This post became a rather longish braindump of my view on the current situation in the mobile computing devices market. It's based on what I read everyday in the news and some basic economic terms thrown in. Most of the ideas here are not new. You might have read them somewhere else. In fact I have read most of them somewhere in someone else's braindump but can't find it again for linking.
During the students talks at the Information Rules 1 conference, it became clear to me that the mobile devices market with all it's highly integrated smartphones and tablets looks a lot like the mainframe market of the 70's and 80's.
Back then large companies were busy cranking out features on proprietary platforms with proprietary operating systems, locking users deeply in and taking money out of them. This was possible because they controlled the whole platform stack: the hardware, the operating system, the developer tools and a lot of userland software.
This obviously is exactly what Apple is doing (and others are trying to do) today. They tightly control the hardware, the operating system, the developer tools, a lot of userland software and even the distribution channels for 3rd party software. And they do a good job of monetizing that control.
In 1981, IBM did something that was going to change the whole computing industry (and kill their own mainframe business, which, apparently IBM didn't foresee). They released the IBM-PC and opened the spec so that anyone could build clones. Although IBM didn't fully open it (they left out the BIOS code, expecting that none would be able to clone that), many vendors started to build clones. In a short timespan most PCs built were "IBM-PC compatible" .
What followed was a time of incompatibilities, bugs and attempts to restore lock in to specific operating system stacks on top of the x86/IBM-PC platform. But it was also a time of enormous growth. A huge number of hardware vendors popped up and improved the platform, all being held together by the IBM spec and mostly Intel which moved the internal interfaces (PCI, ATA, AGP, PCIe, SATA) forward. It wasn't all beautiful. Microsoft took over a big market share in operating systems. But this can still be considered an improvement as Microsoft didn't control the hardware.
Today only very few companies are still locked in to the old mainframe machines (a few days ago, NASA announced that they finally got rid of their last mainframe, an IBM Z9). Many are free and use software that at least with a bit of work could run on any operating system on any hardware. And even better: We have a whole bunch of free and open source operating systems which run on a multitude of hardware and pretty much can keep up with the commercial competitors.
Now what's happening on the mobile devices market? Apple has taken a good share with its closed iOS platform and makes the mainframe companies of the past look like hippies. Microsoft is just now really entering the game with its Windows Phone platform and strong partnership (if not to call it an acquisition) of Nokia. For me this looks a lot like control over hardware and operating system, too (although Microsoft still licenses Windows Phone to other hardware vendors). Blackberry covers another segment of the market with a closed hardware and operating system stack which they keep for themselves.
This could really have easily become a costly disaster with only one huge monopolist left in the end. But then there also is Google and Android.
With Google developing, pushing and licensing the Android operating system under mostly open source terms (without strong copyleft), diversity is coming back into the game: On the Android platform, the control over the operating system is very much decoupled from the hardware. It's decoupled so much that most of the times you can put a different flavor of Android on your device.
Now Google recently has acquired Motorola Mobility. This looks a lot like the vertical integration strategy of Apple, Microsoft+Nokia and Blackberry. But really I think it's not (and I am not the first to recognize ). Google is an advertisement platform for the open internet. Any company which creates a closed network/platform where Google cannot enter (distribute it's advertisement) is a threat to it. The massive momentum in the closed mobile platforms is such a threat (as facebook is one, too).
With the Android platform, Google provides a free operating system for device vendors (for them it's just free as in beer) which lowers the marginal costs (per-device) for creating mobile devices. This puts price pressure on all closed platform mobile device vendors and creates a huge number of devices which are not so closed and more open for Google's advertisement. Essentially, Google has to prevent any closed platform to get a monopoly or a substantially large share of the mobile device market in order not to loose its advertisement market there. Yes, Google could try to be the monopolist itself. But by giving away Android, Google triggers multiple positive feedback cycles (more devices - more apps - more buyers - more devices - ...). Closing future versions of Android would slow down these feedback loops and thus is not in the interest of Google. Acquiring Motorola has probably more to do with it's patent pool. Microsoft and Apple are known to sue or threaten to sue Android device vendors with their own patent pools and at least Microsoft is known to receive patent licensing fees for Android devices. By acquiring the Motorola patent pool, Google can use these patents to lower or eliminate these license fees and further push the Android platform.
Google's motivation to prevent a monopoly is good for everyone. They make the closed devices a little more open. But this is not yet the freedom we need and mostly have on the PC market. You cannot switch Android for Windows Phone or iOS on any mobile device. At least I have not heard of any device where this is possible.
The reasons is that there was no IBM-PC moment yet for the mobile devices market. You simply cannot swap out the display, the microprocessor, the wireless connectivity components, ... . They all are so tightly integrated, beautifully connected and interwoven with the operating system and userland software that it's hard for an operating system to run on anything other than it was designed for.
Of course this is not only a business problem but mainly an engineering problem. Components are not yet small enough to allow the specification of flexible and capable physical interfaces which could be used to build component based mobile devices as beautiful and usable as the highly integrated devices of today are.
I don't believe there is much more room for innovation on the smartphone and tablet markets in terms of form factors. A smartphone has to fit into a human hand. A tablet has to fit into two human hands. Both are rectangles, because every digital display is a rectangle. And that's about it. Of course there may be other form factors (implants, wearable, ...) but those will be a totally different thing.
Now what needs to happen for an IBM-PC moment on mobile devices are three things:
- Hardware components have to become a lot smaller.
- One big player has to make a good spec.
- A critical mass of standardized devices and components have to be built and sold.
I sincerely hope that this will happen some day.
The good thing is, it's not that unlikely. Once the hardware components will be small enough, device design will not be dominated by engineering problems and solutions anymore. Like a PC case, the phone or tablet could become a case for components. Then everything that is needed will be the spec for developing components and plugging them together. Oh yes, and someone has to start building those machines and components. As with the IBM-PC and Intel, the CPU designer (or a vendor of some other important component which is protected by strong IP rights) could then play the role of the spec designer. When the moment comes, I think we can expect one of the mobile CPU designers (ARM, MIPS, ...) to take that road (because they would get a monopoly, and which company would miss that opportunity).
The bad thing is: It might take some time (or never happen at all). The engineering problems currently seem far away from being easily solvable.
When there is sufficient supply of vertically integrated but differentiated mobile devices (different models with different features), and at the same time the costs of customizing are high then of course market demand for customizable devices will be low. The automobile market works like that. You would never buy some components and plug a car together. Regulatory and technological problems increase customization costs while at the same time the market has differentiated the products enough so that everyone will find a car that fits his needs.
The IBM-PC moment might indeed never repeat, because the IBM-PC was not only an open design, but also a leapfrog at the same time. Unlike most competitors who used 8bit processors, IBM used a 16bit chip in the IBM-PC that was able to deliver considerable more performance. So the advantage of buying "IBM-PC" or "IBM-PC compatible" was not only a minor improvement in a feature here or there, but a big killer feature for the customer.
To repeat that on the mobile market, a similar killer feature may be needed to gain critical mass quickly and get other vendors to adopt. In the prospect of the current engineering problems, sadly, steady evolution towards a automobile-like differentiated but vertically integrated market seems more plausible.
As seen on the PC market, a highly vertically disintegrated market can be very innovative. Open standards are the key as competition no longer has to be about who is setting the standards but about features inside the standard. But finding a player who at the same time is capable of and willing to put a killer feature in use to push an open standard will not be easy. And back then, the IBM-PC moment wasn't really intentional. I believe that had IBM known the consequences, they would not have opened their platform for anyone to clone.
tldr
Mobile devices (smartphones, tablets) are highly integrated products. Vendors control the hardware, the operating system, the developer tools and a lot of userland code. This is similar to the situation on the mainframe market of the 70's and 80's. Back then, the open IBM-PC hardware and software platform broke through the strong lock in effects on those markets. Google's Android is a step into the right direction but not enough. An IBM-PC moment is needed for mobile devices to become free.
disclaimer
It's easy to miss a critical piece when putting these chains of arguments together. If you think I have made a mistake, just drop me a note.