VDC Research: Enterprise & Government Mobility Market Blog

VDC’s Mobile NRF Recap

With a show the scale of NRF there is no shortage of topics to address, so our focus will be on mobile solutions that struck us as particularly unique or crafty. The broad themes were largely an extension of topics introduced over the last couple of years: The "connected" and "in-control" customer; seamless "omni-channel" experiences; two-way "sharing" of information. While there clearly are retail visionaries who are daring and "get it" – like Cole Haan and the access they are providing their customers to in-store inventory or Outfittery, with its innovative focus on personalized curation - there seems to still be a lot of unsubstantiated noise. Among the IT meta-trends of big data, analytics and IoT, the retail sector is - surprisingly - behind when compared to other industries. While there is a lot of data being collected and analysis conducted, deriving meaningful value remains a challenge to most. From a purely mobile perspective, some of the dominant themes centered on mobile payments, the continued mobile platform wars and the shifting competitive landscape.

Mobile payments remain a central theme to NRF, especially as the push for EMV continues and OEMS are moving to adopt systems that integrate chip and pin readers. Verifone, the leading mobile payment and POS solutions provider in North America has taken a modular approach that is both device- and platform-agnostic, simplifying the certification process and enabling the company to partner with a wide array of mobile OEMs such as Samsung and Apple and leaving the mobile question in the hands of the retailer. Given the multitude of platforms that are increasingly becoming the norm in enterprise and in front-of-store retail and the shortening lifecycle for deployed devices, this provides Verifone much-needed flexibility to remain at the forefront of mobile payment solutions. From Verifone’s perspective what was also interesting and unique was its continued shift towards software and services with its Secure Commerce Architecture the most impactful for retailers. This solution provides a point to point encryption approach that directly transmits card data to the processor without touching the retailer’s POS system. At the other end of the mobile payments spectrum, Panasonic has introduced one of the first fully integrated mPOS devices in the Toughpad FZ-R1, which combines a 7” all-in-one tablet running full Windows 8.1 with a dedicated PCI compliant mobile payment element supporting chip and pin and with an encrypted mag stripe option in a semi-rugged casing. While the price point of the device will be a challenge for Panasonic, this does provide them with a clear differentiation and inroads into other segments beyond quick serve restaurants.

Another dominant theme that permeated the convention is the continuation of the mobile platform wars in retail at all levels. Mobile strategies by retailers over the past several years have favored Apple’s iOS powered devices and more recently Android-based smartphones and tablets supporting a variety of ‘customer facing’ applications. Rugged handheld devices, prominent for scan-intensive inventory management applications, suffered this shift in focus and were further marginalized by Microsoft’s inability to provide an adequate and timely transition strategy to next generation platforms for these devices. While the legacy Windows Mobile 6.x/Embedded CE platforms remain perfectly suitable for many of the applications they are supporting, especially for more keyboard-centric solutions such as those prevalent in the warehouse. However, when it comes to more touch-centric devices, these platforms really do not stack up with iOS and Android. A blurry OS strategy evolved with rugged OEMs shifting focus towards Android. While Android has faced an uphill battle in the enterprise and especially on rugged devices – issues relating to persistent wireless connectivity a frequent frustration among end users – 2014 represented somewhat of a breakthrough year for rugged Android handheld devices in the retail sector, especially in North America. ISV support of Android was reaching critical mass, enterprise support on a broad or horizontal level was improving and in Home Depot the first benchmark account emerged. We expect that momentum to continue into 2015. While Windows Embedded Handheld 8 was scrapped almost as quickly as it was introduced, 8.1 showed some promise. However with only Panasonic and Bluebird introducing devices, options remain limited. Honeywell appears to also be throwing its hat in the ring with a WEH8.1 device slotted for Q2 2015. However, the sense that we got was that there would be another round of “wait and see” on the Microsoft front with vendors and end users pointing to Windows 10. Make no mistake, there is a vested interest among several accounts – especially in North America – for a strong Microsoft option for rugged handheld devices. It is just taking a lot longer to materialize.

An interesting wrinkle in the OS/architecture debate for handheld devices was introduced by BSQUARE with its MobileV reference platform. MobileV is a complete hardware and software reference solution based on Intel architecture and Windows Embedded 8.1. The software enables screen resolutions compatible with displays ranging from 3.5” and up. In other words x86 and big Windows on a handheld device. Together with partner AAVA, a Finnish mobile device manufacturer, they presented a 5” handheld/tablet and 7” tablet based on MobileV. There has been growing discussion and interest in this option in the market. However, from a BOM and power performance perspective, it will be a challenge for solutions and applications traditionally supported by rugged handheld devices today and will likely take more time to be viable outside of select niche use cases.

The overall competitive landscape within retail is shifting, as merged companies seek to realign their brand and established firms look to take on a more direct relationship with end-users. For the former, Zebra is a prime example, following its headline-grabbing acquisition of Motorola Solutions’ enterprise business in 2014. Traditionally a back-of-store company, Zebra is putting in significant effort and funding to establish a more customer-facing retail presence, not only with the Motorola device portfolio, but in shop floor solutions that leverages its Zatar IoT platform. While futuristic and eye-catching, these technologies will require considerable consumer opt-in to really take off in a meaningful way. However, their offerings of in-store analytics to measure foot traffic and dwell time fit squarely into a growing market that is seeing competition from all sides, including Samsung and AT&T. Samsung could prove to be a serious contender as it has increasingly focused its attention to enterprise in wake of considerable contraction from its consumer devices. The firm’s brand recognition, strengthening Android security and broad retail partnership portfolio should expose Samsung to increased retail opportunity.

with David Krebs, EVP

Mobile Services Vendors are Leaving Money on the Table

As much as today's modern smartphone devices have revolutionized the world of mobile handheld technology, mobile devices have been around for decades. 

For tradtional rugged hardware vendors (such as Motorola Solutions, Honeywell, or  Datalogic), the notion of complementing mobile hardware sales with bundled professional service offerings is by no means new.  These vendors generate significant revenues each year from their help desk, field service and technical support service offerings.  

With smartphones and other mobile devices increasingly finding their way into the world of business, we see growing demand for new and enhanced mobile professional service offerings.

VDC explored this hypothesis in a recent survey and found that on average, organizations' current support service costs range from 8.5% - 15% of the upfront cost of a mobile device.  Yet, this data shows that over 75% of IT decision-makers would be willing to pay extra for enhanced mobile support services, including:  

• Customized cloud-based dashboard for KPI monitoring
• Proactive device monitoring
• Preventive maintenance
• Battery management
• Enhanced support of device accessories (e.g. stylus, battery door cover)
• Device imaging services

As the mobile landscape continues to evolve, who will rise to tackle this growing market opportunity? The mobile services market is seeing interest and activity from all corners of the technology ecosystem:

• Traditional rugged hardware OEMs looking to defend their turf 
• Large systems integrators investing to carve out a piece of this growing, increasingly relevant market opportunity
• Wireless carriers sharpening their professional services offerings to compensate for dwindling voice/data margins

Over the next 1-3 years, you can expect a battle in the mobile services arena as these vendors launch new and innovative services strategies.  We see pricing models shifting, the cloud cannibalizing traditional on-site services, and modern technological advances driving new opportunities in areas such as preventive maintenance.  

Turning the Page on e-Textbooks

The fact that today’s book stores are more a relic than a real destination for those in search of textbooks reflects the digitalization of an entire industry. Both Borders and Cengage have declared bankruptcy over the last two years and companies like Barnes and Noble have tirelessly transitioned their strategy towards an online presence as opposed to their brick and mortar beginnings. It is therefore easy to cite the e-textbook as the next cutting edge in disruptive technology, especially due to price advantages posed by resellers like Amazon and their aggressive strategy towards digital content.  Take for example the survey released by the U.S. Public Interest Research Group that revealed seven in ten college students claimed not to have purchased a textbook at least once due to prices that were too high.

The pricing advantage of digital content however is not the only disruption the e-textbook poses for its traditional counterpart. In fact, the e-textbook market is only in its infancy as the following capabilities pose a threat to not only replace the textbook but re-imagine the quintessential learning experience:

• Capacity to embed interactive tools  and multimedia
• Ease of access to real time, updated content and Open Educational Resources (free, open licensed resources for the public)
• New distribution channels that offer instant, ubiquitous access to content, cannibalizing traditional models of distribution
• Ability to leverage big data and analytics

Simply transferring textbook content onto a digital platform is only the first step for the e-textbook market. In the horizon we see a complete transformation of once static content that promises to change how content is purchased, relationships with authors and the classroom as a whole. As such, the future of the e-textbook market boasts the following opportunities:

• Embedded assessments and interactive tools that align with core curriculum standards
• Social and collaborative platforms for discussion between students
• Leveraging data based predictive analytics and personalized learning
• OER based on established and proven pedagogy
• Ubiquitous support and resources for OER

As these opportunities become realized, established dominance by major textbook and publishing companies will be questioned, encouraging consolidation of the market. Smaller vendors specializing in these capabilities like Inkling and CaféScribe may be acquired while major vendors will be forced to continue to adapt to a changing textbook ecosystem as Pearson has already shown through its OER project Blue Sky. The rise of OER will severely disrupt existing textbook market control and bring legal battles over copywrited material to the forefront. Those looking to succeed will need to look beyond simple, digitalized content and embrace the change of the learning environment. 

Mobile and Channel First

As I began tracking and following the evolution of mobile-oriented solution providers and their channel relationships, I quickly recognized that co-opetition was a fact of life for many market participants. This has historically been the case for rapidly expanding high-tech market segments (just think back to the ecommerce and dot-com boom in the late 90’s). This trend is unmistakable in today’s rapidly expanding market for enterprise mobility solutions. I see competitors that are cooperating to integrate their solutions, collaborating to help set new industry standards, and/or even co-innovate to develop new solutions.

When considering both the current evolutionary stage of today’s IT organization and the state of the Fortune 1,000 supply chain, it is clear that mobile-oriented vendors increasingly will need to partner in order to reach these organizations – direct selling is essential, but is costly and not easily scaled. Today’s organizations are “more global”, they recognize IT as a differentiator, and are beginning to make meaningful investments to modernize their IT infrastructures – for forward thinking organizations, mobile solutions are playing a key role. Another important trend to be mindful of is that most large organizations are more than willing to outsource significant elements of their IT infrastructure and work with numerous channel partners. In summary, in order to capitalize on the opportunity in front of them, companies participating in the mobile ecosystem must partner – often with their competitors.

In this vein, we expect to see several important partnerships announced in the near term – both at RSA and at MWC. Key themes will be partnering for solution enhancement and better positioning to attack specific markets such as government and regulated industries. This has begun in earnest, with many more announcements to come next week.

For example, just yesterday, Fixmo announced partnerships with both AirWatch and MobileIron, and Air Patrol announced it was partnering with Fiberlink.

Looking forward to MWC next week – if you are making the trip, please stop by the AirWatch booth (Hall 3) to see my presentation on the future of mobile application management at AirWatch Connect!

Ping me on Twitter (@eakleiner) to meet at MWC next week ― I'll be in town until Thursday.

Will AT&T's Attention to Mobile Developers Pay Dividends?

AT&T held the 8th iteration of its developer summit this past January in Las Vegas. The event kicked off with the company’s first “hackathon” of 2013 (AT&T held 28 of these in 2012) and offered attendees a full day of mobile-oriented sessions, ranging from technical deep dives to go-to-market strategies for enterprise-oriented developers. This was my second year attending this event, and I came away with a very positive impression of AT&T’s commitment to fostering its community of developers. It is clear that the company is raising the profile of the event. Not only was the attendance up from 2012 (with ~2,700 developers on hand, this was the largest event to date), but AT&T has also added executive presence to the event. Ralph de la Vega, the President and CEO of AT&T Mobility, typically keynotes this event; however, this year he was joined by other key executives, including the company’s CTO and CMO. AT&T also landed Cisco’s Chairman and CEO John Chambers as a keynote speaker and “rock stars” in developer circles like Christian Heilmann from Mozilla to lead breakout sessions. Scheduling the event ahead of CES was a smart move, as it gave the event a good representation of both the media and analyst communities (as well as a critical mass of mobile-oriented developers).

Click here to read this entire research note.

Sprint Bets on "Everything is Connected" with Velocity

On November 29 at the L.A. Auto Show, Sprint announced a new product dubbed Velocity that is an in-vehicle communications platform for automotive manufacturers. The in-dashboard product will have capabilities to deliver music, news, weather, sports and other infotainment features, security, navigation, remote connections for mobile devices, emergency services and engine diagnostics. Sprint will support global deployment via its many partnerships with multiple network providers, and let a customer connect an embedded head unit or mobile phones to applications like voice-activated texting and e-mail. Automotive OEMS will have the option of taking either a modular approach to meet custom needs, or use the product as a turnkey solution.

By partnering with technology providers such as Airbiquity and Wireless Car, Sprint is significantly reducing the development, integration, and selection requirements faced by an automotive OEM for this type of technology. It also opens up the range of products that Sprint offers in the machine-to-machine segment and positions itself at the high end of the value chain among the technology providers supporting the Velocity product.

For automotive manfacturers, it really provides three key opportunities:  the potential for higher margins for vehicle dealers; product differentiation; reducing the complexity of supply chain; and utilizing a business model that delivers effective cost and quality for the product.

As a network provider, Sprint expands its product line-up with a higher value machine, and positions itself well in the market and supply chain as well as providing another revenue stream via a billing service to the machine. In addition, the product aids automotive OEMs by reducing complexity in the supply chain. However, this does bring to the forefront a question of how many subscription services is the "connected" customer willing to pay? As consumers or enterprises continue to acquire and support multiple devices, the burden of paying for service on these devices is going to increase. In most scenarios, these different subscriptions are using data for various services. Network providers need to evaluate their business model, and think about billing based on access versus billing by each individual device. Future service plans need to be built around network access and data consumption versus device connections.

Similar to the product Sprint is bringing to the market, in 2007, Ford Motor Company launched a factory-installed, integrated in-vehicle communications and entertainment system called SYNC. The SYNC system runs on the Windows Embedded Automotive operating system designed by Microsoft and consists of applications and user interfaces developed by Ford and third-party developers. SYNC is only available in Ford products, and some features of the product are limited in markets outside the United States due to compatibility issues, in particular, voice command services such as turn-by-turn directions in Canada.

Sprint's new product certainly reflects the future of "everything is connected", and is a glimpse of what the world of machine-to-machine may deliver. To be competitive the product needs to ensure  seamless integration:  the ease of upgrading operating system software for vehicle radio, and navigation systems as well as applications; a high level of functionality; and supporting features and functions of mobile field workers in different industries. If Sprint can deliver the highest level of functionality in areas such as navigation and web browsing, it has an opportunity to edge out current technologies such as Bluetooth that many drivers employ to access some of the same functionality provided by in-vehicle communication platforms, and users that have been accessing similar capabilities via mobile phone or tablets in their vehicle.

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. 

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

Strong 2010 Rebound for Rugged Handheld Computing Market...But Challenges Remain

Sales of rugged handheld mobile computers - widely used by mobile workers supporting mission critical applications in a variety of industries - cratered in 2009 with the market contracting by 30%+ in certain segments. While VDC Research expected the market to return to growth in 2010, the rate at which the market has performed over the first six months of 2010 was slightly unexpected. Overall, the rugged handheld market grew by almost 8% in Q1 2010 over Q1 2009. Excluding Intermec - which had a difficult comparison because of its strong government sales in 2009 - the growth would have reached almost 12%.

Several factors combined to contribute to this strong performance. Some of the more notable include:

Return of the retail sector. Retail sector spend on rugged mobile solutions has been sluggish for the better part of the past 24 months. Much of the pent-up demand is now beginning to be realized driving a boost to spending for retail shop-floor in addition to back-room warehouse applications.

Tier I account spend. Largely absent over the past 18 months, large Tier I programs - especially in the highly competitive mail/courier segment - have provided a strong boost to the market. What is especially important is that whereas these contracts used to be highly US-centric, large contracts are increasingly available in international markets.

Field mobility opportunity. The strongest long term growth prospects for rugged handheld devices will be in 'beyond the fence' field mobility environments. This represents the least penetrated market segment and is just beginning to realize the benefits of mobilizing certain processes.

While 2009 is a fading memory for many rugged handheld vendors, most continue to face several significant challenges. 

Price competition/erosion. Although performance in the first half has been strong, much can be attributed to unrealized pent up demand. Business development has not been able to keep pace resulting in leaner pipelines. Consequently the level of price based competition continues to be severe and represents perhaps the industry's greatest challenge moving forward (year over year price erosion may reach 10% for rugged handhelds in 2010 - the highest it has been since 2006/07). While end users certainly are not complaining, the intense price wars have resulted in rapidly shrinking margins among both hardware vendors and their channel partners.  

Smartphone challenge. Another critical challenge facing rugged handheld vendors is the increasing level of competition from smartphones and other emerging devices - especially for field mobility applications. While smarphones do not have the same level of integrated I/O capabilities nor the level of ruggedness offered by rugged handheld devices, their proliferation in the enterprise (and lower adoption cost) are making them target devices to support more sophisticated enterprise applications. Plus, in the field mobility market the rugged handheld community is most challenged from an OS perspective. Although there is a strong application and developer community supporting field mobility applications on Windows Mobile devices, customer expectations in terms of user interface and experience - especially for field mobility applications - is increasingly influenced by consumer oriented smartphones.

Amidst these challenges, VDC remains optimistic about the future outlook for rugged handheld devices and is projecting a compound annual growth of 8% through 2014. However, participating in these markets is only becoming more challenging and vendors need to be prepared to be more agile to adapt to these conditions.

Mobile Software Distribution: The Next Great Challenge

There are no effective distribution channels for enterprise mobility software. Connecting the challenge many enterprise mobility software vendors have had scaling their business with the lack of a capable sales, market development and distribution channel is certainly oversimplifying things. However, the issue is not trivial.

One historical challenge has been the propensity for enterprises to custom develop and integrate - either internally or through third parties - their mobile software solutions. This - in part - has limited the need for more effective mobile distribution options. However, that is clearly changing.

VDC's most recent enterprise mobility channel research reveals a couple of trends with respect to mobile software distribution:

1. Hardware margin erosion is forcing channel organizations to focus more on software and services;

2. Enterprise mobility hardware vendor's channel programs increasingly include ISV (independent software vendor) tracks - a historically hardware agnostic community;

3. Enterprise mobile software vendors/ISVs are significantly increasing their investments in their channel programs in attempts to scale their business; and

4. Wireless carriers are expanding their efforts to white label third party mobile software development platforms in an effort to simplify enterprise mobile application development.

Improving mobile software solutions availability and accessibility is clearly a priority for many constituents across the enterprise mobility value-chain. However, most will acknowledge that they still have a long ways to go. What about the 'app store' model for enterprise mobile software applications? VDC has long contended - and continues to believe - that, while hugely success for consumer applications, the 'app store' does not represent a viable channel for enterprise mobile applications.

Why? The need for back end system integration - a critical need when evaluating enterprise mobile applications according to our research - is perhaps the most glaring issue. Others include the need to custom design solutions (defining fields for forms based apps, for example) and other unique enterprise device and security management needs.

However, the app store model - with some modifications - may actually fill a unique need (for a specific application set and target user) in next generation enterprise mobility distribution models. This would take the share of a 'enterprise-focused' application store (the need for a separate storefront away from consumer apps will be critical as most business application developers suffer from lack of visibility in current mobile store fronts). The target solutions would be simpler applications/point solutions targeted at small to mid sized organizations. Some of the key requirements for this to be successful would include:

1. Processes and policies to track the download process and enforce/guarantee employees install the target application;

2. Tools that provide governance over which devices are permitted to download the applications;

3. On-line training and technical support services;

4. Integrated inventory and policy management services; and

5. Ability to create custom enterprise portals that enable organizations to push custom developed applications to target users.

Clearly this addresses only a sub-set of the issues plaguing enterprise mobile software distribution. However, as enterprise applications become simpler to design and use we would expect them to also to become simpler to distribute and deploy.