Handheld revolution

PDAs are rapidly merging with smartphones in terms of functionality. Sold through retailers, delivered by dealers in small batches to SMBs or even bundled as part of an enterprise mobility solution, vendors need the right channel combination to gain maximum market share

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By  Alex Malouf Published  January 27, 2005

Channel push|~|PetrHosekNokia_side.gif|~|Petr Hosek, Nokia’s senior sales manager for Multimedia|~|A completely new product segment has emerged that is laden with opportunities for adventurous channel players. Part conventional IT, part telecoms; PDAs and smartphones are much more than just fashion items for up and coming executives. They represent the ultimate vision of mobility and performance for both the corporate professional and the general workforce. A whole new sector is opening up in front of retailers, systems integrators and independent software vendors. For those that make the right moves now, and offer the services that match the product potential, the future is handheld. Down on Computer Street, Dubai’s IT hub, a product phenomenon is taking shape in resellers’ windows. It is also visible in the hypermarkets and power retailers, where valuable shelf space has been set aside for the likes of palmOne and i-mate’s PDA2k, the star product at Gitex 2004. Smartphones and handheld computers, or personal digital assistants (PDA), have become part and parcel of channel business. While these products sit side-by-side on the shelf, each forms a distinct category. “A PDA is a personal identification management (PIM) based, palm-sized computer which is data-centric,” says Susanne Lewitzki, product marketing manager at Fujitsu-Siemens. Attempting to categorize smartphones is slightly trickier, as Petr Hosek, Nokia’s senior sales manager for Multimedia, explains: “I haven’t heard a definition for a smartphone that would fit all the products coming under that label. For us, it is a phone with an intelligent user interface and advanced features. But it’ll take time for the industry to truly define what is a smartphone.” But the list doesn’t stop there. GSM-enabled PDAs, 3G videophones and rugged small form factors are just the tip of the smartphone and PDA iceberg available today in the market. Hard facts support the sales hype. Examine the unit figures from analysts such as Canalys and it is hard not to be impressed by the Middle East sales surge. As PDAs and smartphones undergo a rapid manufacturer categorisation, new channels-to-market are springing up left, right and centre. On the consumer side, the retail revolution has played the star role in driving sales. Vendors realise the power of the volume business, and Joe Public can now choose from a range of A-brand names. “Traditionally we focused very much on the enterprise side, but with our new product range we have also been focusing very heavily on retail,” says Vishnu Taimni, product manager for pocket PCs, at HP Middle East. “This ranges from specialist outlets to power retailers and even Carrefour, for people who are looking for the cheapest deal.” Channel divergence is a trend that seems set to continue, as vendors seek to push their products through a variety of routes to market. “Over the coming weeks we will be diversifying channels,” explains Hosek. “On the imaging side, we aim to reach agreements with camera outlets such as Kodak, and make use of their specialist knowledge. On the gaming side, we want to position our products in outlets frequented by gaming enthusiasts. It is all about appealing to as many consumers as possible.” ||**||Shopfloor service|~|AlAzzawi,_Ahmed_side.gif|~|Ahmed Al-Azzawi, director of Source IT|~|While expanding channels may drive up numbers, vendors remain concerned about the quality of service offered by retailers and the knowledge on the shop floor. “At present retailers have an easy sale, and so they feel they don’t need to educate their customers on what a certain product can do but instead shift what looks fashionable,” adds Hosek. “Retailers who make the move to providing the public with knowledgeable sales staff sooner rather than later will find they will sell more product in the long-term, as well as establishing a relationship whereby customers feel they can come back again and again.” PalmOne’s Middle East sales manager Stuart Maughan agrees: “People will walk into a retail environment and ask for Wi-Fi features, simply for the fact that they want it. End-users don’t know what they want, why they want it and how to use it. We rely on sales training but it’s tough. If people try the product and are shown killer apps such as email then they are convinced, but staff on the shop floor will sell what is easier rather than educating the end-user as to what most suits them.” Chris Rae, sales director at distribution specialist Source IT, believes that the market is ripe for retailers who recognise the distinction between mass-market mobiles and the new product categories entering the market. “With the exception of a few, most retailers categorise these products as phones, but I believe they form segments in their own right,” says Rae. “They are waiting for distis and vendors to build the hype for them. As an example, the GSM PDA is unique by itself, and forms a product segment but retailers place it alongside typical mobile offerings.” Through exclusive bundling promotions, Source IT has upped the consumer ante by offering unique value-adds while combating the grey market and its harms. Industry insiders estimate that 70% of mobiles purchased in Dubai find their way into re-export channels. While a proportion remains in the region, a significant number find their way into Europe — a reality that distributors like Source IT are fighting against. “People come in with a suitcase full of cash, buy laptops for re-export and take a couple of smartphones with them,” adds Ahmed Al-Azzawi, director of Source IT. “The channel will look to what is happening in retail, find the hot item, and try to turn it into a commodity.” “We deal with top-tier retailers, as we know that they will value-add, that they won’t throw the margin away and won’t re-export the product. The value of the product is retained, rather than being damaged through doing business with every Tom, Dick and Harry. IT distributors who come on board in this sector do seem to bring bad habits with them and find that this business is not as easy as they had expected,” he adds. Taking a step forward beyond the hardware itself, PDAs and smartphones will represent a huge opportunity for the software industry and independent software vendors (ISV) in this region — as long as end-users come to make full use of their purchases. “We have thousands of applications available for our products, over 20,000 as of today, which you can buy off the internet,” explains Maughan. “But I don’t see that many people downloading programmes and buying software in this region, unlike in Europe. I go to events like CeBIT and users are showing me application after application. A smartphone is all about having a handset with features unique to your own personality. You don’t see that phenomenon in the Middle East. You get people here saying I have this device, show me how it works. It is all down to education.” ||**||The corporate sell|~|IntermecColin_side.gif|~|Colin Summers, Intermec’s Middle East regional manager|~|Well not fully. Telecoms operators could also be blamed for the lack of consumer uptake for feature-rich applications, such as video calls. “It is an incredible source of frustration to see our smartphones bring about huge changes in functionality and then for operators not to offer the service,” explains Patrick Mulligan, general manager, personal communications sector, Motorola MENA. “We’re still waiting for providers to catch on to the fact that these devices not only provide additional resources to the consumer but they also mean much more revenue for the operator. ‘3’ has demonstrated this incredibly effectively in Europe with their football replay promotion. They had 400,000 people register in the UK alone on the first day that they brought this service on-line. There is huge demand for the right service if it is sold in a compelling manner. We really need to have [provider] competition in this market.” Savvy channel players who have their eyes on the ball are looking past present obstacles and towards the huge potential of smartphones in the corporate market. “We don’t see yet that the enterprise segment of the market has even been developed,” argues Mulligan. “A true enterprise segment would involve a corporate having a common hardware platform with localised applications operating all the way across the region. As far as I am aware, no one is using the smartphones to do this. Our strategy is to make the hardware available and open-source, and then others can come in and provide the applications. We believe that is the future.” On the PDA side, the enterprise effect has already kicked in as companies realise the benefits for their workforce from using mobile technology. “Our customers are using our solutions to solve practical business issues, to collect information remotely and to maximise productivity,” notes Colin Summers, Intermec’s Middle East regional manager. “An employee on the shop floor can take a stock count, an engineer can send a picture back to base, and a truck driver knows what to drop off where. There are a myriad of benefits on offer to workers.” “But our devices are not just being used by big name companies. We are seeing lots of smaller companies using mobile solutions. The return on investment is as important for a local company as a corporate. There are opportunities in the SMB space as well,” adds Summers. According to Andy McBain, MEA product marketing manager for mobile devices at Symbol Technologies, new opportunities have emerged. “What we have identified over the past few years is that in addition to mobile workers and executives who purchase consumer devices, there is another class of worker in today’s businesses — the mobile professional. This is a person who not only needs access to enterprise systems such as SAP and e-mails, but also has voice and messaging requirements. It is a matter of identifying requirements and we do find ourselves working through this with customers to make sure they make the right purchase.” Whereas past decisions on PDA purchases only factored in initial costs, corporates have woken up to the fact that cheap is not always cheerful. “We have seen a number of customers that have gone down the consumer purchasing route and have switched decisions within 12 months or even less because of the mistake of not looking at the total cost of ownership. That shiny consumer device may only cost US$300 now, but they will have to manage it for three years, have all their mission critical applications on that and let the IT department manage it. The purchase decision should be based on the application involved,” claims McBain. ||**||Commodity item|~|Stuart_Muaghan_side.gif|~|Stuart Maughan, PalmOne Middle East sales manager|~|Whatever the technology developments or buying behaviour, channels will always be tempted to sell a product if they believe margins can be made. “On the PDA side there hasn’t been much pressure on pricing because there is less competition,” says HP’s Taimni. “Each vendor is able to charge the price they want and retailers can make more money.” But Lewitzki of Fujitsu-Siemens disagrees: “These products are now commodity items and competition is fierce, not just between vendors but also between the smartphone and PDA segments of the market. Margins do not come from the device itself as much as the accessories on top — both hardware and software. This is the message that we are trying to get across to channel partners and the market in general.” The coming year will see competition intensify as new vendors arrive on the scene and existing vendors beef up their product portfolios. An influx of manufacturers is expected from the Far East. HTC products are already here, sold through i-mate. Other global players who are expected to put in an appearance include Sanyo, LG, and Samsung. “We have a collection of smartphones and GSM PDAs that we are planning to launch this year,” says Sandeep Saihgal, GSM sales and marketing manager at Samsung Electronics. “The smartphone and PDA base is small but it is growing at a very fast rate and with our brand equity we believe we will garner a lot of market share in these segments.” Looking into the crystal ball, there seem to be as many vendors as there are visions of how the products will evolve. HP and i-mate believe that the future lies in convergence of voice and data as demonstrated by GSM PDAs, while palmOne is placing its bets on keeping the product categories more distinct. Whatever the path taken by the manufacturing majority, it is clear to all and sundry that PDAs and smartphones are now part of the IT business. Opportunities and riches await for savvy, intelligent resellers, distributors and vendors who provide not just a product but a solution to the customer. But the danger is that smartphones and PDAs could end up being treated like any other piece of IT kit — as a box. ||**||

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