VDC Research: Enterprise & Government Mobility Market Blog

2016 Predictions Part II

Predictions for 2016 Part II

This is part II of a two part series of posts which provides the Enterprise Mobility and Connected Devices Team’s predictions for 2016.  The following predictions were written by:  David Krebs, Eric Klein, Cameron Roche, and Matthew Hopkins.  To contact the team, please e-mail us at [email protected]

Top 5 Growth Industries for Mobility in 2016

Companies in just about every industry have the opportunity to benefit from a mobile strategy that improves productivity and engagement. However, mobile penetration among industries varies significantly due to a number of factors including, regulatory drivers/inhibitors, security barriers, killer applications, competitive pressures, work force demographics, etc. Despite these drivers/inhibitors, VDC expects software and hardware mobile investments to increase in 2016 as companies adjust to a world that continues to move towards mobile computing. Specific impetuses and impediments to mobile investments by sector will undoubtedly dictate the pace of mobile adoption, but all companies will nonetheless feel pressure to expand their mobile initiatives. Whether employed to improve business processes or engage customers, mobility’s ability to provide employees and consumers with critical information just about anywhere will continue to transform the enterprise.

Modernization and mobility are disrupting just about every industry, but VDC believes that these five industries in particular will be among the greatest investors in mobile technology in 2016.

1. Following several years of heavy ecommerce investments Retailers are again shifting their focus back to in-store solutions and particularly in-store customer engagement. A key challenge for retailers as their digital and physical presences continue to meld is data and record management and creating centralized inventory and customer datasets. Another key theme for retailers will be around them optimizing the omni-channel initiatives especially addressing their increased delivery cost exposure. In addition, a key focus for retailers will be to create a consistent experience for their workers and customers across multiple platforms.
2. The postal/courier industry, spurred by ecommerce growth, will be expected to deliver a higher volume of packages and meet the growing delivery expectations of customers. To live up to these demands, organizations need robust mobile applications for engagement as well as comprehensive track and trace solutions that provide individuals with near real-time package information. 2016 will see continued modernization of legacy mobility solutions to address customer’s increasingly sophisticated requirements.
3. The healthcare segment has great potential for mobility because its workforce is inherently mobile. However, a general resistance to change within the industry as well as security and patient privacy concerns have provided some road blocks to greater mobile adoption. Nonetheless, many companies in the space have made significant investments to reach out to their customers and provide them with the tools to manage their accounts.
4. Hospitality companies have significant customer engagement needs and the age of information has transformed their business model and increased competition. Market disruptors such as Airbnb and travel websites like Orbitz leverage mobile and Internet platforms to compete with more traditional players in the space. This dynamic is pressuring the larger, traditional organizations to more strongly infuse mobility in their go-to-market strategy.
5. The Transportation industry, like the hospitality sector, has faced its fair share of market disruptors—Uber, Lyft,etc.—that are driving companies in the space towards mobility. In particular, mobile device use among employees in the space for GPS, logistics, and other application-based services has also proved effective in improving productivity. These dynamics should result in increased investments in 2016.

 

Microsoft Surface:  Some Serious Market Share Ahead

While Microsoft has traditionally ruled the desktop space, challengers like Apple and other devices based on Android platforms have forced Microsoft to renew their efforts in other hardware sectors.  Looking at mobile devices, Microsoft has brought their line of Surface products to the market.  Using the Surface Pro 3 and 4 for their current flagship tablets, Microsoft has been able to successfully redefine a market domain which for years was dominated by high-cost high-performance iPads and lower-cost Android devices. The recently released Surface Book has also seemingly hit a sweet spot boasting top-notch performance at a competitive price. While Tim Cook thinks it’s a “product that tries too hard…to be a tablet and notebook” while succeeding at neither, this also comes from the man who said that the iPad Pro would kill the PC. If that’s true, then he may need to keep his guard up as the Surface Book sold out within the first few days. Couple its popularity with the power of a laptop, the mobility of a tablet, and generally better specs than a MacBook Pro, and Microsoft should see their Surface series of products more than double in market share from 8.9% to nearly 20% by 2020. With this kind of success, Microsoft will likely release a Surface Phone in the future. This Surface Phone would shoulder a heavy burden of possibly being the last true chance for a Windows powered phone to become a significant player in the smartphone space. Otherwise, Microsoft may need to investigate partnering their Windows 10 OS with other smartphone OEMs.

Android Makes a Significant Dent in the Rugged Handheld Market

Over the past decade, Windows CE and Windows Embedded Handheld (WEH) 6.5 have become the OS platforms of choice for the majority of enterprise (rugged) mobile devices contributing to an installed base of well over 15 million devices. The platform has offered its enterprise customers a broad portfolio of devices to select from; as well as strong development tools, a stable developer community and wide support among enterprise mobility-focused ISVs. In addition, with support from Microsoft for 10 years, enterprise customers received the stability critical to their enterprise mobility investments. However, as of January 2015, WEH 6.5 is completely off Microsoft mainstream support with only security patches provided until 2020 when it fully reaches its end of support lifecycle.  Microsoft’s answer to the next generation platform for rugged handheld devices is Windows Embedded Handheld 8.1. The platform has been adopted by a small number of OEMs, however, the devices available supporting this platform today is limited as is their functionality. Moreover, support for WEH 8.1 is expected to expire by 2019. More recently Microsoft has shifted focus towards Windows Mobile 10 (or Windows 10 IoT for Mobile Devices) for this category of devices. This version was beset by many delays with OEMs now estimating product availability by mid 2016. However, Microsoft is expected to more tightly control the specs for devices running Windows 10 eliminating options such as wearable form factors or handheld computers with hard keyboards.

This has opened the door for alternative OS options to fill this void with Android emerging as the primary candidate. Enterprise (rugged) mobile OEMs have been investing in Android solutions over the past several years with shipment volumes beginning to reach critical mass in 2015. We expect this to continue in 2016 with Android supplanting Microsoft as the leading platform for enterprise handheld devices.

2016 Predictions

Predictions for 2016 Part I

This is part I of a two part series of posts which provides the Enterprise Mobility and Connected Devices Team’s predictions for 2016.  The following predictions were written by:  David Krebs, Eric Klein, Cameron Roche, and Matthew Hopkins.  To contact the team, please e-mail us at [email protected]

Point: Microsoft Progresses towards Gaining Critical Mass in Mobile

Microsoft’s Windows operating system currently accounts for less than five percent of the smartphone market despite many efforts—most notably its acquisition of Nokia—to revitalize its mobile portfolio. However, 2016 will mark the first full year of Windows 10. This new operating system enables applications to work across all Microsoft devices; thus countering an argument that critical mobile mass is necessary for robust application development. The Windows Continuum allows developers to develop for all devices in the Microsoft ecosystem, thus ensuring an extensive marketplace of enterprise and consumer apps. Moreover, smartphones have largely become commoditized, and with differentiation fading, Microsoft has a new opportunity to enter a static market with new, sophisticated, and affordable mobile devices. A window of opportunity is opening for Microsoft in the mobile space as the previous barriers to success are fast eroding. Microsoft should gain market share because Windows 10 creates a stronger “mobile” developer community that will design applications for sophisticated devices in various form factors that meet the needs of consumers and enterprises alike. Moreover, the novelty of Apple products is declining while their price remains the same, and the gap between high-end and low-end phones continues to blur. From an enterprise mobility perspective, in segments such as retail, we are witnessing a strong desire to create consistent experiences – from POS to clienteling – and the Windows 10 Continuum value proposition aligns well with those requirements. These dynamics present Microsoft with a unique opportunity in 2016.

Counterpoint: Mobile OS is No Longer Strategic to Microsoft

Yes, it is hard to consider something strategic that is teetering at 1-2% market share globally. However, following Steve Ballmer’s bombastic “My way or the highway” approach to conquering the mobile market, one of Satya Nadella’s greatest accomplishments during his still young tenure at the helm of Microsoft is recognizing that Microsoft can be successful and have a lot to offer to mobile users even though it does not dominate the underlying OS. This OS and hardware agnostic approach has seen Microsoft enable and optimize its core services – from Office to Skpe – to work on Android and iOS, the two clear mobile OS leaders. Not to mention that Microsoft makes $2 billion in royalty payments from Android OEMs. Yes, Microsoft would still love to see its mobile OS share grow and, yes, Windows 10 does offer unique differentiation with Continuum. However, outside diehard Microsoft supporters and those curious enough to make the switch, it is unlikely that adoption will be sufficient to propel Microsoft market share to double digits.

Enhanced Privacy:  A BlackBerry Resurgence?

In the wake of the 2015 expansion of ISIS, hardware and software companies were pressured by governments to reduce encryptions or create back-end ways for monitoring potentially dangerous activity. The hardware and software communities will continue to push against these requests as their own quest for secure data continues in light of hacks and breaches. Expect to see more complex encryption techniques from software, mobile payment, and app creators. Additionally, expect to see hardware vendors leverage advanced biometrics. With the introduction of iris scanning into consumer-grade cell phones (e.g. Microsoft Lumia 950); look for further penetration of iris technology. Also, with fingerprint scanning penetrating both high and mid range consumer-grade devices, some rugged or semi-rugged devices may also see enhanced biometrics in 2016. Finally, the focus on privacy and security may also provide BlackBerry’s hardware endeavors with another chance at life.  The relatively positive reception of the BlackBerry Priv and rumors about a modernized design on their next smartphone are indicators that 2016 will provide BlackBerry with an opportunity for success not only in software, but also in hardware.

Graduating From BYOD and Basic MDM…Resetting Enterprise Mobility Expectations

2016 will be pivotal year for the technology industry writ large. Mobile and cloud computing will continue to disrupt how IT services are provisioned, as both personal and corporate computing continues to migrate to mobile platforms. However, how strategic is mobility really to today’s workforce and is the opportunity appropriately aligned with IT vendor’s initiatives? When it comes to customer engagement in segments such as retail then, absolutely, mobility initiatives or digital transformation (or whichever buzzword is currently trendy) are strategic and represent critical competitive initiatives. However, what about today’s workforce? Our research suggests that the workforce is increasingly mobile – estimated at approximately one third of the workforce or 1.4 billion workers. And, yes, the adoption/penetration of sophisticated mobile devices continues to scale – in 2015 global shipments of smartphones and tablets reached 1.6B units. However, when looking at how enterprises are truly leveraging these mobile devices to support or enhance mobile workflows the reality is that we are barely out of the starting gates. Outside of task or line workers such as warehouse workers, delivery drivers, retail associates, service technicians who rely on mobile solutions to support very specific and critical workflows, this opportunity has had a very slow burn rate. In fact, VDC’s research suggests that of the overall 1.6B smart device shipments in 2015, only 50M were deployed to support enterprise mobility workflows (this excludes the use of smart devices for email and basic productivity applications).

Yes, enterprise mobility is extremely challenging as is accurately conveying the ROI of many B2B opportunities. As a result we are seeing a shift among larger IT/technology powerhouses and their enterprise mobility initiatives. Standalone (enterprise) mobility practices will be a thing of the past as organizations realize the value of mobile as an enabling technology of a broader initiative (hello, Digital Transformation) rather than a standalone solution. This will represent a huge challenge for some of the pure-plays especially as some mobile capabilities – MDM representing the obvious example – become commoditized to the point that they are given away for free.

Warfare in the Age of Information and Mobility

In an upcoming military and defense report, VDC will examine the unique security, application, and hardware requirements for mobile devices employed among military users.

The phrase “fog of war” describes the general state of uncertainty surrounding military operations, and has been referenced frequently in military literature for over a century. Equipped with less than perfect information, military leaders use their best judgment and the little information they have to make decisions in the theatre of war. Generally, these gaps in knowledge, or situational awareness, occur on both sides of the battlefield, essentially offsetting one another. However, if one side does possess superior information, even in the slightest, then it could tip the scales of war. This logic largely supports the network-centric warfare doctrine, which argues that communication, computer, and IoT systems provide an operational and strategic advantage in war. More generally, a military receives a competitive advantage when they have the ability to collect, analyze, communicate, and act on information in a synchronized manner.  

Abiding by the principles of network-centric warfare, militaries have researched, developed, and implemented a growing arsenal of information and communications technologies. The United States, the largest military spender, maintains a diminishing global lead in technological superiority. This lead is largely owed to astronomical spending and access to some of the most cutting-edge technology coming out of Silicon Valley and other high-tech geographical clusters located within the nation. Private sector companies have played, and will continue to play, an important role in developing products for command, control, communications, computers, and intelligence (C4I) solutions. Procurement of commercial off-the-shelf-technology (COTS) has increased over the past decade owing largely to the private sector’s improved technical competency and the decrease of Western military budgets. Notably, this reduction in the West contrasts increased military expenditures in the Asia Pacific and Middle East regions.

The investments in C4I technology include hardware, software, and networks; the three components interact with one another to produce insights and an operating picture necessary for informed decision-making. Crucial to ensuring this integration and interaction are mobile devices and applications, which provide soldiers and support-employees with the tools to distribute and act on information. In the most basic sense, these devices act as receptacles for mobile applications that serve as the gateway to data often stored behind organization firewalls. Tablets and smartphones now possess powerful computing capabilities in a mobile format, thus ensuring access to information anywhere and at anytime (assuming an available network is present). This value proposition has encouraged defense organizations to implement mobile devices in the field as well as in-and-outside the office. Imposed requirements such as general-use guidelines and enhanced security features including device management software and encryption help to reduce risks associated with mobility and are representative of a “secure enough” approach taken by many military organizations. This is the most feasible approach since completely impenetrable mobile devices are the stuff of science-fiction. The measures employed as part of this  approach increase security while maintaining functionality, and most agree that the gains of greater information distribution offset minimized security risks.

The Department of Defense’s mobile policy abides by these guidelines and includes an application store, which grants employees access to productivity enhancing, commercially available applications as well as line of business applications that enable business processes and access to organization data. Security measures differ based on whether an employee resides on the classified or unclassified network, but in general, the DoD acknowledges the trade-off between security and usability and has increased the footprint of devices under management to include popular consumer devices such as iPhones and Samsung Galaxy smartphones. While this type of enterprise-use is fairly common throughout the private-sector albeit with greater security measures, the field use-cases for mobile devices are certainly unique.

The U.S. Army’s Nett Warrior system uses consumer-grade Android smartphones to arm individual soldiers with enhanced situational awareness and communication capabilities on the battlefield. This use-case falls directly in line with the network-centric warfare doctrine since it facilitates informed decision-making in an arena in which judgments must be made quickly and frequently involve life and death decisions. Operating on radio networks, these devices provide details on friendly as well as enemy troop locations, and allow soldiers to send text communications to one another. Perhaps most importantly, this system serves as a platform on which more applications can be built; increasing the capabilities of soldiers and improving their effectiveness in the field while reducing risks associated with uninformed decision-making. As tactical radio networks evolve and mobile device technology becomes more powerful, soldiers will essentially have access mini computers in the field. Therefore, this device will not only improve communications with command and control and among soldiers, but will also serve as an interface for data garnered from numerous sensors on the battlefield and satellites in the sky.

Militaries face a number of obstacles—budgets, fragmentation, and legacy technologies—that inhibit their use of modern technologies. Nonetheless, these organizations have made great strides in incorporating mobility within the past few years alone. The idea of equipping individual soldiers with consumer-grade mobile devices in the field for communications and situational awareness would have seemed ludicrous to many only a few years ago; yet Nett Warrior now embodies these ideas. VDC expects “lowest price technologically acceptable” acquisitions to increase the competitiveness of commercial vendors and even consumer-grade products in some instances. Only time will tell whether these devices are suitable for military use-cases as insights into failure rates in mission-critical environments are currently unavailable. While policies and requirements for mobile devices will undoubtedly change to reflect evolving technologies and use-cases, the increasing role of mobile devices in this space is inevitable. Military leaders view information as a transformative tool on and off the battlefield, and mobility is a crucial component for transmitting and accessing this resource.

Written by Matthew Hopkins and David Krebs.  For more information, be sure to review our forthcoming full military/defense report, set to be released next month (January), or contact us at [email protected].  The author can be contacted directly at [email protected].

The Postal-Courier Industry’s Looming Technological Challenge

The postal-courier industry, in the midst of market changes, will need to grapple with a significant technological challenge looming on the horizon. The delivery of goods is an expensive proposition that requires significant capital investments and a large supply of labor. Technology, in the form of handheld devices and delivery software, works to create an efficient process that enables companies to minimize costs and maximize revenues. The handhelds used by delivery personnel include a number of important capabilities—bar code scanning, messaging, GPS—that help facilitate workflows. From enabling track and trace to obtaining proof of delivery, the current use-cases for these devices are plentiful. As the expectations of consumers grow and their desire for greater personalization increases; postal-courier organizations will need to heavily rely on these devices to transfer real-time data between all parties involved in a transaction. Moreover, postal-courier organizations attempting to expand their service offerings to offset declining mail volumes and differentiate themselves from the competition will employ handheld devices and new applications to complete additional business processes. To this end, upgrading to a new, more modern operating system helps organizations expand into auxiliary, customer-facing services.

Today’s Operating System

While several postal-courier organizations have chosen smartphones as their delivery device, the vast majority have opted for ruggedized enterprise mobile computers. Over 80% of these devices run on legacy Windows Embedded CE and Windows Mobile 6.x platforms. These legacy systems are particularly well-suited for enterprise devices and applications due to their customizable nature and strong ecosystems of solution providers developing applications. Moreover, comprehensive lifecycle support from Microsoft and OEM partners provides further value-add for these platforms. However, Microsoft ended meaningful support for Windows Mobile 6.x in January 2015, and support for Embedded CE will end shortly; with Microsoft only providing security patches for the platforms through 2020. As a result, over the course of the next few years, postal courier organizations will need to transition to a new operating system. 

 

In theory, the logical next step would be to transition to the most recent iteration of Windows without needing to implement any serious changes. However, the situation is far more complicated than that; leaving many organizations debating their next steps.

The Path Forward

With the deadline of 2020 fast approaching, companies must begin evaluating their options regarding hardware, operating system, and software. In choosing an OS for next generation enterprise handheld devices, the decision comes down largely to the consumer heavyweight, Android, or the enterprise incumbent, Microsoft. However, with Microsoft having failed to deliver a desirable operating since the release of Windows Embedded Handheld 6.5 in 2011; some in the industry have moved to the Android operating system with its modern features and capabilities.

Android does not represent a perfect solution. Designed for the consumer space, the operating system lacks many of the security and management features of Windows as well as the substantial base of enterprise developers and OEMs supporting it. Nonetheless, Android’s enterprise user-base has grown steadily over the past few years, coinciding with improvements in the OS’s enterprise functionality. All leading rugged OEMs now offer an Android option, and several view this operating system as the way forward for the industry. Moreover, many ISVs that previously supported legacy Windows systems have shifted their R&D focus to Android (and iOS). This growing portfolio of Android devices and enterprise applications serves as justification for many to switch to this OS in light of Microsoft offering no suitable alternative.

Microsoft’s hopes to regain its market share, or at the very least stop the flow of users away from Windows, lie with its new OS for enterprise handheld devices—Windows 10 IoT Core. Postal-courier organizations, specifically those in the United States, have a pent up demand for a Windows solution, albeit having been burned by Microsoft in the past. Failing to deliver a Windows 7 solution and releasing an unsuitable solution in Windows 8; confidence among those in the space is waning. Windows 10, with its cross-device functionality and enterprise features could meet this demand. However, the release continues to be delayed, incentivizing those in need of a more immediate upgrade to switch to Android. Continued delays, or the release of an incomplete product, would further spur Android adoption, essentially sealing Microsoft’s fate in the rugged enterprise space.

What about the Apps?

Devices and operating systems play an important role in the completion of business processes, but applications/software are the last piece of the puzzle. Most organizations either develop their applications internally or outsource the process, but either way, the finished applications provide the key to performing tasks in the field. Unfortunately, postal-courier organizations planning an OS transition will also need an application-transition plan. For regardless of OS choice, organizations will need to recode old applications or develop new ones.

Windows 8 and 10 are not backwards compatible with legacy Windows systems, and a move to Android or iOS will similarly require recoding. This process, in most cases, will be expensive and cumbersome. If the company has the technological resources, they may complete the project in-house; however, most organizations will likely need to outsource at least some of the project. There are a number of tools on the market, such as Xamarin or iFactr, which enable cross platform development, and essentially provide organizations with a bridge to their next OS. Microsoft is also providing hooks from Visual Studio (VS) to the Xamarin platform making it easier to leverage existing .NET and C# skillsets to support development on Android or iOS. Moreover, we expect many in the industry to use this period as an opportunity to modernize applications that have been in service for decades.

The Bottom Line

Handheld devices play an instrumental role in the postal courier market now and moving forward. The next few years mark a period of mass transition of the likes never seen in the postal courier industry, and the lack of leadership by Microsoft creates an environment of uncertainty. However, this period also marks a moment of opportunity for organizations to modernize their systems and applications. The path taken today will largely dictate the quality of enterprise mobility capabilities tomorrow.

Written by Matthew Hopkins and David Krebs.  For more information, be sure to review our forthcoming full postal-courier report, set to be released this month (November), or contact us at [email protected].  The author can be contacted directly at [email protected].

Acquiring Direct Store Delivery (DSD) Optimization

Within the past week, the NASDAQ and NYSE witnessed the announcement of two major acquisitions:  Walgreens intends to buy Rite Aid for $17.2 billion and Snyder’s-Lance plans to buy Diamond Foods for $1.9 billion.  Even though Walgreens and Snyder’s-Lance reside in different industry sectors, they both heavily rely on direct store delivery; Walgreens to keep their pharmacies well stocked, and Snyder’s-Lance to stock their retail partners. 

Direct store delivery (DSD) is a system of selling and distributing a wide array of products in which the supplier delivers goods directly to the retail store, thus bypassing traditional distribution centers and warehouses.  Workflow integration within the DSD processes is often extremely complex and typically involves products which have high consumer demand or shorter shelf-lives.  Product lines which are regularly supported via DSD plans include baked goods, beverages, dairy products, ice cream, and other snack foods.  Other industries that frequently use DSD processes include wholesale distribution, gas, and pharmaceuticals.

In recent years, a primary hurdle for the DSD community has been the increased demand placed on mobile devices coupled with the constant need to optimize the numerous moving parts involved in the DSD process.  In a market space where spoiled, rotten, or out-of-stock goods directly impacts profits, employing mobile devices which are efficient and adaptable to the complex technological requirements of DSD applications is critical.  As such, those engaged with DSD must constantly assess their mobility solutions in order to keep their delivery operations running at peak levels.  A 2015 survey, conducted by VDC Research, found that three of the top five investment drivers are directly related to with the ideas of efficiency and adaptability.  These drivers include reducing order times, reducing out-of-stocks, and providing faster decision-making capabilities. 

Likelihood of Migrating from Batch to Real-Time DSD Processing

The vast majority of the DSD market is only now catching up to the significant advances seen in mobile and wireless technology.  Wireless coverage, performance, functionality, and cost of mobile devices are all factors which have drastically changed with little adoption into DSD systems  Through advances in mobile technology, DSD suppliers can now communicate with their drivers and with retail partners regarding inventory, payment, and customer support services in real-time.  Compared with aging batch-processing methods, WAN (cellular networks) connections or wireless DEX (Digital Exchange) support can significantly optimize every phase of the DSD structure.  The modernization of DEX from a hardwired solution, which required DSD drivers to carry a fragile and unreliable DEX cable, to a wireless Bluetooth solution greatly improves transmission reliability and reduces errors during communication.   A 2015 VDC Research survey revealed that DSD suppliers beginning to realize the opportunities presented by Bluetooth-based DEX and WAN.  70% of respondents indicated they are likely to migrate from batch processing to a real-time processing format within the next 2 years.  With increased migration to real-time solutions seemingly imminent, VDC expects the next generation of DSD solutions to address performance gaps and better support CPG operations.

Even though Walgreens and Snyder’s-Lance populate opposite sides of the DSD chain, the effects of emergent, real-time mobile processing features will be apparent for both companies.  They can expect to see more efficient customer support and faster response times to requests/inquiries.  More specifically, Walgreens can leverage their expanded reach to better optimize existing DSD delivery strategies by modifying routes to better coincide with Rite Aid and Walgreens locations.  Additionally, Snyder’s-Lance will be better positioned to react to real-time inventory information and will be able to consolidate Snyder’s products along with new Diamond products into the same DSD trucks and routes.  Clearly, if Walgreens/Rite Aid and Snyder’s-Lance/Diamond take advantage of new mobile technologies described above, they should see more efficient services and reduction in overall DSD costs.

Written by Cameron Roche, Analyst.  For more information, be sure to review our forthcoming full DSD report, set to be released in December, or contact us at [email protected].  The author can be contacted directly at [email protected].  

Hip to be Enterprise: New Enterprise Focused Tablets Stealing the Show

With the broader tablet market in the midst of an identity crisis one segment receiving increased attention are enterprise end users. VDC’s recently published 2015 Enterprise and Government Tablet analysis confirms this opportunity, forecasting annual growth of enterprise tablets – which represent approximately 15% of the overall tablet market – at 12.1% annually through 2019. A flurry of new products targeting the enterprise user from mega-brands Apple and Microsoft and specialty rugged mobile vendors Zebra and Xplore are directing the spotlight on this segment.

In comparison to other mobile form factors, tablets are an increasingly popular selection for enterprise line of business (LoB) applications. According to recent research conducted among enterprise mobility decision-makers, tablets are selected 33% of the time among devices issued to employees by enterprises in support of LoB applications. As the number of mobile deployments in LoB workflows continues to grow, consumer mobile devices are setting the benchmark for what any mobile device should look and feel like, resulting in the emergence of a new breed of enterprise tablets. Beyond enterprise-focused rugged OEMs, consumer-grade vendors are also turning their attention to the enterprise market through both their consumer portfolios and the introduction of more durable, enterprise-minded devices.

Enterprise Issued Mobile Devices Used to Support LoB Workflows by Form Factor

  

New Rugged Tablets from Zebra Technologies and Xplore Technologies

Zebra Technologies held its much anticipated Tablet Plus launch announcement on September 15 during which it unveiled the details of its new ET 50 and ET 55 tablet computers. As Zebra’s first new tablets to be released since the launch of the ET1 in 2011, notable features included support for both Windows 8.1 and Android Lollipop 5.1 in addition to Wi-Fi and/or LTE connectivity. Designed with a consumer feel and equipped for the enterprise, the tablets look to penetrate a still unsaturated enterprise tablet market. With a rugged design, comprehensive accessories to meet industry demands and unique scanning capabilities the ET 50 and ET 55 look to address a number of business use-cases, most notably those in the direct store delivery (DSD), field service, and retail verticals. However, a challenge for Zebra in our estimation will be aligning their tablets with the most appropriate use cases and target industries. Although tablets are being widely adopted in markets Zebra typically serves, these are mostly lower priced consumer devices. Demand for rugged tablets with the specifications and price points featured by Zebra’s new products is mostly concentrated in public safety, utilities, telecommunications and manufacturing environments, segments outside of Zebra’s traditional “sweetspot”. Another challenge, not uncommon in the rugged mobile market, will be the price points of the ET 50 and ET 55 which are $1,850 to $3,000, depending on the configuration. Although the benefits of rugged mobile devices are calculated by their lower failure rates, higher reliability and ultimately lower cost of ownership, even these target prices are high when compared to competitive rugged tablets.

Not to be outdone, Xplore Technologies unveiled the XSLATE B10, a fully rugged 10.1” tablet running Windows 8.1 (Windows 10 upgradeable), also on September 15th. The device is a fully featured tablet with multiple I/O and configuration options targeting field worker applications in transportation, manufacturing and telecommunications segments.  Xplore has undergone some significant changes in 2015, none more impactful than its acquisition of Motion Computing’s assets in April. According to VDC’s most recent rugged mobile research, boosted by the Motion acquisition and strong performance of its existing business, Xplore was the leading rugged tablet supplier in Q2 2015. Now with the target on their back Xplore will need to provide staying power and consistency in performance – especially surrounding support services for its increasingly global customer base – in order to build on its recent successes. 

   

Not the only new tablets in town

The Zebra and Xplore announcements comes on the heels of Apple’s release of the iPad Pro on September 9. The iPad Pro makes a stronger enterprise use-case argument as compared to Apple’s past consumer-focused tablets. Features including a large 12.9” display, the new A9X chip for increased speed and responsiveness and new iOS capabilities such as split screen viewing. In addition, accessories such as the new Apple Pencil and Smart Keyboard enable the device to more adequately serve end-users in corporate environments. Borrowing liberally from Microsoft’s playbook (which will be introducing the Surface Pro 4 in October), this device is Apple’s first foray into the rapidly growing 2-in-1 market. However, at the end of the day the iPad Pro is an iPad running iOS at a price point that makes it competitive with Apple’s MacBook Pro. While iOS9 does introduce some interesting features that make the platform more friendly to corporate users – for example, multi-tasking and app management including app-specific VPN management – it cannot be considered an enterprise alternative to Microsoft’s Surface Pro or other 2-in1s powered by big OS/x86 architectures.  

The enterprise limitations of the iPad Pro when compared with PCs is clear including the lack of file management capabilities and scripting technologies designed for PCs, compatibility with most productivity applications, lack of AD support and limited I/O options to name a few. At the end of the day this is just another, somewhat larger, iPad, albeit with a high end active stylus (pencil) at a higher price point.  While one could argue a future where iOS or other lightweight OSes become the enterprise OS of choice and laptops are promoted to the same architecture and framework as the rest of the mobile eco-system, that is a generational change and not one just around the corner. That said, Apple is not standing still and is clearly serious about the enterprise opportunity. Initiatives with IBM and Cisco are breaking enemy barriers and compelling use cases for iOS devices (especially tablets) are being created, often transforming existing workflows.  However, even with all of these enhancements, the iPad Pro is not a general purpose PC and cannot be considered a direct competitor to other two in one products like the Microsoft Surface Pro. Therefore we do expect Apple to encounter a bit of a positioning dilemma with the iPad Pro relative to existing iPads, 2-in1s and its own MacBooks.

What Makes a Tablet Enterprise Friendly?

According to a recent survey fielded by VDC Research among over 650 enterprise mobility decision makers, when evaluating mobile devices for line of business applications, battery life ranked predictably high on the list as did price and overall quality and reliability. With many of these tablets used in the field, wireless options—including embedded cellular capabilities—are critical (one key pain point for many enterprise and government tablet deployments has been sub-optimal GPS quality). In addition, overall ruggedness of the device—in terms of drop and water/dust protection—are key decision criteria for many applications. Surprisingly, however, security features such as integrated biometric capabilities did not crack the top five in overall importance.

However, tablets are often best characterized as a marriage of compromises. Therefore, for many enterprise line of business applications, of equal importance is the accessory and peripheral eco-systems developed by tablet OEMs and their partners. According to our research, protective cases lead the list of accessory requirements, in addition to solutions like payment and scanning sleds, multi-bay charging docks and vehicle mounts. In addition, highly application specific functionality, such as Zebra’s wireless DEX Bluetooth FOB (which addresses the huge headache and point of failure of cabled DEX solutions in the Direct Store Delivery market) often represent the keys to a well designed mobile solution. 

Mobile Device Requirements for Devices Supporting LoB Applications

The tablet form factor has unique appeal for mobile workers supporting a variety of enterprise and government workflows and applications. While the overall tablet is going through its most recent identity crisis, opportunities for business and public sector applications remain strong and robust annual unit growth (for both rugged and non-rugged tablets) is projected by VDC through 2019. The tablet form factor addresses mobile workers’ need for a portable mobile device while providing sufficient display real estate to support meaningful applications. From forms-based inspection and data collection applications to using the tablet as a customer engagement tool in high value retail environments, the opportunities for these devices are substantial.

To view our recently released report on the tablet market please click here.

Written by Matthew Hopkins and David Krebs (EVP)

Can Microsoft Take Off With First Notable Surface Deployment?

Following its Surface 2 and Surface Pro 2 that took place last week, Microsoft officially announced its first large enterprise deployments through Delta Air Lines today. As Delta comes aboard the Windows RT bandwagon through the purchase of 11,000 Surface 2 tablets, the company not only aims to lower its fuel and associated costs, but is also looking to enhance efficiency among its workforce. As per the announcement, Microsoft Surface 2 tablets, will initially be used as electronic flight bags (by leveraging Jeppesen’s FliteDeck Pro app that is targeted for the Windows platform) and will enable the airline to eliminate paper-based flight kits that happen to be heavy in nature. The rollout will start with pilots that are flying Boeing 757 and 767 fleets and will make its way into all Delta cockpits by the end of 2014.

This deployment is also significant since it is a natural follow-up to Delta’s commitment to the Windows platform. Back in August 2013, the company announced a 19,000 Nokia Lumia 820 Windows Phone deployment for its flight attendants. These devices are primarily utilized for Dynamics for Retail technology on onboard customer purchases. In-flight purchases that are enabled by these devices not only include food and beverages but also include paying for seat upgrades and receiving   e-mailed receipts as a result of these transactions. The company also announced that a near-term update would include processing digital coupons on customers’ mobile devices. This deployment (including the custom mobile POS solution) was developed by Avanade, Microsoft and AT&T and will operate over both Wi-Fi as well as AT&T’s 4G LTE Network. Delta’s and other airlines’ efforts for enterprise mobility solution deployments also comes in timely since FAA is looking to expedite the approval of electronic devices during takeoffs and landings soon.

While we have all heard of pretty large deployments with iOS and Android-based solutions, (or about smaller deployments based on Windows Phone 8 or Microsoft Surface), this is the first sizeable deployment for Microsoft’s mobile business. Given the fact that the second generation Surface devices were just introduced last week, such large commitments from a large corporation like Delta could get the company start things off on the right foot. Despite the confusion that Surface RT created with its inability to run Windows 7 software last year when it first came out, Surface 2 which is also running on ARM processor can be Microsoft’s special-purpose device targeted for the enterprises that are looking for lower-priced solutions and could use the long battery life. This second-generation Surface RT solution that has a lower price tag could also be a somewhat more expensive alternative to lower-end Android-based solutions for organizations that do not want to let go of the Windows platform.

Established Vendors Demonstrate They Can Innovate In Digital Payments

In July 2013, Visa provided multiple updates on the success that the company has so far received with its V.me digital wallet service. As you may remember, the company had an initial launch in United States in 2012, was already forming partnerships with US banks and went global by adding Canada, UK, Spain and France soon after. As of last week, the company has partnerships with over 90 financial institutions in the US, including Bank of America and PNC Bank, almost doubling the number of organizations supporting the service in an 8-9 months timeframe. Likewise, the company has confirmed that the number of merchants that are on board with V.me service has crossed 250 with over 25% of them signing up in Q2 2013. This can certainly be considered a success in an ecosystem with more established solution providers such as PayPal, Square and Google.  

This service enables consumers to make purchases (both online and in-store) using their smartphones, tablets or PCs without entering their account number, billing/ shipping information, etc. Instead, each shopper has a unique username and password to use in their transactions, which helps in addressing shopper-fatigue in filling out long forms. The company is also supporting accounts from its long-time competitors MasterCard, Discover and American Express. As part of its global expansion, the company has announced that it will launch its V.me solution in Australia before the holiday season to take advantage of the Australians who are receptive to online shopping. The company is aiming to benefit from its long history in the payments space, and its strong security features which include encryption and authentication.

Another important update came from Isis with its announcement for a nationwide roll out of Isis Mobile Wallet as a result of the early successes the company received in Austin, Texas and Salt Lake City, Utah. As you might recall, Isis is a joint venture that was created by carriers AT&T, T-Mobile and Verizon Wireless. Isis Mobile Wallet is using NFC technology to accept payments. Likewise, consumers can also redeem coupons and display loyalty cards just by tapping their smartphones. The number of mobile devices (spread across these three carriers) that currently support Isis is thirty five with more to follow in the upcoming months and years. The company also shared some interesting stats from its pilot that launched in Q4 2012 claiming that contactless payments are accepted in over 4,000 locations in these two cities (combined), more than tripling in the past 9-10 months. Hence, according to Isis, more than 80% of transactions took place at retail outlets such as gas stations, convenience stores, quick-service restaurants, grocery stores and such. Thus, with digital payments increasingly becoming a part of our lives, it will be interesting to see how the market evolves.

Mobile Payments Market Getting More Crowded In Americas Market

Last week, Sweden’s iZettle announced that it is expanding out of Europe and bringing its mobile
payments system to Mexico. The news did not come as a total shock, given the announcement from earlier this month that announced the partnership between iZettle and the Spanish bank Banco Santander with Santander’s €5M ($6.6M USD)  investment in this Swedish start up. Along with this partnership, iZettle had gained access to Santander’s customers in the United Kingdom. Even though the investment looked relatively small in comparison to the funding that Square has received – the most recent one being $200M in Q3 2012 – it is very significant since Mexico marks iZettle’s first
non-European market and is also a market where Square is not participating in. With so many people knowing iZettle as Square’s “European cousin”, this bold move could very well be just a stepping stone to the Swedish company in their plan to further expand into Americas market.

Trying to conquer the Latin America market does come with a price though. iZettle had to develop a new device which is kind of like an all-in-one type of solution for all platforms to enable the company to process payment both through chip-based and mag-stripe based solutions. The cost of tweaking its solution was reflected through an increase in its transaction fees from its flat 2.75% fee in Europe to 3.75% for chip-based transactions and 4.75% for mag-stripe based transactions in Mexico. Likewise, the reader is also being sold for about $40 to the merchants except to the Banco Santander customers who will be getting a discount. The opportunity, on the other hand, is also massive given the majority of the business in Mexico being small and medium-sized enterprises that could likely prefer buying such readers over investing in more traditional payment solutions. According to iZettle’s CEO, 95% of the cards in Mexico are chip-enabled. Just like the fact that this is seen as a key reason for Square not yet moving to European market, this could very well be an important factor that is keeping the company away from expanding into Mexican market. iZettle already had presence in multiple country markets in Europe – including UK, Spain, Sweden, Norway, Denmark, Finland and Germany – while Square’s operations are limited to US, Canada and Japan following a recent expansion.

While Square continues to take its time before moving into the Latin America market, the competitive landscape is definitely getting more crowded in this sub-region. Some strong players include Zoop in Brazil and Mobiliz in Mexico. Though it is not certain which country markets these companies will expand into next, there is also start ups like Clip, which raised $1.5M funding with its Square-like solution that will be primarily focused on the needs and requirements of the Spanish-speaking countries like Mexico. Albeit it is still too early to tell which companies will be “winning” at the end, forming strategic partnerships with “local” leaders does seem to make entering new country markets a little less challenging for these start ups.

Electronic Flight Bag Programs Are Ready for Take Off

Earlier today, American Airlines announced that the company has completed its Electronic Flight Bag (EFB) implementation, making it the first major commercial airline to deploy EFB throughout its fleet. Along with this deployment, the company is not only discontinuing paper revisions to terminal charts, but will also be replacing over 35 lbs of paper-based manuals and various materials that the pilots have been carrying in each flight. This will enable the company to not only be greener with eliminating 24 million pages of paper but will also help its bottomline by saving $1.2 million of annual fuel costs.

After getting FAA’s approval to use Apple’s iPad in all of the airline’s current fleet types and during all phases of flights, the company deployed over 8,000 iPads. Mobile software that the devices will be running is provided by Jeppesen, a unit of Boeing Digital Aviation. The FAA-approved Mobile Terminal Chart application by Jeppesen is allowed to be used from gate-to-gate throughout all phases of flights. Jeppesen has been serving the aviation market with its mobile EFB solutions - Mobile FliteDeck VFR, Mobile FliteDeck and FliteDeck Pro and has been partnering with organizations like AirWatch for an optional MDM capability in order to provide a complete solution to its customers. These solutions not only allow pilots to access and navigate terminal charts but also help them save time in getting updates. Other commercial airlines such as Alaska Airlines, United Airlines and Delta Air Lines have also deployed tablets to their fleets, along with large business jet fleet operators like NetJets, Flexjet and Flight Options.

The approval to use EFBs throughout all phases of the flight will likely attract more commercial airlines to fully deploy a solution. Especially with airlines like JetBlue that already have in-flight WiFi deployed, enabling them to send real time updates to pilots around weather and document updates,
replacing paper manuals with EFB programs would allow the pilots to be much more efficient while performing their duties in a secured manner.