July 22 2010
by Thanasis Delistathis

Are there too many smartphone operating systems?

I had predicted that July 2008 would mark a seminal moment in the history of technology. That’s when Apple launched their mobile App Store. Now, it’s hard to think of an iPhone without the apps. A new app economy has been created with 250,000 applications in the App Store and $1BN paid out to developers.

Smartphone apps are nothing new. Palm and Symbian had created the first popular smartphones several years ago.  But they never really took off. What was missing was a mass market, affordable, attractive device as well as an easy way to develop and market apps, which Apple is offering through its iPhone and iTunes offerings respectively.

This time around Apple’s success has created fast followers. Google’s Android operating system offers 65,000 third part apps, while Blackberry only offers 7,000. Those are the ones most talked about but there are others still.  After HP bought Palm , there is wide speculation that Palm’s webOS might get a second life (currently with about 5,000 apps).  Nokia now supports two operating systems: Symbian OS for the midrange smartphones (about 13,000 apps) and meeGo for high end smartphones in partnership with Intel.  Microsoft is about to launch its newly overhauled Windows Phone Series 7 (previous version of Windows Mobile OS had about 13,000 apps).  In addition, there are proprietary operating systems like Samsung’s Bada.  Finally, we now have a new class of devices that are driven by a mobile OS, the tablets, the leader of which is the iPad.

The result is a very fragmented market.  So, is this sustainable?  If history is any predictor, it is not.  From several PC operating systems, Microsoft came out on top with few other competitors.  The same can be said about the database market with Oracle or the online auction market with EBay.  An easy way to think about it is to think about the decisions that developers have to make. An app company doesn’t have unlimited resources to develop versions of their app for every mobile platform. They have to priotitize. And they will put their resources behind the most popular platforms.  I see it with my companies.  iPhone is currently No 1, with Android being the logical No 2. Blackberry is a distant No 3 (I hear that it’s hard to find developers that want to develop on Blackberry), with a wait and see approach around Microsoft’s Phone 7.

What are the factors that companies use to determine priorities?  Here are a few:

  1. Size of installed base and momentum.
  2. Ease of use and engagement of users (likelihood they will download the app).
  3. Ease of programming using the SDK for the operating system (I hear good things about the webOS).
  4. Availability of developers for programming.
  5. Demographic fit of user base with the target market for the app (blackberry is good for enterprise apps but not so strong in the consumer space).

Because of the factors above, this is a market with tremendous network effects:  the more momentum behind a platform the more companies and developers want to support it, which in turn leads to even more dominance.  So, will all these operating systems exist in 5 or 10 years?  Likely not. This has significant strategy implications for some of these large players. Just read this story from today’s WSJ about Nokia’s challenges in the smartphone market.  When a phone is just a phone with few other add-ons, it’s easier to operate against many competitors.  When the phone becomes a computing device whose utility derives by how many apps are available, there are few winners. Granted that developing for a mobile platform is different than developing for a desktop operating system, in that it’s easier to support multiple platforms.  But once you get past 2 or 3, network effects act as a barrier to diversity.

We are still at the nascent stages of the smartphone market, but the ramp is much faster that many other prior trends.  For OEMs this is risky business and strategy around picking the right partners is crucial. For developers and app companies, it’s important to track the trends carefully and prioritize resources for maximum momentum.


July 22 2010
by Sam Aparicio

Nice post. I agree with your main thesis.

In my opinion we are converging towards a bipolar market: Apple on iPhone OS and Everybody Else on Android. Cupertino will be able to successfully defend their positioning of “best overall user experience” by keeping a tightly knit integration between device and OS and by closely policing their App Store submissions. Everybody else will pool their R&D dollars behind Google’s open source OS, which will potentially dominate on the basis of having created the strongest ecosystem play.

The other players (RIM doesn’t have one OS, it has one OS per device per carrier… their development tools are infuriatingly bad, Symbian’s developers are jumping ship) will eventually cut their losses and follow HTC, Samsung, Motorola and join the Android alliance.

The question that begs to be asked, though, is: what would happen if there was a disruption such that mobile network operators were disintermediated from the go to market of devices, applications and services?

In a post-telecom world of ubiquitous wifi, femtocells, municipal fiber networks and “network neutral” pipes, which players in the OS space benefit the most? And is there room, then, for an OS-specific discontinuity?

An environment like that would probably settle the question of whether there is specific inner value in owning an OS for mobile devices or whether value can only be derived by an OS player that can get a slice of the subscriber pie.

July 23 2010
by Ted Chan

Good post – I think handling fragmentation (porting, etc.) is a major market opportunity. And for some startups, like the company that I run, being agile enough to handle fragmentation is a way an upstart can outcompete the big traditional media players who are slowly limping into mobile. Startups with strong product management and scalable/portable architecture can rapidly respond to change and continued fragmentation.

As much as I complain about having to port, fragmentation is actually helping my business.

July 23 2010
by Thanasis Delistathis

Good point on blackberry. I imagine they are already thinking about streamlining this situation. I don’t know that wireless carriers will be completely cut out of the value chain. Think about the Google phone. I think it was a great phone, but without a subsidy that the carriers can only offer in exchange for subscription revenue, the phone just went nowhere. The AT&T subsidy is what keeps the iPhone extremely popular. Good questions around whether one needs to own the OS to derive value from mobile space. Time will tell.

you make a good point around early stage companies. They are definitely more agile and can adapt faster to this diversity, which is an advantage against entrenched companies!

July 23 2010
by Anup Ghosh

Thanks for laying out the landscape. My conclusion is similar to yours. I believe that there will be two platforms of market share significance: Apple IOS and Android. The question in my mind is how fast will Android over take Apple? Two factors work in Android’s favor: (1) an open platform and (2) a Java-based app development environment.

An open platform for developers means your destiny isn’t controlled by Apple. It also allows other players in the platform stack (such as security software players and system management solutions) to enter. Proprietary interfaces can breed mistrust with the development community.

The Android Java-based application development environment is significant in my mind because it opens up a much larger community of developers, which is also one of your factors in the article. The learning curve for Apple’s Objective C based development environment is steep compared to Java. Most programmers today are Java programmers, too. Ultimately the platform that gets the most content wins and a platform that is open to the largest number of developers is more likely to succeed because of lower barriers to entry.

Finally divorcing the software platform from the hardware as Android has done gives consumers more options and the ability for the market to optimize on consumer interests.

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