cloudalps (hidden peaks)

High Tech Economics – implications from a global perspective.

Beyond the PC? A short history of Smartphones and why ultimately “productivity:cost” decides!

Recently, it has become popular again to announce the end of the “PC era” or even the death of the PC. From bloggers to IBM, many believe new devices like tablets and smartphones will replace PCs soon. It is refreshing to see the (online) readers of the Economist vote clearly against that proposition and for a PC-plus era!

With an order of magnitude more mobile devices than PCs projected by 2020, it seems worthwhile to think about the fundamental drivers of adoption and then the impact of all those mobile devices.

slightly adopted

Smartphones are highly personal by virtue of their (intended) primary use as a communications device, their storage of (very) private data and the performance of an intense tactile and graphic user experience which taken together made mankind adopt the iPhone so vigorously. It took people with enough funding to get devices that were far too expensive for a cell phone and then be proud to own such a fashion item.

It is easily forgotten today, that “mobile devices” have a history of some two decades with many iterations, numerous vendors and an ever evolving product concept. The IBM Simon of 1992 was the first product in 1993 but not ready for mass markets (also due to lack of ubiquitous mobile data networks). The smartphone concept was shelved and PDAs – led by US Robotics/3COM’s PalmPilot – became massively popular until about 2001 when sales started a never ending downward trend arriving at less than 3 million devices annually today.

PDAs were available since 1984 when the Psion Organizer was introduced, followed by HP’s MS-DOS PDA HP95LX in 1991, the Newton in 1992 from Apple (which coined the term PDA but utterly failed with its product) and the first “Handheld PC” based on Windows CE 1.0, the HP 300LX. The first Blackberry was introduced in 1999 as a two-way pager in Germany. What really is fascinating, is how intense the trial and error of adding features and functions to PDAs was at that time. Connectivity to PCs, cell phones, modems, cameras, LAN dominated the hopes of the industry while software capable of running on such small devices had to be invented at the same time. Capabilities exciting for geeks were often introduced while applications compelling to either consumers or businesses were still missing or under development at best. In summary, all PDAs were rather utilitarian and both the devices and their user interface (typically a black on light green LCD screen) lacked any kind of beauty.

Since 2001, mobile phones incorporated so many PDA capabilities that few kept carrying two mobile devices with them. This allowed the (then!) dominant cell phone vendors Nokia, Ericsson and Motorola – and a few software partners (most noteably OpenWave/ – to grow their business massively together with mobile telcos. Those network service providers had to build out new mobile data networks capable of connecting all those devices and adding new layers of data traffic (in ever changing standards of W-CDMA, GPRS, EDGE, HSDPA and LTE) on top of their existing GSM and CDMA systems. Somehow, the industry thought it could force the world to live in a “walled garden“.

The mobile content and application concept pushed by incumbent cell phone vendors together with telcos was not an architecture that would allow enterprise applications and consumer content to become available on mobile devices quickly and broadly . Bringing plain internet to mobile devices, connecting the most important software applications (namely desktop mail, calendar, contacts, ERP, CRM etc.) and then adding software uniquely fitting the mobile experience (like music and games) would be a requirement for ubiquitous use. This and an intuitive user interface is probably what Apple’s iPhone has achieved for the entire industry since 2007. To this day, it has been wildly successful in the western hemisphere where people’s buying decisions argueably are different than in the eastern half of the world where buying power on average still is significantly lower.

Buying Power determines consumers’ behavior far more than we are used to think in the west where immense advertising budgets are used to create trends and fashion. They influence our decision making beyond the utilitarian needs that dominate in “less developed” regions — which is why PCs remain wildly successful in Asia. The general purpose versatility of a PC is hard to beat for a first or second computer at home or laptop on the go. It is less compelling as a fashion and lifestyle differentiator that people look for in their extra (Smartphone) devices that they carry around all the time.

People that lack the opportunity of PCs and broadband access at home (like most in Africa and many in BRIC countries), will jump on any connected mobile device that they can afford. This huge market will be served by less well-known brands like ZTE, Huawei that reach price points below USD 40.- for devices without subsidies. And these can no longer be called “feature phones” – these are smartphones with less prominent operating systems.

With the enormous value of advertising on smartphones – coincidentally led by mobile search – it remains to be seen, how rapidly the rising buying power of consumers in developing nations will indirectly allow them to afford higher end devices. It could well be that – in somewhat of an inverse adoption order – such consumers move from low to high-end smartphone, laptop and finally a plain “old” PC once their small business has grown enough.


Filed under: Digital Lifestyle, Hardware, , , ,

About Thomas Rupp

Economist & MBA focused on leveraging Disruptive Technologies in IT and Telecommunications, mostly for Enterprise clients. More than 15 years at Microsoft, currently as Global Program Manager for Cloud Support Transformation. Sloan Fellow 2010 (MSc in Management) at Stanford Business School. Ultra Marathoner, Foodie, Diver and Audiophile.