VDC Research: Enterprise & Government Mobility Market Blog

Mobile Payment Market Welcomes Swiff

As the market gets flooded by mobile payment solution providers in the recent years, the receptivity for accepting mobile payments has increased. Based on our end-user research, 37.1% of the retailers claimed that they are either using or currently evaluating mobile payment/ POS solutions. While the interest for more consumer-oriented solutions such as location based services is higher, the security and compliance requirements for mobile payment solutions are a lot more complicated.

PayPal recently introduced PayPal Here in the past couple of weeks and is now a strong competitor to Square-like solutions that have been emerging. Last week, the market welcomed another entrant, this time an Asia-based solution, Swiff. The company offers secured mobile payment with its mobile card reader dongle. While the increasing competitiveness in the mobile payment market should be part of an another blog, we thought the Singapore-based Swiff was worth noting given the interesting approach they are taking.

Instead of directly targeting merchants (i.e. mostly SMBs) that are interested in accepting card-based payments, Swiff is partnering directly with banks and financial institutions. The company is not just building on the existing relationships that these organizations have with their clients, but also targets to earn their trust much more easily. So, instead of having a PayPal-like company accepting the payment from the customer and paying the merchant, Swiff is enabling banks to be the medium in accepting payments. Given the high demand for mobile banking in regions such as Latin America and Africa, as well as emerging country markets like India, we believe partnering with banks could be a good differentiator. It is also worth mentioning that the flat-rate business model that is followed by other providers like Square, PayPal and Intuit's GoPayment, that is roughly around 2.7% to 3% based on the solution provider could potentially be a better move than the varying rates applied by Swiff - which varies between 1.6% to 3%. It is interesting to see new entrants trying to distinguish themselves from the competition and we expect the mobile payment market to continue attracting such interest around the globe.

The Enterprise Mobility Bundle

Over the past few years, several of the innovative solutions which have emerged from mobility-oriented ISVs have not only proven to be commercially viable, but have quickly become important and increasingly required components for a complete end-to-end enterprise-grade mobility solution. The growing variety and similarity of market leading mobility solutions are making vendor selection decisions less clear and have created the opportunity for channel constituents to offer a blend or bundle of services from best-of-breed mobile-oriented ISVs. An opportunity has also developed for established ISVs with mobile strategies to round out their product portfolios by developing their channels partnerships. The core components of an end-to-end mobility solution were initially somewhat narrow in scope - however, the advent of BYOD has created the need for a broad range of solution components that goes well beyond MDM. As smartphone and tablets gain acceptance as viable application platforms, IT personnel will require solutions that cover app development, security, remote access to corporate databases and applications, as well as a cost-effective way to manage mobile app provisioning, decommissioning and integration with existing business processes.

While carriers and systems integrators (SIs) have an opportunity to play a key role in the channel for a bundled package of core enterprise-grade mobility solutions, tier 1 players (e.g., AT&T, Verizon, Accenture, IBM, and HP) continue to demonstrate an inability to move quickly in establishing working channel relationships with mobile ISVs. This in turn is creating an opportunity for tier 2 and 3 SIs, as well as mobile-oriented value-added resellers with integration expertise in mobile software and solutions, (e.g., DecisionPoint, Stratix, and Vox Mobile) to partner with innovative mobile ISVs and offer differentiated and cutting edge mobility solutions to their customers.

M&A strategies will be increasingly important moving forward, as strategic acquisitions can enable a vendor to add core mobility capabilities to their product portfolios and get closer to providing and end-to-end solution to the market. For this reason, we think that additional M&A activity is likely in the coming months...

RIM Refocuses on Enterprise Market

In one of the more refreshing RIM calls, new CEO Thorsten Heins pledges a refocused RIM on the enterprise market. While in the ensuing days the company was quick to add that it was NOT abandoning the consumer market, it was saying that it could not keep pace with its fervent change. Is this the right move for RIM? Is this the only move? While RIM still enjoys a strong share in many enterprise and government sectors, as illustrated by the company's first quarterly loss, recent trends are not positive. RIM has also had success with its lower cost devices in emerging markets, a position it is also having trouble holding on to.

Several months ago in a blog post we discussed the balance between RIM the consumer and enterprise brand. While features such as BBM have appealed to consumers, RIM has fundamentally not been a crossover brand. Is it possible to build a strong smartphone today without appeal to the 'consumer' first? RIM has admittedly been slow to respond to the consumerization and BYOD trend, however, with over 50% of organizations today with current or planned BYOD programs is it possible to appeal to the enterprise without winning the employee first? In their next generation OS - BB10 - looks to have a platform that will at least put it on par with its competition. However, with its release date not until late 2012, the stickiness of its competition should also increase making timing critical.

RIM's perhaps renewed focus on the enteprise makes sense and while it will limit its available market it will provide much needed direction for this organization. However, equally critical will be reviving the confidence of enteprise buyers that has been seriously tested during the recent service interruptions. RIM needs to refresh its image as the goto source for best in class secure business critical communications. Security will need to be at the heart of this direction - from communications security to security built into applications from the ground up. Tough times, certainly.

 

Justice Department Sues Apple, Publishing Houses for Collusion on E-book Prices

Given the heinous prices of books – and especially textbooks – these days, as well as the growing adoption of mobile devices (from netbook to smartphone); we would logically expect strong traction in the e-book market.  And yet, invented in the mid-1960s, the e-book has yet to truly take off and own its position as a disruptive technology.  No doubt the leading publishing houses have foreseen the potential for e-books to threaten their margins and sales.  What is it, then, that has impeded the rise of the e-book?  

Well, there are several factors; while present times see tablets flying off the shelf, and smartphones in the hands of everyone from children to grandparents, this has not always been the case.  The lack of widespread adoption of these technologies has limited the available market for e-books.  Secondly, pricing of the e-book has remained a barrier to its natural growth.  Amazon has represented an early advocate of e-books and even subsidized these products (to spur Kindle sales), pricing them below wholesale value. In 2010, however, Apple allegedly worked with several of the top publishing houses, working up a deal whereby the publishers would be able to set the price of the e-book, and Apple would receive a 30% cut.  The publishers then forced others, such as Amazon, to abide by this “agency model,” ensuring that Apple’s e-book prices would not be undercut.  

The DoJ has brought Apple and five major publishing companies to court for colluding to raise the price of e-books.  According to Reuters, we may see a settlement in the next few weeks.  If, as is expected, this “agency model” with Apple as a “most favored nation” is overruled, we may finally see the e-book exposed to free market forces, driving – at last – the market to establish a fair price and value for the e-book.  We expect this ruling will favorably affect e-book prices, and the growth of this market.  For educational institutions working to bring these technologies into the classroom, this may be a big step forward. 

Army Might No Match for BYOD Forces

Battling tough barriers to adoption - including concerns over security, connectivity, and robustness of the app ecosystem – consumer-grade devices and mobile applications are seeing increased toleration and adoption in military.  As a major part of the army’s new Connecting Soldiers to Digital Apps (CSDA) initiative, the army has launched a prototype-phase mobile app marketplace. While the market is not yet fully developed, currently includes only 12 apps, and is limited (for a short time) to the iOS platform, “this prototype is a first step in establishing and exercising new submission and approval processes that will eventually enable Army members, organizations, and third-party developers to release applications for Army-wide distribution.” 



As shown above, commercial-grade devices will see strong growth, even against rugged counterparts, in the military market.  This will open up a new and considerable market for app developers…we look forward to the flood of new and innovative apps we will see developers create to target this space.  Although these new and innovative consumer technologies will no doubt propel the army into an even more tech-filled, advanced future, we will have to see how the industry copes with the rapid rate of change and innovation inherent to consumer technologies.

As RIM Loses its Home-Field Market, Relay Capital Launches BlackBerry Partners Fund II

As this past week saw RIM lose its dominant position in the company’s home market (Canada), the BlackBerry Partners Fund sees an influx of $150 million into what will become the “BlackBerry Partners Fund II.”  The initial BlackBerry Partners Fund was founded in May of 2008, backed by Thomson Reuters, RBC, and of course, RIM (BlackBerry).  Curiously, while this VC fund incorporates the “BlackBerry” brand into its name, and was launched at a time when RIM was reaching its peak in the market, managers of the fund have defined the BlackBerry Partners Fund as being device-agnostic.  This is in contrast to Kleiner Perkins Caufield & Byers iFund, launched around the same time, which dedicated its resources towards advancing Apple and the iOS platform.  Over the past four years the BlackBerry Partners Fund, managed by JLA Capital and RBC, has funded mobile startups including:

• Digby
• Buzzd
• WorldMate
• Xobni
• Payfone
• Appia
• mDialog 

The BlackBerry Partners Fund II, funded largely by Northlead Capital Partners (as well as Thomson Reuters, Corus Entertainment, and RIM) will be based out of Menlo Park – near San Francisco.  This influx of venture capital funding will no doubt draw interest in Silicon Valley – we will be excited to see who makes the cut to earn the backing of these prominent venture capitalists…

Tactical M&A - Imperative in the Enterprise Mobility Ecosystem

Many market watchers like myself have been predicting that consolidation was looming in the MDM space - with Symantec's acquisition of Odyssey Software, we finally have some validation. The MDM segment of the enterprise mobility ecosystem is definitely one of the more mature and crowded ones. Odyssey's tenure, sizeable customer base and well regarded solutions made it an attractive target for acquisition. Mobile specialists such as Odyssey are being watched and evaluated regularly by firms such as Symantec. In fact, the company announced last week that it had pulled the trigger on yet another deal - just 11 days after revealing it had acquired Odyssey, Symantec announced that it had acquired Nukona.

For Symantec, Odyssey + Nukona is only the beginning of its mobility push

With its acquistion of Nukona, a private, ~20 person firm with an elegant and powerful mobile application management solution, Symantec has demonstrated that it recognizes the importance of having a tactical M&A strategy. Nukona is a young company, and yet just 12 short months after emerging from stealth mode, several vendors were focusing on the company and had them on their radar - not for a large customer base, but for its IP and executive talent.

While Symantec is fairly active with its M&A strategy (the company has acquired ~20 companies in the last 5 years) Nukona and Odyssey are Symantec's first "pure-play" mobile acquisitions. This move signals that Symantec saw an opportunity to expand and diversify its mobile product solution portfolio. Indeed, these acquisitions deliver expanded mobile platform coverage (i.e., Android and Windows Phone 7), as well as the ability to offer its customers core enterprise-grade mobility solution components. I'm looking forward to the company's launch of its Secure App Center next month, and expect more innovation from the mobile team that is coming together.

Enterprise Mobile Workers: Tracking Tomorrow's Mobility Opportunities

Today's workforce is undergoing some significant changes, and mobile workers are at the epicenter of many of them. In VDC's most recent report, we project that the mobile workforce will grow to 1.2 billion workers by 2014 - or roughly one third of today's workforce. No other workforce segment is as large or growing at the same rate. The segment spans virtually every industry and organization size.

In addition to this major workforce shift, the GEN Y/ Millenial generation, who has a very different relationship with mobile technology, is now entering the workforce. What makes this significant is that this generation is driving expectations regarding what types of mobile solutions are available from prospective employers and how they want to communicate and interact with co-workers.

To learn more, you can read our most recent research note here or tune in to The Global Mobile Workforce Quickcast.

Symantec Advances Enterprise Mobility Strategy

Symantec's acquisition of Odyssey Software is a clear signal that the firm is making enterprise mobility a key element of its corporate strategy, and that the lines between IT Security, risk and compliance requirements and mobile solutions are blurring.

The company's recent release strengthens its mobile solution range includes enhanced native capabilities for both Windows Phone 7, Android, as well as data loss prevention and managed PKI service integration. The company also announced O3, a cloud service that protects identity and access control, as well as information security and information management. O3 is console-agnostic, and features application and data/threat protection, as well as configuration management, and expense management functionality.

Acquisition Fallout?

Odyssey was very successful with its channel strategy, and was the OEM provider behind Symantec's Mobile Management (SMM). The company's notable partners include Motorola, Good Technology, AirWatch — Odyssey is an important Microsoft partner as well. Assuming there are no snags, the acquisition will likely be finalized sometime this spring — the aforementioned partners will need to make contingency plans as Symantec will not necessarily view Odyssey's current channel strategy as ideal for it's roadmap moving forward.

A shift from Symantec could have consequences — for example, Odyssey Software's flagship product (Athena) integrates completely with Microsoft's System Center Configuration Manager, and provides Microsoft with robust full-featured mobile device management capabilities. While Microsoft recently announced an update to its System Center product (Systems Center 2012), the company remains reliant on the Exchange Activesynch component — should Symantec adjust the way it partners, Microsoft and others will may need to look elsewhere for a 3rd party add-on that can tightly integrate. 

We'll be keeping an eye on the impact of this acquisition — additional consolidation as well as the continued blurring of the lines between MDM and security are likely moving forward.

FCC Oversight of Mobile Networks May Yet Enforce Interoperability and a Competitive Market

As consumers, our primary criteria in selecting a mobile network operator would likely encompass three key attributes: low-cost contracts, widespread network coverage, and high-speed data transfer.  In the U.S, leading carriers AT&T and Verizon Wireless (VZW) drive strong competition in each of these areas and, with strong network buildout, have achieved a competitive advantage in the market against their smaller rivals.  The recent release of Apple’s 3rd. gen. iPad with support for only these two carriers underscores this disparity between top-tier leaders AT&T and VZW and smaller players in the market (e.g. Sprint Nextel, T-Mobile).  While US economic policy promotes healthy competition in all markets, we have yet to see significant criticism from the public against these leading players, nor from the government (aside from prohibiting the AT&T – T-Mobile merger).  VDC believes we may see this change in coming months, as controversy around 4G markets, especially in the 700 MHz band, plays out. 

The 700 MHz band has presented countless challenges for our nation’s governing bodies, including the FCC, Congress, and Executive leaders.  This spectrum was made available for mobile networks after the passage of the Digital Transition and Public Safety Act of 2005.  After allotting spectrum to Public Safety (for buildout of a nationwide public safety communications network), FCC auctions saw a sizeable amount of spectrum fall into the hands of Verizon Wireless, with AT&T gathering the next largest share. The broadcast-attractive physics of this portion of the network (including superior penetration of walls and physical objects) have been a huge factor in driving Verizon’s buildout of a high-speed, advanced 4G network.  Again, though smaller players in this market have contested the fairness and true competitiveness of the market, many consumers now recognize enhanced coverage and faster data communication – we, as consumers, thus have little reason to object.  

Yet, this comfortable condition enjoyed by many consumers, may be in a state of transition.  Below, we have shown the current breakdown of the 700 MHz band, identifying blocks of spectrum and their owners.  We have also illustrated what are known as the “band classes” within the 700 MHz band.  While regulations demanding interoperability of mobile devices have forced network operators to allow other carriers’ devices to utilize their spectrum when roaming, AT&T and Verizon attest that this would not be feasible in the 700 MHz band, and would jeopardize the quality of their network with radio wave interference.  Thus these market leaders have requested of hardware manufacturers that LTE devices be designed to run only within a single band class in the 700 MHz band of spectrum.  Smaller players, which generally lack nationwide coverage and network buildout, thus lack means to support and bolster their network coverage, and have also faced steeper prices for device hardware as they lack the scalar purchasing advantages of VZW and AT&T.  

 

4G networks, and the data speeds enabled by these networks, have already recognized strong demand in the mobile markets.  As we see this trend continue, players such as T-Mobile, Sprint, and Metro PCS will increasingly be at a disadvantages as they attempt to compete in the market.  Recognizing this challenge, and these carriers’ objections, the FCC has integrated the question of interoperability in the 700 MHz band into their agenda for their next meeting on Wednesday, March 21.  The results of this conference will send a signal to these carriers and the market, of the FCC’s inclination to interfere in these markets.  The FCC’s treatment of this issue may also foretell the likelihood of spectrum caps being placed on the market leaders in future auctions of wireless spectrum.