VDC Research: Enterprise & Government Mobility Market Blog

Honeywell's Intermec Acquisition Reshaping the Competitive Landscape of the Rugged Mobile Market

After monitoring the rugged mobile market and witnessing the consolidation trend that has been taking the market by storm for the past few years (e.g. Honeywell's acquisition of EMS Technologies, Inc and Motorola Solutions' acquisition of PSION), here at VDC Research, we were expecting 2012 to bring us more in terms of acquisitions - and the month of December did not disappoint us. On Monday, Honeywell International Inc. (NYSE: HON) announced that it would acquire Intermec Inc. (NYSE: IN) for about $600 million in cash ($10 per share).

Despite maintaining its competitive position, Intermec, the workflow performance company that develops, manufactures and integrates technologies that identify, track and manage supply chain assets has been going through restructuring and was in search of a new CEO in addition to evaluating its alternatives. In addition to being a key manufacturer of rugged mobile computers, RFID, barcode scanners and barcode printers, the company is a turnkey solution provider with offerings in hardware, software, services and integrated solutions.

In this blog post, we are going to be looking at Honeywell's acquisition of Intermec and its impact on the enterprise mobility market.

Sign of the Times*:The rugged mobile market - and more specifically the rugged handheld market - is at crossroads. In fact we appear to be entering a phase of lower growth. Some of this can be attributed to consumerization and increased market erosion by smartphones. In addition, macro factors such as the weak economic climate in Europe and the soft recovery in North America do not bode well for higher growth dynamics. What is increasingly clear for participants in this already wildly fragmented market is that without scale - or an extremely focused niche position - one's ability to compete is compromised. Although Motorola - fresh off its recent acquisition of PSION - remains the clear leader in the rugged handheld market with over 40% share, combining Honeywell (LXE) and Intermec creates a more viable "number two" with a market share reaching 20%. This substantially broadens the gap with the rest of the market as the next closest competitor's share hovers around 5%.

Portfolio Fit and Mix:Honeywell's enterprise mobility and AIDC products are part of its Scanning Mobility unit within its ACS division. From a hardware perspective, Intermec expands Honeywell's rugged handheld and forklift mounted portfolio, especially around devices for field mobile and logistics solutions. In addition, through Intermec's printer and media division Honeywell has effectively expanded its TAM by several billion. Moreover, with Intermec's Vocollect division (Vocollect is the leader in voice solutions for mobile workers) Honeywell is further enhancing its warehouse capabilities, a critical market for rugged mobile and data collection technologies. What is likely especially appealing to Honeywell, is access to Intermec's installed base - particularly in markets like DSD, industrial warehousing, logistics and field service. Beyond core hardware, Intermec also has some interesting capabilities around professional services - through its Enterprise Mobile business unit - and software. These could be critical as Honeywell explores possibilities to enhance its service footprint and scale its service offerings.

Consolidation Trend and Honeywell as a Serial Acquirer:Consolidation trend has been a common theme in theme in the enterprise mobility market over the past couple of years and VDC expects this trend to continue in areas where the market has reached a certain level of maturity. Honeywell has excelled as an acquirer of companies as the company acquired Hand Held Products, Metrologic, EMS Technologies and Intermec since 2007. PSION's acquisition by Motorola Solutions earlier in the year shook up the competitive landscape as the consolidated company is better positioned in the market with its expanded product portfolio and market share gains. While the overall tendency in the market might suggest being more cautious giving the economic uncertainties and volatility, Honeywell once again focused on the potential opportunities associated with it and decided to move forward with the acquisition. The company continues to focus on mid-market deals (under $1 billion) and use consolidation as a way to support its organic growth. Honeywell's expertise in consolidation perhaps gives the company a significant leverage over its peers as the company perceives these acquisitions as a safer way to grow its business.

Despite its large installed base of customers and devices and its strong position with its partner ecosystem, Intermec has been having some challenges over the past couple of quarters. It would be interesting to see how Honeywell successfully integrates the company and turns its business around. The impact of this acquisition on Intermec's employees and product lines is also yet to be seen.

*The figures reported in this section are from VDC Research's Strategic Insights 2012 Enterprise & Government Mobility Hardware Mobile Devices Report and references to consolidated companies when mentioning Motorola Solutions (includes PSION) and Honeywell (includes Intermec).

P.S. Since the announcement of the acquisition, multiple law firms announced that they will be investigating the acquisition as a result of the potential claims against the Board of Directors of Intermec, Inc. We will update this blog post as more information becomes available.

Mobile Operators, Systems Integrators, and ISVs Changing Channels for MEAPs

Our good friends in Stamford Connecticut did a great job in identifying and classifying the vendors who have brought a mix of solutions to the market that can be summarized as "mobile enterprise application platforms" or MEAPs - the core/primary capabilities that have been established are:

Rapid Application Development Tools: Drag-and-drop WYSIWYG design tools (including emulators/debuggers) with robust cross-platform/device support

Management and Security: Client-side security features with enterprise-grade encryption - along with management capabilities that include - application deployments, updates, reporting/analytics and mobile policies

Application Integration: The ability to integrate with a variety of "back-ends" referring to not only databases, but web services, proprietary/legacy systems as most importantly enterprise application suites such as SAP, Oracle, Microsoft etc.

The above are now table stakes for MEAPs - similar to other mobility categories or segments the MEAP space is maturing rapidly - not only has consolidation begun, but channels are evolving. MEAP vendors capabilities that allow for HTML, CSS and Javascript to native development tools are powerful, but the capabilities must expand in order to  remain relevant and have the ability participate in larger portions of the continually expanding "enterprise mobility value chain" (more on this concept later). Below are the areas we see MEAPs quickly moving towards:

HTML5: As ratification inches along, trends like Webkit standardization and a burgeoning developer community that is hungry to experiment and capitalize on the mobile "web app" market opportunity that HTML5 bringsare helping to move HTML5 apps forward. Our view is that HTML5 apps are elegant and service a purpose, however we don't see them usurping/replacing native applications. HTML5 apps are emerging as an important and complimentary element to MEAP vendor offerings as moving forward we see customers requiring both native and HTML5 apps and having a multi-pronged app strategy (more on this concept in future blog posts) - this is part of the "long tail" concept that we outlined in our research last year.

b2e App Stores: While businesses are still in the early stages of formulating mobile strategies, we believe that once they are fully formed, business-to-employee (B2E) app stores will naturally and quickly become a ‘must have’ feature on corporate intranets and as native apps on mobile devices for organizations of all sizes. SAP/Sybase plans to release a significant number of native mobile applications (~30) in the coming months and their strategy makes it clear that they see managing applications as a required element to provide to their customers along with their other platform capabilities - other MEAP vendors see the opportunity as well, and have either already built b2e app store functionlity into their platform, or are preparing (or looking to partner) to provide their customers with this capability.

Mobile Banking: Mobile commerce and banking have arrived - NFC capability will be featured every modern mobile OS by the end of 2012 - MEAPs like Kony Solutions have made significant headway and have caught up quickly to competitors like Sybase, Antenna and Pyxis who have long focused on the financial services vertical.

Vertical Market and Application Integration Expertise: Human capital has long been recognized as indispensible and a key differentiator to enter into specific vertical markets with a cogent and credible marketing  campaign. MEAPs have been hiring key personnel to spearhead specific vertical market initiatives - our view is that these investments are currently and will continue to bear fruit. Integration (implementation) and application consulting expertise in areas such as SOA and web services will also be key as legacy applications will continue to be modernized as IT budgets begin to open up.

The Channel and Partnerships are Critical

The channel opportunity for MEAP vendors is significant; with the solutions well positioned for white label arrangements with vendors with well established customer bases (i.e., systems integrators and mobile operators). We have recently seen AT&T move in this direction - the company currently works  with four prominent MEAP vendors (Antenna Software, Pyxis Mobile, Spring Wireless and Kony Solutions). Recently AT&T began offering Pyxis' solutions via a managed service - this is evidence not only of maturing channels, but is strong evidence supporting the point that MEAPs need to expand their range of capabilities.

Another important trend is the activities of ISVs - SAP (via Sybase), Oracle, Microsoft and MicroStrategy (and others) have mobile application platforms as well - moving forward they will try take more ownership of their customers (both for control and profit). Finaly, we see carriers and integrators moving in this direction as well (Infosys and SK C&C are prime examples).

MEAP vendors have oppporunities in front of them to partner with a broad range of complimentary mobility oriented ISVs - while this has already begun in a meaningful way, there are potential partnerships that have yet to be recognized that we see as beneficial for MEAPs to see the market traction that they have yet to see.

We are in the final stages of our research on MEAPs and plan on publishing a comprehensive report on this segment later this month. If you want to talk MEAPs, ping me! I'm @eakleiner on Twitter.

Cotendo Pressuring Established CDNs

Founded in 1998, dot com darling Akamai Technologies quickly became the market leader in the Content Delivery Network (CDN) segment.  For over a decade, the company’s unique product, established infrastructure and partnerships with powerful companies worldwide have assured Akamai’s continued success.

However, it seems the rapid pace of technological advancement may have caught Akamai off-guard.  In recent years, we have seen mobility-focused startups leverage their agility and innovative technologies to threaten established and powerful companies (Microsoft is a good example).  In the CDN space, VDC believes Akamai has found the startup Cotendo an increasingly formidable threat – particularly the company’s Mobile Acceleration Suite (MAS), a product that can enable high-quality mobile experiences for customers worldwide.  Leveraging the company’s unique distributed services, which develop real-time awareness of the user’s conditions, Cotendo’s MAS is able to make rapid network adjustments, facilitating improved “load times.”  

Given the product’s potential to reduce latency and instability in mobile networks, carriers, systems integrators, and businesses with mission-critical mobility deployments are very interested in and are actively investigating services such as those offered by Cotendo to improve the performance and security of their increasingly cloud-based applications. Recognizing the advantage MAS would represent to its users, Equinix (a provider of global data center services) has allowed Cotendo to colocate servers at each of the company’s data centers worldwide (IBXs).  Cotendo has leveraged this service to essentially quadruple their customer base.

Excitement around this three-year-old startup is far from confined to the world of IT.  In June of this year, the company secured $17M in a single round of private funding, which included contributions from Citrix Systems and Juniper Networks.  VDC believes that in the rapidly-changing world of enterprise mobility, Cotendo will experience rapid growth and potentially become a significant threat to competitors such as Akamai.  Beyond the content acceleration space, we wonder how this disruptive technology will impact private LTE networks that are beginning to emerge.  Cotendo has seasoned executives on their roster, and will continue to be aggressive and encroach on their competitors’ territory while offering unique mobile optimization solutions.  In coming years, VDC believes these solutions have the potential to gain in importance as spectrum becomes an increasingly valuable and precious commodity.

 

Mobile Health: Lots of Initiatives…Little Pulse

Spent the morning earlier this week at the Mobile Health Expo held at New York’s Javits Center which only confirmed one of my long held feelings about Healthcare IT and mobile health solutions specifically: frustration. The healthcare sector continues to be one of the most fickle adopters of IT solutions in general and mobile solutions more specifically and ranks well behind other service industries in terms of IT budgets as a percentage of operating expenses. However, at the same time, it represents the sector that perhaps the most to gain from the adoption of mobile solutions.

While there are no shortage of pilots, initiatives and proposed standards there is still very little to show for when it comes to actual deployments and investment. It is easy to point out what some of the issues or adoption barrier to mobile health solutions specifically – from interoperability issues with stove-piped legacy/proprietary systems and limited commitment and follow-through towards mobile capabilities from major HIS vendors to the obvious security concerns and the lack of agreement of what constitutes (EHR) meaningful use.

Nevertheless, the immense potential of and need for mobile health solutions remains. Moreover, federal money – by way of the ARRA – is beginning to make its way into the system.  VDC has long stated in its research that 2011 would be a turning point in this sector due – in part – to impact of the ARRA on HER penetration  (which is a precursor to many mobile health solutions). Could it just be that this process (in this case EHR adoption) needs more time. EHR adoption – and achieving meaningful use – is complex, especially for the many organizations that lack the appropriate infrastructure, redundancy plan and security capabilities.

There is (still) much to be excited about when it comes to mobile health opportunities. Healthcare providers are responding to the fact that over 60% of care occurs outside the hospital and are beginning to embrace the notion of connected health services that bridges personal and clinical environments through – for example – social tools. In addition, within healthcare facilities, organizations are responding to the need for more schedule and process flexibility among core caregivers with more advanced workforce management capabilities. In this case the adoption of next generation multi-channel redundant communications solutions are driving significant improvements in care coordination and workforce allocation, data acquisition and sharing and overall efficiency and effectiveness of services rendered.

VDC has just completed its annual survey of healthcare service providers. We will be publishing the results in our forthcoming Healthcare Mobility report and are eager measure change and compare results to our previous studies. Stay tuned. 

 

Survey Says: Mobile Managed Services have Arrived

We fielded an end-user survey to IT professionals, and line-of-business managers this past April and captured some very interesting market trends, perceptions, and attitudes surrounding deploying and maintaining a mobile workforce — end-users in organizations both large (65% of >$1B in annual revenue respondents) and small (52% of <$1B in annual revenue respondents) clearly stated that they were "very interested" in outsourcing a broad range of enterprise-grade mobility solutions.

Looking more closely at this "suite" of mobility solutions we saw that it ecompasses everything from device management and security, to application development, integration, billing / expense management etc. — in fact, we asked respondents to rate each of the items in the graphic below as to their level of priority for inclusion in a mobile service delivery platform — each rated >7 on a 10 point scale where 10= Most important.

 

Our data also clearly showed that the key drivers behind this receptivity were as follows:

• Device proliferation ("bring your own tech")
• Lack of in-house skills to support mobile applications and platforms
• Simplifying the end-user experience and ensuring adoption
• High expectations for costs savings

Considering these trends, we see enterprise environments as ripe for the adoption mobile solutions as managed service. However, we do see the increasingly complex channel relationships and the number of vendors “behind the scenes” participating on mobile solutions as a challenge for mobile focused vendors moving forward. 

The post summarizes several of the findings from our upcoming Mobile Managed Services Report

IT Organizations Lack Confidence in Mobility Expertise

Our most recent mobile survey* indicated that IT organizations possess some of the required skills and expertise required to develop, customize and maintain mobile applications and platforms in-house—however, they rate themselves the lowest on this specific category relative to 11 other IT related services we queried on:

 
Mobile Managed Services

Our survey also found that there was very strong interest (across all industries, regions, and by company size) in procuring a broad range of enterprise mobility solutions on a pay-as-you-go basis via a managed services model (57% of respondents overall indicated they were "very interested" in such an offering). In addition to the high level of interest in adopting mobile solutions organizations have indicated, we see the continuing trend of employees bringing their personal devices into the workplace also impacting the pace of adoption. These factors along with the growing complexity of mobile solutions provides fertile ground to a broad range of mobility vendors—particularly given the fact that IT organizations have expressed a lack of confidence on their mobile capabilities.

While pre-packaged enterprise class "off-the-shelf" mobile applications have recently emerged, the need for customization persists—so too does the complexity in managing a fragmented device and OS landscape for IT organizations (we see IT orgs. being forced to manage at least two, and more likely three OSes moving forward). In addition to the resources required to support a mobile workforce, successful deployment, adoption (usage), and maintenance of mobile applications/platforms is also very challenging and costly, even for the most seasoned and well staffed IT orgs. Recogizing these trends, vendors are positioning themselves to offer a very comprehensive managed mobility "solution stack" that continues to expand and now includes elements that extend far beyond device management and security to areas such as custom mobile application development and design, integration, and ongoing support and maintenance.

We will be publishing our Enterprise Mobility Managed Services and Hosted Applications Report (Track 3 / Volume 2) later this month which will examine in detail the current trends, vendor and solution range of mobile managed services solutions, specifically:

• How vendors are positioning / differentiating from one another
• Enterprise perceptions and primary areas of interest for these types of services
• The requisite elements of mobile managed service offerings
• The cost savings that organizations are expecting from adopting a managed service approach to mobility

* VDC's mobile and wireless team fielded a survey to 155 end-users in April of 2011—the respondents were IT and LOB decision makers, and worked for organizations headquartered in North America and in Europe.

Situational Awareness and Mobility: What's Next?

In yesterday's webcast, we discussed trends and other high-level findings from our upcoming report on Situational Awareness in military and federal non-military environments. Knowing what is happening around you and the impact of current and future events and actions is critical for maintaining effective military and public safety operations. Utilizing the latest next generation technology to learn, react and adapt to your surroundings is key to achieving Situational Awareness.

But what is next for Situation Awareness? Situational Awareness concepts have the potential to support a wide range of applications beyond current military and advanced public safety solutions.

During this webcast, we discussed our future expectations for the Situational Awareness market. We anticipate Situational Awareness concepts to stretch beyond current military and public safety applications, such as disease surveillance, response and outbreak management. In addition, we highlighted the opportunity for situational awareness requirements to act as a catalyst to integrate a variety of emerging technologies, including:

• Low-cost sensors
• Vision systems
• Virtual augmentation
• Location services
• Social networks

To learn more about current and future trends in Situational Awareness, we encourage you to look through the slides below or listen to the webcast recording.

Situational Awareness for Complex Environments

View more presentations from VDC Research Group.

Keeping Pace with the Enterprise Mobility Solutions Market in 2010

By the end of 2010, the enterprise mobility market will have experienced the most change that we have seen in the past decade.  2009 budgets for enterprise mobility solutions – often one of the last segments of IT budgets to be crimped - were cut.  This exacerbated an already price and margin challenged mobile platform segment and has given managed services and hosted applications considerable traction.

Even before the latest recession, a number of core vertical markets and installation environments were slowing down, offering less margin, and forcing attrition in some supplier community segments.  We expect that this will continue and perhaps even accelerate in 2010.

Three years ago, application software became the first, and most important, solution element to be specified by users.  Today, wireless service is increasingly cited as the number one facet of an enterprise mobility solution to be specified; pushing traditional hardware platform, solution AND ISV providers aside marginally, or in some markets, materially.

These forces above, and others, are making channel architecture and partner decisions much more important. To help companies operating in, or targeting the enterprise mobility market analyze and compare their options - VDC is once again, planning to publish our Enterprise Mobility Solutions Service.  This market research will address the broad range of technology developments and consumer trends which we see unfolding in the enterprise mobility solutions market in 2010 and beyond.

We encourage you to contact us to learn more about this research, which is currently in our founding sponsorship period and provides early subscribers some significant benefits.