Software Becomes the Smartphone Battlefield

Describing the smartphone market as “busy” these days just doesn’t do it justice.

Tomorrow, Nokia is set to debut it latest high-end smartphone, which comes right on the heels of T-Mobile’s launch of the highly anticipated Android-based HTC G1 handset.

Nokia’s (NYSE: NOK) also been busy introducing new Web- and multimedia-friendly phones, while enterprise mobility leader Research in Motion (RIM) has been pushing hard into the consumer space. RIM (NASDAQ: RIMM) just launched its first flip Pearl handset and is readying its newest BlackBerry, the Storm. It’s also promising new mobile device platforms in early 2009, while Palm is doing the same.

Oh, and let’s not forget the arrival of Apple’s (NASDAQ: AAPL) iPhone 3G two months ago, which, despite launch glitches, further cemented the Mac and iPod maker as a force to be reckoned with in the phone space.

With such frenzied competition, how do handset makers expect to break free from their rivals? The answer is in the platform, which sets the stage for advanced functions such as PC-like multimedia support and third-party application development — features that industry observers see as critical to success.

“Software is changing the soul of the smartphone and making devices much more special,” Carolina Milanesi, research director for mobile devices technology at Gartner, told

And with platforms becoming the key to next-generation applications, there is a continuing debate over whether open source or proprietary systems will ultimately provide the most fertile environment.

While the G1 is the first device launched using the new open source Android platform spearheaded by the Google-backed Open Handset Alliance (OHA), Milanesi expects Android devices from several vendors in the near future. There were rumors this week that Motorola, a founding OHA supporter, is shoring up its in-house development efforts for future Android development. Motorola (NYSE: MOT) did not respond to mobile platform strategy inquiries by press time.

“While none of the vendors have made statements, I think more devices have to come out to give Android strength,” Milanesi said.

Simultaneously, longtime proprietary platform vendors such as Palm and even Nokia are now reconsidering their operating system strategies in the quest to push out new, appealing applications and services.

For some, like Palm and Motorola, such tinkering is key to remaining in the market. The past few years have been tough going for both, as each has struggled to retain its standing amid market woes and increasing competition.

Motorola long enjoyed the No. 2 slot following the big success of its RAZR phone in 2004, but has yet to serve up a device anywhere near as popular since then.

Palm (NASDAQ: PALM), revered for both the Treo and Centro smartphone devices, noted in its September earnings report that the maturing of the Centro handset presents a challenge, and “profits will be elusive” going forward into the next quarter.

These days, Palm relies on two mobile operating systems, including the Palm OS, which it licenses from ACCESS for its consumer-based devices. It uses Microsoft’s (NASDAQ: MSFT) Windows Mobile for its enterprise smartphone line.

“Palm’s play in the enterprise is with Microsoft, and together we deliver a solution that doesn’t require proprietary middleware, while adding our hallmark Palm experience,” Pam Deziel, vice president of software product marketing at Palm, told

Palm’s latest enterprise offerings — the Treo 800w and the month-old Pro — run on Windows Mobile 6.1. The platform, Deziel said, is compatible with Microsoft’s System Center Mobile Device Manager 2008 (SCMDM), which offers needed security for business environments.

“With SCMDM, IT managers can enforce enterprise security policies on mobile devices with the same tools that they are familiar with on the company desktops,” Deziel said.

Such security requirements are behind much of the success for RIM’s BlackBerry OS, which fuels all the vendor’s smartphones. RIM did not respond to inquiries about its mobile platform strategy by press time, but it’s long been praised for its close tie-in to enterprise systems and policies — most importantly, its enabling of IT administrative oversight of mobile devices.

Security provisions represent a main reason why enterprises flock to certain handsets over others, according to experts. Yet while open source mobile platforms can drive faster development, given wider involvement among developers, and less-restricted developer access in general, they are also often viewed as less secure — for the same reasons.

Page 2: Open source fights back

Still, Milanesi said open source platforms offer benefits as well, with Android being the newest example. For one thing, open platforms can help handset makers cut down the time to market, which can be a competitive coup.

“Mobile platform [decisions] are viewed as a cost aspect and often chosen for providing the quickest way to market,” Milanesi explained. “There is also a bigger development community with open platforms and so the devices can become richer, quicker.”

Converts to open source

Increasingly, handset players are buying into that line of thinking.

Over a year ago, Palm announced it was embarking on a new, propriety OS designed for its lower-end consumer line. Aside from promising that the new platform — scheduled for the first half of 2009 — would offer improved performance, reliability, stability and flexibility, the handset vendor has provided few specifics. One detail it has let slip is that the new system will be built on a Linux core.

“We have always believed open platforms are tremendously valuable for building a strong developer community that can offer innovative and specialized add-on software,” Deziel said.

“We do keep abreast of mobile platform developments, and believe our current efforts are the right move for Palm today,” Deziel said. “Our plans are to support popular services on our platform, offering a great customer experience through tight integration.”

Nokia, meanwhile, is undertaking an ambitious effort behind the Symbian platform, which the world’s handset maker announced it was buying out earlier this year, with plans to open source.

Once the offering becomes open to other handset manufacturers, vendors relying on proprietary operating systems may being thinking differently about open source.

“The acquisition is good for the industry and will put more pressure on Microsoft,” Milanesi said, explaining that Microsoft’s Windows Mobile license fees range from $5 to $20 a device, which ultimately adds to consumer handset costs.

“Hopefully, Symbian will get more interest from other players and not be so dependent on Nokia because it could provide the best-of-breed platform,” she added.

That’s exactly what Nokia hopes, according to David Rivas, the company’s vice president for technology management devices’ research and development.

It’s not that simple, however. Nokia has long been juggling a number of operating systems. At present, it has three platforms in play: the S30 and S40 proprietary systems and its the higher-end S60, which is a Symbian platform.

While declining to talk about whether the Finnish handset maker has based the upcoming Tube on Symbian, Rivas told that Nokia’s longtime multiple mobile platform strategy has been critical to its deep and extensive product line.

“It may seem sensible to have just one software play, and some companies do that, but when you have such a deep product line as Nokia, there is a need to have systems that support such depth,” Rivas said.

“The S60 is a relatively mature platform and has played a large part in where we are right now in handset development,” Rivas said, adding that having three mature systems has provided significant cost savings. “It just wouldn’t make sense to go to one platform.”

Nevertheless, Rivas said the Symbian purchase is aimed at creating a unified industry handset environment, and described the acquisition and planned opening of the OS as one of Nokia’s “most important steps” in many years.

“It’s not only a free platform, it’s a mature one, and that’s the criteria handset makers face in platform decisions today,” he said.

Nokia, which is not part of the Open Handset Alliance that brought Android to market, is not looking to join the open source group.

“When anything new comes up, it’s interesting and forces us to strive to perform better … We’re not so confident that we can’t learn form what’s happening in the industry,” Rivas said, adding that Android’s arrival “reaffirmed our move to push an open and free platform” into the market.

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