesses, causing them to back the wrong product, not support the right one, and fire people they need.

gzost

Like a couple of other commenters, I'm wondering about the claimed 18 month replacement cycle, and have been ever since I saw you quote this for the first time.
Here's a quick a look at some customer segments to explain why I don't believe that number:
Huge numbers of customers in Western countries are on 24-month contracts with subsidized phones. An 18-month replacement cycle in these markets would have to mean that large numbers of people regularly replace their phones before their contract is up for renewal, and/or non-contract customers would all have to be phone geeks who always get the newest phone. With a lot of the pre-paid customers on tight budgets, I consider this unlikely. What I do see here in Germany is a lot of people using phones that are 3 or 4 years old, and ones even older than that are not all that scarce either with the older population (if they just need voice and texting, for years now there hasn't been a technical reason to replace a phone that's still working). And once somebody replaces their phone, in a lot of cases the old phone goes to a friend or relative, substituting for buying a new phone there.
In other markets where budgets are even more of a concern, there just isn't the money to replace frequently. And, again, if all my money allows me is to replace one voice/text phone with another, there is little incentive to do so.
So with all these segments out there that have a replacement cycle of (often significantly )less than 18 months, where are all the people who do upgrade more often?

Mikko

Thanks Tomi for a nice post.

You could have mentioned that Nokia's N97 was also boycotted (can't find source right know) a short period by operators because it had already Skype preinstalled right out of box, at least on some markets.

But I wonder how the operators are going to deal with the VOIP which is not their product. Let's see:
- Skype is now connected to Facebook. Blocking Facebook access is a suicide for operator in the Western markets.
- Google has Google Voice. If operators will boycott Windows Phones (due to Skype), they're leaving the mobile OS market to be shared between iOS and Android. (I can't see Bada or Meego as a black horse, Symbian will eventually fade away.) I guess two horse race is not the situation operators would like to see!

Support of the operators is crucial to mobile device business, I agree totally. But at the end operators have to find a way how to make money with VOIP. I guess the price of the unlimited data package will rise considerably. Or revenue sharing, who knows.

Fighting against Skype and Google Voice is futile - it's a similar case than with the big music publishers which tried not to give any other easy options to consumers than by the whole CD instead of single songs electronically. It's interesting to see which of the operators are brave enough to face the inevitable change and adopt their business models to support that.

At the States telco called Sprint has offered Google Voice to its customers. So like you said, not all the carriers are boycotting OSes just if they support VOIPs. But the point is: when one is leading this behaviour (support free VOIPs), others have to follow.

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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