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For the longest time, the only two entities that made money from a mobile phone were the carrier and the handset manufacturer. Open and shut [1].

No longer. Not only are more mobile phones being sold now than ever before, there are more types of folks making money off it. For smartphones with an ecosystem such as iPhone, there is

- Apple, the iPhone manufacturer

- AT&T (in the U.S.) that provides cell phone connectivity

- tens of thousands of developers who sell their iPhone applications through the App Store (with Apple getting a cut). And this is not just indie developers. Amazon stands to make a huge bundle through book sales via its Kindle Reader app for iPhone [2]

- businesses that create free iPhone applications but make money off ads within their applications [3]

- record labels that offer their music for sales on the iTunes Music Store

- television networks and Hollywood studios that offer their TV shows and movies (respectively) for sale/rent, also on the iTunes Music Store

Of course, this runaway success has inspired every smartphone label to scramble to bake its own pie. Witness the plethora of application stores (Palm, Nokia, Blackberry, Windows Mobile, Android) [4], and Nokia’s attempts to sell music.

 

Open or closed?

The more mature a product category gets, the more players there are that stand to make money off it. That’s because the pioneer quickly realizes that for true scale, it must “open up”  the product to entities other than itself. And that’s where it seems we have from history, a clear lesson: IBM opened up the specs of its original PC, and hordes of beige box manufacturers crowded Big Blue out of its own market. Apple itself nearly destroyed all that the Macintosh stood for when it licensed the Mac to other manufacturers.

“Opening up” a successful product and creating an open ecosystem divides the pie into so many slices that the pioneer is left picking up only crumbs. Apple’s iPhone ecosystem has been “opened up” to all those players above through the iPhone OS developer API, the iTunes Music Store and the iPhone App Store, but the ecosystem itself remains tightly closed.

 

[1] OK, so there were (are) electronic component manufacturers on the source side and advertising agencies on the sell side. But let’s limit ourselves to those that gained directly from the mobile phone. 

[2] Also with iPhone OS 3.0, developers can now charge for features within the application (unlocking extra weapons and purchasing weaponry within games being the most commonly cited examples), so you could have a free basic application with paid features if you like. Before OS 3.0, the best that developers could do was offer separate “free” basic and “paid” full-featured apps.

[3] Take Twitterific, for instance. The free version of the application inserts ads into your tweetstream.

[4] With comical attempts to make them sound different (Palm Software Store, Nokia Ovi Store, Blackberry App World, Windows Mobile Marketplace, Android Market). 

Last week Nokia announced that its Mail for Exchange application would now be available for any Nokia phone that ran the Series60 3rd Edition platform. Immediately, about 80 million users across forty-three S60v3 phones can now integrate into a Microsoft Exchange environment.

Also, a few months ago, Nokia released the E71 smartphone. Sporting a QWERTY keyboard, a thin form factor, and attractive metal casing, the E71 is Nokia’s first serious enterprise phone. Its predecessor, the E61i, was a capable phone hobbled by a miserable plastic body, poor build quality and bad branding (the E61, E61i, E62 [1]). The E71, in contrast, is simply beautiful.

A combination of the application and the phone, then, is supposed to demonstrate that Nokia is now serious about the Enterprise. That it is the first choice when a company’s IT department chooses a smartphone to mobilize its workforce.

Not so fast. Research in Motion’s Blackberry series of phones rule the roost in that space. And it doesn’t look like Nokia’s in a position yet to unseat RIM.

Nokia’s Enterprise Problem

 

 

Nokia’s problem are two-fold. One, any enterprise phone has to have a physical QWERTY keyboard, since it’ll mostly be used for email on the go. Nokia only has one device in this form factor. Its history with such phones, as we saw, doesn’t inspire confidence. And it doesn’t have a product roadmap around its QWERTY phones. No organization’s IT department is going to fit its executives with a phone like that. Not when the alternative is Blackberry [2].

Nokia has also never tried to seriously sell to the Enterprise. Sources tell me that in India, the phone is mostly being sold via the retail channel; corporate deals have been non-existent. It doesn’t surprise me. Most of Nokia’s previous Eseries phones had been pretty, Wifi-equipped toys with all sorts of form factors (candybar, clamshell, slider), and tiny 9-button dialpads [3]. Not the sort of product line a sales guy would be proud demonstrating to a firm’s CIO.

Blackberry’s massive brand is also going to be tough to compete with. As things stand today, given a choice, an executive would almost always choose a Blackberry over an E71. Features don’t even matter; just that he/she wants to be seen carrying a Blackberry. RIM has achieved what even Apple hasn’t been able to – ubiquity as well as desirability.

How can Nokia compete in the Enterprise?

1. Concentrate on winning accounts at companies that haven’t set up a mobile device infrastructure for their workforce, instead of converting existing WinMobile/Blackberry accounts. Few IT departments want to support more than one device family. But a surprising number of large firms haven’t gone mobile yet, and there’s where Nokia can leverage one crucial advantage: Price.

2. Reduce price through reduced margins. Nokia commands massive margins on its Eseries phones currently, I’ve learnt. It could win any bidding war by cutting those margins. Blackberry will make it a neck-and-neck affair on features, but Nokia could win on price.

3. Over the next 18 months, build a product portfolio around mobile devices with QWERTY keypads, with a 3-tier low-end, medium and flagship strategy. Nokia’s own Nseries 7x, 8x and 9x models are a good example of this. And retire the 9-button keypad Eseries models [4]. They aren’t going to win Nokia any accounts.

Conclusion

Nokia’s crafted a brilliant entertainment devices strategy around its Nseries branded phones. Not so with its enterprise strategy. While the Eseries brand is strong, Nokia has problems both with its Eseries phones as well as the marketing around them.

Either the company can pull along anaemically, selling “business” phones through its retail channels, or it can take on Blackberry by winning more corporate accounts. That’s going to require changes in its product, pricing and marketing strategy. Tall ask, tall results.

 

Footnotes:

[1] There were 3 models, nearly indistinguishable externally. The E61 did not sport a camera but had WiFi and 3G. The E62 had neither a camera nor WiFi/3G. The E61i had both. And all 3 were ugly. (back)

[2] Of course there’s Windows Mobile, which runs QWERTY phones by Samsung, Motorola and Palm. Nokia’s E71, in my opinion, trumps Samsung’s Blackjack II and Motorola’s Q9c. Palm practically invented the smartphone market but is now in a dead slump. Then there’s iPhone. Unless it gets a physical keyboard, Apple isn’t winning any deals. Open and shut. I’ve used both the iPod Touch and the Blackberry Curve, and there’s no contest when it comes to doing email. Neither of these are game-changers in the Enterprise smartphone market. (back)

[3] Ironically, with the release of the Blackberry Pearl Flip 8220, RIM has decided to go the other way and test the clamshell market. (back)

[4] There have been repeated calls among the Nokia enthusiast community to bring some Eseries-only features to Nseries devices, notably the ability to display additional information and notifications on the home screen, ability to define “modes” – a collection of active standby shortcuts and themes, the enhanced calendar, a fully functional version of Quickoffice, among others. The E51 and E66 with enhanced cameras (they’re cheap to put into a phone) and standard 3.5mm audio jacks could function admirably as Nseries devices with the above features.

Alternatively (and controversially), it could create another brand for small businesses, (Eseries Lite? Ugh.) that need the business capabilities of Eseries, but for whom the E71 and its ilk are too expensive. (back)

I’m surprised this didn’t happen way back in early 2005, but here are the first steps towards unification of mobile and email contacts. Research In Motion, the creators of the Blackberry, have announced a version of Google Talk for the Blackberry, to be out in a month’s time. Hope to see one for the immensely successful Nokia Series60 too.

Another great step forward is “opening up” the Google Talk network to any XMPP-compliant client network. That means, as the GoogleTalk blog says, “Google Talk users can now chat with users on other XMPP services and vice versa”.

Finally, by releasing an API for Google’s implementation (libjingle) of Jingle, the peer-to-peer session extension to XMPP, Google Talk now has immense interoperability! This is a wonderful step towards popularising Google Talk. By focussing on the network, not the client itself, Google’s laid the groundwork for establishing Jingle as the protocol of choice for instant messaging. Additionally, once again, Google has shown how they are adroitly using the community to enhance/extend/popularise their products, by open standards, as opposed to lock-in. This is a Good Thing. As the GoogleTalk Blog says, this opens up additional capabilities:

• Voice calls between other PC IM/VOIP clients such as Gaim, Adium, Psi, etc. and Google Talk.
• Voice calls between mobile devices and Google Talk.
• Peer-to-peer applications.

The last two are particularly interesting (the last one in the mobile context), since we have finally begun to unify the mobile space and the Internet space. (Think – simply using your mobile borwser to browse the Internet isn’t any substantial unification). Once we have applications that work across devices – whether it’s a mobile device, or your computer, or, for that matter, any consumer electronics device, that’s when we’re talking True Unification. More on unification in an upcoming article.