SAP bets on the cloud

SAP is making a big bet in the cloud.

SAP, the quintessential big enterprise software company is making a big change. It’s going all in on the cloud, and as the New York Times reports, it’s a move that could alienate some of its enterprise customers.

SAP doesn’t seem to care. There is no “innovator’s dilemma.” It recognizes the future is in the cloud and its firmly aiming its business in that direction. This is in stark contrast to companies like Microsoft and Adobe, which have made nods to the cloud, but haven’t really fully embraced it.

Adobe turned some heads recently when it announced it was dropping the boxed version of Creative Suite in favor of a product they were calling Creative Cloud. It sounded very much like they too were going all in on the cloud, leaving the world of physical software behind, but when you dig a little deeper, you see that it’s not really a cloud suite at all. The main applications of the suite like Flash, Dreamweaver and Photoshop actually are downloaded and installed on your desktop.

As Roo’s mother might have said in Winnie the Pooh, “Roo dear, if the applications are on the desktop, it’s not really a cloud application.” Sure, it has file sync and share and some other cloud pieces, but at its core it’s a desktop subscription service, not a cloud at all, and what appeared to be a brave, even bold move by Adobe isn’t that brave or bold at all.

Similarly, Microsoft talks about the cloud a lot and it says what you expect a cloud vendor to say. Heck, at the SharePoint conference in November it was encouraging customers to go to the cloud  version of SharePoint even if its customers weren’t necessarily ready to go with them. But again a closer examination shows this isn’t cloud at all, it’s a fully hosted version SharePoint, same as the one you install in your data center. The only difference is the location of the software.

It’s important to note that Microsoft does offer some pure cloud services in that it owns Yammer, a cloud company it bought last year and it has Azure, which appears to be a pure cloud development platform, but it also throws around the term when it’s not always appropriate.

But now we have SAP saying they’re a full fledged cloud vendor, but can we believe them anymore than the others? I think we can because the evidence points to a huge cloud investment in the form of 7 data centers around the globe and 30,000 computers put to bear on the project for starters.

That would suggest a company that is serious and not just talking the talk and indiscriminately throwing around the term “cloud” for the marketing points it gets from it. The New York Times article even suggests that SAP could be building out infrastructure services that could put it in direct competition with Amazon Web Services.

It always gets interesting when established companies go after the disruptors and try to beat them at their own game. Amazon has a built-in advantage in a significant head start and an acute understanding of the cloud that can only come from a company that’s been built from the ground up as cloud vendor, but SAP brings enormous resources to the table.

Right now SAP appears to be doing and saying the right things, but whether it can make the transformation into a pure cloud vendor remains seen. But it sure should be fun to watch it try.

Microsoft still doesn’t get tablets. Here’s evidence.

Bill Gates recent statement about tablets proves how little Microsoft understands the market.

Last week, I was more than amused to read the statement from Microsoft Chairman Bill Gates on CNBC about iPad users. While trying to promote Microsoft Surface tablets, Gates’ reportedly told the cable news station: ” A lot of those [iPad] users are frustrated. They can’t type, they can’t create documents, they don’t have Office there.”

Sorry, Bill, but that’s just a completely twisted and confused view of tablet usage in general and iPads in particular. The fact is, if we wanted a laptop running Windows and Office, we would buy one. A tablet is a touch device and as such it’s a totally different animal. While we are still learning how to use it as a content creation device, what we need is a little more imagination about how to take take advantage of the new computing approach, not a return to Windows and Office.

But this statement was revealing in itself because it brings to the surface, if you’ll pardon the expression, the whole problem with Microsoft’s tablet strategy.

They say all the right the things (most of the time) and they sound like they really get tablets, but the fact is they don’t, not even a little bit and the statement from Gates illustrated this better than any discussion of their corporate strategy ever could.

I’ve used Windows 8 and Office 365 on a tablet for instance, and Microsoft has not tuned it to the tablet experience at all. The Windows 8 front-end tiles make sense, but once you get past that into Office 365, it’s the same Office as you’ve always known on the desktop  with all its complexity and no attempt whatsoever to exploit the fact you’re on a touch device.

I found myself frustrated trying to use it with my finger as a touch application until I connected a bluetooth keyboard and mouse.  So to that extent Gates is right. It really is frustrating using Office on a tablet. But that’s because it’s still essentially a desktop computing application moved part and parcel to another device. There has been no attempt on Microsoft’s part to push itself to redefine Office for the touch experience — and frankly it’s exasperating and baffling. Why wouldn’t you do this unless of course, you don’t understand the new computing model.

As John Blossom wrote on Google + about the update to Windows 8 called Windows Blue, “Microsoft remains attached to the notion of installed software, period. Yet, at the same time, it’s trying to move its customers into cloud-based apps. It has an inherent conflict of interest in this mix,” Blossom wrote. Blossom’s right and what he writes is applicable to Microsoft’s tablet approach. It can’t let go of the old model, even as it tries to move its customers to a new one.

All of this tends to dent their credibility when Gates starts talking about what iPad users might want, and it’s just embarrassing to have your Chairman sounding like a 90s has-been on TV grumbling about iPads, and how what users really want is a return to the days when his company controlled the computing experience, all installed on the hard drive or server.

I’m sure he wishes that’s what most users still want, but so far, there is absolutely no evidence that people want Surface tablets or even that tablet users want a keyboard and a copy of Office on their tablets. That’s may be what Bill Gates wants and what the company he helped found hopes happens — but that’s very different.

The fact is the market has shifted in a dramatic way and Gates moaning on TV about it, only makes Microsoft appear desperate and out of touch.

Photo Credit:  batmoo on Flickr. Used under CC 2.0 Share Alike/Attribution license.

Of Course, Mobile Makes us More Productive

Mobile devices clearly make workers more productive.

Last week I was traveling covering a conference and over breakfast I read the Wall Street Journal (the paper version). I came across this article, Why Aren’t Smartphones Making Us More Productive?  I was concerned. Why aren’t they? Then I read the post and realized it was rubbish.

Of course, smartphones and other mobile devices are making us more productive. Maybe the Wall Street Journal writer needs to find some different sources or maybe economists are having a hard time measuring productivity using whatever tools they have, but make no mistake, it’s happening and it’s like a slow train moving out of the station. It’s going to gain momentum as people figure out new ways to take advantage of mobile devices.

Look at just about any field and mobile has disrupted traditional business. Taxis? How about Uber, which is has driven traditional taxi companies to distraction because it’s much more efficient. You open the Uber app on your smartphone, order a taxi and watch as it comes toward you in real time on a map. It beats standing on a corner with your arm raised trying to get a cab driver’s attention. And it works. People love the service because it’s customer-centric.

How about travel? Take a look at Airbnb, a service that connects travelers with people who have rooms or apartments to rent. Using a mobile and social model, Airbnb lets you search for a place to stay, contact the owner directly and make arrangements. The price is set beforehand, so there are no surprises. The social comes into play because you can rate and comment on the quality of the stay and the accommodations. And it’s working too because it’s so simple and it provides a person-to-person direct link that only mobile devices can bring.

And mobile changes the dynamics in interesting ways for other businesses too. Box customer Sunbelt Rentals, for example, went from a system of using paper binders to using iPads running a custom version of Box. Gartner analyst Karen Shegda reported at a Gartner Portals, Collaboration and Content Summit session last week, that the company saw a 66 percent increase in leases after switching from paper to the iPad and custom app, and reported an astonishing 181 percent return on investment.

Shegda went on to say that Gartner estimated that within 2 years, 20 percent of salesforces will be using iPads. Given the productivity increases of Sunbelt Rentals, it makes me wonder what the other 80 percent are waiting for. One thing I’ve noticed about iPads is that they are a perfect sales tool because they don’t get in the way of the human interaction between individuals. The iPad is a tool that smoothly integrates into the sales process.

And if you get past the selling to the sale itself, you can expedite the process by filling out whatever forms are required and getting an electronic signature on the spot. It’s fast and relatively painless and it’s all done while the customer is ready to buy.

These are just a few examples. I didn’t have to cherry pick them either because there are countless other stories of massive increases in efficiency and productivity being extracted from mobile. Why the Wall Street Journal can’t figure this out is a little baffling to me. The irony is that after saying mobile wasn’t living up to its promise (however you define that), the writer went on to give several examples of his own of mobile productivity increases.

Mobile has the potential to change many different aspects of the business process. All it takes is some imagination. Companies which are reluctant to take the leap may find themselves leap-frogged by the competition or that users simply find more efficient mobile tools on their own.

The bottom line is that smart mobile apps make your workers more productive, no matter what the Wall Street Journal may think.

Photo Credit: (c) Can Stock Photo

Disruption catches up with everyone, even Apple

Apple needs to innovate to sustain growth.

I’ve been studying a lot about disruption recently, and one thing is clear. Everyone gets disrupted eventually –and in the digital age the likelihood is accelerated dramatically. So it should come as no surprise that after more than decade of dominance, Apple is facing disruptive forces in several of its product lines.

What will be interesting to watch is how Apple reacts to that unusual position, and if they can continue to innovate in an increasingly hostile environment.

It’s no secret that investors have lost favor with Apple as the stock price has gotten whacked over the last several months, even though evidence from their earnings call this week shows a company that’s still very strong, but getting squeezed on its margins. The focus for many was on the fact that Apple had a reduced year over year profit for the first time in memory, even though its sales figures were actually up year over year.

Apple is still selling product like nobody’s business (literally), selling 37.4 million iPhones in the quarter compared to 35.1 million a year ago. As for iPads? They sold 19.5 million iPads during the quarter, compared to 11.8 million a year ago.

All in all, by just about any measure it was still a healthy quarter. Would you rather have sold almost 38 million iPhones or 4.4 million Lumias? Just saying.

Meanwhile sales of Macs were flat, but as CITEworld editor Matt Rosoff pointed out on Twitter, flat is a whole lot better than the precipitous 14 percent drop for desktop PCs in the first quarter.

The trouble with eye-popping numbers is that it’s hard to sustain year after year, and this especially true as more and more interesting devices compete for our attention. As James Kendrick wrote this week on ZDNet, Apple needs to get its game on in the smartphone race because the iPhone is beginning to look a little dowdy compared to its competitors.

Steve Jobs is not walking through that door.

Same is true for the now venerable (that’s polite for having been around a long time) iTunes. As BusinessWeek reported, iTunes is facing pressure on a number of fronts, especially from streaming services like Spotify (a personal favorite) and rdio. While iTunes changed the music business when it came out, the iPod, which drove that part of the business, is a device that’s well past its prime and people aren’t as interested in owning music anymore. The article quoted, Ted Cohen, a recording industry consultant, who put it this way: “It’s no longer about individual tracks, it’s about access,” says Cohen. “The concept of buying music at 99¢ a song is becoming irrelevant,” Cohen told BusinessWeek.

Overall though, Apple still appears to be a healthy company, but what they can’t do is rest on their past successes and think they can continue to produce at the same level. Sustaining the kind of growth they’ve been on is not easy and probably unprecedented. To continue to grow with shrinking margins, they will need to expand the product line in new directions while updating popular products like iTunes and the iPhone to appeal to the changing tastes of the marketplace.

Tim Cook hinted that there would be new products and services coming in the Fall and throughout next year. I can’t imagine sitting still and getting complacent, but they cleverly plucked low-hanging fruit with the iPod, the iPhone and iPad; recognizing that nobody to that point had done a good job with these products.

Finding similar areas to exploit moving forward is going to be harder, but if Apple hopes to sustain its growth trajectory, it needs to start innovating and fast.

Photo Credit 1: Dick Thomas Johnson on Flickr. Used under CC 2.0 Share Alike/Attribution license.

Photo Credit 2: thetaxhaven on Flickr. Used under CC 2.0 Share Alike/Attribution license.

Lines at T-Mobile prove Apple brand still has clout

Apple still has plenty of brand clout, as lines last week at the release of the $99 iPhone 5 showed.

I was chatting with a friend regarding Tiger Woods before The Masters this past weekend, and about how we were both rooting for him to do well — even though truth be told, I’m not much of a golf fan. When he was on top, it probably wouldn’t have been the case. Seems we love to hate the top dog, which might be what’s happening with Apple these days.

Seems everyone is quick to look for any sign that Apple is decline. But there’s perception and feeling and there’s reality and as much as the press seems to be hell bent on hating Apple, people just keep buying their products in dizzying numbers.

And if you wanted proof that Apple still has some brand clout, consider that on Friday, T-Mobile began offering iPhone 5s for $99 and saw lines, yes actual lines, outside their retail stores.

Apparently even T-Mobile didn’t expect this. As Wayne Rash reported in eWeek, the stores were unprepared for the popularity of the offer and just a bit overwhelmed. Apparently, they hadn’t dealt with the passion of Apple buyers before.

What those lines proved was the Apple brand still has plenty of reach and people are still willing to wait in a long line to get the Apple product. Samsung may cleverly make fun of those lines in their ads, but the fact is people have so much brand loyalty when it comes to Apple, they are willing to do that and if the T-Mobile experience is any indication, that still hasn’t changed.

Yet, people want to believe Apple is in decline in the worst way, the same way they wanted to see LeBron James and Tom Brady and so many other successful atheletes taken down a notch. Once they win, it’s human nature to want to give someone else a chance.

So now, it seems Apple is the brand everyone loves to hate because it’s so successful. But if it’s true that the youth market is the leading indicator of product popularity, consider that Business Insider reporting this week on a Piper Jaffrey survey of teen mobile buying habits, found 48 percent of teens currently own an iPhone and 62 percent (that’s almost two out of three) plan on buying one when they purchase their next phone. Just 23 percent want an Android according to the Piper Jaffrey survey.

All of these numbers suggest that perhaps, Apple is doing just fine after all and and the perception that it’s in decline could be more wishful thinking than actual fact. It may be indeed that Apple can’t keep up with the growth trajectory its been on these past several years  as more competition enters the market and margins get squeezed as the markets mature, but even the strongest Apple hater would have to admit the company is still doing pretty well.

If people are willing to stand in line for iPhone 5s long after they were released, and if rumors are right, not far ahead of the next release, the brand still has some cache even though a lot of you probably wish it would just go the way of Tiger Woods.

Photo Credit: (c) Can Stock Photo

Facebook Home on Android is a non-starter

Facebook as the center of your mobile life is a non-starter.

After Facebook made its Android announcement called Facebook Home last week, my first reaction was “this is nuts,” but I decided to let it sit. After almost a week, I still think the idea is a non-starter.

There are so many reasons this is a bad idea, but let’s just explore a few of them.

* Who in their right mind wants to have Facebook as the center of their phoning lives? Zuckerberg made it sound like a feature that my friends’ information comes up on my phone, even when it’s locked. As my colleague Wayne Rash pointed out, unless your socially obsessed, this approach isn’t for you. Is the latest George Takei ditty so fascinating that it can’t wait for me to open the Facebook app and see it? I don’t think so. Facebook just isn’t as important as it wants us to believe.

* Aside from the fact that Facebook thinks I want it at the center of my life, when I don’t, there are other reasons to leave Facebook safely locked in the browser or an app. I don’t want Facebook having access to my entire mobile life. It’s bad enough, the amount of information Facebook has on our lives, do we really want to give it control of our mobile phones? Om Malik thinks not. I’m inclined to agree.

As Malik wrote, “In fact, Facebook Home should put privacy advocates on alert, for this application erodes any idea of privacy. If you install this, then it is very likely that Facebook is going to be able to track your every move, and every little action.” It’s a scary scenario and no thanks, Facebook.

It’s precisely the reason if I were a Bing user, I wouldn’t add Facebook search to my results. I don’t want Facebook and Microsoft sharing all this information about me and how I search and what I do on Facebook. It’s bad enough that Facebook knows what it does, I’m not giving it any more ammunition from my mobile phone. No thanks.

* It’s a blatant power grab of the Android platform. Why would users who choose the Android platform for its openess, give that up to Facebook? The fact is most people wouldn’t. As Alexandra Chang put it on Wired, ” It isn’t a phone made by Facebook. It’s something better than that, and in some ways, more important: a deeply integrated application with its hooks set tightly into the Android platform. Think of it as an apperating system.”

With this move, if people actually did it, Facebook would get the best of all worlds. It would attack Google at the heart of its OS by taking it over before you even get past the lock screen. Great for Facebook, but for users, not so much.

Facebook Home is Zuckerberg’s wet dream of what he wants the mobile experience to be — centered around his service while weakening a key competitor in Google in the process, but this isn’t some teen dream about mobile. It’s reality and nobody in their right mind other than the completely Facebook-obsessed (and even my teen has backed off from it a great deal) are going to go for this.

This makes great theater for tech journalists like me and we love the drama of the announcement and watching Zuckerberg grow as a pitch man, but this approach is a non-starter and I’m predicting right now it’s not going anywhere.

Photo Credit: Kris Krug on flickr. Used under CC 2.0 Share Alike/Attribution license.

In spite of good quarter, BlackBerry is still toast

BlackBerry is like this Zombie, still walking, but not really alive

So Blackberry had a good quarter and it sold a few Z10s. Good for them. They’re a company that’s been down so long, looks like up to them, but don’t confuse a smidgen of success with a turn-around.

Chances are the surge is nothing more than a short-lived little burst of energy. As Zack Whittaker cleverly put it on ZDnet, they have done little more than “lived to die another day.”

Sure, it feels good to write something positive about a once dominant company that somehow defies the odds and finds its way to profitability, but that’s not what happened here. As Whittaker wrote, “[In spite of the good quarter], the picture was still pretty bleak on the top line, reporting revenue of $11.1 billion, down 40 percent year-over-year.”

That’s a precipitous drop in revenue, folks and even though many including Wayne Rash at eWeek think BlackBerry hit the requisite homerun here with the hardware and the OS, there are fundamental issues with a lack of apps.

I can say personally saw a Z10 at the Mobile World Congress last month and it has style and polish and some very neat OS features that differentiate it from the competition. In short, it was a competitive high-end phone. I walked away impressed.

But what even Rash, who gave the phone a positive review, acknowledged that its achilles’s heel could be its dearth of decent apps. You can have the best phone in the world, but if you don’t have apps, nobody is coming to your party. And that could be a huge issue for Blackberry going forward.

It could be why Larry Dignan reported on ZDNet that BlackBerry is predicted to lose money in every quarter in fiscal 2014 and only survive on its substantial cash horde, a situation that is obviously not sustainable long-term. Of course, it’s worth noting experts predicted a loss this quarter too and they were wrong. Unfortunately, even beating expectations didn’t impress investors all that much as the Wall Street Journal reported the stock dropped 0.08 percent after initially rising 10 percent on the earnings report.

The same WSJ report called a new plan by BlackBerry to distribute a range of phones a risky one. The feeling at BlackBerry is it ultimately can’t compete at the high end of the market with Apple and Samsung, so it’s aiming lower down where it might sell more phones across a range of price points in a wider variety of markets.

Regardless of the plan or the quality of Z10 or the profitable quarter, BlackBerry has been toast for a long time, they just have too much cash to lie down and die. The best they can hope for is that they have set themselves up as a more attractive takeover target.

I know it would be a nice story if they could rise up and compete again, but this isn’t a fairy tale, and no matter how good the Z10 is, it’s not saving the company. It’s too late for that.

Photo Credit:  My name is Randy on Flickr. Used under CC 2.0 license.

Oracle reports losses as pressure mounts from cloud and open source alternatives

Oracle’s business model is under attack from cloud alternatives and shifting priorities as companies begin to support more and more mobile devices.

As disruption from cheaper, smaller and more agile upstarts begins to have an impact on Oracle’s business, it reported its third losing quarter in the last two years, according to a report in the Wall Street Journal.

The WSJ article reported subscriptions slid 2 percent in the latest quarterly earnings report and the stock market didn’t deal well with news as the stock price dropped 9.7 percent.

Oracle is in fact just the type of company ripe for disruption by smaller more agile ones offering the same types of services, whether database management or CRM  and marketing monitoring and automation (to name just a few of the enterprise categories in which Oracle has products), customers who once turned to Oracle are turning to cheaper open source and cloud alternatives.

As an example, the Wall Street Journal article cites the price difference for Oracle’s marketing software and the similar offering from rival Salesforce.com. Oracle charges $5,795 per user license with a 10 license minimum. Salesforce.com charges $125 per user per month for a similar service with a year commitment. Any way you slice it, that’s undercutting Oracle’s offering in a big way.

Oracle faces disruption on a number of levels. As a company trying to sell hardware and enterprise software to run on it, it faces competition, not only from Salesforce and other cloud alternatives, but from open source choices like Hadoop for data analysis and cheaper cloud infrastructure providers such as Amazon Web Services.

When companies looking to cut costs look at the bottom line, Oracle faces tough going against cheaper alternatives. What’s more, after years of aggressive pricing, customers are happy to find  other options.

Meanwhile, in spite of the fact that Oracle has bought a number of cloud vendors over the last several years in an attempt to move some of its offerings to the cloud, it remains at its core very much an on-premise enterprise software vendor trying to sell a stack of software at a time when IT is looking for cheaper and faster vendors.

As the WSJ article points out, Oracle has a loyal customer base, but companies looking at new offerings aren’t looking to Oracle anymore when it comes to enterprise software, not when they can find alternatives that are far more economical — and that doesn’t bode well for the long-term future of the company.

What’s more, Oracle faces the classic “innovator’s dilemma” as defined by Harvard professor Clayton Christensen. They are forced to protect their most lucrative clients, and even though they must recognize the competitive pressure from younger, faster, cheaper companies starting out at the bottom end of the market and working their way up. Yet because companies like Oracle want to protect its most lucrative customers, they can’t afford to pay attention to the lower end ones the competition is gobbling up.

Oracle isn’t going anywhere because it has a bad quarter, but it’s the third bad quarter in two years from a company that used to consistently hit its targets and could be a sign that the disruptors are having an impact.

It can try to answer the disruptive forces, but it can’t fundamentally change what it is:  A large company that was created to answer an enterprise need in a different decade under different market conditions. As such, it will very likely continue to suffer a death by a 1000 cuts as disruptive forces attack it at every turn.

Photo Credit:  (c) Can Stock Photo

With so much fragmenting, is Android still a single OS?

With so many flavors of Android, is it still a single operating system?

As Android becomes increasingly fragmented, it’s fair to ask if it’s a single operating system or many separate ones. I’m inclined to believe that it’s breaking into separate ones, but a couple of experts I spoke to think as long as generic apps run on the platform, it’s fair to call it a single platform

At the recent Mobile World Congress, I had a chance to play with the new HTC One, which was a nice piece of hardware. I’m not an Android expert by any means, but a colleague who was with me indicated HTC had gone out on its own on this one in terms of the interface and Android fans might find it confusing as a result.

Meanwhile, Twitter was aflutter on Friday with news of the Samsung Galaxy s4. Ryan Faas writing on CITEworld suggested Samsung is introducing its own Android platform (with its eyes on the enterprise). He wrote that with so many flavors, that some of these can “credibly considered to be their own platform.”

Steven J. Vaughan-Nichols, a freelance technology journalist who writes frequently about open source including Android, see it differently though. He says all these flavors of Android remain essentially the same OS even though each manufacturer is putting their own stamp on it. “Android has always been fragmented. Even today there are seven–count ‘em 7–different Android variations ranging from Eclair to Jelly Bean with at least 1% of the market. But, not counting corner cases like Aliyun OS, it’s never been forked. What HTC and Samsung are doing is just adding their own special sauce on the Android goodies,” he said.

Vaughan-Nichols adds, “Now, when it becomes impossible for a third-party generic Android app. to run on those devices then we’ll have something to worry about.”

The Samsung Galaxy s4 has its own unique flavor of Android.

Rob Pegoraro, a freelance writer for USA Today and other sites, who covers Android agrees and doesn’t see it as an issue. “If you look at Android as a way to run apps, it still appears as a single platform–thanks to a lot of hard work by developers that users don’t see,” he said.

He notes, however, that for users, the look and feel could change fairly dramatically from device to device. “But if you consider it as a common interface that you only need to learn once every few years, it’s pretty much forked. You can’t count on something as basic as the back button being in the same spot on different vendors’ phones,” he explained

The problem for me is that every member of my family could have Android phones and they could all look, feel and operate completely differently. Yet they are all called the “Android” OS because at their core they are Android and run Android apps.

But Pegoraro explains it might be better to think of the different flavors in the way we think of dialects. They are the same language even though they sound a lot different. “The difference between an HTC-style Android interface and a Samsung-esque one used to be something like the difference between Boston and New York accents. Now it’s more like the gap between Cajun and Nebraskan dialects, or maybe American and British English: There’s a lot more distinct vocabulary, and you need to work more to decipher the other party’s speech at first,” he told me.

For now, Android gets counted as a single OS regardless of flavor, but you have to wonder if Samsung and HTC continue on their own path if this will continue or if at some point we will have different Android flavors counted as separate operating systems. Time will tell.

Photo Credit 1: (c) Can Stock Photo

Photo Credit 2: Samsung

So many nice phones, but Apple and Samsung still rule

During my recent trip to Mobile World Congress in Barcelona, I got to handle a bunch of phones I had heard about, but never actually held and saw updates to some I hadn’t seen in a while. After playing with phones for a few days, I came to a couple of conclusions.

First of all, there is a lot of nice hardware out there — the BlackBerry Z10, The Nokia 920, The Motorola Droid Razr HD — and there were lots of others made with quality hardware and gorgeous displays.

There are tons of nice phones out there, but Samsung and Apple dominate the market.

Second of all, I came to the conclusion it didn’t matter how nice a phone was because the market is essentially frozen in place and the two manufacturers that rule the roost are Samsung and Apple. Too bad, so sad for everyone else.

That may sound harsh, but it’s the truth. The Wall Street Journal reports that Samsung and Apple dominate the worldwide market with a combined share of 51 percent (according to IDC). This is in line with Strategy Analytic’s numbers which found the two companies had a combined share of 49.8 percent for 2012. Close enough for rock and roll.

The numbers tell a story and, it’s the two dominant players have a strong-hold on the smartphone market. I don’t have break-downs by country, but I suspect it holds pretty consistently, although there is a fight in the works for emerging markets.

ZTE announced a new phone called the ZTE Open phone, a low-end device running the open source Firefox mobile OS. I checked out the phone. It’s not great, but it’s not aimed at a market looking for greatness. The target market is young people in Latin America and to a lesser extent Spain who currently have feature phones and can’t afford smart phones. I heard Telefonica planned to sell it in Latin America for well under $100. I asked how they could make any money at that price, but nobody at the Telefonica booth could answer my question.

Nokia, not to be left out, also announced a low-end smartphone running Windows Phone 8 called the Lumia 520. It’s like a baby version of the Lumia 920. It doesn’t have the polish outside or inside of its much more expensive older sibling, but a Nokia spokesperson at the Nokia pavilion told me it’s only $129 Euro ($167 USD) off contract. That means it’s very likely free with one. According to VentureBeat, only T-Mobile will be offering this phone in the US.

All of these companies are trying desperately to break the market stronghold of Apple and Samsung. For a long time Nokia controlled the low end of the market and was the best selling brand in the world, but no longer. Nokia is going to back to its roots in a sense with this lower end Lumia (although its Asha line of phones really is much more suited to the low end of the market).

The conundrum for all these companies is that no matter how hard they try and no matter how sweet the phone looks and feels in your hands, nobody seems to pay attention — or at least not enough people to matter. No matter what the competition does, it seems they are stuck fighting for the scraps left over by Apple and Samsung.

The reality is though that half the worldwide market is still a big piece of the pie. Unfortunately after you subtract Nokia’s 5 percent share, the remaining 45.2 percent is divided among such a wide variety of players with shares so small Strategy Analytics didn’t even bother counting them. Unless somebody emerges from that pile, the numbers don’t lie and it’s harsh market. It’s Apple and Samsung’s world and everyone is just picking up their table scraps.

Photo Credit: Ron Miller. Used under CC 2.0 Share Alike/Attribution license.