Author: Bob O'Donnell

The foundation of the tech business has nearly always been based on the idea of creating products and services that appeal to as wide an audience as possible. As we begin to enter a more mature, slower growth phase of the industry, however, the possibility of going horizontal is getting increasingly difficult. Particularly as we look to the business world, all the best opportunities are about finding specific niche opportunities that offer a smaller set of customers a more customized fit. In a word, it’s now all about going vertical.

One of the many benefits of tapping into vertical markets is the ability to run a profitable business because companies/individuals with specific needs are much more likely to pay a premium to get exactly what they’re looking for. The challenge, of course, is that to really grow a business that’s focused on serving verticals, you often need to find several of them.

At last week’s DellWorld event in Austin, TX, I was one of the co-hosts of the DellWorld Live streaming TV coverage and, as part of that job, had the pleasure of interviewing people from a wide variety of companies with an enormous range of perspectives. Though there were many different themes that were discussed throughout the event, one point that became clear is that companies like Dell and its partners are increasingly focused on finding solutions that are targeted at many specific vertical industries, such as healthcare, retail, finance, education, manufacturing, etc. These verticals often have very unique requirements, so it can be difficult meeting their demands, but they represent strong opportunities for growth for many different types of vendors.[pullquote]Despite all the hype around increased mobility in the workplace, the reality is that most companies are just now starting to get serious about building custom mobile applications for their businesses.”[/pullquote]

Apple’s recently announced deal with IBM for developing mobile apps for business was/is also targeted towards verticals. In fact, much of IBM’s focus in that partnership is geared towards leveraging their expertise across a wide variety of these specific industries into custom mobile applications. Despite all the hype around increased mobility in the workplace, the reality is that most companies are just now starting to get serious about building custom mobile applications for their businesses. As a result, there’s a strong interest in developing solutions that meet the specific demands of the business. Up until now, many of the business-oriented mobile apps have been more broadly, horizontally focused, so there’s a relative dearth of vertically-focused options.

In some cases the differences between apps across different vertical industries may not be all that great—it could be as simple as simple different field names in a database, for example—but in others, it boils down to understanding different business processes, different workflows, different requirements, and so on.

At the end of the day, businesses want to feel like their unique needs are being met. That means learning more about these businesses and how they operate, and devising solutions that will help them feel like they’re being more effective or more productive than they were before they started using the new tool(s). It’s hard work, to be sure, but the days of easy, horizontal solutions for business are going away. Companies that can learn how to specialize in these specialty industries—and go vertical—are the ones who will be best positioned for success in the years to come.

The wearables category has seen some important new announcements and additions over the last few weeks, so it’s not surprising to see more attention being paid to the market. Of course, there was the Apple Watch announcement back in September. Just last week Microsoft debuted the Microsoft Band to reasonably decent acclaim, while HP jumped into the act with their Michael Bastian-designed MB Chronowing smart watch. The week before that, we also saw several new announcements from early market leader FitBit with their Charge, Charge HR, and Surge additions to their line of activity trackers. The week before that Will.i.am jumped in with his standalone i.amPULS smart watch.

It’s as if everyone thinks this market is set to explode.

In many cases, however, all we really got were announcements, because a lot of these new products won’t start shipping until 2015. In fact, my December 2013 prediction that there would be more wearable announcements than wearable shipments in 2014 is proving to be significantly more prescient than even I could have imagined…

Despite all this news and excitement around the wearables category, I’m still not convinced it’s going to be as big a market as many have made it out to be. The primary, over-riding problem is that no one has really been able to provide a compelling reason why the vast majority of people would want a wearable, let alone feel that they “need” to have one. Sure, there are good cases to be made for fitness junkies, the whole “quantified self” movement and bleeding-edge early adopters, but for most people, smart wearables still feel like a solution in search of a problem.[pullquote]For most people, smart wearables still feel like a solution in search of a problem.”[/pullquote]

If that wasn’t enough, many of these early products suffer from limited battery life, offer only semi-accurate sensor readings, and lock you into working with only certain smartphones.

That doesn’t mean I don’t think people will buy these devices in reasonable numbers. Believe it or not, I actually do, because there is still something intriguingly compelling about moving computing and information access even closer to your body. Plus, the relatively moderate price points for the devices will enable a number of people to purchase and try them on an experimental basis. However, I characterize the expected market reaction to be tepid—not hot, but not really cold either.

To be more specific, in the newly updated smart wearables forecast that my firm TECHnalysis Research just published yesterday, we predict that the worldwide wearable market will double from just under 20 million unit shipments this year to around 40 million in 2015. Yes, that’s strong growth on a percentage basis, but remember that Apple by themselves sold nearly 40 million iPhones just last quarter. Put under that comparative light, the number isn’t that overwhelming.

©2014, TECHnalysis Research

Longer term, we believe the wearable market will grow to around 103 million units in 2018, with most of the shipments coming from the smart watches segment. On a revenue basis, the numbers are expected to move from around $2 billion in 2014 to $16 billion in 2018.

By the way, just to be clear, here’s the definition of smart wearables we used as a basis for this forecast:

A smart wearable device is a battery-powered, portable electronic device worn on a human body that offers some level of onboard processing and runs some type of integrated software. Most wearables have integrated sensors of various types as well as connectivity options (either wired or wireless) to other smart devices, such as smartphones. Electronic devices that are worn on the body but don’t have their own built-in compute capability, such as basic Bluetooth headsets or heads-up displays, are not considered smart wearables.

The wearable market has caught the attention and fancy of many leading tech vendors and much of the tech press, because it’s an intriguing new potential market. While I, too, share their enthusiasm for following it, I think it’s prudent to keep our near-term expectations in check or else we could end up with serious disappointment.

You can read more about the TECHnalysis Research updated Wearable Forecast here.

The wearables market has been dissected and analyzed so much it would be easy to presume that nearly every possible angle on the market or detail about it would have been thoroughly covered. But I believe there is one important area/opportunity for wearables that has been nearly completely overlooked: the use of wearables in business.

Virtually all of the wearable market analysis and coverage has assumed that it was a completely consumer-focused effort. The reasons are relatively obvious: virtually all of the wearable products that have been introduced, unveiled or discussed are completely focused on consumers.

Behind the scenes, however, a number of vendors have actually created, or are actively planning, products that are designed to be purchased by and used in business. I’m not talking about activity monitors for while you’re sitting at your desk—although, as I’ll discuss later, there has been some discussion around that—but devices that help you do your job more efficiently.

For example, imagine a heads-up display integrated into a glasses-type wearable that lets field service technicians overlay important information from a service manual on top of the live image of a device they’re repairing. This would enable these technicians to have hands-free access to critical information and even potentially relay a video signal back to an in-house expert if they run across a particularly difficult problem. In fact, these kinds of head-mounted displays have actually been used by some airplane mechanics for several years now in a more basic form. Newer versions can leverage the technology improvements that have occurred thanks to all the R&D that’s been done for consumer wearables.

These kinds of devices can be extremely beneficial for certain types of workers in certain types of companies, because it can allow them to get their jobs done more effectively. For companies, this can translate into direct dollar savings, because they can reduce the cost of things like additional truck rolls for repairs, allowing them to easily justify the expense of these devices.[pullquote]Business wearables can be extremely beneficial for certain types of workers in certain types of companies, because it can allow them to get their jobs done more effectively.[/pullquote]

Plus, in the case of a business version of a head-worn wearable, virtually none of the privacy concerns or social awkwardness that have sidelined products like Google Glass are an issue. This allows vendors of business-focused wearables to be free of these potentially problematic concerns.

In addition to head-worn wearables, there could be things like finger-worn mouse replacements for giving presentations or navigating through large bodies of data, or 3D models, in a “Minority Report”-like style. Leveraging biometric sensors, business wearables could also be used as digital authentication methods for device log-ins, security card replacements and more. (I wrote about the Wearable Identity Connection a few weeks back.)

Some companies have even talked about offering activity bands to provide ergonomic-based reminders about taking breaks or monitoring people’s health. In some cases, these health monitoring tools could be linked to insurance premiums with companies potentially obtaining lower rates if they have higher percentages of healthy people. (Although, to be honest, the potentially Orwellian-like privacy invasions that could occur when companies are tracking the physical activity, or inactivity, of their workers throughout the day are more than a little bit scary….)

To be clear, most business wearables aren’t designed for a large swath of workers, but rather, are focused on more specific vertical applications. As a result, the market for them is likely to remain relatively small when compared to the wider consumer wearables market.

Nevertheless, there are some very real business cases that can be made about bringing wearables to work, and I suspect we’ll see a lot more innovation in this area in the months and years to come.

Welcome to the weekly Tech.pinions podcast. This week Bob O’Donnell, Ben Bajarin, and Jan Dawson chat about the recent quarterly earnings announcements from Apple, Microsoft, Amazon and Google.

Click here to subscribe in iTunes.

If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is: techpinions.com/feed/podcast

The number of comedic comments that have been made about “size” probably outnumber knock-knock jokes these days, because it seems everyone likes to offer their view on the matter. When it comes to technology devices, there have also been numerous debates about the importance of size—or not—particularly when it comes to different devices within a specific category. The current iPhone 6 vs. 6 Plus discussions are a classic example.

What I haven’t seen discussed much is screen size differences across device categories. On the one hand, the reasoning is simple: everyone knows that TVs are bigger than PCs, which are bigger than tablets, which are bigger than smartphones, which are bigger than wearables. In fact, the very definition of several of these device categories (and sub-segments within them) is determined by screen size measurements.

Another reason we haven’t seen much discussion in this area is that it inevitably leads to the contentious discussion about which device is most important. Of course, “important” is a loaded word and could be interpreted to be the one that’s used the most, the one that provides the most value, or several other variations on that theme.

Interestingly, for some people, the amount of time people spend with their devices is directly proportional to their screen size, with many people spending the most time with their TV, next their PC and on down the line. Of course, there are many others for which it’s nearly the exact opposite (leaving out the brand new wearables category for the moment), with the most time spent on their smartphone, then their tablet, then their PC, and finally, their TV. I’ve even heard some discussions—which I don’t agree with—suggesting that within a few years, people will spend most of their time with wearables and less time with their smartphones and larger screens.

The implication in these arguments is that screen size doesn’t matter—that it’s all about portability and in that view, the smaller the better. Now, I admit I may be showing my middle age here, but c’mon, really?

In my opinion, larger screens do matter, and they matter a lot. In fact, I’d argue there’s a certain hierarchy of device importance based on screen size. In this instance, I’m not defining importance as time spent, because there is a lot of data out there (including my own) which suggests that reality is too complex to make a simple statement about time spent by device. What I’m referring to more is the ultimate importance of the activities done with the device—its overall gravitas.[pullquote]Larger screens do matter, and they matter a lot. In fact, I’d argue there’s a certain hierarchy of device importance based on screen size.”[/pullquote]

Looking at things from that perspective, I’d argue that the PC (which is, admittedly, second to the TV in terms of screen size) continues to be the most important device to many people, even for many who only use it occasionally. The PC is still the device where the most important activities occur—doing taxes, keeping track of finances, maintaining photo and music libraries, attaching peripherals, creating documents, editing photos and videos, design and much, much more. Do some people do some of these activities on other devices? Of course they do. But for many people, these critical activities are still being done on the biggest screen people can possibly get their hands on.

The importance transfers over to electronic commerce as well. While lots of people browse on smartphones and tablets, most of the actual purchases are made on PCs, because people still perceive the PC as the most important, potentially most secure device. Plus, given that PCs still have more storage than any other devices, it’s also the place where our libraries of personal data—collected from across all our other “smaller” devices—still reside.

That’s why innovation in PCs is still important, whether that innovation comes from Apple or Microsoft or Dell or whomever. At last week’s Apple event, for example, it was clear that the new iMac with the 27” 5K retina display in conjunction with OS X Yosemite is a serious piece of computing gear that deserves a spot at the top of the device food chain. (Although, I kept wondering where the standalone 5K screen for the new Mac Pro was….) But it’s also why Windows 10 in combination with a 5K display from Dell can earn an equivalent spot at the top of that hierarchy. (And if we needed any more proof of the ongoing significance of larger-screen devices, the fact that Apple’s PC revenues were higher than its tablets revenues in its most recent quarter pretty much puts an exclamation point on it.)

There’s no question that people will be spending a great deal of time with smaller screens, particularly as we start to finally see sales of devices with really small screens (i.e., wearables) starting over the next year or so. Nevertheless, it’s important to remember that when it comes to device screens, size really does matter.

One of the hottest topics in the world of enterprise IT for the last several years has been big data. The idea behind it is relatively straightforward: in our increasingly connected world, it’s possible to collect a lot of information on everything from how people use different types of applications, to how athletes perform on the field, to what web sites we all visit and what types of things we search for and/or purchase.

All of this information is essentially just a bunch of random data bits that are increasingly being stored on the seemingly endless supply of storage housed in increasingly more powerful data centers that companies and other institutions are putting up all over the world. By itself, of course, this data is meaningless, but through the use of analytics-based software, the idea is that you can mine these big data stores for truly useful information.

In reality, many organizations are finding that it’s pretty difficult to make that leap from data to information, but there are also many companies who are doing it quite successfully. We’ve all undoubtedly seen how quickly an innocent search on say, a new suit, translates into a barrage of men’s wear ads on nearly every site you visit.

But targeted advertising isn’t where these interactions end. Instead, some companies are compiling entire profiles on individuals that pull together everything from marital status, political perspective, income, health, location and much more into a somewhat frightening, Orwellian-like dossier. In fact, a front page story in yesterday’s WSJ is about companies who are building entire businesses around this collection of data as well as how companies in other industries are trying to place a value on this information.

Depending on your age, your technology comfort level, political viewpoint and many other factors, your view on this subject may range from completely OK to completely not OK with these developments, but regardless, there’s no denying that they represent an unprecedented degree of insight into our personal lives.[pullquote]While I don’t believe all companies who are collecting big data are planning to use it for big brother-like purposes, I do think that turning a blind eye to private industry-driven personal data collection and keeping governmental organizations from playing some kind of role in this area is a mistake.”[/pullquote]

In my mind, that raises the inevitable question: Is this something that needs to be looked at, considered and potentially even legislated by governmental organizations? In some parts of the world, notably European countries such as Germany, it already has. But here in the US, there’s been little “official” action on the issue.

The reasons are probably fairly obvious: Do we want government impeding with private enterprise? Given the Edward Snowden revelations, there are understandably big concerns about the US government regulating the tracking of individuals, given how much they’ve apparently already been doing.

But despite all these concerns—and to be clear, I think many of them are very legitimate—is it really fair to assume that private industry is going to be any more protective of our personal data? I would argue that both common sense and business history would suggest not. Basic Adam Smith-inspired capitalism tells us that companies’ fundamental interest is making money and they often use whatever approaches they believe are acceptable in order to achieve that end.

Do I believe all companies who are collecting big data are planning to use it for big brother-like purposes? Of course not, but do I think that turning a blind eye to all the private industry-driven personal data collection and keeping governmental organizations from playing some kind of role in this area is a mistake? Absolutely. Given all the security breaches we’ve seen from private companies, there clearly needs to be outside focus placed on these issues.

No one wants to live through true Big Brother-like scenarios, but l believe it is naïve to think those kind of scenarios could only happen through a governmental organization. Given the level of information many tech-focused big data firms already have, an unregulated private industry could prove to be an even bigger threat.

While many may find the idea of regulating private industry to be an unpalatable concept, I believe that the time has come to start an active dialogue on the subject of how our personal data is collected, stored and used.

To say that the past week has been an interesting one for the PC market is one heck of an understatement. Between Microsoft’s first official preview of Windows 10 and HP’s announced split into two companies, there has been an enormous amount of hand-wringing and questioning about the future state of the PC market.

Not surprisingly, that’s also led to a lot of questions about Windows, given its still very close ties to PCs. Many reporters I’ve spoken with have basically asked, given the challenging conditions PCs face, is Windows still relevant?

My short answer? Absolutely.

First, let’s address the PC question. Though 90% of the tech industry seems intent on burying PCs while they’re still alive, the truth is, they are still alive. In fact, they’re showing signs of coming back to life, which I’m defining as no longer declining. (Hey, remember, flat is the new up.) We’ll know more next week when third quarter shipment numbers are announced, but given all the research I’ve done, as well as the upbeat reports we’ve heard from component makers and PC vendors, I’m willing to bet the PC story is going to be decent.

Plus, in a strange way, some of the bad news we’ve seen about tablets recently (flat to declining sales, etc.) could prove to be good for PCs. What’s implied in that news is that tablets are not going to take over PCs for most individuals, so those people who’ve been holding off on upgrading their existing PCs for fear that PCs won’t be relevant anymore, can now go ahead and upgrade.

Given the big HP news from earlier this week, it’s somewhat ironic that one of the more upbeat PC companies of late has been HP. In their last reported quarterly numbers released in August, their PC shipments were up an impressive 13% year over year. Not bad for a “dead” market. Additionally, even though many have tried to read a negative PC story into the news, HP’s announcement doesn’t mean that they’re questioning the future of the PC market. In fact, you could even make the argument that it’s the exact opposite. The truth is, it’s much too early to tell exactly what the impact (if any) HP’s announcement will have on either the near-term or even medium-term outlook for PCs.

So, let’s turn our attention back to Windows 10. I’ll start by making the argument that Windows 10 is what Windows 8 should have been all along. Instead of bifurcating into two distinct environments with a confusing model for working and switching between them, Windows 10 looks to leverage everything that’s good about the familiar Windows 7 interface, along with some of the genuine enhancements that came with the Metro UI of Windows 8. Again, it’s a bit early for final pronouncements here as well, but what I’ve seen so far is definitely encouraging.[pullquote]Windows 10 is what Windows 8 should have been all along.”[/pullquote]

Of course, the unfortunate implication is that Windows 8 set the PC industry back a good two years and it’s going to be difficult to catch up. While there may be some truth to that argument as well, I think it’s far from a lost cause. PCs still play a critical, if not always central, role in many people’s digital lives, so the fact that a new option that brings them back up to modern expectations is set to launch is very good, and important, news.

Microsoft has even bigger plans for Windows 10. Their goal is to be able to scale the UI intelligently from phones through tablets up to large-screen monitors attached to PCs. While that’s still going to be a challenge to do well, in some ways, it may not be as much work as it first appears because I’ve always felt the pure Metro UI actually works better on smaller screens, so there isn’t as much to change there.

The bottom line is that both Windows and PCs are still relevant in an increasingly mobile world. The role that all tech devices play is evolving and Windows-based PCs are changing too, but they continue to play an important role in both commercial and consumer applications and will continue to do so for some time to come.

As the markets for tablets and smartphones continue to mature and saturate, I believe we’re heading towards some important changes. Specifically, I think the time for mass market smartphones and tablets is rapidly nearing an end.

It’s not that we won’t have any big products, but post-iPhone 6, I think it’s going to be much harder for any vendors (including Apple) to create something that has enormous mass appeal.

The reasons for my thinking are pretty simple. As people have become more comfortable and familiar with smartphones (and tablets), they’ve started to realize the specific things they like and don’t like about certain models or certain types of devices, and they’re gravitating towards models that meet their personal needs.

Look at the debate over the iPhone 6 vs. the 6 Plus. Some people really want the bigger screen and some people really don’t. In fact, you could argue that the entire large smartphone (“phablet”) category is a great example of the specialization I’m referring to here. Depending on personal preferences and tastes, there are very strong supporters and detractors of the entire movement.[pullquote]I think the time for mass market smartphones and tablets is rapidly nearing an end.”[/pullquote]

In that light, I think the introduction of BlackBerry’s Passport phone last week actually makes a great deal of sense. The Passport is not something that an enormous number of people are going to want, but for the right market (mobile professionals who work for companies with strict security policies), it’s actually a pretty cool device. Similarly, for people who care more about looking at work documents on a phone than watching movies, the 4.5” square screen of the Passport works very nicely.

In the case of the Passport, it’s also important to remember that many people who still use BlackBerries carry two phones: a work phone and a personal phone. While that may not be an ideal situation for many people, it’s perfectly OK to many others. Again, in that light, the Passport is a great update of the work phone.

Moving forward, I expect we’re going to see a lot more specialization by other vendors to meet the needs of specific markets. As I’ve written about before, there’s a huge opportunity to create different types of smartphones for different age groups—15-year olds and 55-year olds don’t need (and probably don’t want) the same phone. I also expect to see a group of people who will steadfastly hold onto smaller size phones because of their easier portability and “pocketability” and expect some vendors to cater to those needs.

I believe the specialization trend will extend beyond phones to tablets as well. Of course there are the OS-based differences—just as there are for phones—but there’s also screen size preferences and other activity-based differences. The 9.7” iPad did a good job of introducing many people to the concept of a tablet, but honestly, is there anyone really that excited about another version of it?

That’s why I expect to see Apple introduce a larger 12” or so tablet, in addition to updated versions of their 9.7” products. A larger iPad isn’t likely to sell as well as the smaller models, but it will fill the needs of creative professionals and others who really want a larger screen size quite nicely. Similarly, that’s also why I find nVidia’s Shield gaming tablet to be an intriguing indicator of where the tablet market is headed. The Shield tablet is never going to sell anywhere close to the iPad or even generic Android tablets, but for the right audience, it’s a great product.

As appealing as the concept of more specialization may be, however, there’s a big challenge for hardware vendors: the larger the sales volume of a given device, the more you can reduce its costs and, conversely, the lower the volume, typically, the higher the cost. Smart designs will allow vendors to leverage similar components across multiple products, but it does place more difficult demands on their supply chains (and product designers).

Ultimately, technology products are likely to follow the path of other mass-produced goods, such as cars, appliances and even clothing. In all those markets (and many more), the ability to specifically target different types of consumers and then create products that match the unique needs/interests of those different consumers is what allows companies to thrive. Now, it’s time for technology companies to step up to those challenges and give us the breadth of product options that the market is hungry to see.

Welcome to this week’s Tech.pinions podcast.

This week Tim Bajarin, Bob O’Donnell, Jan Dawson and Ben Bajarin discuss the release of BlackBerry’s Passport phone and analyze the impact of the Apple controversies around the bending of iPhone 6’s and glitches in iOS 8.0.1.

Click here to subscribe in iTunes.

If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is: techpinions.com/feed/podcast

Runtime: 27:49

The focus on mobility and mobile platforms as the growth engines for the tech industry’s future is now so engrained into most people’s heads that it seems nearly blasphemous to suggest there could be faults in that thinking. But there’s a question that keeps popping into my mind—is the mobile app ecosystem really sustainable at its size and rate of growth?

I’m increasingly starting to think that no, it isn’t.

Some simple math helps with my reasoning. First, we’re at well over a million (likely around 1.2 or 1.3 million) apps in both the iOS and Android stores. Yes, the revenue numbers paid out to developers keeps growing as well, but it doesn’t seem to be growing nearly as fast as the number of apps are. So, basic division would suggest the amount of payouts per app is decreasing. In fact, I’ve seen numbers which suggest that a large majority (>50%) of mobile apps make only a few hundred dollars a month.

Now, of course, some of this could be due to the fact that many apps have moved to a freemium model, where the app is free, but in-app purchases and advertising generate the necessary revenue for developers.  But in-app revenue still counts towards those revenue payout numbers that Apple and Google love to talk about, so the lower average per app still seems relevant.

With regard to advertising, mobile ads have notoriously poor click-through rates, so the amounts that ad networks, app developers and others selling advertising can charge on mobile devices is still relatively low.

So, as with many industries, it seems a tiny, single-digit percentage of applications and app developers are making the lion’s share of the revenues. Everyone else is just doing it for fun or holding onto the dream of being one of the very select few who do make it big—at least for a while—in the mobile app business.

Now, as an entrepreneur myself, I’m certainly not going to fault small businesses for having big dreams and hoping to generate a big financial windfall. More power to you.

But as a musician and someone who worked in the music business, I also know that 11+ years after the introduction of the iTunes store, we haven’t seen an explosion of new artists that have all reaped large financial gains. Instead, we continue to have a reasonable number of long-term popular artists, a few one-hit wonders and occasional breakthroughs of new artists that hit it big. Consider this, when Apple chose to release a free album to their hundreds of millions of iTunes users, they didn’t pick a relatively unknown new artist—they went with one of the most successful bands of all time. (Don’t get me wrong—I’m a big U2 fan and I wasn’t one of the people who wanted to delete their free album, but you get my point.) [pullquote]Instead of being cognizant that it’s very difficult to make it big—as most aspiring musicians know and readily accept—mobile app developers seem to think that their paths to the top are paved with gold.”[/pullquote]

The relatively harsh metrics of the music industry are widely-known, but I don’t see that same kind of thinking and logic being applied to the app ecosystem, even though—I think—they’re relatively comparable. The problem is, instead of being cognizant that it’s very difficult to make it big—as most aspiring musicians know and readily accept—mobile app developers seem to think that their paths to the top are paved with gold.

I believe some of this fault lies with tech investors, as well as the tech press, who promote the myth of mobile app millions, instead of the harsh realities that most mobile app vendors face. Of course, no one seems to want to burst the mobility bubble, for fear of what might be exposed. But it’s a story that needs to be told—and told—and told again.

The reason is, we’ve now reached a point where there are too many apps (yes, I said it) and there needs to be more focus on quality versus quantity. But if everyone involved seems to think building more mobile apps is their ticket to millions, the problem is just going to get worse. And that’s, ultimately, why I believe the app ecosystem could end up buckling under its own weight.

Until we’re all willing to take a more realistic look at both the pitfalls and opportunities in the mobile app ecosystem, I’m afraid we’re heading towards an implosion instead of the explosion that many still expect.

Two of the hottest topics in technology these days are smart wearable devices and digital identities. The former, thanks in part to last week’s unveiling of the Apple Watch, has captured the attention of nearly everyone recently, while the latter has gained more notoriety recently than anything else, but is poised to be a key issue for years to come. While at first glance the two are unrelated topics, I believe we will see them come together in some very intriguing ways over the next few years.

One of the key characteristics that ties these two concepts together is they’re both very personal. Wearables are the most personal technology device you can own because, by definition, they are designed to fit or be worn somewhere on your body—and you can’t get any more personal than that. In fact, I believe some of the key challenges facing wearable makers is the need to account for this basic, but essential fact. It’s one thing to design something that lots of people want to use and carry with them—it’s something else entirely to design something that millions of individuals are willing to regularly wear. Unless you’re a big believer in standardized uniforms—and all that implies—the idea that lots of people are going to all wear the same wearable strikes me as a bit naïve.[pullquote]It’s one thing to design something that lots of people want to use and carry with them—it’s something else entirely to design something that millions of individuals are willing to regularly wear.”[/pullquote]

In the case of digital identities, the collection of data that goes into that identity is, again, by definition, as personal as you can get. The challenge here is that we haven’t really seen any great example of products or services that tie all of our information into a coherent, singular form. In fact, some people would argue that it’s better to have information about various aspects of your life—from email and social network site passwords, to your financial information, medical records, friends and family contact info and so much more—kept separate because that makes it harder to piece together all your critical information. (Never mind the fact that just by analyzing all your online activities, many firms probably already have a “scarily” accurate view of you that they’re selling to the highest bidder—that’s a topic for another column on another day…)

The basic assumption here is that none of the elements that would go into a unified digital identity are really safe, so we’re better off spreading that security risk across many individual services. That way, if someone gets one thing—like access to a credit card account—they don’t necessarily have access to all your other key bits of information or personal data, such as your personal photos. While that argument is relatively sound in some ways, it obviously ignores the potential benefits—particularly around convenience and ease-of-use—that a unified approach would clearly offer.

The problem is, one of the critical challenges in putting together a unified type of digital identity service is that you would have to create some kind of “master key” that would unlock the entire treasure trove of your personal data. The potential risks in that scenario are frightening to many people and no one is really confident enough in any single security/authentication mechanism to serve this purpose.

But that is exactly where I believe the wearable/identity connection can, and must, occur. One of the “side” benefits of having a device you wear is that it’s in direct contact with your body. In conjunction with the right sensors, that bodily connection could be used to provide some kind of biometric data to uniquely identify you and serve as a “password-less” automatic means of getting access to your digital identity. Conversely, without that biometric match, access to your digital identity would be denied.

While lots of attention has been focused on fingerprint-based biometric recognition, there are challenges to this technology. In fact, in many cases, such as manual laborers whose fingerprints have worn down, people with certain genetic issues and others, it simply doesn’t work. There are some promising new developments in low-cost iris scanners, as well as mechanisms for matching hand geometry, faces, vein pattern-based recognition and, likely, more to come. In all cases, there are tradeoffs between cost, accuracy and convenience and that will likely lead to the use of several different methods of biometric identification.

Regardless, it seems clear that wearable-identity connection could become extremely important over the next few years and open up a wealth of interesting opportunities for digital identities as well. We’ve yet to see anyone pull together all these aspects into a single solution—no, not even Apple—but I suspect that when it does come together, the impact will be profound.

Security-related issues have come to the fore recently and focused a harsh light on some of the methods that companies use to try and protect your data and/or identity. The consistent theme throughout virtually all these methods is the use of passwords and the problems associated with them.

Recent efforts have been focused on using more challenging passwords that contain a minimum number of capital letters, non-alphabet letters and so on. There’s also a lot of attention being paid to two-factor authentication, which often boils down to having two different passwords (although, sometimes one is supplied by an outside party). The simple fact of the matter is that passwords are a horribly outdated, unnatural way of trying to secure data. They are clearly a solution designed by engineers for other engineers, yet have managed to survive and seep into our consciousness to the point where many people think they’re the only realistic option.[pullquote]Passwords are a horribly outdated, unnatural way of trying to secure data. They are clearly a solution designed by engineers for other engineers.”[/pullquote]

Real people, on the other hand, don’t mesh particularly well with passwords. We’ve all heard the stories about the horrendous over usage of the most common passwords (12345, pa$$word, etc.), but even people who figure out clever password combinations can’t typically remember more than about 1 or 2 of them. So, they keep using those same clever passwords over and over, which defeats the purpose of clever passwords in the first place. Given the increasing number of places where some type of log-in are becoming necessary, this model also doesn’t scale particularly well.

There have been a few attempts to break out of our password-dependence over the last several years—notably through fingerprint readers—but they’ve yet to move into regular usage for most people. Plus, even people who use them only tend to do things like log into a single device—not all their devices or all their services or all their data stores. And, in my experience, even some of the better ones—including Apple’s TouchID—are far from consistent and far from perfect, especially when you use them for a while.

As a result, I believe it’s way past high time to get something that we can predictably, reliably use to provide safe, secure access to our entire digital persona—including all our devices and services. In fact, we need a secure, memory-independent means of adding even more data—like digital health records, commerce transactions and more—to our growing digital identities.

Given all the other amazing technical marvels we’ve seen get introduced to the market over the last several years, I’m actually shocked we haven’t seen better solutions. Part of the issue, of course, is cost. But given all the attention we’ve seen on security-related issues and, therefore, the interest in providing security across a very wide range of devices, I think the enormous potential market for some kind of hardware-based security solution will drive costs down rapidly.

Ultimately, I think some type of biometric-type approach—whether it be improved fingerprint readers, retina scanners, vein matching, or some other sensor-based technology that can positively and uniquely identify an individual—will be the winner. But the devil is in the details and accuracy levels need to improved and become more consistent before any of these technologies can go mainstream.

Beyond the hardware, we’re also going to need a lot more work on standards across devices, platforms, software and services in order to really get these kinds of solutions to take off. It’s all fine and good if a single vendor comes up with a reasonably effective technology, but unless it’s widely adopted across a wide range of companies, devices and services, it’s ultimately not that useful.

Solving this dilemma is clearly a challenging task, but given how broken our current password dependent-systems are, it’s one that needs to be tackled—and soon.

As an analyst, one of the first things I was ever asked to do was put together a forecast. In fact, a key part of an analyst’s job is to dive deeply into a market, learn as much as you can about what the current market size is, understand where it’s going, and use all the insight you can to make predictions about where it’s headed. While there are some mathematical tricks and a certain amount of scientific rigor that can be applied to the process, it’s fundamentally more of a creative, artistic effort.

At the end of the day, you have to trust your gut and intuition about where you believe certain markets are headed, based on as many useful forms of input as you can ingest. This is really where the magic is, in my opinion, because selecting the right questions to ask about what products are being made, what components are in the pipeline, what tangential trends have started to make an impact, and how people are using the products, is what can help drive a more accurate forecast.

I use those principles whenever I develop a forecast and it led me to foresee a number of things—including a drop in tablets, a turnaround in PCs and an increase in the number of larger 5”+ smartphones—back in the February TECHnalysis Research forecast that were counter to popular thinking at the time. Since then, I’ve completed additional research, including a deep dive into BYOD usage in US businesses and, most recently, my Worldwide Consumer Device Usage study. These have made me realize I need to take those concepts even further.

The bottom line is that I’m now expecting the PC market to perform even better than I first predicted, the tablet market to do even worse and the smartphone market to do better exclusively because of an explosion of interest in larger smartphones. In fact, my new forecast numbers show that the tablet market will never catch the PC market, but instead will linger in the sub-280 million unit range through the end of the 5-year forecast period (through 2018). The reasons for this shift are many, but essentially boil down to the fact that tablets have come to be seen more as “nice-to-have” products instead of “must-have” products. In addition, I believe the rapid rise of the 7” category will not only stop but turn into a retreat, due primarily to the expected growth in larger phones. As a result, we will see a shift back towards larger-size 8”+ tablets, with that category taking more than half of the tablet market starting in 2017.[pullquote]I’m now expecting the PC market to perform even better than I first predicted, the tablet market to do even worse and the smartphone market to do better exclusively because of an explosion of interest in larger smartphones.”[/pullquote]

Conversely, I now believe PCs will actually see year-over-year growth this year and then go through a very modest dropoff throughout the next five years, but stay above the 300 million number through 2018. The big shift in PCs is that commercial PCs will become the larger half of the PC market starting in 2016, as businesses around the world will continue to drive PC purchases.

The story for smartphones is that growing interest in larger smartphones will drive rapid turnover of existing devices, even in the US and other markets that have been slower to adopt larger smartphones to date. This, in turn, will lead to the sub-5” smartphone market peaking in 2015, but the larger smartphone category growing to nearly half of all smartphones by 2018.

The chart below shows these forecast numbers in graphical form.

©2014, TECHnalysis Research, LLC

The combined worldwide total of PCs+Tablets+Smartphones, which together I call Smart Connected Devices, will cross 2 billion units in 2015 and peak at around 2.25 billion in 2018. By that point, we will likely have other product categories that need to be considered in the mix, but I do believe the signs are becoming clearer that the decades-long run of compute-intensive devices growing at impressive rates will soon be coming to an end. In fact, from a revenue perspective, my prediction is that 2016 will be the last year of monetary growth for these categories, with modest declines starting in 2017 and continuing forward.

Given these changes, I suspect we will see a number of companies evolve their strategies over time as they adjust to this new world order. Devices will certainly continue to be critical and their sales will not simply go away, but creating software and services that ties these devices and the information they contain together in compelling, useful ways is where the real excitement is going to be.

I’m writing this week’s column from the comfort of my hotel room in Shenzhen, China where I just witnessed first hand the evolutionary wave that has begun to take over the world of smart connected devices — phablets are king. Everywhere I turned in one of the many buildings stuffed full of electronics products and components for which this very large (~10.5 million) and surprisingly affluent[1] city is famous, I found more evidence.

It wasn’t just the large screen dominated selection of legitimate and knock off phones offered by hundreds of different small vendors, it was also the comparative scarcity of tablets—especially the 7” varieties which this region is famous for producing. Don’t get me wrong, they were still there—as well as lots of tablet component parts—but nowhere near the level of mobile phones. In fact, in my tours of several buildings, I’d put it even lower than the amount of PCs and related components.

The final form of evidence came in the form of the iPhone 6, which is poised to bring a whole new level of legitimacy and interest in the large screen smartphone market. As I expected, I saw a whole range of vendors offering iPhone 6 cases for sale—theoretically sized to match up with the leaked specs for the device.

But what caught me off guard were all the vendors actually offering iPhone 6 phones—or at least what they claimed were iPhone 6s. Having done a bit more digging, I’m now pretty convinced they were Goophone’s i6 knockoffs. Still, when one booth worker pulled a roughly 4.7” screen-based device out from behind their glass case and turned it on and I watched what certainly looked like iOS booting up, I have to admit I started to wonder. (Unfortunately, I only got to look at it for a few seconds, but I did notice an OS version of 7.1.4 on the About screen, which suggests a jailbroken version of the OS.)[pullquote]What caught me off guard in Shenzhen were all the vendors offering iPhone 6 phones—or at least what they claimed were iPhone 6s, several weeks before its introduction.”[/pullquote]

Regardless of the device’s authenticity (and again—very unlikely to be the real McCoy), seeing an Apple-looking device of that size (as well as even larger), lined up against the other large screen smartphone competitors reinforced the fact a large screen iPhone is likely to be a monstrous hit for Apple here in China and probably in many other places around the world.

Tie that together with the research I wrote about a few weeks ago (see ”Hot Items for the Holidays: Large Phones, Notebooks and Smart TVs”) which clearly showed strong pent up demand for larger smartphones among consumers around the world and, well, you don’t have a guarantee, but it sure makes the odds increase.

On top of that, we’ve got reported numbers of increasing PC sales and flat to declining tablets sales through the first half of the year and several supply chain-related news tidbits suggesting those trends should last at least through the end of the calendar year.

The end result? I think it will lead to some fairly dramatic shifts in the devices markets as we have known them. I’ll talk more about this next week when I unveil the updated TECHnalysis Research forecasts on PCs, tablets and smartphones, but the gist of it is pretty easy to guess: big smartphones will move the balance of power to themselves and away from smaller smartphones and smaller tablets. In the process, they’ll actually end up helping boost the PC market, as both consumers and enterprise buyers start to recognize the potential synergies of combining a large smartphone and a touch-equipped, but clamshell-focused notebook.

Looks to me like we’re in for some important changes over the next few years….