January 14th, 2007
Closed iPhone is a necessary evil, for a while
The talk of dissatisfaction that the pending Apple iPhone is "closed" makes a lot of sense … later. The fact that convergence has not meaningfully happened for mobile, PC, communications, content, and Web tells us that the market needs a spoiler.
And Apple seems ready, willing, and able to be that spoiler with the iPhone as currently defined. It may well take a draconian, closed, heavy-handed approach to bring together the converged functionality, network access, universal GUI, and media access that defines the next generation of mobile device, functions and service.
Apple at the same time will finally elevate the role of software innovation as the primary differentiator for these devices. And that will ultimately benefit users, as well as the competitors.
Jobs at Macworld painted only a modest goal for his phone in terms of deployment: 1% of the market in year one. The effect the device and its approach will have will be much greater than its share, however, because it forces the rest of the industry to adjust, innovate, and provide alternative approaches.
Already, for those watching the U.S. football playoff games, the mobile communications/smart phone competition is delivering a mainstream media ad blitz on current smart-phones, many running Windows CE across the major mobile networks. That's great, because just the specter of the iPhone is already doing more to enliven this business than anything in memory.
Problem is the current generation of smart phones are insufficiently differentiated in features and functions that they are left mostly to compete on price — a vicious downward spiral of diminishing returns for users and investors. Users get the cheap end of product, billing, and support. Investors get RAZR thin margins from a business that should not yet be in commodity mode.
Apple can ultimately help reverse the current self-imposed stranglehold of bottom-line starvation by redefining the industry, and allowing for price migration upward based on compelling features, service, convenience, and more use of associated business models such as direct media/content sales and mobile commerce advertising.
I for one will be happy to enter a quid quo pro (as I already do with iTunes/iPod) with Apple on iPhone. I will pay more and have less openness, but you must make me highly productive right away. You must not waste my time with slipshod product, security and support. You must make my convenience and time the primary motivations for your design. You must do the integrations for me, not force me to converge the elements as an after-thought.
We should expect then that the Windows CE-based phones may be more open than the iPhone … but at what cost? A price war, while also slowing down their ability to advance their offerings in the market. "Open" devices will slow down the providers' ability to deliver innovation because they need to drag along the ISVs and developers, with all the complexity of attending to all the iterations of hardware, firmware, and drivers, et al. Vista took five years — can't wait that long in the mobile software business.
Meanwhile, Apple and the iPhone can in about three years move the paradigm forward at break-neck speed. They will redefine the standard for full-function performance and ease of use. They could well dominate the top-end of the market, while forcing much larger changes in the mid-market by the competitors. Being closed for a period of time will allow the iPhone approach to mature quickly, and give the users a chance to vote their preferences.
If in three years an open approach — where there's a bazaar of players that can work well together (network, software, device, add-ons, services) as an ecology — emerges, great. That then allows users to choose, a closed iPhone or an open … whatever. Apple at worst will repeat history by reaping 5% to 10% of the market. But they could also repeat not the Macintosh history but the iPod one, and fully define the category as well as capture critical mass of use.
I say keep iPhone closed, quickly evolve the category, and then let the competition react. Then the customers will have more choice — and not just choice between highly similar offerings from a few similar networks, but the choice between two fundamentally different approaches to mobile, converged computing and communications. Until June, when iPhone arrives, the choices are actually quite limited — be the offerings open or closed.
Incidentally, the close returns from my blog poll on the carrier approach choices going forward shows no clear preference in the market. Nearly equal numbers see the Apple and Microsoft approach winning. That means the market remains open, and an open market is more powerful than an open API for a mobile device.
Dana Gardner is principal analyst of Interarbor Solutions. For disclosures on Dana's industry affiliations, click here or to view his full profile click here.
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