Smart Phone OS market growth: RIM the winner

Canalys, which is an independent technology analyst group, has released its latest numbers on the global smart phone market, and there’s some interesting stuff in there.  Overall smart phone growth was 4%, with the largest regional growth was 26% in APAC (East Asia, Southeast Asia, Australasia and Oceania), and North America saw a 5% increase, while EMEA (Europe, the Middle East, and Africa) actually dropped 6%.  The overall 4% growth is much smaller than the 13% growth last year, and some of this could be attributed to the global economic climate.

• Global smart phone shipments grew 4% year on year, to 41.4 million units in Q3 2009
• Nokia, RIM, Apple and HTC command over 80% of the market between them
• The APAC region shows the highest growth, at 26%, while EMEA shrinks
• Proportion of smart phones with touchscreens reaches 45%, up from 31% a year ago
• Over 80% of smart phones now ship with integrated GPS, more than 75% have Wi-Fi built in

Taking a look at the numbers, there is one clear and somewhat surprising winner: RIM.  The Blackberry OS saw a 40% growth over the past year, and an overall marketshare increase from 15.2% to 20.6%.

The OS with the most loses, outside of the ‘other’ category, is Windows Mobile (WM), which saw a 33% drop in the same time period, from 13.3% to 8.8%, which is also somewhat surprising on the surface, as from 2007 to 2008 it was climbing.

Google’s Android OS went from 0 to 3.5% since the launch of its first device, with is a pretty strong opening (similar to that of the iPhone’s initial launch time period).  Speaking of which, the iPhone saw less than 1% market share gain, bringing it up to 17.8%, and the world’s more ubiquitous OS, Symbian stagnated and lost less than 1% for a 46.2%.  While Symbian is still the leading OS, it’s no longer at the 65%+ level it was 2 years ago.

As for Palm’s new webOS Pre, its limited availability made few waves outside of the long time smart phone junkie crowd.

Reading the Tea Leaves

The past year in smart phones has been somewhat lack luster, outside the introduction of Android to the marketplace.  The iPhone saw a bit of a speed bump with the introduction of the 3GS, while Microsoft rested on its 6.1 laurels until October of this year.  Even then, the introduction of WM 6.5 is only a minor enhancement and a hold over until they theoretically launch WM7 in 2010.

RIM’s highly publicized touchscreen Storm and yet to be released sequel, the Storm 2 were considered a disappointment by many, but it’s Bold and reduced price Pearl & Curve phones apparently more than made up for it.  In either case, it appears dependability and lowered prices made a huge difference for a number of people.  RIM made its mark by providing a great email experience, and their expertise in the area shows.

Compared to the past year, next year is going to be very interesting.  There’s still plenty of room for growth in the smart phone market as prices drop, to the point many analysts predict that the vast majority of phones will all be internet capable smart OS based by the end of 2012.  I find this very plausible, as the bang to buck ratio has just gotten better over the past 3 to 4 years, and more consumers with older phones are looking at devices that do more when they upgrade.

If we hold with the common wisdom that 2012 will mark the saturation point for smart phones (though I believe it could be sooner), then the game is still very much open for just about any player.

Before breaking into the individual OSes,  a few innovations need to be addressed.  In the hardware space, with the introduction of high end processors such as the Tegra, Snapdragon and other modern ARM chips, all smart phone makers will have to start making this functionality a baseline moving forward.  Whether you’re a closed shop like Apple, or all about open development like Android, consumers will come to expect better 3D graphics, and overall performance gains to remain relevant.  As the prices continue to drop for faster hardware, I’d even suggest that this holds true for devices like Blackberry phones which don’t necessarily focus on the gaming and portable entertainment sector.  Other hardware improvements such as brighter screens and better cameras can also play a factor, but right now it’s all about speed.

On the software side, the biggest innovation is not a specific ‘killer app’ but a killer way to access applications.  The App Store is arguably one of the best features of Apple’s iPhone, as it makes finding new software easy right on the device.  There are some valid drawbacks to Apple’s model, such as the sometime arbitrary decisions Apple makes regarding approval, and the locked down nature of the device overall (without going into the jailbreaking discussion), but they got the basic idea right.  Prior to the iPhone, both Windows Mobile and Palm OS allowed the end user to download applications from just about anywhere, which has its own benefits, but searching for said applications on your phone was annoying, especially to the new user.  How each OS manages application development and distribution going forward will be important to longevity.

With that out of the way, for Nokia to stay on top, it will have to really push its Maemo (Linux-based) phones, as the Symbian OS is arguably the longest in tooth and most archaic of functionality.  The biggest problem Maemo faces though, is Android which is also Linux based, and has the support of a wider range of hardware vendors.  Of course, Nokia will always have the option of biting the bullet and switching to Android, which wouldn’t be too difficult.  They could easily take a page out of HTC’s book and provide a value-add custom Maemo interface based on the Android platform without losing much face, or much of an investment.

RIM is in a different boat.  It’s clear that the keyboard and email combination is something a lot of consumers want, but in 3 years will it be enough?  Probably not.  That’s why RIM picked up Torch Mobile, makers of the Iris browser, as internet browsing on the Blackberry OS has left a lot to be desired until this point.  Beyond web surfing, an overhaul of their UI, and introducing touch screens on devices with keyboards would also go a long way.  Things are looking good for RIM at the moment, but they’ll have to keep the OS up to snuff to avoid the Palm OS fate.  I’d be surprised if a Blackberry with a similar form factor to the Palm Pre doesn’t come out in the next year or so.

Apple’s iPhone has been a huge success, and sticking with a single form factor has worked for them so far, but I’m not sure that sticking with this model will hold out in the long run.  There’s still a large contingent of users who will insist on a physical keyboard as they’re heavy email users.  A well-designed keyboard will always trump a virtual one for the text (not TXT) heavy user.  RIMs success over the past year suggest that there are a lot of people who would prefer keyboards and a best-in-class email experience over some of the features the iPhone brings to the table, and the iPhone’s market share seems to have lost some steam over the past year, even with the launch of the 3GS, which was a minor speed bump that had few recommending it as a upgrade.  That’s not to say they’re in a bad spot at all, as the Apple’s profit margin is much better than other smart phone makers.  Introducing a new form factor can only help them.

The Windows Mobile Conundrum

Windows Mobile gets the biggest writeup, because it’s probably in the biggest state of flux, and can go in the most directions.  Microsoft, which has seen its share drop drastically, will have to make similarly drastic changes to their model moving forward, or Android is going eat them up.  I say Android, and not the iPhone or RIM, because there are a lot of similarities between MS and Google’s new OS.  Both depend on 3rd party manufacturers to use their OS, and both run on similar hardware.  In fact, there are a number of Android ROMs available to run on existing WM devices, that’s how similar they are.  Traditionally MS licensed the OS for a nominal fee, and let the hardware makers do what they will.  This has lead to quite the splintering of WM as an OS.  Right now there are WM for Smartphone devices which don’t have touchscreens, instead opting for physical keyboards and a Blackberry-like use, and WM Professional for touch screen devices.  Along with the two main forks, there are devices that have low end (by today’s standards) QVGA 320×240 screens and 400MHz processor, all the way up to 800×480 WVGA 1GHz devices, and not all software is compatible with all models.

From a developers perspective, maintaining compatibility across all device types can be a real nightmare, to the point where smaller devs just don’t bother.  On the plus side, software development tools are free, and even the individual dev can make whatever program he or she wants, hang a shingle on the internet and distribute it as they wish.  The recently released WM 6.5 (stop gap edition) has done little to alleviate this, and real change won’t happen until WM7 is finally released (supposedly next year some time).   At that point, supposedly all WM devices will have very high minimum specs equal to the most powerful smartphones available today.  If they manage to pull this off, then they have a fighting chance.  MS has promised that even with the launch of the WM Marketplace, individuals will still be able to develop and distribute apps in the traditional manner, but for this to work, there has to be an easy way for the end user to do this.  To not lock out the thousands of current developers, MS (or a 3rd party) needs to have a parallel app store complete with “Online interactions are not rated” warnings.

The end user experience is another cornerstone of a mobile phone, and once again, WM 6.5, though good, isn’t great.  In this arena, MS has relied on its licensees to customize the OS, which leads to very different experiences.  After all, one of the most sought after phones right now is the WM 6.5 powered HTC HD2, with the latest iteration of the TouchFLO interface, now called Sense which was first introduced on the Android-running HTC Hero.  More than a mere skin, Sense totally replaces the user experience one gets from a WM phone, and provides the most well rounded experience on a mobile device.  Of course, without keeping their licensee list short, the end user experience for WM on an HD2 is going to be vastly different than it will be on a stock HTC Touch, to the point where a newcomer to the smartphone space wouldn’t believe they’re the same basic operating system underneath.

All this leads to the integration problem.  Out of all the smart phone OSes, only Apple and Microsoft are diversified enough to offer an integrated solution, from mobile to desktop OS and online media store all under one roof.  Up until MS has failed to capitalize on this, whereas it’s one of the strong points of the iPhone experience.  There have been promises of integrating the PC, Xbox Live, and Zune/WM Marketplaces, but so far nothing has materialized.

In short, MS has a lot of hurdles to overcome, but they’re all obvious to WM users for a long time.  All the pieces of the puzzle are there.  MS just has to assemble it before Google eats them up.

Android: The new Windows Mobile?

As I mentioned earlier, there are a lot of similarities between WM and Android, in the way developers work, applications load and hardware.  Android is new, and doesn’t bring with it years of baggage, offering the still growing smart phone market a fresh OS that doesn’t feel as closed as either the iPhone or RIM.  Android is gaining new fans every day.  Some of them, like early iPhone fans, are amazed at the incredible things their phones can do, as if it’s brand new (even if other OSes had such capabilities years before).  And that’s the whole point.  Even if something isn’t REALLY new, that perception of ‘freshness’ is important.

Android’s launch has taken longer than many expected, and the numbers in the Canalys report don’t reflect the number of new devices announced just this month.  2010 is shaping up to be the year of Android, with devices manufactured by HTC, Motorola, Sony Ericsson, LG and others launching on carriers in diverse regions.  Android already has a growing Android Market, has deep integration with Google services (though most of these are available on other OSes like iPhone and WM), and a variety of form factors for broad appeal.

I think it’s safe to say that Android is going to see tremendous growth over the next year or so, as it’s a very flexible OS and can be easily shaped to fit the needs of a media-centric consumer, a business environment, or any combination.  The stock interface is a little bland, and it’s certainly a battery hog, but both of these issues can be overcome, and the former in a spectacular fashion.

In The End

Whatever smart phone OS you decide to go with now, you probably won’t be sweating bullets over it in 3 years, given the 3 year contract norm in Canada.  At the same time, while Bell and Telus entering the HSPA game just showed how similar the big 3 wireless carriers are, Wind Mobile has a real chance of still launching by the first quarter of 2010.  Unlike the big 3, Wind operates on the same frequencies at European carriers, which means we might see a wider mix of smart phones, and if the Wind plans are anywhere close to what’s been leaked, we’ll finally see some competition in pricing structures.