1. VisionMobileMobile Megatrends 2011how telecoms business is transforming in the software era. updated 8 March 2011 Copyright VisionMobile 2011

2. Knowledge. Passion. Innovation. Andreas Constantinou Michael Vakulenko Matos Kapetanakis (c) VisionMobile 2011Licensed under Creative Commons Attribution 3.0 Unported License (http://www.creativecommons.org/licenses/by/3.0)You are free to Share or Remix any part of this work as long as you attribute this work to VisionMobile (www.visionmobile.com).Copyright VisionMobile 2011 3. VisionMobile researchDistilling market noise into market senseResearch TrainingMarket maps Strategy definitioncompetitive analysis,open source economics,Competitive landscape maps of strategy design, ecosystemcommissioned research, Android commercials,the mobile industry positioning, product definitioncompany due diligencemobile industry dynamicsDeveloperEconomics 2010:Everything on mobiledevelopmentActive Idle Screen Open Source ChessboardWho will own the business impacts of mobile openMobile Megatrends series source, the competitive landscape and Mobile Industry Atlas, 3rd ed.screen?1,100+ companies, 69 market sectors how to design your company strategy Top-100 analyst blog 4,000+ subscribers 20,000+ monthly uniques 90% mobile industry insiders GPLv2 vs GPLv3 White Paper The Android Game Plan the commercial mechanics100 million club behind Android and howtracking successful businesses Google runs the showin mobile Copyright VisionMobile 2011 4. Trusted by industry brandsClientsselected VisionMobile clients 2008-2010 Copyright VisionMobile 2011 Copyright VisionMobile 2007-2010 5. Mobile Megatrends 2011The DELL-ification of mobileSoftware: new era for telecomsExperience ecosystemsHow the mobile handset landscape is and the new rules for innovationhow telecoms + internet convergencebecoming much like the PC is leading to the next megabrandsApps are the new webopen + closed Developers, developersWhy apps are the new informationuse of open + closed strategies tothe engine behind telecoms innovationparadigm for web 3.0commoditise + protectCommunities: a new currency Stuck in the telecoms ageAugmented EconomicsCommunities will provide the main how carriers are stuck in the telecoms age and making money at the edge of realitydifferentiation above price, design and contenthow to compete Copyright VisionMobile 2011 6. The DELL-ification of mobileHow the mobile handset market is approaching PC-like commoditisationCopyright VisionMobile 2011 7. Internet players agenda drive top-5 OEMs and OEM market is fragmenting, approaching the PC market!"""!""! !""#$ !""%$ !""&$ ($!")"$Market share of top-5 OEMs (source: Gartner)!$# $%#$ "* (#!"# Copyright VisionMobile 2011 8. Profits are driven by end-to-end playersand away from the old top-5 OEM league source: Deutsche BankCopyright VisionMobile 2011 9. OEM strategies: volume vs profit strategies = strategy expectations$ profit per unitdata source: Deutsche Bank2010 market share % Copyright VisionMobile 2011 10. OEMs at different stages of integration Three roles for handset manufacturers across the double helixHorizontal player structure Vertical player structureLeaders: new product experiencesand enviable marginsAssemblersrazon-thinmargins wannabee innovatorswannabeeleadersInnovators: incremental innovationstrong brand, performance, good looksand servicesCopyright VisionMobile 2011 11. Lead, innovate or assembleThe new role models for OEMs in the post-Android era1. Assemblers: Razor-thin margins10s of assemblers use Android to deliver ready-to-market smartphones with complete service and appsecosystem competing head-to-head with major OEMs. iPhone me-too experience at $100 retail.2. Leaders: unique product experiencesManufacturers who can masterfully integrate hardware + software + services + industrial design into newproduct experiences - from phones and tablets to TVs. Unique product experiences at $500 retail.3. Innovators: incremental innovationThe old top-5 OEM guard. Differentiation is on strong brand, performance, good looks and services.4. Mass producers: catering to developing markets ?Mass producers rely on huge economies of scale to break even at $50, but make up nearly 50% of unit salesin the mobile handset market. Copyright VisionMobile 2011 12. The innovators are squeezed in Revenue pyramidperformancepressure Leaders: new product experiencesInnovators:incremental innovationAssemblers:price razor-thin marginspressurePyramid squeeze is accelerated by Googles Experience handsets (fast hardware/software evolution) and Windows Phone Copyright VisionMobile 2011 13. DELLification in 2015closely modelling the PC business Profit pyramid Revenue pyramid Present-day example Leaders Role model: Apple $37.5B 5% @ $500 Innovators Role model: Samsung$90B25% @ $250 Assemblers Role model: Dell $56B 25% @ $100 s ce Mass producers vi Role model: Nokia ? de $37.5B45% @ $50B1.5$200B Copyright VisionMobile 2011 14. OEM + Android: winners and losersThe winners:The losers:low cost assemblers old guard OEMsCost structure optimised for razor-thin margins Cost structure requires high-marginsAndroid is a long-term opportunity for global reach Android is a short-term life supportNo Name source: VisionMobileCopyright VisionMobile 2011 15. The new world: Innovate or be replacedThe new rules of the handset industry1. Software and hardware is commodity- Software is a loss-leader, monetised by ads (Google), hardware (Apple), content (Amazon), services (RIM)- Software is provided a la carte and pre-integrated by chipset providers (e.g. Qualcomm, MediaTek)2. Points of differentiation rapidly disappearing- Android provides out-of-the-box, complete ecosystems; OEMs compete on equal footing to assemblers3. The search for innovation is onOEMs are search for new models of innovation beyond price, brand, performance and marketing:- communities BlackBerry messaging or facebook deals- made-to-order handsets; copying DELLs PC model- white label services for carriers where OEMs trade service revenues for carrier subsidies- micro-retailing slotting promos across distribution regions and channelsCopyright VisionMobile 2011 16. Software: the new era for telecoms and the new rules for innovationimage source: maschinenraum / FlickrCopyright VisionMobile 2011 17. $$$ and software DNA are key for platforms20 dead platforms in the last 10 yearsInternetDanger OS AndroidChrome OSSavaJe OSPCTrolltech $30M A la MobileiOSNokia GEOS IXI Mobile Palm 5/6 AzingoMotorola L-JComneon ApoxiAccess ALPMobilee-SIMIntrinsyc OS OpenWave MIDASSasken Aria Mizi PrizmSKY-MAP MOAPUIQTTPCom AjarOpenMoko 2000 2001 20022007 20082009 2010 = dead endbubble size = company revenuesCopyright VisionMobile 2011 18. The battle for mass-market smartphone reach OEM internallicensable!600+computersmobile!400device retail priceconnectedNokia Series 40phones Samsung SHP!100 LG Wise !50phonesvoiceNote: OSes omitted: Myriad, Mediatek OS, Mango (Qualcomm), Koretide Elastos 14 out of 15 platforms are monetised indirectly by complementary products 11 out of 15 platforms have developer ecosystems or industry consortia built around them Copyright VisionMobile 2011 19. The battle for ecosystem completenessCarriers Nokia RIM Apple QualcommGoogle facebookComponentsSocial networksCloud servicesDeveloper ecosystemNetworkUser interfaceOperating systemHardware IPManufacturingdenotes where vendor startedCopyright VisionMobile 2011 20. Huge gap between telecoms & software worldssuccess asdefined in2010success asdefined in2005Copyright VisionMobile 2011 21. software: turning telecoms upside down VA3#234+53#41G#N::1#L8?87-W#XX#C+1+-.D-E+,3#Y3138?5A# 234+531#6-,7#0-#7803#9/:#0-#;%#)"*E+8.#$&%#internalised $!#+LA-.3# )H 9+M6#"personalityback to"&(#S,81A#(T+03#square oneback to U+.7-F1##I#square one *+,,+-.#/.+01# LA-.3#8::1# %&(#%)&(# ) "&(# "(# ## ( ""( ))( % =-:>?+@A0#B#C+1+-.D-E+,3#)"# FFFG4+1+-.*-E+,3G5-*#Copyright VisionMobile 2011 22. Huge gap between telecoms & software worlds Telecoms worldSoftware worldSuccess factor installed basenumber of appsPrimary customer consumerdeveloperSpeed of innovation1 OS version every 2 years5 OS versions/yearTime to market 1-2 years 1-2 weeksType of services comms-centric catering to entire needs portfolioRisk-takingpredictability / de-risking entrepreneurship / uncertaintyAccess to innovation 100s of close partners100,000s of developersBusiness model B2B licensing B2C sales/ads/in-app salesChannel to marketvoice, text and web smartphonesDiscoveryOn deck / on device App storeFirst step we need to sign an NDAwe need to download the SDKProcessWaterfall: RFI, RFQ, deliver, QA Agile: add feature, build, test, repeatAttitude developers will come to uswe need to go to developersCopyright VisionMobile 2011 23. The new rules of innovation1. Speed of innovation defined by internet companies, not hardware / networks- Companies from the Internet domain (Apple, Google, Facebook) out-innovate companies from the mobileindustry domain (Nokia, Samsung, Sun) and the networks domain (Vodafone, China Mobile)- Internet players are at top of the food chain and are becoming increasingly assertive- Yet network operators still hold most value (insights and retail channels) in the last mile to the consumer2. Innovation requires new competence and regional presence- California is the center for software and services innovation. Japan/Korea is the center of CE innovation.3. If you cant innovate in software, you will be replaced- The evolutionary game has just accelerated 10-fold.- Players who cannot evolve at software speeds will eventually be replaced by alternatives(oftware has superseded carrier efforts in non-comms user needs, location, billing, discovery, authenticationand mobile termination)Copyright VisionMobile 2011 24. Experience Ecosystemstelecoms + internet convergence is leading to experience ecosystems Copyright VisionMobile 2011 25. telecoms + internet + PC + consumer electronics = ?our definition of convergence has changed!""($ !")"$ !")+$,$ Copyright VisionMobile 2011 26. Is the future of convergence?-.$/.012 Leaders Innovators3$455.678.09$701$:5$7$;0:5?0.:?$:9$/7@:5A$9/708$?16:DE$B1