VDC Research: Enterprise & Government Mobility Market Blog

Could the Apple Watch be a tipping point for enterprise wearables?

In the days before the official launch of the Apple watch on the 24^th and Apple counting nearly a million pre-orders since last Friday, much of the tech world is abuzz with talk about the newest smartwatch to hit the market and the impact it could have on wearables as a genre. Although wearable devices have been on the market for some time, they have failed to garner any notable traction in the consumer market. The question remains as to whether the pricier, designer Apple Watch can be the catalyst for widespread adoption the way its predecessors were for smartphones and tablets and pave the way for greater integration of wearables in the enterprise.

The slow climb towards enterprise acceptance

Despite the current focus on smartwatches, the wearable form factor represents a broad spectrum of devices, particularly in the enterprise, where less consumer-oriented devices like wrist- and hip-mounted computers and ring-mounted scanners are more the norm, as well as head-mounted displays like that of Vuzix and the much-maligned Google Glass. However, the majority of the deployments for these wearables have primarily been for relatively niche applications that have traditionally revolved around data collection-intensive environments like the warehouse, where the benefits of hands-free devices are more immediately tangible. However, with enterprise mobility reaching even the most conservative of companies, interest in wearables is spreading across industry verticals. Notable examples include the healthcare industry, as well as logistics and field services where the benefits of being hands-free are becoming increasingly apparent. While many of these developing use cases have been for head-mounted displays like Google Glass (particularly in logistics and warehousing for vision-based picking applications), it has made enterprises take a more creative approach to equipping their mobile workforce and the benefits to be gained. Data from VDC Research shows that a growing number of industries are evaluating wearables, although the lack of a clear ROI remains one of the primary barriers to adoption.

Finding the killer app

The primary challenge in bringing wearables like the smartwatch into the enterprise is that, unlike other mobile devices, the wearable is not typically a standalone product, but is tethered to another device – usually a smartphone. By acting as a complementary device, it brings up the question as to whether it is truly needed in line of business applications. However, the ISV and development community is bullish on the notion, as evidenced by the growing number of solutions that incorporate smartwatches: last month Good Technology became the first enterprise mobility management (EMM) vendor to support wearables with Good Work, while Salesforce launched Salesforce Wear in the summer of last year as a platform to encourage app development for the form factor. Many of the emerging use cases revolve around hands free notification and ID functionality through NFC and BLE, although EMM vendors like Good Technology see potential for data security through the use of the device in dual-factor authentication and access control. Nevertheless, many of the gains are viewed as incremental and complementary rather than revolutionary, as the introduction of the smartphone and tablet into the workplace has set the bar high.

 Awaiting the tipping point

With thought leaders across the board predicting the explosion of wearables and IoT both in consumer and enterprise markets, it is only a matter of time before wearables as a whole gain more widespread acceptance and, once again, all eyes are on Apple. If the company succeeds as it has in the past in capturing the imagination of the public and the developer community alike, this month’s launch will likely prove the much-anticipated and talked about tipping point for wearables. This, in turn, will bring forth new layers of complexity regarding BYOD and security policies to an already complex environment, especially as the vast majority of devices will be personally-owned for the foreseeable future. In the meantime, April’s launch will determine whether wearables can finally make the transition from consumer trend to enterprise-ready. 

(Research and contributions from Judy Zhang)

Large-scale Deployments Increase Growth Potential for BLE, iBeacon

Bluetooth Low Energy (BLE) technology is poised to revolutionize consumer in-store experience in 2014, further augmenting already existing mobile retail applications. VDC research from last year revealed that 23% of retail organizations had rolled out mobile applications to supplement their current in-store services, and that an additional 42% planned to deploy mobile applications in 2014. BLE technology, like that of Apple’s iBeacon, strives to address this gap with increased location and engagement services by allowing devices to communicate directly with one another.

A cheaper, more precise way to engage consumers

BLE represents a drastic improvement from existing solutions like Near Field Communication (NFC) and GPS-based geo-location. Bluetooth beacons eliminate the need for close proximity for interaction between devices by vastly increasing the data transfer range from the current distance of 8 inches to 150 feet, and at a much reduced cost. Additionally, BLE has a greater potential consumer reach, as all mobile devices come equipped with Bluetooth capabilities, instead of requiring a specific installation, as is the case for NFC. The greater range and improved precision also allows for retail stores to use micro-triangulation services in-store to improve both analytical capabilities and in-store promotions, creating endless opportunities for personalized marketing strategies on an individual level. Consumers who opt in will be able to view information such as reward points, daily deals, and history of purchases upon entering a given store. Such interactions have the potential to increase both consumer spend per visit and overall brand loyalty.  As of January 2014, a handful of companies have begun trial runs for BLE technology, with Macy’s, American Eagle Outfitters, and Safeway Supermarkets all running iBeacon in select stores across the US.

iBeacon goes mobile

Other companies are looking to take the new technology out of the store and onto the road. This week, smart driving assistant maker Automatic announced its device, which plugs directly into a car’s data port will now support iBeacon, representing one of the largest BLE beacon deployments to date. Automatic speculates the roll out will transform the traditional iBeacon retail framework to provide their users with similar automotive services such as pay for parking, gas, or automatic alerts as they drive. If successful, this could help pave the way for greater integration of BLE as a payment solution, boosting acceptance for other POS solutions, like that of PayPal, which was announced in September of last year, but has yet to gain widespread adoption.   

BLE is lucrative, but barriers remain

While many of the advantages that BLE offers revolve around its energy efficiency and potential reach, these strengths are tempered by existing barriers to adoption. Although the energy requirements for businesses deploying BLE are low thanks to its design (the technology can run on coin-cell batteries for months or even years), this is not the case for mobile device users, who frequently keep their Bluetooth capabilities switched off to conserve battery life. VDC estimates that only small fraction of device users keep theirs switched on. Another barrier is the limited access for Android devices and even Apple devices to a certain extent. BLE’s current reach within the Android ecosystem is severely limited (the technology requires Android 4+) and Apple’s reach is not as pervasive as believed: only iOS devices from the 4S generation have the same capabilities. However, with the imminent launch of Android-based Datzing as an Apple competitor that can function on older phones, Android’s present gap in this market could narrow significantly in the year to come. Barriers also remain on the enterprise side, as BLE in its current incarnation requires individual apps. Currently, there is no central iPhone app to interact with retail beacons using iBeacon. For businesses that already have mobile apps, this presents less of a limitation, as the functionality can be added, but for firms, a dedicated app will need to be designed to capture the benefits of the new technology.

Privacy remains a primary conern

One of the remaining hurdles that BLE technology will need to overcome is the most pressing of them all: that of privacy. Right now, beacon technology is based on company-specific applications that require opting in. However, the question remains whether, despite the current opt-in setup,  users will want businesses to know their every step and whether payment software can be trusted to charge the correct amount to a customer’s  credit card. More importantly, the issue remains as to whether BLE can succeed given the current environment in which revelations of security breaches like that of Target are becoming increasingly prevalent. Additionally, there are growing concerns surrounding data collection and overall privacy that many companies will need to address in order to allay consumer fears. VDC believes that the inherent effectiveness of the technology has tremendous capacity for consumer buy-in and will likely overcome most concerns surrounding privacy and security, but firms will nevertheless have to work to earn and keep consumer trust as BLE continues to gain traction. 

 

(By Kathryn Nassberg.Research and written contribution by Katelyn Moroney, Research Intern for Mobile and Wireless)

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.

A Square Service in a Round, Cash Market?

Mobile payment platform Square is now processing more than $15 billion in annual payments with roughly half of its 2 million US customers stemming from iPad users. In addition, Square recently released its new Square Stand cash register for its line of small business solutions. This momentum has fueled last week’s announcement that Square is set to enter the Japanese market – its first country outside of North America – through a partnership with Sumitomo Mitsui Card Corporation.

Unlike in the US, NFC and mobile payment solutions are not a new phenomenon in Japan. The service has been around for the last eight years and is perceived to have matured considerably under the leadership of competitors such as:

• NTT DOCOMO
• KDDI
• PayPal

Rather than offer “old fashioned” swiped payments, these companies have relied on Osaifu-Keitai, or a mobile wallet that leverages NFC chips embedded in mobile phones. In fact, the vast majority of mobile phones in Japan are preloaded with mobile wallet technology. On the surface, the mobile wallet appears pervasive, leaving little room for swipe technology offered by Square. However, research has indicated that while mobile wallet technology is widely distributed as a function of mobile phones, these applications are not widely used; there are mature players in the market but not widespread adoption.  Japan is still, in fact, a cash driven society.

With a little room in the market, the question arises as to how Square will choose to enter and compete with mobile POS powerhouse PayPal and pioneers like KDDI when NFC has yet to command interest in the Japanese market. The answer seems to be incentives.

For example, Square recently revealed a beta version of SquareCash in which money can be delivered via email directly to a recipient’s debit card. The company also introduced SquareWallet – its own take on NFC mobile payments. KDDI has leveraged strategic partners such Japan Airlines to offer NFC airline tickets and loyalty programs through Bic Corporation.  These companies are trying to make mobile payments attractive to the Japanese consumer that tends to value convenience above all. 

While mobile wallet vendors strive to grow their market penetration through various partnerships and incentive strategies, future evolution of the mobile payments market will be largely determined by consumer and retailer preferences. 

We see future growth limited – to a large extent – by consumer questions concerning the security of mobile payments and the price of transactions, in addition to their persistent penchant for hard cash. Further, retailers could prove just as important a market to win over for vendors looking to gain market share.  Value for retailers may stem from the capacity of these solutions to facilitate operational efficiencies, improved inventory management and an enhanced ability to leverage customer data. Retailers will look to be able to print receipts, refund capabilities, and the ability to track cash payments among a variety of other applications designed to increase retail efficiencies.

While swipe technology will most likely face an uphill battle in Japan due to the established NFC infrastructure, Square could find success if it plays its cards right - by embedding them in the phone and focusing its efforts on retailers as much as consumers.

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.

BIG Again! NRF's 2012 BIG Show Brims With Traffic

National Retail Federation Expo 2012 took place in NYC this week and highlighted the future of retail. The attendance from solution providers including hardware, software and services providers was highly significant as well as visitors. Following a strong 2011 performance complemented by the holiday sales, the general outlook for retail remains strong, while the pace is expected to be slower than 2011. Nevertheless, NRF is projecting retail industry growth of 3.4% in 2012 to $2.5 trillion.

Members from VDC's Mobile and Wireless Practice spent Monday at the show meeting with a variety of established and emerging vendors. Some of our early impressions include:

Apple exhibits at NRF!

While Apple does not do tradeshows, based on the bevy of iOS devices on display at the show it clearly does not have to. A perhaps not so outrageous prediction of ours for 2012 was Apple's (and specifically iOS's) continued expansion into the retail market. Much of what we saw at NRF certainly confirmed this expectation. From customized sleds that convert the iTouch or iPhone into a secure mobile payment platform to sophisticated business intelligence applications designed for iPads, Apple's presence was widely felt. Secure payment solution providers such as Ingenico and VeriFone introduced their solutions targeting the iOS platform which are capable of processing both credit and debit cards, making them usable globally. While the mobile vendors typically selling into the retail segment continue to debate the Windows vs. Android scenario, Apple/ iOS - with no major push of their own - is establishing itself as a strong retail mobile platform. This only confirms another trend we are tracking in that Chief Marketing Officers are usurping power from traditional IT decision makers when it comes to which mobile solutions to deploy for highly visible and customer facing retail applications.

Are tablets right for retail?

The uptake in tablets appears to be noteworthy given that small form factor devices have traditionally dominated retail. In addition to small form factor vendors like Motorola which has been among the leading vendors in retail with their rugged handheld solutions debuting their ET1 tablet, rugged large form factor vendors such as Panasonic and Motion Computing are also going after the highly promising retail market with their recently introduced rugged tablet solutions. While tablets clearly have a role to play in retail operations - especially for customer facing applications and for solutions such as interactive displays - retailers are still evaluating the true potential of these devices. A recent survey did not perceive store associates equipped with tablets as providing superior service in comparison to those equipped with other mobile computing and communications solutions. While we expect tablets to represent a strong platform for certain retail workers and workflows, 2012 may bring more pilots and evaluations rather than large scale rollouts.

Consumer WiFi, mobile payments and mobile scanning providing more immersive retail experience

Similar to themes we have been discussing throughout 2011, customer engagement is expected to play a huge role in this move. More and more store associates are being equipped with mobile devices in order to lookup customer and product information during their interaction with customers. Most retailers we spoke with also talked about public WiFi for their shoppers to drive a more interactive experience while evaluating next generation presence applications.

Likewise, mobile payments and mobile POS solutions were in high demand during the show as many solution providers introduced their newest products. Not only answering the customer's product-related questions but also completing the transaction at that point of contact is becoming highly valuable for retailers as the traditional in-store environments which may have limited number of POS machines can result with long lines and lost revenue for these organizations. Thus, this enables the associates to not only sell the inventory in a particular store but to also order an out-of-stock product through their online/ mobile site and have it ship directly to the customer or the store based on the customers' preference. Hence, the up-sell and cross-sell opportunities that can be achieved through this interaction are very significant. Tracking how traditional retail POS vendors respond to this trend will be especially interesting as many of these have the most at stake. One interesting solution was from Wincor Nixdorf - a leading brand of traditional POS solutions. They are extending their mobile capabilities with their TP Application Suite, which provides two hardware independent modules: TPiSCAN supports all self-service solutions in the checkout area. TPiSHOP offers the possibility to implement mobile self-scanning either on retailer-owned devices or on individual smartphone of the customer.

Following a dynamic 2011, expectations for retail technology solutions - especially customer facing mobile solutions - remain robust in 2012.

Mobile Software Developer Perspectives Needed

VDC is conducting its annual survey of market trends in mobile software development.  If you are a mobile software developer we are asking for your help.  Please go to, or send others to, our end-user survey:

The research covers mobile OS, development platforms, tools, and environments. Your thoughts will improve our insights into the development community and help to influence next generation solutions.

Every respondent who completes the survey will receive:

• Entry into a prize drawing for one of five $100 Amazon.com gift certificates (drawing to be held June 7th, 2010)
• The executive summary of our survey findings once the data has been analyzed

Thank you in advance for your assistance.
 
Best Regards,
The VDC Enterprise Mobility Team

Whither RIM?

Following the recent ‘missed quarter’ by RIM there has been much chatter about the future demise of the company and its widely deployed BlackBerry at the hands of Apple’s iPhone and devices running on the Google-backed Android platform. While the articles bring up many valid points – iPhone’s encroaching RIM’s enterprise stronghold, RIM lacking a strong touchscreen solution, RIM’s App World metrics - the desire for sensationalist reporting may have kept the reporters from addressing some of the more important issues. More to the point: there remains much to be bullish about RIM.

BlackBerry’s core value proposition revolves around its best in class – in terms of security and manageability – enterprise wireless email and messaging solution. This has and continues to resonate with enterprise customers. BlackBerry is viewed as the Gold Standard in sectors – especially where security and compliance mandates are tight – such as government, financial services and healthcare. While RIM has done well to maintain and expand its position in these core markets, it’s value proposition has recently been challenged by individually liable (IL) devices entering the enterprise.  During the recession enterprises have been increasingly receptive to the idea of supporting their employee’s personal device for some enterprise applications (email, messaging, etc.). Moreover, enterprises have succumbed to the pressure from individuals to support popular consumer devices such as the iPhone. This has loosened RIM’s vice grip on the enterprise segment and has created challenges for RIM as the company generally performs best in accounts where it is the only device.

These challenges have shown up in market share figures as – according to our research – BlackBerry’s share of the enterprise segment in North America is expected to decline from just over 50% in 2009 to just over 40% by the end of 2010. The primary beneficiaries here will be Apple – capturing 22% of the enterprise market by the end of 2010 – and the various Android-based devices. However, even as BlackBerry’s market share declines, overall shipments and new subscribers are expected to grow, driven by the continued strength in Smartphone demand.

RIM clearly needs to address the IL issue more effectively – it has been targeting the consumer market with mixed results for some time now. However, according to our research, the share of corporate liable devices is actually expected to increase slightly in North America. Conversely the share of IL devices purchased from ‘approved list’ is expected to give way to IL devices purchased from ‘any list’. In other words we are seeing a splintering in the enterprise between highly controlled and regulated environments and those that are more open to multiple platforms. RIM’s position in the former is unquestioned. What it needs is a more effective answer for the latter.

The fact remains that the Smartphone opportunity is massive with growth continuing unabated. While hardware innovation – such as Apple’s multi-touch interface – can define and reward vendors, this market is not (entirely) about hardware. It is about delivering appealing services and user experiences. The killer applications for RIM and its BlackBerry platform have been wireless email and BlackBerry Messenger which offers some of the strongest real time communication and presence capabilities (through GPS location integration and proximity sensing). RIM needs to build on these platforms to extend a broader range of services in a broader range of environments.

RIM is addressing this and several of its recent acquisitions are targeted squarely at both improving the user experience on the BlackBerry and also extending RIM’s reach beyond the traditional Smartphone. More specifically, last August 2009 RIM acquired Torch Mobile to support its WebKit-based browser development – a major hole in its portfolio. The browser was officially released earlier this year at MWC. (OK, this is more catch-up than trial blazing). More recently RIM acquired QNX Software Systems from Harman International. One of QNX’s leading markets for its Neutrino embedded OS is the automotive sector. This acquisition has the potential to significantly enhance the integration of RIM’s BlackBerry platform with in-car computing, navigation, entertainment platforms (check out VDC’s Embedded Practice’s blog post on this transaction).

Another – more traditional – opportunity for RIM to lead is the creation of the de facto enterprise mobile software application channel.  The fact remains that with all the success of Apple’s App Store, its most successful apps are for gaming and other entertainment/consumer applications. No viable channel exists today to address enterprise applications. While much of this is tied to issues relating to back-end integration requirements and customization requirements evident with so many enterprise mobile applications – enterprise organizations are clamoring for ways to more efficiently distribute and manage mobile applications. Getting the developer community excited about BlackBerry development opportunities will be critical here. BlackBerry has taken a step in the right direction with its recently enhanced development tools (especially the HotSwap simulator which significantly reduces development time).

RIM clearly has its work cut out for them. Apple, Google and others are nipping at their heels and are intensifying their enterprise play. However, considering RIM’s loyal customer base, broad global partner network and best in class services it would be reckless to write them off.

Keeping Pace with the Enterprise Mobility Solutions Market in 2010

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

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

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

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

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