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.

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.

Yahoo's Future in Mobile

"Our top priority is a focused, coherent mobile strategy," declared, Marissa Mayer on October 22, 2012 during her first investor call as CEO of Yahoo!, which included the comment, "we'll have to be a predominantly mobile company". Given Yahoo's diminished market share for search engine, what opportunity exists for Yahoo in a mobile context?

Our expectation is that Yahoo will focus their efforts around service and software plays. And yet, dominant vendors such as Google, Apple, Microsoft, and even RIM have a strong lead in the market with powerful operating systems that can stake a claim to major device lines, and therefore own large segments of the application developer channel; as well as viable channel partnerships for content. These vendors have all advanced commercially successful services for mobile platforms, covering the gamut from maps to entertainment to search. In addition, these vendors are making a drive, from a sales perspective, to increase penetration in non-dominant areas such as Google and Apple into the enterprise, and Microsoft and RIM into the personal space. These players are fiercely fighting each other through content partnerships, patent actions, innovation, and strategic acquisitions, thereby raising the barriers to enter the market. Where is there room left for Yahoo as a major mobile player?

For now, there isn't. What Yahoo should focus on is doubling down on its core identity, and strengthening its brand identity in the mobile space. While Yahoo's brand and user base have sunk in recent years, the company remains a valuable source of news, entertainment, and information for ordinary people of whom, luckily, there are some 7 billion and counting. Several hundred million people still look to Yahoo every day for curated news, videos and media, and information on local businesses. The companies that have traditionally owned that space - local newspapers - are evaporating by the day. That leaves a significant opportunity for Yahoo to take over the role that newspapers are leaving behind, and become the de facto first-port-of-call for ordinary people for personal, rather than professional, information. Investors will always look to the Wall Street Journal, scientists to Science, entrepreneurs to Techcrunch; and there are plenty of strong outlets people go to for information related to their jobs. But information about local politics? Local businesses? Lighter news? Self-help? Local Craigslist? Yahoo can and should focus on becoming the global/local leader in every segment of information below the professional. Global because its infrastructure allows it to reach every household; local because its intelligence allows it to tailor information to the needs of each community; and leader because its scale and reach into the advertising world allows it to monetize this information in a way that local newspapers no longer can do. 

Is being the world's source for local and lighter information a glamorous role for Yahoo to play? No, but it's more glamorous than extinction, which is where Yahoo is heading if its mobile strategy only replicates the footprint of the leaders in the mobile domain. Yahoo needs to ensure it focuses on its capabilities as a content provider with mobile technology as the tool not the endgame. 

With the acquisition of Stamped, Yahoo is investing in building a team to execute their mobile strategy. The sooner Yahoo gets serious about acquisitions that bolster its current - and eroding - niche, the sooner it will find itself able to speak its own name in earnest. 

When and Where for HTML5?

Even before Facebook declared, "The biggest mistake we made as a company was betting too much on HTML5 as opposed to native.", there had been much debate about the viability of developing mobile applications on HTML5. When an e-mail came to a colleague with the message:  Don't Miss Out:  Try our new NYTimes Web App for iPad free; my thoughts were, hey, here's a web app being boldly promoted by a content leader formerly known for a native app.

VDC has never seen HTML5 as a panacea for developing applications that can deploy on any device. For the enterprise, the challenge is understanding the needs of the user to determine if a native or web application (see our full report, Mobile Development Platforms http://bit.ly/i3C8x1) is the most suitable path to get the job done. What essential requirements should be evaluated to determine the path for mobile application development?

Nearly as important as cost considerations, are the technical and functional requirements of the application, which we consider the most significant drivers for selecting a native, web app, or a hybrid development approach. The enterprise needs to align the end-user requirements with the business need to drive the decision-making process.

Whether your mobile strategy is looking to increase revenues, expand markets, compete directly, play catch-up in the market; or some other goal; be sure to balance the needs of the user with the priority of the mobile opportunity for the end-user. One of the most frequent comments about HTML is that it's not robust enough to create "stickiness" with customers. (Limited capabilities in supporting advanced device features available by a native OS such as integrating data from the app into the phone, push notifications, update calendars, etc.) For a content provider, like the NYTimes, is it essential to provide these features, or is it enough to start with a mostly digital version of their paper with some other features? Whether it is or not, it meets a user requirement for a web app.

To determine technical and functional requirements, again, the user profile should lead the evaluation, but within mobile parameters. Given the nature of mobile (a small screen, gaps in connectivity), the enterprise does not necessarily need to replicate a desktop application on mobile. If the browser (as a "container") cannot connect with core device-side features, what will be the impact in a mobile environment for the user? Is a camera, or microphone paramount to the user experience?

Other companies such as LinkedIn and Walmart have taken a hybrid approach, which allows access to some hardware device features, and does not limit application development to only one platform. As a content providers, one guiding parameter for mobile strategy is reaching all users.

Is The New York Times using this app to evaluate HTML5? Probably. Does it accelerate customer penetration on mobile devices? Yes. Does it give them the user experience to launch other web apps in the future? Definitely, and the "middleman" (and their revenue share) are taken out of the equation.

What parameters are you seeing for native versus web approach? What features if made available on HTML could displace a native approach?

Android Has a Target on Its Back

While final decisions on the Apple vs. Samsung Lawsuit are not expected until a ruling scheduled for December 6, there are some clear implications for both the software and hardware market.

Despite the recent verdict from the lawsuit that Samsung's hardware infringed on Apple's intellectual property, VDC Research does not believe that Samsung is the primary target of Apple. It's Google. A once happy relationship has bee on the rocks and now is broken. Apple's zeal to squash Android is driven by Apple's increasingly direct competitive positioning with Google. If Apple went after Samsung's hardware devices to get to the Android operating system, what are the implications for the Android licensee market?

If Android software is essentially the Google operating platform, although not as tightly controlled as the Apple iOS platform, as a result of the lawsuit verdict, Apple has raised the competitive stakes for the Android ecosystem of hand-held devices and tablets. For one of the largest e-commerce retailers, Amazon, the stakes could be even higher. Right now, Amazon has built its Kindle e-reader on the Android platform, albeit a platform that is significantly modified. Given the legal verdict, licensees of the Android OS that are not closely aligned with the core Android OS are exposing themselves to scrutiny from Apple. Apple has sent a strong message that it will pursue companies they believe violate their patented technologies. Hence, the parameters for development and design for all licensees of Android need to clearly differentiate themselves from the existing market and not rely on "me-too" devices, or Apple will certainly strike. For Amazon, it's a clear directive that any path off the core Android OS needs to ensure it doesn't expose them to patent infringement.

Given Android's target appeal, the bird's eye view of Microsoft's competitive position may have improved as the Windows 8 platform uses a more differentiated UI, Metro, and Microsoft's licensing of patents from Apple may keep it out of Apple's crosshairs. While Microsoft may gain some incremental market share, for Microsoft to really capitalize on the situation will be dependent on whether companies using Android will feel the need to diversify.

The new reality for the Android ecosystem requires design and development that stays far enough away from Apple. The "me-too" market for product development has been curtailed, which means that competitors will need true innovation to be competitive and that is a win for customers. The hurdle is certainly not too high for companies like Amazon as a competitive company should be able to bring out a product that doesn't infringe on Apple's IP. It just means Tom sitting in his garage might not be able to do it. 

Of course, in the short-term Apple has made it more difficult for Android to get to market by limiting one of the key channels for Android, the device market. Anybody that uses Android has a target on their back. Apple is trying to kill Google. 

Requirements are Changing in Field Mobility

VDC Research recently published Strategic Insights 2012: Field Mobility Solutions Report as part of its Enterprise Mobility Vertical & Applications Markets Research Service. Some key findings from this research include:

Hardware requirements are changing in field mobility organizations - Both field service and field sales organizations are looking to deploy tablets as a result of the real estate that they can get from the large display size. While the notebooks used to dominate these markets (in terms of rugged large from factor devices), the portability element is making tablets a much viable choice. The trend with equipping mobile workers with multiple devices continue to receive traction. The demand for having a mobile device at the point of interaction with the customer in addition to an in-vehicle solution is on the rise.

Rugged value proposition is being re-evaluated - With the increaseing availability of user friendly devices that have touchscreen and broad app ecosystems, the value proposition of ruggedized solutions need to be redefined. While rugged form factor will continue to be used for some mission-critical workflows, BYOD trend has made its way into this market. End user requirements are changing the applications and mobile platforms are becoming more important than ever. Many rugged mobile device vendors as well as field mobility organizations are adopting multiple OS strategies where they are introducing or deploying Android-based devices.

Customer engagement is becoming a key differentiator - As they evaluate/ deploy enterprise mobility solutions, field mobility organizations are looking to gain improvements in customer service in addition to improvements in workforce productivity. Cross and up selling capabilities and improvements in first-time fix rates are critical for field sales and field service organizations respectively. Thus, client facing applications are receiving traction as these organizations are looking to gain higher customer retention rates.

Growth in Rugged Tablet Market Trying to Make Up for the Loss in Others

VDC Research recently published its Q2 2012 Rugged Mobile Quarterly Shipments Report, supplementing its Enterprise & Government Mobility Hardware Research Service. Some key findings from this report include:

• The market for rugged large form factors had double-digit growth in Q2 2012 (over Q2 2011). The growth in the rugged tablet market was the primary contributor as the market for rugged notebooks and forklift mounted computers both contracted.
• Rugged notebook market experienced the greatest drop among large form factors. Vendors are positioning themselves to better serve the commercial segments as a result of the cuts in government spending. Shifting focus to commercial markets is not as easy as it may seem, given the historic ties the majority of the rugged notebook vendors have with the public sector.
• Rugged tablet market is taking a boost from the overall demand for the media tablets. The market grew by 30.1% over the year-ago-quarter, experiencing double-digit growth across all regions. Rugged forklift mounted computer market contracted by 9.1% (over Q2 2011) as the only growth came from the Asia-Pacific region while the Americas region shrank by 14.1%.
• Rugged handheld market was flat in Q2 2012, achieving a YoY growth of 1.8%. The economic uncertainty in the EMEA region was a key contributor to this outcome, as well as the fierce competition that this market is facing from lower cost solutions such as the smartphones.

Multiple Paths Have Emerged to Secure Mobile Apps

We all love our mobile devices. They (many of us now have two — usually a smartphone and tablet — some of us [like my wife] have a COPE [corporate owned personally enabled] smartphone, and a personal smartphone and tablet) are inevitably never more than a few inches aways from us — this of course means that they are with us both at home and at work.

The Way in Which we Work is Changing

While today's workforce is changing, and our employers are increasingly providing us with powerful tools that bring reliable access to corporate data and the ability to collaborate with co-workers remotely — a large portion of our workforce (the clear majority) still commutes on trains and drives to their offices. For many of us (I know that many of my firends who work in large corporations don't see this changing any time soon), this may be the case for the foreseeable future.

Sure there are forward-thinking companies like IBM, SAP, and Cisco that "eat their own dogfood", and have embraced technology, offering their employees tools to enable them to work remotely. However, it is important to point out that the aforementioned tools are largely aimed at remote application access via laptops. What has and will continue to change is the way in which we work ...

Yes, I'm Going to Talk About BYOD ...

Modern mobile platforms are the change agent — our personal devices that we bring into the workplace and carry with us everywhere we go have opened the door to productivity-enhancing scenarios that are often "customer-facing". Forward-looking companies recognize this opportunity, and will continue to increase their investments in enterprise-grade mobile applications (VDC estimates this to be a $6B market in 2012). While many businesses have started to offer COPE options and are likely to continue down the COPE path (i.e., offering employees a choice of mobile platforms)— others will put mobile policies in place that accomodate BYOD. These trends, along with a burgeoning apps ecosytem are driving both opportunities and challenges to CIOs and IT organizations that administer and manage these deployments.

Multiple Paths Have Emerged

Clearly enterprise mobility is an increasingly hot topic in the enterprise — moving forward, the single most important priority that will give companies the peace of mind to invest in the mobile enablement of their workforce, will be securing their mobile deployments. The real challenge that I see for companies moving down the mobility path is the competing approaches that have emerged — this has put a significant burden on companies who want to deploy mobile solutions, as it is causing them to have to evaluate multiple approaches and vendors. These emerging paths will increasingly be covered as part of our mobile software research here at VDC.

One method to securing mobile applications that has quickly gained traction is the "secure container" approach, where corporate data is protected (i.e., encryted and isolated). This can be evidenced not only by the funding that several startups in this space have obtained, but by the large cutomers that they are beginning to attract. While several vendors that have emerged with secure container solutions, the most visible today are: Bitzer Mobile, Good Technology, and Excitor — as would be expected, each has a different approach and value play.

Be sure to Register for an Important Webinar Discussing the Impact of BYOD on July 19th at 2PM EST

If you'd like to learn more about BYOD, and the competing paths to securing mobile applications, I welcome your participation in an important webinar I will be co-hosting with Bitzer Mobile (@bitzermobile) later this week — you can register for it by clicking here.

 

 

Mobile Payment Market Welcomes Swiff

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

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

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

Enterprise Mobile Workers: Tracking Tomorrow's Mobility Opportunities

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

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

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