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Rim of Trouble: Apple, Google Battle RIM for Smartphone Dominance

Place your bets. Carefully.

The simmering war for domination in the smartphone market among {complink 379|Apple Inc.} (of iPhone, iPod, and iPad fame), {complink 4644|Research In Motion Ltd. (RIM)} (maker of the BlackBerry device, ubiquitous with corporate types), and {complink 2294|Google} (champion and developer of the Android operating system but which itself does not make the mobile phone hardware) has finally burst into the open.

Who will win and who will emerge into the Nos. 2 and 3 positions? Until now, many in the industry had consigned Apple to a secondary role in the enterprise environment, believing its iPhone would wow only consumers and not win over wary CIOs. Think again. Apple is crossing over into the corporate world, courtesy of the iPhone’s immense popularity with consumers. In the third quarter, Apple, according to CEO Steve Jobs, sold 14.1 million iPhone units, 2 million more than RIM shipped of its BlackBerry.

Since seeing that figure, the industry has focused on Apple's challenge to RIM and Google, but neglected one significant fact: Apple is making strong headway in the enterprise market, and that represents a major headache for RIM. In fact, while the comparison may tend to be an extreme one, the contest now reminds me of the losing battle Palm Inc. — now absorbed into {complink 2376|Hewlett-Packard Co.} — faced once telecommunication OEMs swamped its market, turning the Palm Pilot into a relic. Nothing Palm did after that could return the company to the peak position it once had in the market.

Quietly but strongly, the iPhone is winning over chief information officers in corporations worldwide, noted Peter Oppenheimer, Apple's CFO, during the company's conference call to discuss fiscal fourth-quarter results on Monday, Oct. 18: “Adoption of iPhone within the enterprise continues to accelerate. In fact, since we've shipped iPhone 4, we've seen extraordinary growth from 60 percent to more than 80 percent of Fortune 500 companies deploying or piloting iPhone. Enterprise CIOs continue to add iPhone to their approved device list worldwide.”

The iPhone's penetration into the enterprise market combined with its popularity with consumers — it is available now in 89 countries, the latest being China — is turning the smartphone competition into a two-horse race, with a bunch of contenders falling far behind the main contenders. Which companies do I see emerging as leaders? Apple and Google's Android, but not necessarily in that order. RIM's BlackBerry will continue to fall further and further behind if the company does not initiate a major design reinvention to make its product more appealing.

The Android, in my opinion, will eventually lead the smartphone market simply because it has an open platform that can be used by many other wireless equipment vendors, as opposed to Apple’s closed system. (Jobs disputes this argument — see below.) In turn, RIM's share as a percentage of the entire market will decline as more businesses opt for different options. The BlackBerry's most enduring utility to most CIOs is the secure platform upon which corporate emails are transmitted to the device. Once — and it's only a matter of when and not if — CIOs become convinced the iPhone and other smartphones can protect the integrity of their messaging systems, the BlackBerry could fall even further behind.

Meanwhile, a lot of flak is being taken and exchanged by all parties involved, although Apple seems to be firing the heavier shots. During the conference call this week, Jobs trained his guns at both Google and RIM and let loose. The first shot was directed at RIM.

“We've now passed RIM, and I don't see them catching up with us in the foreseeable future. They must move beyond their area of strength and comfort into the unfamiliar territory of trying to become a software platform company,” Jobs said. “I think it's going to be a challenge for them to create a competitive platform and to convince developers to create apps for yet a third software platform after iOS and Android. With 300,000 apps on Apple's App Store, RIM has a high mountain ahead of them to climb.”

Jobs, who typically does not participate in Apple's analyst conference calls, was not done: “Google loves to characterize Android as open, and iOS and iPhone as closed. We find this a bit disingenuous and clouding the real difference between our two approaches. The first thing most of us think about when we hear the word 'open' is Windows, which is available on a variety of devices. Unlike Windows, however, where most PCs have the same user interface and run the same app, Android is very fragmented. Many Android OEMs, including the two largest, HTC and Motorola, install proprietary user interfaces to differentiate themselves from the commodity Android experience. The users will have to figure it all out. Compare this with iPhone, where every handset works the same.”

By the way, Eric Schmidt, Google's CEO mentioned by Jobs in his comments, used to be on Apple's board of directors. Clearly, the love has grown cold as the competition has heated up. Read the full transcript of Jobs's comments here.

19 comments on “Rim of Trouble: Apple, Google Battle RIM for Smartphone Dominance

  1. Tunrayo
    October 20, 2010

    I predict the race will end with Andriod leading the way, followed by Apple and Blackberry. I would have picked Apple as a winner, because of two key components of their products – a device with touch-screen user interface and a great software base in the app store.

    However, because Andriod works on a similar framework, I feel it has a better chance to win the game given that there is the advantage users being presented with a wider variety of smartphones. Apple users will be restricted to the iPhone while Andriod users will have a greater variety of smartphones to choose from.

    Another key advantage for Andriod is the open standard of the software. This feature may attract corporate users especially when it comes to security. Corporate users on the Apple platform will have to depend on Apple to progressively plug security holes. Does this remind you of Windows?

    Although RIM currently supplies the most secure smartphones, they were slow to come out with their own version of a touch-screen device. This has resulted in Apple and Andriod taking all the hype as consumers rush to experience this new and exciting graphical user interface (GUI). RIM will regret their failure to quickly recognize that the touch-screen GUI was the key differentiator that led to smartphone frenzy; the apps were just a derivative of this GUI technology. I remember apps have always been available ages ago – but they were so cumbersome and basic and wireless data speeds were insufficient. So, the app culture did not really take off until Apple came out with the superior capacitive screen GUI phone (previous touch-screen GUIs were basically useless – and should rightly have been called press-screen as you had to press really hard or use a pointer to get any response from your phone).

    So I feel Andriod will lead, followed closely by Apple and RIM really needs to get in the game. 

  2. bolaji ojo
    October 20, 2010

    Tunrayo, Thank you for going back in time to back up your argument because doing so makes it clear the advantage Apple is getting today is not because the company invented anything new but made better use of existing technology. Palm's Palm Pilot had the user interface that came with the stylus. You press, it responds. That was light years ago back in the early 1990s. The touchscreen has been around for quite some time also. In fact, Ericsson, which merged its mobile handset business with Sony's, had a handset with touchscreen interface earlier this decade.

    What Apple has done is bring all the technologies together and then pack these into a beautiful case. RIM has certainly missed a great opportunity. A couple of years ago, the discussion with regard to Blackberry was that corporate types did not care about the iPhone user interface! Some wag said at the time that people who had the Blackberry carried them for the email capability and were not so juvenile as to care about a shiny, friendly-to-use computerized phone. I got my first Blackberry phone three years or so ago before my company recently got one for me. I was happy to pay the fee myself because it helped me do my work better. This meant though that I had to carry around two phones. It also meant I didn't care about calling anyone on the Blackberry phone. I still don't like making phone calls on the Blackberry. The numbers are tiny–I've dialed the wrong numbers numerous times because my fingers pressed the wrong button. To be honest, I like what the Blackberry does for me but I hate the Blackberry as a device. If my company supports a different device I will ditch the Blackberry the day I can safely get work-related emails on a different phone that has a better user interface.

    If I feel like this about the Blackberry, I bet there are millions of others who share the feeling. Any of the Android phones will do for me. While I like the iPhone, what I hate about it is exactly what Steve Jobs crows about. I don't like the feeling of being controlled by some company that basically talks down to its customers. I am experienced enough with a computerized device that I am not scared that I have to program the experience myself. I am not part of a collective. That's why I vote for the Android personally and I suspect many others would too. Apple has a great device but its stranglehold on the user experience is going to knock the company down a few notches. Still, it will remain one of the leaders in the market sector.

  3. Anna Young
    October 20, 2010

    Apple may win the race. It has the products and the momentum. It also has inept competitors. If it wasn't for Apple we would not have the types of smartphones that are in the market today. The established mobile phone makers were contented to roll out the boring products they had produced for years. Apple compiled a bunch of technologies, put a nice fancy touch on them and made them available to appreciate consumers. All the others are now rushing to catch up.

    Everyone gets tripped up by something, though, and Apple is itself sowing the seeds of its own downfall. The company is full of hubris and Steve Jobs' rants during the company's conference call is only the latest sign of this.

  4. Tunrayo
    October 21, 2010

    Bolaji, your points are right on the money. I never actually bought a Blackberry because I felt the user interface was gawky. I am glad someone else feels the same way about the phone. Just because a phone has a QWERTY type keypad doesn't mean it will be easy to use. I even find the keypad on the iPhone quite cumbersome to use. I tried posting a comment on my iPhone and I was aghast to see a couple of errors, and it was a painful experience.

    I have pondered why Apple suddenly launched itself into the Phone market in recent times … my hunch is that it must be credited to the superior touch-screen technology that has evolved over the years. Steve Jobs and Apple must have felt this is another chance for them to repeat what they did with the MAC back in the 80s. How major phone vendors like Nokia, Motorola and even RIM missed this opportunity is quite puzzling – the phone market is their domain.

    I have also heard those kind of comments you mentioned about the iPhone: “The iPhone is a plaything”, “The iPhone is not really going to be adopted by the business world”, “Blackberry's are secure and RIM owns the business market”. Well, almost all corporations I know of in the UK currently purchase Blackberrys for their staff. However, RIM may become unsettled in this domain if they don't produce new phones with better user touch-screen interfaces. Apple and Andriod phones may find their way into the business domain soon.

  5. Tunrayo
    October 21, 2010

    Anna,

    I felt the same way you did when the iPhone was first launched – how did Apple manage to come up with such a cool phone. Were Nokia, Motorola etc fast asleep?!!

    You are right that Steve Jobs may end up irritating some of Apple's precious customers. Steve Jobs has been agitated since the antenna problems on the iPhone 4 provoked so much negative press for Apple. He should be careful not to let this incident undermine their business.

  6. DataCrunch
    October 21, 2010

    I am intrigued that no one has mentioned Microsoft, especially with their launch of Windows Phone 7.  I don't disagree with the momentum of Apple's iPhone and Google's Android platforms, but it seems strange that Microsoft is viewed as irrelevant in this race.  Although they may have to play catch up, I wouldn't count them out yet, especially with the business user.  Remember Netscape anyone?

  7. bolaji ojo
    October 21, 2010

    Dave, You are absolutely right. Microsoft cannot be ignored if it so much as pokes a finger into a race. I certainly remember Netscape and how Microsoft ran it out of the browser market. So, here's to Microsoft making a big dent on the market. As you noted, though, they are starting late and the market dynamics may have changed with Apple and Google having deep enough pockets to withstand a Microsoft onslaught. May the best OS win.

  8. DataCrunch
    October 22, 2010

    Bolaji, let's hope that there is not one OS to rule them all.  We want competition, especially the kind that's as innovative as we have been seeing in the smartphone market. 

  9. maou_villaflores
    October 24, 2010

    What about the Symbian OS? Based on my research almost 40% of the smartphones used this OS as of today. As of the first quarter of 2010, Symbian was officially made for open source code (free and open OS). I think Symbian is the OS that Android, Apple and RIM should beat.

  10. DataCrunch
    October 25, 2010

    Maou, good point!  Symbian does have the biggest market share in terms of devices currently running the OS, but Symbian is losing momentum with developers, and that will determine the number of apps available and the rate of adoption.  For example, as of Q2 2010, there were approximately 390 million devices running Symbian and approximately 60 million iPhones sold to date.  Now clearly, there are a lot more Symbian devices in people’s hands than iPhones and even a lot more than devices running Android.  The problem for Symbian is that when you look at the number of apps available for Symbian vs iPhone, you can see the writing on the wall for Symbian’s potential demise; 6,000 apps available for Symbian, in comparison to over 180,000 apps available on iPhone.  The mobile OS that is picking up the most momentum at the moment is Android, which has become the most popular OS with developers.  Android may really be the OS to beat.    

  11. maou_villaflores
    October 25, 2010

    Thanks Dave :-). The presence of the different smartphone OS is a big threat for Symbian thats the reason why this OS was made as an open source code to compete with Android. Lets see what will happen in the next few months.

  12. itguyphil
    October 25, 2010

    If you simply look at the wave of mobile OSs recently, one can easily see that the meat of the battle is betweem iOS and Android. Apple holds the crown for the time being but Android is making it an interesting chase with the flood of widescreen HD devices out on the market recently.

  13. Anna Young
    October 25, 2010

    Maou, Astounding how many people seem to forget about the Symbian OS despite its high market share. Recently, Nokia came up with an upgrade to the Symbian operating system and my initial reaction to it was “What's that? I thought Symbian was dead!” As it turned out, the demise of Symbian if it ever comes is still years away. Symbian may still give Apple's iOS, the Android and any other rivals quite a run for their money. So, for all those who still want strong competition in the market, Symbian's viability is good news.

  14. Backorder
    October 27, 2010

    Lets take a step back. For perspective's sake.

    2009, while the smartphone market grew a decent 18%, Nokia was the market leader with 36% market share. RIM and Apple were at 20 and 15. And in the OS market, Symbian had around 45% share with Blackberry and Apple OSX again at 20 and 15 respectively. Windows Mobile had a share of 13% and was pushed out by apple and blackberry. Android was below 10%. Now, we all know what the present scenario is.

    Questions: In a market where every one of the top players have roughly the same technical/creative minds, why are we so eager to label a technology/presentation as clear winner? I mean, blackberry reached where it did because of a unique value proposition. Similar for Nokia, Apple, MS, Android.. Of course in a changing environment, there will be some one who breaks new ground and it is always a risky business! So what if Apple or Google have managed to win this time. Should we rule out Windows or RIM or Nokia for that matter, if they have been taken by a surprise? Can one of these not create a new technology wave too? 

    I think, we will see a good competition going forward. Most of the major players have deep pockets. And we can never rule out someone who is yet to join the fray. No one thought Apple would be selling phones! And, about the number of apps available on a platform? Is there not some saturation level for the apps available? I mean, how many apps does it take before the user stops caring about them?? 

  15. itguyphil
    October 27, 2010

    Unfortunately, in the tech sector, it's all about who's the best right now. When the apparent 'leader' in any space begins to decline a little bit, it all becomes about the soon-to-be leader. We happen to all like to pet the frontrunner and kick them on their way down.

  16. maou_villaflores
    October 31, 2010

    With the fast technological advancement …I think the question here is who will survive. I remember Motorola during the first and second cellphone generation. People thought they will be market leader for cellphones but it didnt survive the race. The main key to survive this race is innovation that is affordable to the consumer. Blackberry, Android and Iphone are good  products but expensive. 

  17. itguyphil
    October 31, 2010

    That's a good point. One thing I never quite understood is the vendor-provider agreements. Haven't you ever wondered why certain carriers have some phones and not others?
    I realize that the type of broadcast network plays a factor but if the availability of devices across the board (relatively) were higher, the cost of phones would decrease since the demand would balance out with the supply. Now, the demand is high but the supply is low due to carrier restrictions.

  18. DataCrunch
    November 1, 2010

    Well I must assume that a specific example of the vendor-provider relationship you are referring to is the Apple iPhone-AT&T partnership.  It works both ways.  AT&T paid a lot of money (which now may seem like a bargain) for exclusive rights to the iPhone, which was a brand new smart phone device from Apple (although based on the massive success of the iPod).  AT&T took a big gamble on the iPhone, which was new to the market and had no idea that it would be as successful as it has been.  In retrospect it was a very wise decision for AT&T.  Now perhaps for Apple, it may have been better not to have given AT&T exclusivity at the time, but hindsight it 20/20. 

    This is all about gaining and holding on to customers for the carriers.  It will be interesting to see what happens to AT&T once Verizon start selling the iPhone.

  19. t.alex
    December 3, 2010

    While Apple is making its own hardware with its own iOS, Android has found its way to many handset vendors (HTC, Samsung, Motorola, etc.). These number of handsets from many companies are growing exponentially every day. The only thing Google should thrive its best is to make sure its marketplace infrastructure stable as well the SDK cool and easy enough so that people can make more and more apps.

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