Services and apps sell devices in the post “closed source code” PC era

I’ve had the privilege of working with open source software in consumer electronics and in the IP Communications (SIP/IMS) space since 2001.  It’s interesting to see how finally, after a decade of pioneering work, open operating systems and the Internet are starting to transform the telecom industry for good.

Let me give you an example of how open software and Internet architectures changed the technology industry in the past. The emergence of Linux either put a number of “slow to adapt” UNIX firms out of business or created an environment in which they could no longer exist as standalone businesses.  Linux drove down the price of IT infrastructure, and those firms fast enough to adapt survived and thrived.  A few UNIX vendors chose to go with Microsoft with some limited success.  Just as Linux changed the tech industry environment, similarly Android has changed the landscape for smart phones.  There are already winners and losers.

I’ve been a proponent of open ecosystems throughout my career.  Closed ecosystems are monopolistic and insufficient as we’ve already seen with the stagnation of Nokia and Microsoft as Android ate their proverbial lunch.  Android on mobiles, tablets, TVs and home devices is proliferating services and convergent innovation.

Following the analogy of server side Unix to Linux, from closed OS to open OS in the mobile phone software stack – the next frontier to be changed by Google is going to be the home. 

Android@home and Google TV can be expected to be a disruptive force continuing to drive innovation.  Google plans to make Smart TVs and Smart entertainment systems talk to Android handsets hassle free. This poses a challenge for the established TV and consumer electronics companies that are not ready for software to be the driving choice for consumers over hardware.  Just like Nokia and RIM, a number of consumer electronics firms will fall from grace unless they are fast enough to react or get on the Android bandwagon.  I believe there will be a shake-up in the consumer electronics world as devices get smarter, cheaper and Internet connected. There’ll be room for new entrants and opportunities for the smart, established players to strengthen their positions.  Key to success will be the ability to design end-to-end services and utilize software to sell the hardware.

Consumer choice is driven by affordable and less power-consuming devices.  New devices enable new ways to interact with services provided by the Internet giants or start-ups.  High speed fixed and mobile broadband provides effortless access to these services with almost any device. And fast CPUs and GPUs (graphical processing unit) enable computing-intensive user experiences on almost any home device.

Consumers are buying affordable devices to use Internet services that keep them organized, on track, entertained, increase their efficiency and even improve their well being.  New ways to save energy and stay connected on any device from anywhere make the home network even more compelling.

I have been talking to carriers about the changing business landscape for quite some time. They seem somewhat reluctant to face the fact that the smart phone operating system vendors today have a hold on end-to-end communications service offerings. Apple has iMessage and FaceTime, Microsoft has Skype and LiveMessenger and Google has Google Voice and Gtalk. The adoption of LTE (long term evolution) will increase the speed of change and what I hope — will force carriers to realize it’s time to change – before they are pushed out of the communications services business entirely.

In order to compete, carrier service offerings will need to be built with high quality customer experience in mind.  Carrier organizations will also face challenges in customer acquisition. The organization will not have time to form the front line to match the market need.  Often carrier organizations are not agile enough to provide innovative communication services, rather they focus on selling mobile subscriptions — an easy sell in a growing market.

The likes of Apple and Google provide an increasing number of customers what they expect – relevant and interesting services provided in a meaningful and easily accessible way. Only players who can match or exceed these expectations will stay in the game.

The adoption of LTE as the worldwide standard for mobile broadband means that you can be connected to TVs and other consumer electronics and bypass the fixed line broadband altogether.  The consumer electronics manufacturers and carriers should now form partnerships that focus on innovations that break barriers. Think of your web-enabled energy meter being read on the TV or turning your Smart TV into a video conferencing unit.

Internet companies navigate the affordable and software-friendly devices to provide innovation to end users with disruptive business models. In order to move at Internet speed, companies in this new ecosystem – the bricks and mortar firms – need to heed the lessons from the past and form new partnerships.

Jari Ala Ruona
Movial Corporation

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