New platform, new possibilities

Nokia has been instrumental in shaping the mobile device market, but today it is facing tougher competition than ever. Tom Farrell, VP for Nokia Middle East, says the company has the strength and the right strategy to fight back.

Published Sunday, 24 June 2012
By Mark Sutton

Nokia has been instrumental in shaping the mobile device market, but today it is facing tougher competition than ever. Tom Farrell, VP for Nokia Middle East, says the company has the strength and the right strategy to fight back.

For mobile phone giant Nokia, the past 18 months have been disruptive, to say the least. In February 2011, under new CEO Steven Elop, the company embarked on a major strategic overhaul, dropping its own Symbian operating system and platform in favour of a tie-up with Microsoft, cutting several thousand from its workforce, shifting manufacturing to Asia and pushing to be the first to market with devices running the new Windows Phone OS.

Under pressure from both high-end competition from Apple and Android devices, and from low-end competitors from China, one of Elop’s first milestones as CEO was to spell out to company employees, in what became known as the ‘Burning Platform’ memo, how he thought Nokia had lost its lead in innovation, and the choice facing the company – stay with its existing platform and software, or jump into something new. Nokia jumped, and made the tie-up with Microsoft.

Since then however, despite delivering several well-regarded smartphones based on Windows Phone OS, Nokia has continued to see its market share decline. Analyst company Strategy Analytics reported in April that rival Samsung had taken the overall market lead in mobile shipments in Q1, a position that Nokia had held for the last 14 years.

For Tom Farrell, vice president of Nokia Middle East, the disruption is just symptomatic of the wider changes going on in the mobile sector as a whole.

“I think it is a pivotal year in the industry, and even more so for Nokia. If you look at the industry, look at what has happened in 12 months – Google acquires Motorola, Sony Ericsson split, the industry loses an extraordinary individual in Steve Jobs, Nokia appoints an outsider CEO for the first time in its 147 year history, and Nokia and Microsoft decide they are going to fight together. All this shake-out is just extraordinary – it is just an amazing industry,” Farrell says. “Absolutely we are a company in transition, it is a difficult year, but it is a hugely important year for us, we have very good momentum in this company.”

At a local level, the high degree of mobile penetration, large disposable incomes in the GCC and the young user demographic, all point to huge potential, Farrell says. The brand is well established, and Nokia’s wide product range, which goes from entry level handsets to high-end smartphones, allows the company to offer devices that suit all budgets.

Farrell also points to the success of Nokia’s app stores for the region to show that its platform is in demand locally. The Saudi app store recently crossed the 100 million cumulative downloads mark, and the company gets around two million downloads per week across the GCC, for around 90,000 apps, with social networking apps making up eight of the top ten downloads.

“What is interesting is [downloads are] across about 75 different devices, from the low price point, to very high – that tells us that mobility plays an important role in everybody’s life, everybody wants to be connected, irrespective of your income. People are really engaged with mobility, and they really want to be connected,” says Farrell.

The tie up with Microsoft has resulted in the first Nokia Windows Phone devices, the Lumia range, which has picked up awards at both the Consumer Electronics Show (CES) and Mobile World Congress at the start of the year. Farrell says that the awards, which included the overall Best of Show at CES, are proof that Nokia can still deliver innovative products, and that the new Windows Phone UI is proving to be very popular with users.

For now however, the new range is not available in the region. Farrell says it will be available soon – “the sooner the better” – but Nokia and Microsoft are working to ensure that they have all elements in place for a Middle East launch.

“We have not launched in the Middle East,” he says. “First and foremost, today, the Windows Phone platform from Microsoft does not support Arabic. As Nokia, we want to launch in the Middle East when we have a market beating proposition – you’ve got to have Arabic, there is just no debate. Secondly we want to have really strong local content and apps ready for the proposition. Third, we want retailers, mobile operators behind us, and really willing to drive this new eco-system,” Farrell adds.

Farrell is confident that the ecosystem is something that Nokia is already well versed in managing. The company has always worked closely with local telecoms operators, and it also has an established distribution channel.

“We work very closely with our distribution partners, our retail partners and our mobile operator partners. On top of that, we have really put a big focus on going beyond just the telco entities, into the application developer, software developer space,” he says.

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“We are very, very active, we have a dedicated team here in Dubai to work with local app developers, we have over two and a half thousand Arabic applications and content,” Farrell says. “We made a huge change in direction, it is no longer about devices. From a structural standpoint and a competitive standpoint, it is about broad eco-systems. It is not just the hardware, it is not just the operating system, it is absolutely fundamentally about local and global content. Local app developers are a really important part of our DNA.”

The company is very active in content development, and supporting that space, Farrell says. For example, to encourage downloads, the company has worked with local mobile operators so that users can download Nokia apps and pay for them through their regular billing. Nokia has an open platform approach and a good revenue share model, to help entrepreneurs push out their apps to a global audience, and to generate return from them. It also encourages interaction with its own teams. Since 2007, Nokia’s Beta Labs website has hosted early versions of Nokia’s own software, so that anyone can test and comment on their inventions.

The company also has relationships with a broad range of developers in the region, from major brands and development houses through to student developers, who it supports through programs with local universities.

It is in the partnership with Microsoft however, where Farrell sees the biggest potential for developing Nokia’s ecosystem. At a device level, there are synergies between Nokia’s experience with advanced mobile features like Nokia Maps and Nokia Compass, and high quality imaging technology, and Microsoft’s Bing and Xbox Live services. Microsoft has a well-established channel in the enterprise and SME space, and with governments, while Nokia’s mobile operator and retailer relationships will help Microsoft in accessing online services and consumers.

Microsoft also has the depth of expertise in business software, with a huge installed base for solutions such as Office and SharePoint, Farrell says, that the two companies will now be able to address with mobile solutions as well.

“One place where we have earned every right to be bold is when it comes to the business segment. You put the Microsoft experience on the smartphone, plus the Microsoft installed base on the back-end, the numbers are huge,” he says. “We’re very excited about what we can do together in the enterprise B2B space. If I am the CIO of a company, and I have already invested in a Microsoft environment, now I can leverage it even better.”

Another point of synergy between the two is in the area of research and development. Nokia is one of the largest investors in R&D in the industry, with 2.4 billion Euros ($2.9bn) spent on R&D for devices and services in 2011. Nokia’s corporate research arm, the Nokia Research Center, celebrated 25 years of operations last year, and Nokia conducts R&D with academic institutions in a very wide range of discplines. The company will now work together on co-creation and co-innovation with Microsoft, Farrell says, which will help to develop new implementations of some of the technologies that the pair have invested in previously.

“If there is one thing we know about our industry, it is that the pace of scientific research, technology innovation and R&D, is phenomenal. My view is that the mobility industry is just starting the second wave of innovation, and we are just starting a new decade of innovation. It is a strong combination of apps and content, but more than that, it is augmented reality, location based services, mobile commerce, payment, NFC, all that stuff is just starting,” Farrell says.

“2012 is a big transition year for Nokia, we are confident and excited that we have the right strategy and it is working. When I get tough questions, people saying it’s over, it’s too late - we’re just starting. When you look at the resources, at the assets that Nokia and Microsoft bring together, whether it is in the pocket or in the cloud, we are just starting. No one can tell me we are running a sprint, this is a marathon.

“The question now is how we go beyond just apps? Apps, candidly, are the basics. The question is what comes after apps? When you have a device in your pocket that knows where you are, knows if you are you accelerating, are you static, who in your social graph is nearby, what shops are nearby that you like to buy in, that’s when it gets interesting.”