Making the smart move

Does the birth of the data friendly smart phone herald the end of the much loved PDA? Many feel the PDA is indeed headed for the IT retirement home, others claim news of its death has been greatly exaggerated. Andrew Picken investigates.

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By  Andrew Picken Published  May 25, 2003

Introduction|~||~||~|The gramophone, laser disks, and the Sinclair ZX-80 all constituted innovative technological breakthroughs in their time, but are now firmly consigned to history or the eBay auction rooms.

A growing trend towards convergence in today’s technology makes tipping the next one to fall tricky, but many feel the mobile phone’s latest incarnation, the smart phone, is strong enough to take over from the PDA.

With the mobile phone rapidly morphing into a computer and PDAs now capable of making phone calls, the lines between the two have been permanently blurred. The Middle East IT market has long been characterised by its thirst for the latest and most innovative products, and the buoyant mobile device market has witnessed phenomenal growth over the last year. According to analyst firm Canalys the EMEA mobile device market grew by a staggering 125% year-on-year for the first quarter of 2003.

Speaking to the industry players involved, you detect a strong current of excitement about the smart phone technology. One person who embodies this spirit is Jim Morrison, the senior vice-president of Carrier Devices, which produces the i-mate smart phone. Unequivocal in his approach to business in the Middle East, Morrison says, “It’s simple, we’ve taken all the functionality of the PDA and put it on a phone. There is no smart phone on the market that touches the i-mate for functionality.”

There are two key words that underpin the battle between PDA and smart phone: voice and data. PDA’s are data-centric devices with voice capabilities, while smart phones are voice-centric devices with data capabilities. Although an important distinction to make, the lines between voice and data centric devices are becoming increasingly blurred with both camps making great advances with the supposed weaker side of their products.

In the PDA market, the two main competing operating systems are the well-established Palm O/S and the relative newcomer Microsoft CE. The competition between the two operating systems is fierce but set against a backdrop of a declining overall market. Research house IDC reported a 21.3% decline for year on year worldwide PDA sales in the first quarter of 2003.

The smart phone market is relatively immature but the two emerging operating systems have already locked horns in what will be an interesting contest over the next few years. A group of the leading mobile phone manufacturers have developed an operating system called Symbian while Microsoft is promoting its CE operating system.

Luckily for consumers this is no VHS versus Betamax type battle and it’s the customer who will ultimately benefit from more competition in the PDA and mobile phone markets.

The history of IT has taught us that establishing a dominant operating system is crucial for the long-term success of new technology. The battle between Microsoft and Apple during the eighties resulted in Microsoft becoming the dominant force in PC operating systems. Having taken first mover advantage, Microsoft has doggedly held on to it and its current rivals will be more than aware of the competitive muscle that Microsoft can flex.

Microsoft has not, however, found things plain sailing since it entered the smart phone sector and the Symbian group has put up some fairly resolute competition. The senior partners in the Symbian group are the world’s leading mobile manufacturers and this has enabled some of the brightest developing talent to work together on the Symbian operating system.

The comprehensive nature of the Symbian group is crucial according to David Levin, CEO of Symbian. He says, “Symbian enjoys support from right across the industry, from content providers such as AOL, from network operators such as Orange and from leading IT companies such as IBM, Intel, Metrowerks, Oracle, Texas Instruments, as well as from Symbian OS licensees.”
||**||Speed to market |~||~||~|

The respective members of the Symbian group have been quicker to bring smart phones to the Middle East market than Microsoft’s manufacturers, a point that Chris Jones, director & senior analyst at Canalys, believes is crucial.

“From an operating system perspective, it is important for Symbian that Nokia has now been joined by another vendor shipping in large quantities,” says Jones who feels speed to market is a key factor in the Middle East. He adds, “with more device launches expected over the course of the year we anticipate that Symbian will retain its lead in the smart phone segment in EMEA.”

Symbian held 91% of the voice-centric market in the first quarter of 2003 but this figure also includes sales of standard feature phones. Microsoft, with no feature phones in its portfolio, held 7% of the market share.

A further blow to the Microsoft position was the decision by T-mobile, Europe’s second largest mobile phone operator, to delay developing a smart phone based on the Microsoft operating system. Nikesh Arora, a T-Mobile spokesperson insists: “T-Mobile remains committed to launching a Windows Powered Smartphone. The exact launch date for the Smartphone launch is still to be confirmed.”

A crucial determinant of the smart phones success will be the amount of data revenue that the network operators can yield. Possibly the most successful ‘data revenue’ role model for the operators is DoCoMo in Japan, which managed to attract 17 million users, 20,000 contributing content sites and also turn a handsome profit from its WAP based i-mode service. One of the factors underpinning DoCoMo’s success was that it tapped directlyinto Japanese culture and made cartoons, ring tones and adult content data readily available for its customers via their mobile phones.

The DoCoMo example proved that a phone is only as good as the network that supports it and the region’s mobile operators have so far given a cautious welcome to 3G technology.

As network operators in Europe have discovered, the cost of setting up a 3G network to support the next generation of mobile technology can be almost crippling but one Middle East operator that appears to be embracing all things 3G is the UAE carrier, Etisalat.
The company is launching its 3G network in the second half of 2004, or as “soon as there are enough handsets that are compatible with the existing 2G platform as well as the new 3G networks” according to Mohammed Naguib, acting public relations manager for Etisalat.

A more immediate concern for all smart phone manufacturers is the lack of MMS messaging coverage in the Middle East. Etisalat has indicated that the service is under technical trials, with a commercial launch expected in the middle of 2003, the rest of the regions network operators, including MTC in Kuwait, are expected to follow suit shortly after.

The network operators are in the fortunate position where they don’t really need to take sides in the operating system battle. Naguib says Etisalat has a good relationship with both Microsoft and the Symbian manufacturers. “It is our belief that these good relations will encourage both operating systems to provide good features to our customers.”

“One key element for future services is to have the devices configured out of the box and we are currently working with device manufacturers to provide this convenience to our customers,” adds Naguib. A point that touches on the issue of greater co-operation between network operators and the operating system providers. Naguib insists Etisalat has no intention to follow European network operators, such as Orange and o2, who recently bypassed the traditional mobile manufacturers and developed smart phones based on the Microsoft operating system, branded with their names but manufactured in Taiwan.

||**||Microsoft’s offering|~||~||~|
The first Microsoft based smart phones started appearing towards the end of 2002, including the sanguinely named ‘Smart amazing phone’ from SMART, the Philippines biggest mobile operator (which obviously felt the Smart Smart phone was just too silly).

One manufacturer serving the Middle East with a foot in both the PDA and smart phone camps is the British company, Carrier Devices. Having already established its Qtek PDA in the region, the company took the recent GITEX Saudi Arabia event to launch its first smart phone, the Windows CE based i-mate.

The company recently underlined its confidence in the Middle East market by deciding to move its headquarters from the United Kingdom to Dubai. The move will act as a catalyst to Carrier Devices plans to build the first smart phone designed and developed in the Middle East, purely with the Arab market in mind. “Arabic is already built into the operating system of Qtek and by June the i-mate will also have the Arabic operating system,” says Morrison who is quick to stress that Carrier Devices itself, not Microsoft, carried out this development work.

The i-mate is available across the region and Morrison is confident that it will be a success, dismissing any long-term threat from the Symbian stable of smart phones. He says, “Low end Symbian phones will work well, but for business phones you need more horsepower to run programs.”

Before Carrier Devices, Morrison worked for British Telecom in the UK, in this research position he was faced with the decision to opt for Symbian or Microsoft, and advised BT to go for Microsoft because it was a stronger proposition. He says, “Microsoft is technically superior to Symbian, particularly at the high end of the market but it’s important to remember that smart phones are not for everyone.”

In a statement that echoes the infamous quote ‘nobody ever got fired for choosing IBM’ Morrison says Microsoft is the safest bet for smart phones. “If an IT manager is making a purchasing decision on smart phones and considers that 90% of corporate is already Microsoft, he is going to choose Microsoft,” he argues.

On the issue of a supporting network, Morrison feels that the strength of the product is equally as important to the strength of the network. He says, “it’s like having a nice car, it’s always good to have nice roads to drive it on, but you still have a nice car.”

Another manufacturer benefiting from the region’s zeal for smart phones is Sony Ericsson. Its P800 model was launched in the Middle East last December, one month before its worldwide launch. Gabriel Sjogern, product-marketing manager Middle East & Africa, Sony Ericsson insists that this was quite a coup for the region and greatly appreciated by Middle East consumers.

On the battle between Microsoft and Symbian, Sjogern remains diplomatic but points out that Microsoft trying to condense its existing operating system into one suitable for a mobile phone is completely different to the Symbian approach. “The Microsoft operating system was built from the top down but Symbian was built from the bottom up, we crafted a dedicated operating system for small devices,” insists Sjogern.

Sjogern adds, “the great thing about Symbian is that it is an open platform so you buy your phone and it comes with applications, but you can download a lot more, it is also open to any [programming] language.”

A recent addition to the already swollen Symbian development community was Intel. Tony Sica, vice president of Intel’s wireless communications and computing group and director of marketing belives it was a logical move for Intel: “Intel becoming a Symbian Platinum Partner is the result of close co-operation between our two companies and a shared vision to help bring data applications and services to mobile phones.”

||**||The PDA perspective |~||~||~|
Many proponents of the smart phone will have you believe that the PDA is in terminal decline, but has the PDA really drawn its final breath?

The Middle East data-centric market this year experienced 10% Q1 year on year growth according to Canalys research, compared with a staggering 796% growth in the voice-centric market during the same period. If Microsoft is struggling to make headway in the smart phone market then it is having no such problems in the PDA arena. Microsoft CE appears to be establishing itself as the dominant force, holding a 48% Q1 market share compared to Palm’s 42%.

A plethora of new models has hit the PDA market in the past few years and the PDA can no longer be considered solely the domain of the business user. Functionality is still increasing, while significant price drops make today’s PDAs genuine value for money with prices that range from $100 up to $1000.

Crisis, what crisis, would seem to be the message from Stuart Maughan, general manager of Palm’s Middle East branch, which has just launched the Palm Zire and Tungsten C products into the region.

“Although the overall handheld market has shrunk we have still maintained our market growth,” insists Maughan who also revealed that Palm was initially overwhelmed by demands for the new models in the region.

Andy Buss, senior analyst at Canlysis, does not share Maughan’s confidence. “While Palm is still the leading handheld vendor, and Sony continues to post good growth rates, the sheer number of vendors using Windows CE in their devices means that Palm OS is now in third place in EMEA,” he says.

“We envisage growth on the corporate side,” says Maughan who also adds that the prevalence of SME’s in the Middle East makes it difficult to gauge sales due to customers going into retail outlets and buying their PDA but using it in a business environment.

When pressed on the competition between the smart phone and the PDA, Maughan feels that it is not really a fair comparison. “They are targeted at different markets, devices based on the Symbian operating system are not as reliable as handhelds for data purposes, try syncing a smart phone with Microsoft Outlook. Palm devices are targeted at users who have specific data needs, where as smart phones are essentially voice centric and can’t handle the data demands that handheld’s can,” insists Maughan.

Maughan cites the case of the Tungsten C to prove his point. “Technically the Tungsten is a smart phone because it has voice capabilities but we market it on its data capabilities and all the feedback we have had backs our assertions.”

Palm introduced a fully Arabic PDA to the market last year that received a “great response” according to Maughan, he feels that the price penetration of new products will be crucial to the future of Palm in an ever increasingly competitive market.

“Traditionally the Middle East has gone for the high end products but we have seen a shift over the last year and we expect to be more consumer focused with the launch of our two new products” he says.

Over at HP, a similar story unfolds but HP retains a firm focus on capturing the enterprise and corporate markets. Vishnu Taimni, category manager, HP notebooks and handhelds Middle East, says, “we are aiming at the enterprise and corporate markets but our products still do well in the retail markets.” Taimni gives the example of the iPAQ H5450, which is a high end PDA that sold well at retail level because it was feature rich.

Carving out new segments from the traditional PDA market is the HP goal and it envisages a new lease of life for the PDA in restaurants, hospitals and factories. Taimni indicates that HP’s focus on the corporate customer has also allowed it to make the most of the lucrative PDA accessories market.

Taimni insists that although things are hoting up in the Middle East PDA market, there is still plenty opportunity for HP. He says, “there are a lot of new entrants but not so many here in the Middle East, especially if we compare our market to Europe.” On the issue of smart phones, Taimni says, “we do see the potential in the smart phone” but says that nothing will be happening on that front in the near future.

PDAs are now increasingly difficult to differentiate in an ever-crowded market and the market is reaching its saturation point, with a growing number of players chasing after a decreasing market share. Manufacturers are deciding between the corporate and consumer route for their PDAs, with both markets becoming increasingly price sensitive.

Where the PDA does steal a march on the smart phone is the depth of community spirit that exists behind popular models. Palm user groups number in their hundreds and are certainly no marketing ploy, these groups are full of users swapping tips and eulogising about their PDAs. Only time will tell if the smart phone can arouse this level of fervour and support.

||**||Make your mind up time|~||~||~|
The trend towards convergence does carry a number of issues that users need to consider before deciding whether to plump for a smart phone or PDA. The smart phone offers a great deal of synergy between the various components that it encompasses but is rather limited if you wish to upgrade any of its elements, requiring an entirely new handset. It’s also perfectly conceivable that you won’t use a number of the features that you have just shelled out a couple of hundred dollars for.

In terms of size, the PDA simply cannot compete with the smart phone and this is a definite advantage for anybody that needs to travel light. However, with the smart phone condensing so much technology into a space smaller than an ice-lolly, something has to give. Screen size is where the PDA comes up trumps over the smart phone and if you are handling big chunks of data the larger screen on the PDA is ideal. Where the PDA has the advantage over the smart phone is in its recent incorporation of the wireless communication technology, Bluetooth. Bluetooth has made its debut on a number of the high end PDA's but at present is only an optional add-on for a handful of the smart phones. Bluetooth is a short-range communication method that relies on radio signals and allows any technology fitted with Bluetooth to talk to each other and is envisaged to be an integral part of the wireless house or office.

Configuration is also a key issue with both technologies, Palm claims configuration of PDAs is easier than smart phones but in truth, both are fairly easy to set up and get started. The Sony Ericsson P800 for example features ‘over the air’ configuration, where you go to the company’s website, enter your phone number, and then the company sends you a text message informing you if your configuration has been successful or not.

Ergonomics is another influence on the buying decision and the PDA has the advantage of a wide screen that makes data work a lot easier. Smart phones, however, have made great inroads into the data side of things, and the Carrier Devices i-mate for example can even hold PowerPoint presentations.

The PDA now appears to have reached a plateau in terms of technological growth and manufacturers are now exploring different applications of the devices as well as determining new pricing strategies.

The mobile phone, however, remains the veritable technological chameleon and continues to evolve. In addition to the smart phone, the latter part of this year will witness the birth of a new generation of mobile phones capable of handling serious games playing. Nokia is releasing its N-Gage phone, reputed to have as much power as a games console, with the latest Tomb Raider game among the many titles planned.

Palm and HP are among several manufacturers determined to prove there is life left in the PDA yet, but sales figures of handheld’s around the world are already beginning to slip and the Middle East has reacted with real gusto to the smart phone. Although too early to write off the PDA, the smart phone does appear to be already making PDA owners think twice about the sense in carrying separate voice and data devices in their pockets.
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