While the smart phone market growth has so far mainly been driven by the high-end segment, the market is now reaching a tipping point where the mid-level makes up a growing proportion of that growth. Smart phones are becoming the standard!

Fantastic news for operators?

Not completely as a recent study carried out on 1,000 UK customer claims that the strong uptake of smartphones threatens to damage the profitability of operators.  The combination of expensive subsidies, flat rate data tariffs, complex service set-up and the high cost to support means that it can take up to 16 months for an operator to breakeven on every new smartphone user.

Almost a third of consumers experience difficulty setting up email and 21% struggles to set up internet on their device. Customers need help and the operator is spending a lot of time and money supporting the customers as resolving smartphone issues takes on average 30% longer than with feature phones. A large group is struggeling with the advanced functionality of the smartphone and is defaulting back to the more familiar voice and SMS phone. Operator’s margins can quickly erode because of these factors.

So what’s next for the operators and what is their plan to increase profits? I my opinion the device manufacturers and operators need to design their products and services around the end-user. Making the products and services easy to use for their customers, question is if they have the capability and competence to turn this into reality……

Source

Is this a big surprise?  No!

As long as device manufacturers have a strategy of competing on design and providing consumers a Swiss Knife-like device (Technology/Feature push) to keep their Average Sales Price (ASP) high without developing an end-to-end service (device, software, network) with the end user in mind (only most relevant features, take away comlexity). Likewise most operators are deploying MDM tools, with a focus of firmware updates (>200 software bugs per launched device) and pushing the right network settings, to keep connectivity/data revenues going.

Basically the device manufacturers and operators need to change their business model from a technology/infrastructure push to an end-to-end service designed around the end-user. Both Blackberry and Apple have already provided the proof points that this is the way to go.

Question will be whether the device manufacturers and operators have the capability and competence to make this change over time…..

http://www.mformation.com/mformation-news/press-releases/95percent-of-mobile-users-would-use-more-data-services-if-setup-were-easier

Market leader Nokia understands what services offerings consumers like best, a recent Nokia study on device usage shows that Email has really taken off in 2008 and demonstrates increased use of Music, Maps Browsing and Social Networking. While devices are becoming more powerful, hardware vendors push services and end users more and more use the services available to them.

An example of this is the fact that the MySpace Blackberry App was downloaded 400,000 times in 7 days. This is ~2% of all 19 million Blackberry users globally. This presents some real proof that the Blackberry user does actually want to do more than ping emails about the place.

The greatest example of this trend is the Apple App Store with an astonishing 100.000.000 downloads in 60 days. Assuming ~14 m iPhone users, this is an amazing ~7 downloads per iPhone user. Taking a neutral business case of app. revenue 10 $/user per year, iPhone Average Sales Price (ASP) of 158 $ (See Apple Annual Report), 30% Apples revenue cut, and a write off over 24 months….this nets to 10 / (158/2) * 30% = 4% additional revenue beyond selling the iPhone. This doesn’t sound as a lot…….but it is a good starting point…..bear in mind the iPhone is also a platform for Music, and Apple has grown this to 36% additional revenue around the iPod.

Of course all supply chain actors (operators, content providers, device manufacturers,…) are watching this new revenue stream and will try to claim their share….it will be interesting to see how this evolves over time.

What does this mean for TEM and the Enterprise?  This is another example of how adoption of consumer services will find its way into the enterprise leading to interesting questions around how to deal with private versus business, security risks, escalating cost of mobile data, escalating end user support cost around consumer related questions, etc…….

• 27% growth YoY in smart phone shipments shows the increasing popularity of smartphones;
• The Apple iPhone shipments represent over 17% and even overtakes RIM in popularity;
• Nokia retains its leading position but looses 12.4% market share;
• The charts will look differently with Android and Storm on its way in Q4. 

Adoption of Smartphone takes place with professionals in enterprises first as business users like the Apple iPhone for the obvious reasons, as is shown in the recent customer-satisfaction survey taken by J.D. Power.

What does this mean for the enterprise?

• More unique platforms to support, more complex devices……….expect support cost to increase, as it takes experts to fully understand the different platforms and expect end users to ask more device specific questions;
• Devices are geared for high mobile data usage…….will the operators keep promoting “all you can eat” or “fair usage policies” once adoption is there or will they eventually move to an usage based model, how to deal with mobile data roaming…..expect mobile data cost to increase. Ezwim has seen 100% growth of mobile data cost in recent years through its Ezwim Telecom Monitor;
• Device are becoming more open and powerful……end users will put their own software on devices……what about security (Trojan horse, etc.) and what about interoperability issues…..enterprises will need to spend more in establishing and enforcing corporate policies by means of the right tools.
• Devices are becoming more expensive and have a shorter life span…….in the past a simple voice centric device of 100 Euro with a write off in 24 months would be sufficient, today a Smart Phone of 220 Euro with a write off in 14 months will become the standard……

Does the above sound familiar? Yes, it is like watching the life cycle of Desktop Management Services 20 years ago.
Enterprises should start managing the baseline cost and assets, set-up and enforce a corporate policy, and introduce service management.