Computing in the Cloud

The move to cloud-based computing models and cloud-based services continues forward at a breakneck pace. Seemingly everything is migrating to the cloud and along with that transfer there seems to be an assumption that the local capabilities of attached client devices, particularly the CPU, don’t really matter. The reality of the situation, however, is actually much different.

The quality of virtually any cloud-based service is directly impacted by the horsepower of the device you’re using to access it. Don’t believe me? Think about it this way. If the local CPU (and graphics) didn’t matter, you should be able to have the same experience when you visit a web site or other cloud-based service from several different devices across the same network connection. As we all know, that just isn’t the case. In fact, the experience can vary widely between different devices and one of the core reasons—pardon the pun—has to do with the computing power of the connected device.

Other factors can certainly make an impact too. Everything from whether the service is accessed via a dedicated app or through a browser, the choice of browser, the efficiency of the underlying operating system, the speed of the memory and storage subsystems, and more. The bottom line is, though it may not appear that way at first, cloud-based computing solutions are dependent on the speed of the attached client. In other words, cloud computing isn’t all about the cloud.

Part of the reason for this has to do with how web-based applications and services are created and delivered. Generally speaking, there is a split of the computing load between the server hosting the application or service and the local device accessing it. The amount of the split can vary tremendously, from, say, 90% on the client and 10% on the server, to the exact opposite (or more likely, somewhere in between). But even in cases where significantly more of the workload occurs on the server, the performance of the client matters, because the local device needs to render the results of any server-processed workload to the local screen (at the very least). Plus, in true “thin client”-type environments, where 100% of the work is done on the server and a series of pixels are sent down a network connection—sometimes called “screen scraping”—the local device also has to deal with the protocols used to take those packets and convert them into pixels on the screen.[pullquote]Even if you’re connecting globally, you’re still computing locally, and that’s going to continue to drive the evolution of devices for many years to come.”[/pullquote]

The issues can also go beyond performance. Even today, there are still some web-based application services that don’t run on certain operating systems or certain chip architectures. Believe it or not, the good ol’ x86-based PC is still the most compatible cloud computing solution.

There’s no question we’re seeing an evolution of computing models and more and more of the applications we use every day are moving to the web. When it comes to computing in the cloud however, even if you’re connecting globally, you’re still computing locally, and that’s going to continue to drive the evolution of devices for many years to come.

The Tech.pinions Podcast: Intel Chromebooks and AMD Architectures

Welcome to this week’s Tech.pinions podcast.

This week Tim Bajarin, Bob O’Donnell, and Ben Bajarin chat about the introduction of both new Intel Core i3-based Chromebooks and AMD’s ambidextrous computing architecture, which offers the option of ARM or x86-based CPUs.

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Runtime: 19:08

Device Usage A Question of Degree

The seemingly incessant discussions about which device is “winning” the battle for the hearts and minds of users seem to ignore an important, if not particularly helpful, fact: they all are winning to various degrees. Generally speaking, people tend to use multiple devices, sometimes even for the same task. Of course, it depends on what devices they actually own, but people who have regular access to PCs, tablets and smartphones—like many individuals in the US—are likely to use PCs, tablets and smartphones.

However, the amount they use each device does vary and in most cases, by a relatively large amount. Here, of course, is where the nearly religious debates about the superiority of tablets over PCs, or smartphones over tablets, or “phablets” versus everything else, will continue to rage. But regardless of what group (or groups) people tend to fall into on these discussions, the fact people use multiple devices has important implications for both the hardware and the applications and services running on those devices.

Building devices, applications and services that are not just able to connect to and work with other devices (and services) but are actually optimized to do so is an important distinction many companies seem to either ignore or pay little attention to. Wouldn’t it be nice for example, if any type of process I start on one device could be seamlessly continued on another?

The situation is complicated when we start to consider the different platforms all of these devices run. In the recent BYOD survey my firm conducted of 750 workers in the US, 450 of whom were employees at small, medium and large companies, we asked about the platforms they used on their devices. The results confirmed my expectations: the most popular PC platform in use was Windows by a large margin, the most popular tablet OS was iOS and the most common smartphone platform was—you guessed it—Android. (FYI, on both tablets and smartphones, the leading platforms had just over 50% of the total.) Extrapolating that data means there are lots of people with devices running three different platforms, from three different companies. Yet we’ve seen few efforts from any of those vendors to even acknowledge this reality, let alone incorporate it into their products and services to try and make them better.[pullquote]There are lots of people with devices running three different platforms, from three different companies. Yet we’ve seen few efforts from any of those vendors to even acknowledge this reality.”[/pullquote]

The “right” device also depends on what people are trying to achieve. But even here, crossover between devices is greater than many are willing to acknowledge. Think about something as universal as email for example. We can all certainly read email on whatever screen happens to be convenient, but when it comes to responding, the device on which we choose to compose our missives is often strongly influenced by the amount we need to write. A quick short response can be done on a small phone screen, a slightly longer reply on a tablet but a longer discussion almost always falls to a PC with a full sized keyboard and larger screen. So, all the devices are used for the same task, but to different degrees. It’s not just email. For example, watching videos of different lengths—generally the longer the video, the larger the screen. Or researching information on various topics—the deeper the dive, the greater the need for multiple simultaneously open windows, etc. Many tasks are divided across our different available devices.

A select group of software vendors and services providers have started to fully embrace this multi-device, multi-platform reality, but I would argue there’s still a long way to go. As new types of devices — smart TVs, connected cars and wearables — start to play a larger role in people’s lives and as our dependence on the services that empower these devices continues to grow, the need to create products and services that embrace the diversity of the device landscape will become essential for future success.

The Tech.pinions Podcast: Amazon Smartphones

Welcome to the second in the series of the revived Tech.pinions podcasts.

This week Ben Bajarin, Bob O’Donnell, and Jan Dawson chat about the opportunities and challenges for a potential Amazon smartphone and what kind of impact carrier or vendor financing could have on the sales of new smartphones and tablets.

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Runtime: 27:41

The Next Smartphone Battleground: Durability

As smartphones continue to evolve, it’s getting harder and harder for vendors to create compelling new features and functions that drive existing users to upgrade their phones. Sure, there are important increases in screen sizes and resolutions, improvements in camera quality and modest increases in performance/. But most of these have been underway for quite a while now. Plus, with a few important exceptions (I’m talking about you, future large screen iPhone), they are already part of the mainstream options most of us are using today.

But there is one area very few vendors have tackled I believe is going to be increasingly important: a phone’s durability. I’m always amazed at how often I see people still using phones with modestly or even horribly cracked screens for example, and speaking from my own experience, there is no device I own that gets more abuse than my smartphone. While I don’t have any hard statistics on it, I have to believe a good percentage of smartphone replacement purchases are based on “broken phones”—either from dropping on the ground, dropping in liquid or any number of other accidental spills bound to happen to devices most of us carry with us all the time and everywhere we go. Based on this, having a more durable device is bound to be attractive to consumers of all types (and all over the world). Yet the vast majority of phones in use and currently being sold don’t feature any kind of enhanced “toughness.”

Part of the issue is there are many ways to add robustness to a device like a smartphone. Recently, we have started to see several vendors, notably Samsung with their S5 and Sony with some of their Xperia phones, offer pretty impressive waterproofing capabilities. Leveraging new coating materials that can protect both external and internal components from damage, these phones are being actively marketed as more durable.

The biggest challenge most users face isn’t waterproofing, however, but cracked screens. This is a much tougher problem to solve unfortunately, because the need for a clean, touch-friendly display has driven most vendors to glass—particularly chemically-strengthened varieties like Corning’s Gorilla Glass. But even fortified glass is still essentially glass and that means when you drop it, it often breaks. Some vendors are starting to look at plastic substrates and plastic cover layers—which, in some cases can also be used to create curved glass—in order to get around this. I expect we’ll see more developments in this area over the next 12-18 months. Other companies are also starting to consider more exotic materials, like transparent sapphire (chemically synthesized in labs, by the way, not from the naturally occurring jewel), with rumors the iPhone 6 could have a complete sapphire cover layer when it debuts later this year.[pullquote]The ironic reality is, as smartphone lifetimes lengthen because of the lack of compelling new hardware innovations, a feature designed to make them last even longer could be the ticket to trigger a new wave of upgrades.”[/pullquote]

Of course, part of the challenge is also the fact vendors may not be as interested in adding durability as they are other more whiz-bang features. Let’s be honest. Durability may be of practical value, but it isn’t exactly a sexy attribute and lots of phones are still sold on sex appeal. Plus, the longer devices last, the less frequently they are going to be replaced and that potentially works against vendors eager to sell more devices. The ironic reality is, however, as smartphone lifetimes start to lengthen because of the lack of compelling new hardware innovations, a feature designed to make them last even longer could be the ticket to trigger a new wave of upgrades.

BYOD: Still a Work in Progress

The concept of Bring Your Own Device (BYOD), where individuals purchase and bring device(s) of their choosing into the workplace and use them alongside or in place of company purchased assets, has been around long enough it’s easy to think it’s readily established and well understood. But a recently completed survey of just over 750 US-based employees and IT decision makers by my firm, TECHnalysis Research, suggests otherwise. The results paint a relatively complex portrait of the current reality–while BYOD is strong and on the rise in many ways, it’s also facing a number of growing pains that clearly illustrate challenges both now and in the future.

A few basics first. The survey upon which this study was based was fielded two weeks ago among 452 employees and 302 IT workers evenly split among small companies (10-99 employees), medium-sized companies (100-999 employees) and large companies (1,000+ employees) spread across a wide range of industries. The initial sample pool was much larger however, and results from that group of 2,814 individuals show just barely under half (49.5%) of the respondents said their company had some type of BYOD policy in place.

BYOD Policy Chart

© 2014, TECHnalysis Research, LLC

Depending on your perspective, that’s a classic glass half empty/half full dichotomy. It shows both a huge opportunity for vendors eager to create solutions that help companies enable BYOD as well as the fact that despite years and years of efforts, only half of US-based companies have started to address the interest. Of course, the BYOD adoption numbers could be a bit higher as nearly 12% of respondents (most likely employees) didn’t know whether their company even had a policy. While that might seem odd, throughout the survey results there was a clear and noticeable gap in understanding between IT decision makers and employees on the topic of BYOD. In fact, one of the key takeaways from the report is IT needs to do a significantly better job at communicating their company’s BYOD policy and the specific elements that are or are not included in it.

Of those with any kind of BYOD culture, approximately 40% said their companies had a formal policy, while the remaining 60% said they only had an informal policy. This suggests that, in most cases, IT is simply reacting to the reality of employees bringing their own devices into work rather than proactively tackling the challenge. Part of this may be due to the sophistication, or lack thereof, of the tools IT has at its disposal for implementing BYOD programs, as well as the complexity of the problem, but it strongly implies BYOD continues to go through a maturation process.[pullquote]20% of all IT decision-maker respondents with BYOD programs and 29% of the medium-sized business group said they have started to pull back a bit from their earliest efforts.”[/pullquote]

Even more telling is 20% of all IT decision-maker respondents with BYOD programs and 29% of the medium-sized business group said they have started to pull back a bit from their earliest efforts. As with many tech industry phenomena, the pendulum often starts to swing back after the initial hype around a topic has begun to fade. These numbers clearly show there are some serious concerns IT departments have had to face after the sometimes “Wild West-like” atmosphere of early BYOD deployments–where a level of “digital lawlessness” took hold. Balancing data security and freedom—which is essentially the key problem for BYOD—is an ongoing challenge ITDMs, and the vendors supporting them, will need to keep revisiting on a regular basis.

BYOD Involvement Chart

© 2014, TECHnalysis Research, LLC

Another challenge is the manner in which IT is approaching the task of managing devices used for BYOD. As discussed in last week’s column (“The Mobility Myth”), the devices used by employees in today’s business environment is a much more conservative mix than many might suppose. In fact, the PC is still king in business. Because of that, IT’s approach to BYOD often reflects a more conservative perspective. Many companies are focused on trying to manage smartphones and tablets as if they were PCs, which is likely contributing to some of the challenges and concerns that ITDMs expressed throughout this research.

On the other hand, most employees are clearly (and perhaps not surprisingly) enthusiastic about BYOD, although with some reservations. Only 8% of employee respondents in companies with BYOD programs said they do not participate in them. A majority of the remaining 92% who do participate enjoy the freedom and flexibility these programs provide, but a reasonable 13% of respondents (17% in large companies) expressed concerns around potential invasions of privacy from BYOD policies and 22% said their program was just OK.

There’s no question that BYOD is an important, ongoing trend that will continue to influence how our workplace environments evolve. But there’s also no question BYOD is far from mature and still in need of work and evolution—a potentially lucrative opportunity for companies ready to take on the challenge.

AMD: Back in the Groove

Looking back 18 months or so, things were not good for chip stalwart AMD. Despite having a solid new leadership team that was just starting to hit its stride, the company was facing some difficult times as the PC market—the company’s primary source of sustenance back then—suffered through an even faster decline than most had predicted. In fact, some were even questioning the company’s long term viability.

As things sit here in April of 2014, the picture is much improved. Thanks to the first ever sweep of a complete generation of game consoles—Playstation 4, Xbox One and Wii U are all powered by AMD chips—the execution of a management plan that itself focused on better execution within the company, and intelligent attention to and restructuring of its debt burdens, the atmosphere around (and apparently even within) the company is greatly improved. CEO Rory Read and his team have laid out a clear vision of deriving only 50% of the company’s revenues from the PC market by the end of 2015. In addition, they’ve started to preview a strong road map for new innovations within their GPU, CPU and APU (accelerated processing unit—AMD’s melding of a graphics and computing engine into a single piece of silicon) line of products.

The company is coming off not only the success in game consoles, but its graphics business also boasts a high profile win in Apple’s sleek new Mac Pro, which features two discrete AMD FirePro workstation GPUs. For now, they’re also claiming the lead in the hard fought and never ending graphics performance battle with rival nVidia via the dual GPU Radeon R9 295X2. However, they’ve still got a way to go in order to catch their rival when it comes to graphics market share.

On the computer side, AMD has been suffering a bit more. Many of its recent successes were in the low cost consumer notebook segment—one of the tougher markets to be in and one that’s been declining even more rapidly than the overall PC market. The company has made some important new hires on its CPU architecture team over the last year or so, however, and hopes are high a completely re-architected next generation mobile APU, “Kaveri,” expected to launch later in the first half of this year will have a positive impact. In addition, the company is planning some stronger forays into the commercial PC space, which has been a traditional weak point for AMD, but which is also the most promising segment of the PC market. Finally, the company has announced two low cost APUs—codenamed “Mullins” and “Beema”—will ship sometime in 2014 with both significant performance-per-watt improvements over their predecessors, as well as the rather intriguing prospect of an on-chip, ARM-based security co-processor that leverages the ARM TrustZone. While full details haven’t been released publicly yet, the concept appears to ensure a secure boot and provide for the creation of a trusted execution environment, both of which will likely be well received in a market becoming increasingly security conscious.

Moving forward, the company is also putting more emphasis on the little understood, but very large, embedded computing market (think gambling machines, medical devices, ATMs, etc.), the custom silicon space (game consoles), and is even attempting to re-establish its previous glory in servers with both its SeaMicro “data center in a box” architecture as well as forthcoming ARM-based server CPUs. The company continues its efforts around heterogeneous system architecture (HSA) as well, which is driving for standardized ways of leveraging GPUs (and APUs) — not just for graphics but other computationally intensive applications.

All told, it’s becoming increasingly obvious AMD has moved well beyond any danger zone and is headed towards a brighter future. To be clear, numerous challenges remain—particularly if we see a sudden drop off in game consoles or if some of their future CPU designs fail to close the gap with Intel—but like the musicians who populate the company’s hometown of Austin, TX, it seems AMD is getting back into its groove.

The Mobility Myth

The near constant discussion of mobility and various types of mobile computing can easily give people the impression nobody cares about or uses anything but tablets, smartphones and notebooks. In reality however, that viewpoint couldn’t be further from the truth, especially when it comes to business use of various computing devices.[pullquote]On a regular, day-to-day basis, the device that doesn’t just lead but dominates the usage of US business employees is the good ol’ desktop PC. Yes, even today.”[/pullquote]

On a regular, day-to-day basis, the device that doesn’t just lead but dominates the usage of US business employees is the good ol’ desktop PC. Yes, even today. In fact, just last week my firm TECHnalysis Research completed a survey of 750 people employed across three company sizes: small (10-99 employees); medium (100-999) and large (1,000+). The group consisted of a mix of employees (150 per company size) and IT decision makers (100 per company size). The primary purpose of the study was a pulse check on the current state of BYOD (Bring Your Own Device) programs—more details on that in next week’s column—but part of the survey questionnaire also covered basic issues around what devices people used to do their work.

Both employees and IT decision makers were asked to select from a list of choices which devices they or the employees at their companies used to do any aspect of work related to their jobs. The results, as shown in the chart below, may be somewhat surprising.

BYOD Devices Used Chart

© 2014, TECHnalysis Research, LLC

Though the numbers differ between the two groups, both employees and IT decision makers put company purchased desktop PCs as the most commonly used devices in their organizations. For employees, personally purchased smartphones were a reasonably close second, while IT department representatives thought those were a distant third and company-purchased notebooks were second. Interestingly, IT decision makers believed personally purchased tablets were in higher use than employees actually said—and by a decent margin. Apparently, IT has bought into the myth of the tablet’s enormous role in business even more than the IT press has led them to believe.

And let’s not forget this data comes from the US—the most mobile-focused and tablet-friendly market in the entire world. If you were to ask these questions to employees and IT folks in companies around the world, the results would be even more lopsided towards PCs and desktops in particular.

But the story for PCs in business gets even better. Employee respondents were then asked to divide their total work time across the list of available devices—in other words, not only what they use, but how often they use it. These results, which represent the average percentage of the work day each device is used across a sample of 450 employees, are telling.

Overall Device Usage Chart

© 2014, TECHnalysis Research, LLC

Here, the work purchased desktop PC, and PCs overall, absolutely dominate. Even if you add together both personal and work purchased tablets and 2-in-1 devices (which are arguably PCs anyway), the total time spent on tablets is only 9% on average, with smartphones taking up another 13.3%. The remaining 77.7% is spent working on PCs, with desktops representing just over 50% of all time spent on computing devices. While arguably that number is down from 100%, it’s still a staggeringly lopsided battle that shows the PC is far from dead in business environments and the potential fear of tablet cannibalization on business PCs was (and still is) dramatically overblown.

Just to put a cherry on top of this week’s PC cake, the survey also asked IT decision makers about their plans for future internal application development by both device type and platform. The final option in each case was to say the company was not currently planning to develop applications for a given device type. The results? Only 7% of respondents said they were not planning to build any new PC applications, but 12% said they had no new plans for smartphone applications, and 13% said they had no new plans for tablet applications.

To be clear, mobility and mobile devices are a critical part of today’s business computing landscape. But the level of coverage and focus they receive is clearly out of line with the frequency of their actual usage. That’s a point that’s easy to forget, but definitely worth remembering.

BYOD Dilemma: Devices vs. Data

Though we’ve started to see a small bit of retrenchment from the most extreme examples, it’s clear the BYOD (Bring Your Own Device) phenomenon in the workplace is here to stay. Younger and older workers alike have become accustomed to using their own devices to do their work, particularly when it comes to smartphones and tablets, and IT departments continue to refine policies and procedures to adjust to this new reality.

But one of the remaining debates within BYOD is determining what, exactly, IT needs to manage. Traditionally, IT focused on the management of the physical device, especially with PCs, doing everything from tracking the actual location and status of corporate-owned PCs, to ensuring all the latest OS, anti-malware and application patches were installed. BYOD adds several new twists to that equation, however, with a significantly wider range of device types and platforms to support, as well as potential differences in ownership. Toss in the increased mobility of many BYOD devices, and the growing usage of all devices for personal applications and you have the recipe for a very messy situation.

Not surprisingly, many IT departments, and vendors serving those communities, initially fell back on the types of solutions they were comfortable with: tight management of the device and everything on it. Large numbers of companies built MDM (mobile device management) solutions to essentially bring the kind of strict management policies commonly associated with PCs to the world of smartphones and tablets.

But several problems popped up fairly quickly. First, people change their smartphones and tablets more often than they do their PCs, making it virtually impossible on any given day for a corporate IT department to really know what types of devices were walking in and out of their doors (let alone what kind of information was getting copied onto those devices). Second, the need for more granular control became readily apparent. The notion of remotely wiping devices of all data on them—particularly those that may have been purchased by the employee—surprisingly (cough, cough) did not sit well with most people. In addition, many employees discovered they could use other types of mobile applications to open, edit and/or use their work-related data, making the range of applications in use tremendously more varied than it had ever been. This situation also created the need for yet another type of management tool: MAM (mobile application management). Topping things off is the fact employees have now become much savvier about how to work around any limitations IT might impose.

The end result is the somewhat chaotic mess we find ourselves in today. In fact, things have gotten so out of control in some environments, there are increasing reports of companies starting to reign in at least some of the BYOD freedoms they previously doled out to their employees. After numerous refinements to existing tools and a multitude of new products and concepts—including the appealing idea of separate work and personal “containers”, each of which can be separately accessed and managed—things do seem to be moving in a better direction.

I would argue however, that the real problem stems from looking at this challenge from the wrong direction—at several different levels. Instead of looking from inside IT out to these devices, the real answer is looking inward from the individual employees and whatever set of devices they happen to be using at a given time, to the corporate data and applications rightfully controlled by IT. The keys to the kingdom, so to speak, are access to the data and applications employees need to get their work done. By essentially assigning different “keys” to different levels of data and access, and then doling out those “keys” to the appropriate people, IT can focus specifically on the assets they really need to manage, while still giving the freedom to employees to use whatever devices they want in order to get their work done.[pullquote]The keys to the kingdom, so to speak, are access to the data and applications that employees need to get their work done.”[/pullquote]

Both vendors and IT have quickly learned that adding friction to a process employees feel they need to be productive is an open invitation for those employees to work around them. So, rather than creating unnecessary and unproductive tension between employees and IT, both solutions vendors and IT departments need to create solutions that keep things clear to everyone — it’s not about the devices, it’s about the data.

Qualcomm’s Evolving Story

When most people think of Qualcomm, they tend to think of modems and cellular radio technology. After all, that is how the company began and it still forms a large part of their approximately $25 billion in fiscal 2013 revenues.

But the company does much more. They have been successfully targeting Intel and other CPU/GPU companies with their Snapdragon line of mobile application processors and Adreno graphics engines for several years now. They’re even starting to make efforts in the sometimes murky world of chip branding, thanks to its clever Snapdragon marketing campaign. Plus, like most large, successful silicon companies, Qualcomm is increasingly focused on software. From radio drivers and firmware to DSP (digital signal processing) algorithms and auto infotainment systems, engineers at Qualcomm shipped an impressive 3.3 billion lines of code in 2013.

For years, much of Qualcomm’s financial success was due to a very strong set of core mobile radio-based patents that it vigorously defended as the need arose. Royalties from these patents provided the cash necessary for the company’s aggressive expansion into new types of markets and opportunities, particularly with the explosion of the smartphone market over the last few years.

But with an expected slowdown in smartphone growth rates, rapid declines in smartphone ASPs (average selling prices) and increased competition not only from other silicon makers but the increasingly “vertical-ized” supply chains of mobile phone makers themselves, the question arises as to where the next era of growth could come from, or if it comes at all. The company recently changed management—with long-time Qualcomm veteran Steve Mollenkopf taking the CEO reins from Paul Jacobs, who will continue as Executive Chairman—so many are expecting to see the company’s strategy begin to slowly evolve to address some of these issues.

While there are no easy answers, to the company’s credit, they’ve extended themselves across a wide range of potential new opportunities, from their virtual reality Vuforia initiative to the Qualcomm Mirasol display-driven Toq smart watch to their Gimbal context aware platform, which among other things, can leverage digital beacon technology. Some of the most intriguing options revolve around the development of software algorithms that can interpret data generated by the wide variety of sensors and inputs expected to make it into future generations of both smartphones and wearables. Astutely dubbed a “digital sixth sense,” this software promises to bring a level of situational relevance and intelligence to devices that should make them much “smarter” smartphones and smart wearables. Details on exactly how this capability will be built into future mobile platforms is still a bit unclear—especially because it would seem to demand integration into mobile operating systems, which Qualcomm does not control—but the concept is clearly appealing.

Qualcomm has also leveraged its industry leadership position to assert itself in some important industry standard discussions, most notably its open-source AllJoyn initiative to help connect at least some of the “internet of things” (IOT). AllJoyn is an important initiative with the potential to help avoid the “Tower of Babel”-type challenges currently facing the connected digital home and the wider IOT marketplace because it helps define the types of messages and means by which they can be communicated across different devices. To date, Qualcomm has done a good job of evangelizing the standard, but it’s going to take the addition of several more big industry players to really get it off the ground. Given the importance and necessity of solving this problem—for the sake of the entire IOT industry and opportunity—let’s hope they’re successful.

In the short term, Qualcomm can continue to leverage the expected growth in the mobile market, but more importantly, longer term, the company has placed a number of interesting bets that look to position it well for the future.

A Wearables Forecast

Analyzing and discussing a product category from afar is always a fun exercise, but for me, the pedal doesn’t really hit the metal until I put together a market forecast. As an industry analyst, building forecasts is part of what I do and the process helps me crystallize my thoughts about the direction I believe a market is taking. To do it well, you need to think about definitions, categorization, key component trends, new technologies, consumer trends, big vendors, small vendors and more.

I’ve put together many forecasts for PCs, tablets and smartphones over the years, but recently completed the task of building my first forecast for the smart wearables market. Doing this one was a particularly interesting exercise because of the relative newness of the category and the rapid speed at which it’s evolving. Of course, it’s also a very hot topic now—witness all the recent columns written here on Techpinions—so that made it fun as well. But the other reason it was interesting is because of how wide ranging the existing forecasts are—they are truly all over the map, which simply confirms how dynamic a marketplace it currently is. In fact, because of this, I also built three different forecast scenarios with three different sets of numbers that represent where the market could go: a baseline (most likely) scenario, an optimistic scenario and a pessimistic scenario.

But enough preamble…onto the numbers.

Despite all the hype, my expectation is the worldwide market for smart wearables (my baseline view) will be decent but not as large as many have predicted, at least in the near term. Specifically, I’m forecasting the combined total of the wearables market—and I’ll explain exactly what I mean in just a bit—will be about 9.9 million unit shipments this year, generating just under $2.1 billion dollars in worldwide revenues. The US market will represent a large majority of worldwide shipments and revenues with 7.7 million units in 2014 and $1.7 billion in revenues.

I define smart wearables as “intelligent devices worn somewhere on the human body that generate and/or display and/or communicate digital information.” To be clear, that digital information may be no more than a vibrating notification that a new text message has arrived on your phone, but it is information nonetheless. In order to make sense of the market, I chose to break it up into six subcategories that are determined primarily by where on your body the device is worn: “headworn” wearables, such as smart glasses; “wristworn” wearables, broken up into two separate categories for smart watches and smart bracelets; “earworn” wearables, such as smart headsets; “fingerworn” wearables, such as smart rings; and a tiny catch-all “other wearables” category for things like necklaces, pins and other non-standard (at least at present) form factors.

By 2018, the end of the five-year forecast period, my baseline forecast has worldwide wearable shipments across all six categories totaling just over 70 million units and generating approximately $12 billion in revenues. For the US, the numbers are about 37.1 million units and $6.2 billion in revenues. The chart below graphically depicts the worldwide shipment numbers split by category.

Wearables Forecast Chart

As you can see, I expect the “wristworn” categories of smart watches and smart bracelets to be the most successful by far, with the lower cost smart bracelets owning the largest portion of the wearables market throughout the forecast period. Of course when it comes to wearables, there are still more questions than answers, but it’s going to be an interesting market to watch.

If you are interested, a complete 49-page forecast report on the US and WW smart wearables market is available for purchase through my company, TECHnalysis Research.

Measuring Success In Wearables: It’s Thousands of Thousands

The wearables market continues to capture the imagination of the tech industry, press, and investment community. (A few actual customers also seem interested, although they almost seem secondary at this point…) Even early on, it seems clear that the wearables market is going to be significantly different from other device categories that have preceded it, such as smartphones, tablets, etc.

By definition, wearables are devices you wear on your body. Doing so creates a more intimate connection between an individual and a device and that in turn drives a more personal perspective on those devices. Plus, I believe it drives a significantly greater need for individualization and differentiation in the product. In essence, wearables become akin to fashion accessories. Just as it’s unlikely you’ll bump into two people wearing the exact same set of clothes or the same jewelry—thanks to the enormous variety of different clothing and jewelry designs and manufacturers—I believe you’ll see demand for an unusually wide range of different wearable designs and “looks”.

From a manufacturing and supply chain perspective, this represents a tremendous challenge to the traditional tech market approach. A successful tech product SKU (that is, an individual model) sells in the millions of units and typically leverages a shared set of components with a few other related SKUs from the same vendor. With wearables, however, success is likely to look radically different. Instead of a few units doing millions, there’s likely to be hundreds or even thousands of SKUs, each selling thousands of units. That is a dramatically different business model than what the tech industry has had to face and one that’s likely going to create big supply-chain headaches for companies both large and small.

Having spoken with a number of up-and-coming wearable companies over the last several weeks, it’s becoming clear this challenge is something many of them are already facing. A few have talked about developing strategies to deal with this new reality, but all acknowledge it’s a tough problem to solve.

For big companies, this could prove to be very difficult. While I’m certainly not naïve enough to think we won’t see a few big hit products follow the more traditional model (iWatch, anyone?), I do expect even in those cases, the demands for customization and personalization are going to be significantly higher than previously experienced. It might be OK if all your friends and colleagues have the same phone as you, but do you really think everyone’s going to want to wear the same watch? Even now, arguably, the “coolness” factor of having access to some of the early wearables like Google Glass and even the Pebble Smart Watch makes a bit of a statement, but how long will it be until too many people have them and they’ve lost that edgy style?[pullquote]It might be OK if all your friends and colleagues have the same phone as you, but do you really think everyone’s going to want to wear the same watch?”[/pullquote]

And this leads to yet another challenge bound to plague wearables—the fickle nature of fashion. Is that device or design in style or out of style this season? Laugh now, but my guess is, that’s going to be another completely new problem wearables will introduce to the tech industry.

Concerns aside, it’s clear there’s a lot of excitement around the wearables market, and I’m confident we will see some pretty amazing new things over the next few years. But, for those who are eager to jump into the latest new thing, I really think you need to look before you leap.

Intel Strategy Moves Forward

After a long period of relative stasis, it’s becoming clear that relatively new CEO Brian Krzanich and his leadership team are driving forward with some important new strategic directions for Intel. The company is moving aggressively to shed its image as little more than a PC and server component supplier—a welcome and long overdue move. They recently unveiled a forward-looking guiding principle/strategy catch phrase, “If it computes, it does it better with Intel,” which is a concrete reflection of their desire to extend their reach and influence to other new markets.

The company previewed some of these ideas at CES, where Krzanich unveiled a complete line of Intel designed (though not Intel-powered) wearable devices, as well as board-based products. The new boards are named Galileo, for the burgeoning “maker” market, and Edison, which the company hopes to see embedded into a whole new generation of wearables and other “smart” devices (think Internet of Things, or IOT). The Galileo is made more interesting by the fact it apparently only had an 8-week gestation period from idea to shipping product—a completely unheard of time frame for the “old” Intel. The company was late to the game for mobile phones and other mobile products, so it’s good to see them getting aggressive early on in what are expected to be higher growth areas.

One of the more interesting aspects of some of these recent announcements—based on comments Intel leaders have made—is the company is willing to acknowledge it’s not entirely sure where some of these new markets are headed—a refreshingly honest perspective—yet it still wants to actively participate to help drive innovations. Whether they actually can remains to be seen of course, but there’s clearly a new perspective from the top on how the company can and should proceed.

The company has also recently started to emphasize their developments outside of CPUs, with a particularly strong focus on communications. Again, this is also long overdue as the company is virtually unknown as the number two player in the modem market. They’ve also been making the point they want to be seen as an SOC (system on chip) company, not just a CPU company. The company has talked in detail about their achievements in LTE modems and mentioned improvements in process and packaging technology that could offer improvements for flash memory and other non-CPU components. Given their strong interest in wearables and IOT, it wouldn’t be surprising to see the company making investments in technologies such as sensors and wireless power, both of which would help them offer a wider range of key components for future SOCs. In fact, they may want to consider broadening their new strategy catch phrase to say, “Make your devices smarter and better connected with Intel.”

In the realm of PCs, its traditional stronghold, Intel also continues to drive forward, with plans to drive greater awareness for portable all-in-ones, like Dell’s XPS18, as well as continuing the push for 2-in-1 devices. The company has also targeted 40 million Intel-based tablets for the year—an aggressive target that, thanks to its many investments in Android compatibility, it could very well achieve. For PCs, things are going to be tougher because many of the same challenges that have plagued the PC market remain. But even here, Intel seems to be approaching things with a new, more realistic attitude by focusing on several potential opportunities for interesting sub-segments instead of a complete PC industry turnaround.

All told, Intel’s attitude and approach seems to reflect the beginning of some important changes stemming from the recent transition between former CEO Paul Otellini and Krzanich. The company’s view is arguably getting broader, deeper and more open than we’ve seen in some time and I for one hope it represents a sign of things to come.

IOT: Islands of Isolated Things?

In addition to wearables, the other hot topic in tech these days is the Internet of Things, or IOT. The concept behind IOT is certainly an intriguing one—in the future, there will be tens of billions of devices (about 10x the current installed based of PCs, smartphones and tablets combined) all connected to the Internet and, at least to some degree, to each other. Most of these devices are expected to be relatively simple sensor-based gadgets or components that generate vast amounts of data that needs to be stored and analyzed in the cloud.

Of course, if you’re a company that sells networking equipment, connectivity solutions or storage, this is a particularly grand vision because it says, “Hey, don’t worry if the sales of traditional computing devices is slowing down, there’s an even bigger opportunity coming down the road.” Not surprisingly, companies like Cisco, Intel, Qualcomm and lots of others are very gung-ho on IOT and its potential.

To be fair, much of their enthusiasm is justified. We’ve already started to see a number of intriguing and cost-saving implementations of IOT technology being deployed today. For example in the transportation business, delivery trucks and tractor trailers are now loaded with sensors to deliver data over wide-area network connections and, post-analysis, can deliver important feedback to the drivers that help better plan their routes, saving gas, time and money. Similarly, some auto insurance companies are using devices installed in cars which spit out a stream of information on the customer’s driving habits including speed, location, etc., to help deliver lower-cost premiums to good drivers—or, at least those who fall within the prescribed rules they’ve set up to identify lower-risk drivers.

As compelling as these examples are, however, the problem is they (and others like them) are relatively modest-sized and essentially isolated implementations. Now, that’s not a problem for these specific vertical niches, but to reach the kinds of numbers being bandied about for IOT, it will literally take a million of these different deployments to be made and that just doesn’t seem feasible in the near-term future.

The real challenge is there isn’t a common language for all these different devices to speak. If the industry wants to reach the scale it believes is attainable (and, for the record, I believe the numbers are possible as well—just not sure of the time frame), it needs to figure out ways to get both more and larger deployments. Right now, it’s essentially like a Tower of Babel where you have lots of types of devices, each speaking their own language—both in terms of data types, definitions, and protocols used to send those messages. Heck, we can’t even get all the devices in our homes to talk to each other, despite decades of trying. So how are all of these other devices possibly going to communicate with one another?[pullquote]Right now, the Internet of Things (IOT) is essentially like a Tower of Babel where you have lots of different types of devices, each speaking their own language—both in terms of data types, definitions, and protocols used to send those messages.”[/pullquote]

While it’s unlikely all the specific needs for potential vertical industries can be determined by a single set of standards, there’s no question in my mind that to even start the process of reaching millions of new “things” (let alone billions), significant industry-wide standards efforts around communications protocols, data structures and more need to get started—and soon. We have seen a few interesting efforts—including the Qualcomm driven AllJoyn initiative—but we need to see other larger players either join this organization or drive the creation of alternative or preferably, complementary initiatives that can start to build the links necessary to fulfill the dream of IOT.

If not, the next several years could lead to nothing more than some interesting, but isolated islands of things that fall far short of the industry’s expectations.

Wearables Cautionary Tale

Like many new industries, the smart wearables market is filled with lots of startups looking to create interesting new products and build a successful business. Unlike previous hot trend markets, however, the launch of the wearables market also happened to coincide with the rise of crowdfunding sites like Kickstarter and Indiegogo. It’s a fortuitous combination at many levels, because several of the unique characteristics of the wearables market—including the need for lots of experimentation, small production runs, modest price points, strong interest in personalization and customization, and the cutting-edge technology aspect of the devices—are a perfect match for individuals who peruse those sites, looking for the latest thing. Several of the more successful, or at least more interesting, wearables have indeed been launched on these sites, including the Pebble Smart Watch.

But having done a fair bit of digging around for new smart wearable devices on some of these sites, I’ve also come across a few products that have stretched credibility too far. I suppose that’s probably true of virtually anything that’s being showcased at these sites—it’s definitely a buyer beware type of environment—but I’m more sensitive to and cognizant of the tech-related products.[pullquote]Having done a fair bit of digging around for new smart wearable devices on crowdsourcing sites, I’ve come across a few products that have stretched credibility too far.”[/pullquote]

I’ve seen images and watched videos of supposed product demonstrations that were—to my eyes at least—pretty “doctored” up. I’m not going to name any specific names, but there are some tell-tale signs to be on the lookout for. In my case, being an analyst who has covered display technologies for many years and as someone who continues to follow those developments very closely, it was the displays that were the dead giveaways. For example, no one is mass producing a high-resolution, bendable color display that will wrap around even a good portion of your wrist. So, when I saw very attractive images of smart watches/smart bracelets that essentially consisted of exactly that, I knew that was a big red flag. In one case, the company representatives acknowledged that their prototypes only had black-and-white displays and seemed to imply they were lower resolution—which was likely true—but you had to read through a fair bit of material before you got to that rather important detail.

Similarly, some of the demonstrations I’ve seen of smart glasses show resolutions that are clearly much higher than current microprojection displays can achieve. The LCOS (Liquid Crystal on Silicon) display in Google Glass, for example, is only 640 x 360, which is less than good ol’ VGA resolution.

The challenge is that there are lots of great low-cost tools for doing high-resolution, lifelike 3D rendering and video special effects that even Hollywood specialists would have killed for just a few years ago. With enough time and talent, creative people can create their own “Minority Report” views of the world and the products that fit in them. Think about how many impressive “artist renditions” we’ve seen of forthcoming Apple or Samsung or Sony products, which sprang entirely from the minds of their creators with the help of some useful software.

I’m certainly not trying to imply that all, or even a large percentage, of the cool new products you see on crowd-sourced sites are a bit “juiced,” but as my mom and your mom probably used to say, “If it looks too good to be true, it probably is.”

The New Platform Battle

For decades now, debates have raged, developers have been wooed and dollars have been spent trying to convince the world of the value of various consumer-focused computing platforms. From the early days of Apple DOS, AmigaOS, Atari TOS, and MS-DOS; through the middle period of Windows and MacOS; to the modern battles of Android, iOS, Windows Phone and more, there’s probably more time and energy spent on these operating system issues than virtually any other aspect of modern computing.

While I don’t expect these ongoing skirmishes to end anytime soon, I believe we are on the cusp of a new type of platform battle that will start to make those debates less relevant. I’m referring to services platforms, or what I call a “metaOS”. The concept behind a metaOS is something that lives beyond (or above) the existing platforms that drive today’s devices (hence the name), yet can be accessed through them to achieve an end user’s goal: mapping a destination, communicating with a friend, accessing media content, sharing a file, or much more. Virtually all of today’s device platforms first offered applications with these capabilities and, over time, these applications have morphed into services that make these functions easier and/or faster to do.[pullquote]The concept behind a metaOS is something that lives beyond (or above) the existing platforms that drive today’s devices, yet can be accessed through them to achieve an end user’s goal.”[/pullquote]

The platform creators (Microsoft, Google, Apple) have built services that are tightly tied to their base platform, both to offer a more seamless experience and because they recognize an opportunity to monetize these services over time. In fact, business models built around this core concept of linking revenue-generating services to essentially “free” platforms.

But what happens if this binding link between device platforms and services is broken? To my mind, a very interesting and exciting next few years as companies are forced to reinvent themselves, reconsider with whom they partner (or acquire), and work to build a comprehensive metaOS-style offering that delivers a set of services that people want, regardless of the device platforms they currently own and use.

One of the critical turning points for this shift occurred at last week’s Mobile World Congress in Barcelona. Just prior to the culmination of its purchase by Microsoft, Nokia made the initially rather confusing announcement of a line of Android Open Source Project (AOSP)-based smartphones called the X series. Many have misinterpreted the news as somehow giving in to Google. (Apparently, including some who walk the halls in Redmond.) As has been thoughtfully explained elsewhere on this site, however, the announcement is actually a very clever strategic move on several levels. For the sake of my argument, I want to focus on only one aspect of it. By integrating Microsoft-owned services on top of a Google OS, Nokia (and presumably at least some people at Microsoft) redirected the focus of the conversation away from the device OS and onto the services platform. That one move, by itself, constitutes a dramatic shift in strategy for Microsoft and places a very big spotlight on the shift in emphasis that I mentioned at the beginning of this column—the focus on services that sit above and beyond a simple device platform.

Now, to be fair, there are a number of challenges associated with this Nokia/Microsoft move. First, most people still focus on device platforms because platform-specific applications are where they currently achieve their intended goals. Over time, however (and the exact timeframe is today’s $64,000 question), I expect we will see many of the most popular applications evolve into platform-agnostic services, partly because business models are expected to move this way. In fact, arguably, many of them (think Yelp, Facebook, What’s App, Instagram, etc.,) already have. Another challenge is that the quality of some of Microsoft’s services are not up to the standards of the competition, particularly around its media offerings. That issue, however, could be addressed with the right acquisition (or acquisitions).

But the Nokia X-Series news wasn’t the only announcement from MWC to highlight this shift towards services. The Jolla Sailfish OS announcement described a business model and an OS where services from various sources could essentially be plugged in, letting vendors create a product that came “prebundled” with whatever combination of services they felt their customers would want. So, for example, if a company like China-based Alibaba wanted to offers its customers a mobile phone with direct links to its ecommerce sites and included its electronic payment services in it, they could. (To be clear, there is no announcement of such a phone—just a possibility.) Now, Jolla has even bigger challenges to get to meaningful scale than Microsoft/Nokia do with their X-Series, but still, it’s an intriguing new alternative.

Yet another reason to think about this move away from platform OS’s and towards a service-based metaOS is the next set of devices: smart wearables. As discussed in my column from last week on smart watches, OS platforms on wearables are going to be almost irrelevant, but access to services will be critical, so the need for a set of services that can be accessed from any device is going to be increasingly important. Given the growing OS diversity in most people’s collection of “regular” devices (PC, tablets and smartphones), the demand for platform-independent services is just going to get that much stronger.

To be clear, the implications of this shift go well beyond a discussion about Android and Windows Phone. Apple, Microsoft, and Google, as well as lots of other major companies with popular services but without current device platforms (think Facebook and arguably Amazon) need to think about, and many likely will, organize a set of service offerings that people can access, regardless of their device platform. Of course, some may choose to keep their services with only their platform, at least in the short term, but ultimately I believe the companies who are willing to move to multi-device platform support will gain some key advantages that promise to reshape the “metaplatform” wars for years to come.

Watch What Happens

One of the hottest topics in personal technology these days is the smart watch, one of several new categories of smart wearable devices. The idea with a smart watch is to offer tidbits of “glanceable” information and various types of notifications within a small, lightweight form that people are already accustomed to wearing on their body.

Conceptually, a wrist-worn computing device is an intriguing idea that carries with it not only the back to the future visions of a Dick Tracy-style communications device, but the promise of easy access to information and—thanks to the potential of integrating various sensors—the introduction of new data types that translate characteristics of both the physical world and our own bodies into the digital realm. If you really think about it, that’s pretty heady stuff.

Unfortunately, the reality of first generation smart watches has fallen fall short of this ideal. Instead, what we’ve seen is a number of very techy-looking products that tend to offer simple duplications of what our smartphones already do: notifications that someone is calling, displays of texts and social media updates, playing back music, etc. While some of those capabilities are certainly OK, we haven’t seen anywhere near enough applications and capabilities that take advantage of the smart watch form factor and justify the high price points. Most of the existing smart watches are essentially very expensive smartphone accessories—hence their limited appeal to date.

But for all the challenges and debates about smart watches, there’s one topic that has generated a completely unnecessary amount of discussion: smart watch operating systems. So, let me be clear, a smart watch OS does not matter.[pullquote]For all the challenges and debates about smart watches, there’s one topic that has generated a completely unnecessary amount of discussion: smart watch operating systems. So, let me be clear, a smart watch OS does not matter.”[/pullquote]

Remember, a smart watch is not a smart phone (well, except for a few companies trying to essentially put an entire smart watch into a wrist-worn form factor—given all the horrendous battery life tradeoffs that entails, all I can say is good luck to that…). The need to run the same OS as a smartphone, therefore, is completely unnecessary. An OS essentially provides a means to run compatible applications and a method for interacting with a device, and neither of these two key points translates between a smartphone and a smart watch. Most smart watches have screens that are less than 2” diagonally and, even if you could squeeze the same resolution from a smartphone into that tiny size, you wouldn’t be able to read it or interact with it as you can on smartphone display. In addition, the hardware platform that’s running inside a smart watch or other wearable is likely to be very different from that found inside a smartphone. So, the concept of OS and application compatibility on a smart watch has no meaning or value. Plus, smart watches are designed to be glanceable devices that you can quickly view from a distance. Bottom line is that applications and their interactions have to be completely rethought for smart watches and that can just as easily be done on a “new OS” (as long as there are reasonable development tools for the platform) as an existing one.

As a result, Samsung’s decision to move its second generation Galaxy Gear 2 smart watch to Tizen (instead of Android) is actually a good thing because it both breaks the inevitable functionality duplication that reformatted Android apps would have, and it helps position Tizen as a viable new alternative in the wearables area. But it’s also not about building up a different set of competing OS’s. Does anybody really know or care what OS is running on the popular Pebble line of smart watches? (For the record, it runs its own Pebble OS, now up to version 2.0.) No, because the key point is that Pebble has created a variety of developments tools that allow programmers to create interesting applications specifically targeted for smart watches. Similarly, I would not be the least bit surprised to see an Apple iWatch running something other than “traditional” iOS.

What does and will matter about smart watches (and all wearables, for that matter) is the ability to communicate with smartphones, tablets and even PCs of all operating systems and share information back and forth between them. The industry needs to leverage and, in the case of sensor-generated information, develop standard data types and means of communicating these data types across all platforms if we really want to see the smart watch industry survive past its current “fad-ish” stage. The open-source AllJoyn initiative started by Qualcomm looks to be an intriguing step in that direction and I’ll be very curious to “watch” where it goes.

Talkin’ ’bout Touchpads

A great deal has been written recently about the challenges that the PC market faces in comparison to other product categories, such as smartphones and tablets. But there hasn’t been much discussion about some of the self-inflicted wounds that PC makers have placed upon themselves. In the consumer market, in particular, many people find PCs to be more difficult to use than competitive products. Part of the problem, of course, has to do with the operating systems and types of applications available on the different types of products.

I would argue, however, that another part of the problem has to with the execution of certain principles long associated with PCs, especially with regard to input. Poor quality touchpads, in particular, have become particularly problematic and have turned what would otherwise be great, highly productive PCs into devices that all too frequently end up causing enormous frustration among end users. How many of us have had to retype words, sentences or even entire paragraphs (on some days, seemingly, every few minutes) when we somehow brushed against the touchpad, ending up selecting a chunk of text and started typing over it before we even realized it was happening? So frustrating![pullquote]Out of the box, I’ve run into way too many PCs whose useful value has plummeted in my mind because of the faulty performance of its touchpad.”[/pullquote]

It’s unfortunate, really, because generally speaking, touchpads have made great strides over the last several years. They’ve evolved from tiny, hyper-sensitive squares that were difficult to control to large surfaces that can not only accept basic pointer movements but right and left mouse-button clicks, scrolling and even multi-finger gestures. Part of the problem is that as the touchpad sizes have increased, so has our ability to unintentionally engage them into performing actions we never intended. Virtually all touchpads now come with customizable control panel software that enables palm rejection and other technologies designed to reduce these accidental encounters and, in many cases, tweaking those settings can make a big difference. Out of the box, however, I’ve run into way too many PCs whose useful value has plummeted in my mind because of the faulty performance (or poorly chosen preset settings) of its touchpad. In fact, it’s gotten so bad, that touch panel performance (or rather, lack of interference) is now one of my key metrics for measuring the overall performance of a PC.

Happily, not all touchpads suffer these kinds of challenges. Apple, for example, has done an excellent with its touchpads over the years, giving MacBooks some of the first large-sized, touch-integrated, gesture-friendly touchpads available for PCs several years ago and continuing to offer a rock-solid touchpad experience ever since. In fact, without starting a religious war, I think it’s relatively easy to even find Windows zealots who will acknowledge the general superiority of the MacBook touchpad experience compared to most Windows-based PCs. To be fair, there are also certain models of PCs from most of the major PC vendors that offer a high-quality touchpad experience as well, but the problem is it’s really hit and miss. If you dig into the specs of a machine and can determine the touchpad supplier for a given model that can help—I’ve generally found Synaptic touchpads to offer a better experience—but even there, the default settings of the touchpad driver may not be well suited to the way you type or work on your PC.

As with many things in life, it typically comes down to a matter of costs. Higher-quality, better performing touchpads cost a bit more than some of the alternatives, and in the hyper price-sensitive, profit-starved PC business, literally every penny counts. But in my mind, the at most $2-$3 difference in cost is well worth it—in fact, I would much prefer to compromise on virtually any other element on a notebook than the touchpad, except perhaps the screen. PC vendors do have some difficult design tradeoffs to make these days, especially given the challenging nature of the market, but let’s hope that more of them put the appropriate amount of attention on the elements that matter most.

The Multi OS Conundrum

The worldwide market for smart connected devices continues to be a battleground not only for device makers, but for the companies that create the operating systems and ecosystems that power those devices: most notably, Google, Apple and Microsoft. Each of the companies currently offers two major OS choices: Android and Chrome for Google, MacOS and iOS for Apple and Windows and Windows Phone for Microsoft. While people have argued that some of these OS’s will merge over time, I believe we will continue to see these six choices (as well as a few others—though I expect the others to remain relatively small) for at least the next five years.

As I built the TECHnalysis Research Smart Connected Devices forecast that I first referenced in last week’s column, I used that assumption to create a forecast for operating system share through 2018, both in the US and WW. Perhaps not surprisingly, I believe Google will continue to dominate the worldwide OS share through 2018, particularly given the success of lower cost smartphones running Android that are getting popular in many emerging countries. However, the news is not all good for Google, as I believe the company’s share of total smart connected devices will actually peak in 2014 at 63% and then decline modestly to 57.1% in 2018.

The reasons for this expectation are all around the theme of this week’s column: the overabundance of OS choices (as well as the expected slowing growth for tablets and even smartphones discussed last week). Apple may not ever go for the low-end of the tablet and smartphone markets, but there’s no question that they will widen their reach into emerging regions and take some share in those critical markets. Also, while Samsung’s recent announcements with Google would certainly suggest there isn’t much hope left for the Tizen operating system, other low end alternatives, including Firefox OS and perhaps even Jolla or some other Linux-based variant will likely become an important Android alternative in these emerging markets. I even believe Nokia’s strong feature phone presence in these regions could lead to Windows Phone gaining some ground if the company is smart about transitioning the tens of millions of Nokia feature phone users over to low-cost Windows Phones. Finally, there’s also the big concerns about the ongoing splintering of Android, and even the possibility the company will battle itself by bringing Chrome over to the tablet market. The resulting worldwide market view is shown below.

WW SCD Shipments by OS

Of course, the story in the US is very different. Here there is a much closer race between Google, Apple and Microsoft and other alternatives are nearly non-existent. I do expect that Google can maintain a very modest lead over Apple throughout the forecast, but it will be very tight. Microsoft, on the other hand, will continue to lose share due to the struggling PC market, but I believe they will gain modest share in tablets as more of them are deployed for business purposes (the only part of the US tablet market I forecast to grow between now and 2018) and if they can build on the modest momentum they have started to create around Windows Phone in the US market. The chart below shows my operating system market share forecast for the US.

US SCD Shipments by OS

Regardless of where the exact figures end up, there’s no question that the multiplicity of OS choices is going to continue to be a serious challenge for app (and application) developers. Admittedly, not all OS vendors are going to necessarily want to be on six (or even more) platforms, but the prospect of having to support 3-4 different operating systems is a very real one that will many software vendors will have to face.

If you’re interested in seeing the highlights of the new TECHnalysis Research forecast document (which covers significantly more than I could cover in a single column), you can download a free copy at http://www.technalysisresearch.com/sample_research.html.

Computing Redefined: A Smart Connected Devices Forecast

The market for smart connected devices is changing and it’s doing so at a rate that’s even faster than most people realize. In the process, the whole conception of what computing is, where it happens and even what means is changing and evolving.

Let me put it another way. This year, my firm TECHnalysis Research predicts that the 2014 shipments of large smartphones (those with screens 5” and larger—commonly called “phablets” but perhaps better coined “mobile connected devices”) will far outsell both small tablets (those with under 8” screens) and even notebook PCs. Specifically, we are forecasting that worldwide phablet unit shipments will reach approximately 240 million in 2014 versus 173 million notebooks and 158 million small tablets. That’s a seismic shift that will have profound implications on branded device vendors, component suppliers, ecosystems, applications and app development, and even regional influence. We’re going to see an increasing influence on mobile operating systems, developing markets and computing devices that fit into your pants pocket or small purse.

In the US, the story isn’t quite as dramatic, as large smartphones have been a little bit slower to reach mass appeal, but even by 2015 we expect large smartphones to outship notebooks in the US by a margin of 37.5 million to 35.9 million and by 2017 we expect them these mobile connected devices to outsell small tablets in the US (41.9 million versus 41.5 million).

The charts below show our view of the entire smart connected devices market (the combination of PCs, tablets and smartphones—it’s a term I coined while at IDC), split by the six key subcategories: notebook PCs, desktop PCs, small tablets (under 8”), large tablets (8”+), small smartphones (under 5”) and large smartphones (5”+). The top graph shows the WW numbers and the second one shows the US numbers.

WW SCD Shipments by Type, Feb. 2014

US SCD Shipments by Type, Feb. 2014

 

In addition to the major transitions in device influence show by these graphs, one of the other key takeaways is that the total smart connected devices market is starting to stabilize and show much more modest growth, especially in the US. The fact is the market for these device categories are all starting to saturate, as people hold onto their devices longer and the need to upgrade is reduced. PCs were the first to suffer this fate, but we believe it will move over to tablets and even smartphones by the end of the 5-year forecast period—again, especially in the US.

As a result, the only way vendors can continue to grow within these categories is to steal share from one another. We believe this is one of the many reasons Apple is likely to enter the large smartphone market later this year. Demand for these devices is particularly strong in the regions where the company wants to grow and even in the US, it will be necessary to help them maintain their share.

The device industry has been on a treadmill of seemingly never-ending growth for decades, but we believe that era of unimpeded growth will be coming to an end by the end of this decade. Of course, many device vendors, ecosystem providers and supply chain partners will transition over to wearable technology and other yet-to-be-discovered product categories in the interim in order to compensate for this change. However, this maturation of core computing devices into a more mature, slower growth industry is bound to bring with it some other unexpected changes that promised to keep this space an exciting and interesting one to watch.

If you’re interested in seeing the highlights of the new TECHnalysis Research forecast document (which covers significantly more than I could cover in a single column), you can download a free copy at www.technalysisresearch.com/sample_research.html.

The Apple Problem

Apple’s most recent quarterly earnings, as usual, have generated an enormous amount of press, a staggering amount of pontificating and lots of interesting questions. On the one hand, the initial after hours market reaction has been swift and to the point: pushing the shares down over 8% at one point last evening—the equivalent of a staggering $40 billion in market value. Apple apologists, on the other hand, are equally quick to point out the incredibly important role that the company and its products continue to play by highlighting lifetime sales, device usage, ecosystem health and other interesting, if not always particularly relevant, factoids. The company itself points out that the underlying health of the business is better than the numbers might first suggest.

Of course, the numbers themselves are, by any objective measure, not bad at all. The highest iPhone and iPad sales ever, a 19% increase in both Mac sales and iTunes store revenue is something that most companies would be incredibly happy to have. But, this is Apple and when it comes to Apple, all bets are off—whether you’re on the side trying to push them up or the one trying to bring them down (interestingly, there don’t seem to be a lot of people in the middle on this one…). I’ve argued for a while that, as far as the market goes, Apple got treated unfairly on its wild ride up and equally unfairly on its big slide down a year or so back.

The real issue here—as it often is with Wall Street—is about expectations. Apple was expected to do better on iPhone sales and was certainly expected to give higher guidance for next quarter, especially after the potentially ground-breaking deal with China Mobile. (Remember: with stock prices it’s virtually never about the absolute numbers, it’s about how things do against what “the street” wanted to see.)  [pullquote]From the time I first saw them at the launch event in Cupertino, the Easter Egg-like pastel colors of the 5C struck me as something that would have limited appeal.”[/pullquote]

But beyond these expectations, there clearly were some challenges with Apple’s iPhone numbers—specifically, one problem: the 5C. Though no details were given, it’s clear that the company had more 5Cs than they needed and not enough 5Ss. As I watched my Twitter feed during the earnings call I saw lots of people offering their own views as to why this may be the case—including the lack of new functionality, pricing too close to the 5S and so on—but no one even mentioned what seems to me, at least, to be blatantly obvious: it was the colors of the phones themselves. From the time I first saw them at the launch event in Cupertino, the Easter Egg-like pastel colors of the 5C struck me as something that would have limited appeal. I don’t claim to be a color expert of any sort, but heck, I would’ve even preferred to see a return of Bondi Blue.

But the challenges that Apple faces go well beyond colors. Though Apple loyalists like to point out that market share doesn’t matter or isn’t relevant anymore (I guess it only matters when you’re winning—interesting how things get turned around over time…), the truth is, market share does matter. It may not matter from a global total smartphone or tablet perspective, but it certainly does when you start to break things down by countries by demographics or by other important metrics. In this regards, several critical trends are conspiring to create some strong headwinds for Apple. First, most of the growth in both the tablet and smartphone markets over the next few years is going to be in developing regions where incomes are lower, subsidies from telcos are much less common, smartphone lifetimes are expected to be longer and local domestic brands still have a lot more influence than large multinational brands. (High-end smartphones are saturated here in the US and Western Europe, so it wasn’t terribly surprising to hear Apple say that North American sales were down in the quarter.) The critical test here will be how the iPhone fares with even the upper middle class in Tier 2 and Tier 3 cities in China. Given the strong preference for local brands like Huawei, ZTE, Lenovo and CoolPad, as well as the strong in interest in “phablet”-size phones over there, this could be a serious challenge. Presuming the iPhone 6 will have a larger screen, this challenge could be somewhat offset later in the year, but the company’s limited expectations for their fiscal Q2 could reflect this concern in the short term. Second, the overall tablet market is starting to slow and it’s not inconceivable that within 5 years, tablets will face some of the same sales challenges that PCs have had to deal with over the last few years. The cannibalization of tablets by “phablets” may even exacerbate this problem. After a tough drop over the last several years Apple’s share has begun to stabilize in tablets, but the company can’t count on the high-growth curve for the overall category that it may have in the past.

Of course, most of these challenges are going to also impact Apple’s competitors in the higher-end device space—they aren’t unique to Apple. Plus, Apple has proven over and over again that they’re able to innovate in way that its competitors can only dream about. So, don’t get me wrong, I’m not worried about Apple’s long-term fate in the least. However, that doesn’t mean we won’t see a bumpy road over the next few quarters and that’s an Apple problem that has to be given serious thought.

The 2-in-1s People Might Want

With the PC industry in the doldrums, there’s been a lot of attention focused on new ideas designed to reinvigorate customers’ interest as well as bring some excitement and new sales to the market. One of the most talked-about examples has been 2-in-1s, sometimes referred to as hybrids or convertibles. The basic idea behind these devices is to combine the capabilities of a notebook PC and a tablet into a single unit at an attractive price.

The argument goes that these devices give you the “best of both worlds” because they offer the productivity and familiarity of a notebook PC in conjunction with the flexibility and mobility of a tablet. To their credit, many PC OEMs have created some very intriguing new form factors based on this concept, including Lenovo’s Yoga line and Dell’s XPS12 “carousel” convertible notebook, among others. Unfortunately, with few exceptions, most of these devices have not been huge sellers—certainly not duds, but not enough to reignite PC sales on a wide scale basis. Part of the reason has been that price points for some of the more innovative 2-in-1s have been relatively high—in some cases more than the cost of a separate notebook and a tablet, which makes the value equation around 2-in-1s difficult for many consumers to accept. In addition, there are some challenges with finding the right size—getting a screen large enough for notebook use but small enough for mobility-focused tablet use has been tough. Many vendors are ending up with 11.6” screens but again, that tends to be pretty small for a notebook and pretty big for a tablet—a compromise that, for many, is far from ideal. [pullquote]…combining 2-in-1s with dual boot and adding the Windows 7 twist, you end up with something that really could stand out”[/pullquote]

Another challenge has been around the operating system. Windows 8.1 is starting to get a little traction on the PC side, but it’s still just not a great choice for a tablet. The choice of touch-focused Metro-style apps is still very limited, making tablet use on Windows-based 2-in-1s an unpopular option.

Given these challenges, it’s easy (and tempting) to write off the category as nothing more than a niche. However, I believe there is an option that I’ve yet to hear anyone discuss that could have some potential: a 2-in-1 that runs Windows 7 in notebook mode and Android in tablet mode.

Generally speaking, dual boot options have had even less success in the PC market than 2-in-1s, so some might argue that this combination just puts two questionable ideas together, but I would argue that the new form factor makes a critical difference. Think about it, a 2-in-1 that literally functions like two different devices—either a Windows PC or an Android tablet—offers a more compelling value to consumers than something that just gives you two versions of Windows 8.

A number of device vendors, as well as Intel, have been publicly discussing dual-booting Windows/Android devices lately, but they’ve all been focused on Windows 8 and Android and often on standard notebook or desktop form factors. I believe by combining 2-in-1s with dual boot and adding the Windows 7 twist, you end up with something that really could stand out. (Of course, this is all dependent on getting both Microsoft and Google to agree to this—which won’t be easy, particularly in Google’s case.)

It seems clear at this point that there is no single silver bullet to fix all that currently ails the PC industry, but if a number of smaller elements—like this idea and others—can sum together to at least turn the industry’s momentum around, then it could be a positive step forward.

The Post-Tablet Era

Coming off what will undoubtedly be the best quarter that tablet sales have ever seen, you might wonder if I’m a bit crazy calling 2014 the potential start of the post-tablet era, but hear me out. In truth, 2014 could be the start of the post-device era. [pullquote]the number of total smart connected devices being sold continues to grow at a faster rate than the population[/pullquote]

As the ongoing record attendance figures for last week’s International Consumer Electronics Show (CES to the rest of us) demonstrate, people’s love affair with gadgets continues to grow. So, how, you must be thinking, could I possibly make such a ridiculous assertion? Ironically, in abundance, there is often indifference. Or, to put it another way, the more devices we all “collect” and use, the less each one actually matters. No matter which brand, operating system or device type you prefer and no matter how you choose to draw the boundaries between all of these different things, there’s one fact that no one can ignore: the number of total smart connected devices being sold continues to grow at a faster rate than the population. That means the total number of devices owned (and presumably used) per person is growing—and rapidly.

Plus, even a quick glance at the market share—either by brand, by operating system or any other metric you prefer—will show you that the numbers are not growing equally across these different breaks. This implies a wider variety of combinations that people end up owning. Now, admittedly, this last point is a bit tougher to prove, but common sense will tell you that as more devices from more brands become available, the likelihood that people will end up with a diversity of different brands and operating systems grows. But, it’s more than just common sense. Research projects I have worked on over the years show definitively that while there are certainly strong correlations between the brand and/or OS of your smartphone and your tablet, for example, the two are not always identical—even among iPhone or iPad owners.

Another factor to consider is that the number of hours in a day is not increasing (despite our often intense desire for it to be so), so it’s not difficult to imagine that people are spreading their available time across their various devices. Again, research backs up this intuition and shows that while there certainly has been shifting of time between devices—from TVs to PCs and from PCs to tablets, for example—there is no uniformity amongst time spent with devices. Some people spend more time with PCs, for example, some with tablets, some with smartphones and so on. What everyone is still doing is, however, is using those devices—whatever particular combination they may own—to get things done, whether that be pure entertainment, pure productivity, pure information or, more likely, an interesting combination of them all.

This focus on activities—as opposed to the devices upon which you do them—brings me back to my original assertion. While there is absolutely no question that tablets have had (and will continue to have) a monumental impact on the device market, I would argue they have had an even more profound impact on how certain types of “computing” are done. The simple, touch-based interface has enabled the creation of an entirely new set of application genres and allowed smart intelligence to be brought into situations and environments that would never have allowed “traditional” computing devices to enter.

However, I would argue that this new form of computing isn’t directly tied to the tablet form factor and screen size and therefore the tablet device, as it’s commonly defined. Instead, it has more to do with the resolution of the screen and the connectivity of the device. In this regard, the new kid in town—“the phablet”—has some clear advantages over many tablets. First, the smaller screen sizes of phablets (5’’-7” in my view) actually make the devices more portable than tablets, without sacrificing resolution. Plus, by definition, a phablet is a phone—meaning it has a built-in 3G/4G modem. At best, a third of tablets ship with these radios built-in, but given the enormous amount of connectivity-dependent applications, this 100% radio attach for phablets is a huge advantage, especially when you are not within an available WiFi hotspot. Finally, in most cases (at least in the US), phablets are subsidized by the telco carriers, meaning the actual out-of-pocket purchase cost for the phablet is almost always lower than a tablet.

As I’ve discussed before, too many people get caught up with the notion that the phablet is a ridiculously large smartphone to hold up to your ear—this completely misses the point. As with a tablet (or for that matter, almost any size smart phone), a phablet is a mobile, portable computing device being used to achieve what it is that people want to get done. And for a lot of people—it’s just a better value than a tablet. So, while I’m not certainly not going to predict the demise of tablets, I do think that a lot more “tablet computing” will get done on phablets this year and that will have a profound impact on how the device market evolves in 2014.

The Innovation Asymptote

One of the most common complaints heard around the Consumer Electronics Show these days is that the pace of innovation seems to be slowing, particularly in the world of hardware. For years, we seem to have been treated with amazing new products or capabilities on a frequent basis and somehow got tricked into believing that this pace of change could continue ad infinitum. Of course, the reality isn’t quite that clear—yes, we saw a number of important new categories get created over the past 10 years or so, but in many cases, they were really incremental changes over existing devices: iPods updating Walkmans, flat-panel HDTVs replacing standard definition CRTs, touch screen smartphones taking over from candy-bar style mobile phones, etc. Those same kind of innovations continue today with touch-based 2-in-1 PCs outpacing traditional notebooks, curved OLED 4K TVs outdoing flat-panel LCD HDTVs, and so on.

The difference now is that the improvements versus previous generations are arguably smaller—in large part because the previous generation products were (are) pretty good. As a result, the new products aren’t necessarily as compelling—as must have—as those previous generation products. In general, I believe you could argue that we are seeing an innovation curve that appears to be asymptotically approaching zero—at least when it comes to hardware—hence the title of this week’s column. Now, to be clear, I’m not arguing that innovations are stopping—obviously, that would be ridiculous. But I do think the extent of traditional hardware innovations is slowing. For example, if you look at the transitions between recent generations of popular products—iPad Mini to iPad Mini with Retina, Galaxy S3 to Galaxy S4, etc., the actual feature improvements were relatively modest. And, I think some of the products we’ll see this year will show even more modest changes—what is the second generation iPad Air really going to offer over the first (other than a fingerprint reader of course…)? Most of the new innovation is happening around software and connectivity options—things that don’t necessarily have an impact on the physical form factor of the device. Right or wrong, that’s how many people view or expect innovations in the hardware world to present themselves.

If you think about it, most of the more interesting device categories are all moving to the same basic archetypal shape: an increasingly thin piece of glass sitting on top of a circuit board. Whether you’re talking about wearables, smartphones, tablets, PCs or TVs, they’re all moving towards variations of smart glass. Now, I think we all like sleek, sexy touchscreens of various sizes, but the logical end to these types of advancements seems to be in sight.

But of course, innovation (even in hardware) isn’t really ending. So, what’s going on? Well, it’s not entirely clear yet, but I believe the traditional mechanisms of measuring innovation may indeed be moving to zero. However, I also think we’re on the verge of some major shifts in the shape of the innovation curve. I believe some of the more interesting innovations that we may start to see this year (but certainly next year) will be more orthogonal developments that aren’t necessarily thinner or sleeker, but just different—in some cases maybe very different. These could be driven by the kind of funky world view of the SteamPunk movement or intensive customization enabled by the availability of low-cost 3D printers, or other things that we haven’t thought of yet. I also believe major developments in bendable and eventually foldable displays will drive some dramatic innovations, but despite the early hype around some of these technologies, mass production is still a long way off.

So, in the meantime, I’m going to be on the lookout for things that either take a dramatically different twist on an existing design, or even better, put together combinations of capabilities we haven’t considered before. It’s here that I believe we’ll free ourselves from the slowly declining innovation asymptote and start to move in some very different directions. Should be fun to watch….

Top 5 2014 Predictions

The next year promises to bring some critical new changes to the world of devices, the software and services that run on those devices, and the usage of those devices in both commercial and consumer environments. In this year-end column, I predict what I believe will be the top 5 changes impacting the tech market for 2014.

PREDICTION 1: WORLDWIDE “PHABLET” SHIPMENTS WILL OUTPACE WORLDWIDE SMALL (8” AND UNDER) TABLET SHIPMENTS

The technology market, the hardware supply chain and most vendors have been almost obsessively focused on the tablet market for the last several years. Of course, they’ve had good reason to do so. Tablet shipments grew from almost nothing in 2010 to a market that in 2014 will be measured in the hundreds of millions of units and tens of billions of dollars. During that time, we also witnessed an important transformation within the tablet business, as the market flip-flopped between demand for larger tablets (such as the original iPad) and smaller tablets (such as the Google Nexus 7). In fact, in 2013, the smaller 8” and under category was expected to account for about 60-65% of all tablets. At the same time, we began to see the growth of the 5” and larger screen size smartphone (commonly called a “phablet”), thanks to the popularity of products like Samsung’s Galaxy Note.

In 2014, I expect these two powerful developments to cross streams, with the phablet category gaining the upper hand. Specifically, I predict that the market for large-size smartphones will surpass that of smaller tablets (in the range of 175 million units versus 165 million units) and that development, in turn, will have a dramatic impact on the hardware and software ecosystems supporting these devices for many years to come. For US-based industry observers, this phenomena may be a bit difficult to see initially, in part because I believe it will occur outside the US first. But this difficulty is also because many in the US have failed to look past the idea of a phablet as anything more than a device that looks ridiculously large when held up to your head to make a phone call. In many Asian countries (notably forward-looking South Korea—where phablets already make up about 2/3 of all mobile phones and where tablets remain a limited market) as well as developing regions, where broadband connectivity and WiFi hotspots are more limited, phablets are seen for what they really are: always on, always connected, always with you mobile computing devices that occasionally make phone calls (and typically with a Bluetooth headset when they are).

I believe many vendors—including Apple—will enter and/or strengthen their phablet offerings in 2014, with a particularly strong push from Chinese vendors such as Huawei, ZTE and Lenovo. In fact, these vendors, amongst others, will help drive down the costs of these devices significantly over the next year—even in markets where there are little or no subsidies from the telco operators. This, in turn, will open up hundreds of millions of new customers to a more complete, more visual experience of the internet and, for many of them, serve as their sole computing device. The impact is bound to be enormous.

PREDICTION 2: THE BUSINESS PC MARKET WILL REBOUND

The PC market has been written off as a lost cause for years by some in the tech press and even within the industry itself. And again, there has been good reason for these concerns: PC shipments peaked in 2011 and have been declining ever since. But, I would argue, even a steep decline, does not a death foretell. In fact, in the business world, there are several signs of hope. The last few quarters in the US commercial PC market, in particular, have returned to positive year-over-year growth and I believe this phenomena will continue in 2014 and even spread to other developed regions.

The reasons for this belief are several. First, the installed base of commercial PCs is aging and a reasonable number—the exact percentage being a hotly debated subject—are in need of replacement. Second, there are a number of business organizations still running Windows XP and with the April 8, 2014 end-of-support (and more importantly, end of security updates) deadline now just a quarter away, there are bound to be a bunch of last minute stragglers who will purchase new PCs to upgrade some of these older machines. The third reason—and the one I believe actually has the biggest potential impact—is the increasing awareness that PCs in business are not going away anytime soon. For all the justified excitement around tablets, smartphones and the aforementioned phablets, people also now recognize that, particularly in business environments, those devices do not replace PCs. They are great supplemental tools—and for some, perhaps even the primary tools—but the likelihood that large numbers of people in a typical business environment would be willing to completely walk away from a PC and still feel confident that they could get their work done is small, particularly in regions outside the US.

Even consumer PCs may get some badly needed reinvigoration late in 2014 thanks to the expected arrival and growth of lower-cost (sub-$500) 3-D printers. Part of the reason consumer PCs have struggled is that many feel they are overkill for the types of applications most people use. Viewing, creating, editing and scanning 3D images before they are printed, however, seems like exactly the kind of activity that could get at least some people to justify a new consumer PC purchase. I expect to see 3D cameras that could function as simple 3D scanners in notebook PCs by the end of the year, so this is an area that bears watching—but it probably won’t have much of a serious impact until 2015.

PREDICTION 3: LOW-END SMARTPHONE BUSINESS WILL DRIVE MAJOR PLATFORM READJUSTMENTS

The majority of the focus on the smartphone market for the last few years has been on the high-end devices geared towards developed (and relatively wealthy) markets, such as the US and Western Europe. In 2014, however, a confluence of factors will start to shift more attention to the lower-end markets in developing regions and the full impact of the widely anticipated but long delayed BRIC (Brazil, Russia, India, China) phenomena—in which developing economies, such as the ones found in these four countries end up having a much greater impact on worldwide trends—will likely hit the smartphone market more than it ever did the PC market. First, the smartphone share of the total mobile phone market in countries like the US and parts of Western Europe is extremely high—nearly 90% in the case of the US. That means the market is nearly saturated in these countries and depends almost completely on replacements—people exchanging one smartphone for another. Of course that’s a popular exercise here in the US—and one that the carriers are trying to encourage as much as possible—but it doesn’t drive nearly as many sales as that of first-time smartphone buyers. Plus, as the pace of smartphone improvements inevitably starts to slow—something that you could easily argue has already started to occur and will increasingly be the case once we see a wider array of phablet-sized phones (iPhone 6, anyone?)—the desire and impetus to upgrade is also likely to decrease as well.

The bottom line? New smartphone purchasers in developing markets will quickly become the most important consumers for smartphone vendors to target. Of course, many of those buyers will be upgrading as well—but it will be from small-screened feature phones, many of which carry the Nokia brand. As a result, I believe that if Microsoft and Nokia focus the proper attention on a solid step-up strategy for these types of customers with smarter versions of the popular Asha line of Nokia phones and embed a Windows Phone 8-like UI, there could be a very real chance for the pair to become a solid number three choice in the mobile phone platform world. In addition, while there has been almost no measurable success to date, I believe it’s too early to completely write off Firefox OS, Tizen and other efforts targeted at creating an alternative mobile OS environment for the low end. While Android clearly has a huge advantage, ongoing concerns about splintering and the uncertainty surrounding how Google intends to merge Android and Chrome (details of which are likely to emerge in 2014) could create opportunities for new, smaller players.

PREDICTION 4: WEARABLE ANNOUNCEMENTS COULD OUTNUMBER SHIPMENTS

The hype around “smart wearable” devices, particularly smart watches and smart glasses has hit the kind of absurd level that one often associates with fads and other “bubble”-type developments. So, while there will certainly be no shortage of announcements coming out of the Consumer Electronics Show (CES) in Las Vegas in January and Mobile World Congress in Barcelona in February, the actual shipments of the devices will almost certainly have less impact than all the stories they will inevitably generate.

Admittedly, the headline to this prediction is more than a bit hyperbolic in the opposite direction, but the truth is that early results from smart wearables have been disappointing and reflect the more “experimental” nature of this category’s first offerings. Smart glasses suffer not only from the basic pricing and “fashion” concerns of such a device, but from a level of privacy and security concerns that could easily lead to restrictive legislative action in countries all over the world. In fact, I would not be shocked if 2014 was the year when devices such as Google Glass were legally banned in some types of establishments and/or some states or countries.

Smart watches should avoid those kinds of hassles, but have unique challenges of their own. Because of basic physics and mechanics, none of these devices are likely to include a wireless broadband (3G/4G) radio—or the battery necessary to support it—anytime soon. As a result, they will be stuck functioning as expensive accessories to mobile phones, with limited differentiation and perceived value by most consumers: not a strong recipe for success. But, if vendors can come up with the right kinds of clever applications that take clear advantage of the new form factor, then there’s always the possibility of a game-changing product. Right now, however, I’m not holding my breath….

PREDICTION 5: MULTI-DEVICE, MULTI-PLATFORM “COMPANION APPS” WILL BECOME AN IMPORTANT NEW CATEGORY

As people continue to add to their collections of smart connected devices, a few important revelations start to become clear. First, though, they’re theoretically designed to make our lives easier, it seems the more devices we own, the harder it is to get everything working together. Part of this may be due to the related axiom that the likelihood of having all your devices on a single platform decreases with every new device you acquire. Second, and somewhat paradoxically to the first point, the more devices you own, the more interest you develop in getting them to work together.

As a result of these observations, I would argue that the market is in desperate need of more applications and services that allow multiple devices running multiple platforms to work together as a coherent whole. I call this category “companion apps” and I believe it is poised to become an important new opportunity in 2014. The concept here is for combinations like a Windows PC and an Android Tablet or a Chromebook and an iPhone, or a smart TV, a Windows Phone and an iPad to all work together in helping to complete a task, provide some information or simply serve as a source of entertainment. This is not simply a case of duplicating functionality across all the devices, but of actually using each device at the elements of a task for which it is best suited. So, for example, to use the last combination, the act of watching TV could be greatly enhanced if the Windows Phone could function as the smart remote control for the TV, while the TV relays supplementary content (e.g., character background, sports statistics, etc.) to the iPad’s screen. To be sure, there are many different ways to achieve the scenario I described (as well as many other potential combinations—see my previous “Multi-Device, Multi-Platform Companion Apps” column here on Techpinions for a few more companion app examples). But the important point is that these kinds of combinations could give end users a great sense of satisfaction, as well as the perspective that each of their devices was now even more powerful and more useful.

Of course, talking about these kinds of ideal device-to-device communications situations and actually achieving them are two very different things. But with developments like Qualcomm’s AllPlay protocol starting to gain traction, I believe 2014 will be year when these types of multi-device applications become important.