Geek Sports Page: The Coming Contest Over Mobile Operating Systems
At Business Insider, Henry Blodgett is at his snarkiest in dismissing Microsoft’s forthcoming Mobile Windows Phone 7 operating system as “a fantasy,” with no chance of making a dent in the market. (And when the mood is on Blodgett, he sets a high standard of snark.) Blodgett’s reasoning is simple: Microsoft will charge $15 per instrument for the OS; Android is free. QED.
Not so fast, Henry, because Microsoft’s entry sets up a fascinating natural experiment in business models, as varying approaches compete with each other, and pre-judging the outcome is rash.
A mobile smartphone system has four parts: hardware; operating system; carrier; add-on applications. These can be furnished as a complete or partial package — Apple, for example, provides the hardware and the operating system, maintains tight control over the applications store, and integrates its offerings with the carrier, AT&T. Or they can be furnished as stand-alone items, as Google furnishes only the Android OS. Or something in between is possible, as handset makers load Android, but are then integrated with carriers which provide subsidies while they duel over who will control the applications.
Competitive advantage can be sought from any element of the system. Apple profits greatly from the elegance of its hardware and the devotion of its fans to its OS. RIM (Blackberry) has long been a favorite of corporate America because of its security and integration with corporate systems. Android gets an edge by being both free and open, two different attributes. Free appeals to the handset makers, who like the idea of paying nothing for an OS and at the same time having no responsibility for developing or maintaining it, and open appeals to everyone (makers; carriers; programmers) who might want to tweak it for their own particular purposes.
But competitive advantage is a tricky thing, and the characteristic for which the tech world most loves Android, which is that it creates a great playground for geeks, and encourages the development of thousands of applications, is probably the least important concern for the vast mob of consumers, who can barely program a video recording machine. For the mass market, the most important considerations are ease of use and transparency, lack of hassle in use, reliability, security, enough of the right apps. Above all, the time of the user is the most important resource.
Windows won in the PC not because anyone loves Microsoft or because it lacks many annoying idiosyncracies (for example, its help functions were written by brains that do not work like mine) but because Microsoft invested heavily to ensure that anything that is plugged in, works. Anyone who remembers the early days of the personal computer, when adding a printer was a day-long project, understands how important this is. And how quickly lost time wipes out any money savings – for any sensible person, the $15 that Microsoft plans to charge for Windows 7 will be a bargain if it saves him a single hour over the life of the phone, and this is without consideration of any possible ancillary costs, such as security breakdowns.
So what approach to a smartphone system will win in the market? The only thing we know for sure is TANSTAAFL – there ain’t no such thing as a free lunch. Every element of the system must be paid for in some fashion, at the outset and most probably by continuing investment in maintenance. Microsoft, and all other software companies know this, as is shown by the stream of updates, many security-related, that appear regularly on my PC. As Apple has grown more popular, it too has become more of a target for malicious hackers, and it too must be devoting more resources to countermeasures.
So, who is going to maintain Android? Will Google? But how, since a chief characteristic of Android is openness, which means people can tweak it in private ways? And how does this fit with Google’s business model, which is to collect money for advertising that is connected to Android, and to use its software to collect information that improves the effectiveness of that advertising; there is no logical or necessary relationship between this model and the costs of maintaining an OS on a continuing basis.
Will each handset maker that installs Android undertake the responsibility for maintenance, and is this economical? It appears quite duplicative on the surface; indeed, it would not be long before the handset makers got the idea that they should all contribute to a third party that would maintain Android for all of them, but oops! Wasn’t that that $15 per instrument savings that just went out the window (pun intended)?
Blodgett followed up his original post with one quoting an unnamed “person familiar with Microsoft’s mobile strategy” who contended that “Android comes with all sort of hidden costs that drive up the per-unit expenses such that Microsoft’s $15 per unit actually seemed like a better deal.” Said person notes the plug and play point, for example:
Android’s laissez faire hardware landscape is a fragmented mess for device drivers. (For background, just like PCs, mobile devices need drivers for their various components—screen, GPS, WiFi, Bluetooth, 3G radio, accelerometer, etc.) Android OEMs have to put engineering resources into developing these drivers to get their devices working. The Windows Phone 7 “chassis strategy” allows devices to be created faster, saving significant engineering cost. It’s essentially plug and play, with device drivers authored by Microsoft.
Blodgett asks for continuing input on the issue, and Amen to that. In theory, my guess is that the the $15 per instrument charge for the OS will win out, but maybe not, or maybe Google or the handset makers will find that continuing services are not necessary or that the economies of scale are such that they can be provided at a cheaper price. The scale is certainly there, as hundreds of thousands of Android phones are being activated every week.
So let the games begin, and may the best business model prevail!
Wall of cell phones from Jason Dunn.