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Mobile Computing Outlook For 2002.

Review of Mobile Computing and Wireless Data Happenings During 2001 and Trends for 2002

This week, MobileInfo.Com would like to summarize various noteworthy events and trends in this space during the past one year. In this effort, we cleaned our crystal glass and we are sharing with you what we saw. Superstitions apart, we base these observations - not on a self-satisfying survey that most research organizations employ but more on our observations of product announcements, trials and tribulations faced by the enterprise professionals and our consultants’ insight into what is real and what is vaporware and finally an acid test to determine whether the environment exists for technology adoption. Therefore, we let the traditional trade press have its say and digest what the trade press says. We hope to have the last word.

General Review

We started 2001 with a major hope that this will be the year of wireless. While dot-com industry started noticing a sudden degradation in mid 2000, wireless and mobile industry had to wait for another nine months before it felt the full brunt of this decline. At the end of 2001, there was a general agreement among serious industry analysts and consultant community that wireless and mobile computing had joined the rest of the economy in its downward spiral.  The intensity of this degradation varied from one segment to another. The worst impact was in the wireless infrastructure sector of the telecom industry that provides the critical portion of the access highway for these applications. Credibility of the network vendors, external market forecasters and analysts was toasted on fire and it evaporated as steam vapor in many cases. We must confess that even relatively cautious Internet publication like MobileInfo did not predict the level of change that actually took place. Neither did we forecast the domino effect of e-business failures on wireless business, nor did we imagine possible repercussions of September 11. Let us highlight these changes sector by sector.

Notwithstanding these short-term changes, we saw continuous evolvement, refinement and maturization of wireless and mobile market and supporting technologies even in an uncertain economic environment of the last year. We would like to summarize fundamental themes of this industry.

Fundamental Themes of Wireless and Mobile Computing

  • To us at MobileInfo, fundamentals of wireless and mobile computing remain strong with a fairly valid business case for implementing enterprise applications and need for ongoing development in a number of product and service categories. All forecasts – short-term, medium term and long term are bright. Short-term (six to 24 months) is bright because we have bottomed out. Medium-term (2 to 4 years) outlook is better because there will be a lot of deployment from projects that were being planned but have been deferred. Finally, long-term outlook (five to seven years) is bright because our industry will make fundamental and structural changes that take longer to implement across all businesses and industry sectors. Difference between our forecasts and that of aggressive market research firms is that we recognize the pace of technology adoption and the surrounding environment. They ask the question "Would you like to use wireless Internet?". We ask "Does wireless Internet give you enough value and can you afford to juggle your spending priorities to start using wireless Internet?" 
  • History tells us that Rome was not built in a day. We say that no emerging technology, howsoever enticing, can become mainstream in a year or two. Wireless and mobile computing are sharp step technologies that change our old habits and business processes. Therefore, wireless/mobile technologies will take longer than incremental technologies. If economic environment is not supportive, it will take even longer. Developers and startups with a feint heart should stay away. Others should dig in and keep their course.
  • Developing end-to-end wireless applications is a complex endeavor. It is not just about 3G networks, 802.11b wireless LANs, WAP, I-Mode, smart phones, handheld devices, wireless e-mail, stock trading and location-based applications that this industry is all about. It is ultimately systems integration of these components into reliable, affordable and manageable solutions and applications.
  • The mobile solution developers and implementers continued to be inundated by a lot of PR from network folks. There is a gap between what we hear and what we see.
  • As far as mobile consumer applications on smart phones are concerned, adoption is governed by generation gaps. There is a new generation that takes control every twenty-five years. Assuming that the majority of adopters is in the 12 to 25 age group, significant shift in our habits will take a period of 12 years.
  • While we are moving towards mobile computing standards, there are still a lot of gaps in standards. Based on what we see (and not hear), serious adoption of even those standards (defacto or dejure) that are already on the table is somewhat lukewarm. .
  • Convergence is taking place in every sector – devices, networks and service provider organizations.
  • First half of 2002 will witness continuous caution in capital spending in the wireless/mobile arena. Enterprises will tighten their belts and try to do more with less. Second half of 2002 will see upward movement in demand and increased spending.

Wide Area Wireless Network Infrastructure Scene

This sector witnessed, by far, maximum changes during the past year. If we measure news coverage index, 3G stories overshadowed other stories. Reluctantly, 3G proponents were forced to acknowledge the realities of economic and technical challenges in upgrading to 3G technologies in a short time. The hype of 3G was replaced by more realistic plans based on 2.5G GSM/GPRS and 1XRTT implementation by network providers. Asian countries - Japan and Korea, snatched wireless leadership and moved forward with pilot 3G deployments. TDMA network technology was edged out by GSM/GPRS.

CDMA lost some of its shine in spite of superior technology and greater spectrum efficiency. GSM/GPRS gained much more credibility. The result was that CDMA and a smattering of GSM in North America gave way to predominantly GSM/GPRS and a smattering of CDMA here and there. In Europe, GSM/GPRS was the default route towards 3G. A few 1XRTT CDMA networks were installed there as well.

These events of 2001 are precursors to network trends for 2002. During this year and a part of 2003, we see a continuous but phased migration from 2G to 3G via 2.5G and 1xRTT (not true 3G technology but shall we say, -3G). The network vendors will benefit from faster speed and increased capacity. We expect that wireless data prices will come down by 50% at least during 2002 when these networks get implemented, even though speed and capacity at the network level may increase by a factor of 3-5 initially and by a factor of 10 in the second phase. Network providers would prefer to price their offerings on a transaction basis rather than raw megabyte data transfer basis. Large enterprises will be able to negotiate much better wireless data deals with network carriers.

Trend towards physical or logical network infrastructure sharing across competing service providers and roaming across different networks will continue as providers try to compete downstream (at the customer level), rather than upstream (at the network infrastructure level).

What Does it Mean to Enterprise IT Professionals Developing Applications?

You can expect faster wireless network speeds with reasonably national coverage and can plan to implement wireless applications with 40-50 Kbps speeds. This is a respectable speed for most enterprise applications (be it wireless e-mail, field service, wireless CRM or consumer stock-trading. Do not start designing multi-media wireless applications for the enterprise unless you have a strong business case for these applications or if you are an independent application developer being financed by the carrier. Keep your network air-link software support isolated from the business application logic or use a communications middleware or a gateway that is not tied to current generation of network only. The importance of this issue become quite apparent as you read about 802.11b versus 3G debate.

2.5G and 3G Handsets

Number of handsets sold reached its peak in 2000 and declined during 2001. There may be a slight increase in 2002. Unfortunately for manufacturers, handset business is highly competitive with decreasing margins. As a result, Ericsson joined hands with Sony and Motorola started licensing its design to other manufacturers. This way, they can protect their IP and realize reasonable profit on it. We see more movement of manufacturing to Asia.

2.5G GPRS and 3G handsets are still in short supply. We expect that this problem will be resolved during the second half of 2002. Disposable cellular phones will become more widespread and will replace cellular cards.

MVNOs (Mobile Virtual Network Operator)

Red Herring (a VC magazine and research service) predicts that 2002 is the year for wireless business in the form of MVNOs). It says that by using powerful brands and customer service satisfaction, MVNOs will compete against wireless carriers. The industry will split with some operators becoming MVNOs and some selling services directly from their networks. Carriers that are slow to adapt will miss this trend.

MobileInfo agrees with the trend except the its timing. We see some negotiations and announcements but very little delivery.

Geographical Coverage

Japan and Europe will continue to lead North America in terms of cellular penetration. While in Europe, cellular phone is gradually becoming the primary phone, this will not happen in North America during 2002. We shall continue to rely on our reliable and almost ubiquitous fixed line phones for as our primary phone.

Roaming across different carriers in Europe will become more widespread. North America will see the beginning of roaming in late 2002. Consumer wireless Internet applications will be more prevalent in Europe and Asia than in North America. We expect a lag of 12-18 months between the two markets.

Wireless LANs Enhancing 3G Wireless WANs

There has been a lot of debate and discussion (including our editorial) during 2001about 802.11b, 802.11a and future 802.11.x technologies wiping 3G networks. We do not support the use of the word versus. It is not a question of 802.11b versus 3G. We strongly support the words 802.11x networks enhancing 3G networks by creating hybrid networks. We are pretty confident that wireless LAN implementation in enterprises and hot spots will continue, in spite of disappearance of Mobile Star. We expect serious realization by network service providers first and then by infrastructure manufacturers (Ericsson, Nokia, Lucent, Nortel and Motorola) that wireless LANs must form an integral part of this hybrid architecture. Adoption of wireless LANs in the SOHO market will continue at a fast clip.

Bluetooth Coexisting with 802.11

We expect "Bluetooth versus 802.11" debate to die and be replaced by how two technologies can co-exist. The two technologies will find their respective places in the scheme of things. Bluetooth will become preferred and more affordable method of short-distance connectivity between handheld devices and peripherals as also with drive-in kiosks, wireless ATMs and similar application-specific servers. High-end smart phones in second half of 2002 will be equipped with Bluetooth chips. You will see this in the second half of 2002.

WAP & I-Mode

During 1999 and 2000, there was a tremendous hype built around WAP as the pre-eminent protocol for delivering wireless data on various mobile devices, especially smart phones. Phone.Com was the darling of the industry and its merger with Software.com in November 2000 to create Openwave was heralded as a great event. But weaknesses of WAP started appearing rapidly and a strong gap emerged between WAP’s promises and delivery. Success of competing wireless application delivery mechanisms like I-Mode made the future of WAP uncertain during 2001.

By the end of 2001, WAP had given up its leadership role. Instead, it assumed its natural place as one of the several competing standards that will continue to change and grow. We think that WAP has some more life left in it before it is replaced by its own variation, I-Mode or most likely yet another converged protocol that combines the best of what has been incorporated in existing implementations.

SMS and Wireless Instant Messaging

SMS has moved very fast in Europe with only a small traction in North America. We think that inter-carrier agreements to support universal SMS (versus within a single network service provider) in North America will spur this in the second half of 2002. This agreement has already happened in Canada – it should happen in USA later in the year. This will put paging in a gradual slowdown mode and lead to its eventual death in two years.

As far as wireless instant messaging is concerned, 2002 will see a lot of action with AOL and others offering an affordable service.

Handheld Devices, Smart Phones, Communicators and Consumer Devices

We saw a lot of new devices, especially smart phones with strong wireless data capability and with slightly bigger and higher resolution screens than before. Some PDAs got voice capability. Handspring’s Treo will have voice; our guess is that Palm will announce it soon when they have put their house in order. Even RIM’s Blackberry got voice. Always-on feature as implemented in Blackberry became a must-have feature in PDAs. Convergence between smart phones and PDAs moved forward but there was no clear sign that it will solve the problem of multiple devices.

We see continuing proliferation of wireless devices – more before we have fewer. Several new device startup ventures like Danger will introduce a new breed of device that will support instant messaging, wireless e-mail and entertainment. This will make device selection more difficult. Since we are always trying to simplify device selection process, we categorize hybrid devices in the following categories:

  • Voice Heavy, Data Light – In this category, we include smart phones with some PDA functionality for business professionals and simple business applications
  • Voice Light, Data Heavy – Here we include, PDAs like Handspring with phone module. New Blackberry could fall in this category as well.
  • Voice Light and Entertainment Light – Primarily voice-heavy but with limited entertainment applications.
  • Wireless-enabled PDAs – Pocket PC devices with heavy emphasis on enterprise data applications
  • Application-specific devices like those from Symbol

Data entry will continue to be problematic in most cases. Integrated keyboard as implemented in Handspring Treo’s and Blackberry will be copied by more devices, we think. While we would like to believe that speech recognition will come one day, it won’t become mainstream in 2002. While pick and choose method of data entry is a reasonable alternative, there are form-based applications that do require a lot of information to be entered. For these applications, keyboard will continue to be a required feature.

You should expect incremental improvements in devices with better resolution displays and barcode-reading functionality embedded in smart phones and PDAs.

As far as device operating systems (PalmOS, Pocket PC, Symbian) are concerned, we do not see any standardization or rationalization during 2002. Multiple platform support and device data transformation functionality in application servers will continue to be challenges for application designers.

PalmOS will continue to lose ground to Pocket PC for serious enterprise applications. Palm has to transform its products and organization quite a bit more to make a dent in the enterprise for applications other than PIM, corporate e-mail and low data entry enterprise applications. Recent organizational changes like separation of solutions and Platform groups, as also the acquisition of ThinAirApps by Palm will not do the trick. Completely.

Consumers should stop hoping for finding the ultimate single device. They should select their favorite device on the basis of matching their task with device capabilities and accept a compromise. Life is full of tradeoffs, we say.

Application Development

Selection of the right development platform continues to be a daunting task. Devices OS, software development kit (SDK’s) for the handheld device, communications gateway, middleware, application server, transaction processing, payment processor for m-commerce applications and integration into legacy ERP applications require careful analysis. We have seen more choices, more confusion, more incompatibilities and increased lack of understanding for the end-to-end application integration. However, this proliferation of application development tools will see some consolidation. More tool developers want to work to introduce mobile device specific and wireless-specific support in application servers like IBM’s WebSphere, Oracle 9i and BEA’s WebLogic. In fact, enterprise professionals should use this as a cue to select development tools. We see Sybase’s iAnywhere platform well positioned to provide support in this area.

In terms of applications and applets running on handheld devices, Java’s J2ME became a preferred platform for development, over and above a number of other development platforms, including Microsoft’s Windows CE component of .NET. It garnered extensive developer support and is intrinsically a better choice for diverse hardware and software environments that exist in handheld arena. This trend will continue. Microsoft’s .NET initiative will gradually get more flesh, improve and become a serious option for Microsoft-centric environment.

Mobile and Wireless Applications – Enterprise versus Consumer

Earlier in the year during 2001, there was much hype and hope for adoption of mobile applications like consumer e-mail, consumer m-commerce and SMS-based messaging, especially in Europe. This did not happen. We do not expect these applications to take off in 2002 either. Instead, it is the enterprise market where real business value and opportunity exists – both horizontal and vertical applications. Over the long haul, consumer market will be quite big but only a few large carriers will reap the seeds of this market. That would not happen in 2002.

Horizontal applications did gain more acceptance and adoption. Wireless email continues to be much sought-after application in the enterprise sector. But cost considerations will force enterprise IT managers to offer it to their employees on a very selective basis – executives first, sales and service staff second. Field service automation, Wireless CRM, Telematics will see more action in 2002. M-commerce will generate negligible revenue for most carriers. May we remind the carrier business development executives that 2002 is investment time for location-specific m-commerce applications?

Wireless e-mail, instant messaging and groupware applications assumed greater importance. Enterprises started investigating how they should offer e-mail to their mobile professionals in the field. There were a number of product developments in this area with most e-mail engines trying to support most popular device platforms like PalmOS, Blackberry, smartphones and Pocket PC.  Both Lotus Notes and Microsoft Exchange became more mobile than before gaining wireless network support. Microsoft became more serious and announced groupware server called Mobile Information Server. By promising superior technical and functional integration with Exchange, Microsoft hopes to fortify its position in 2002.  Earlier, Microsoft had depended on Wireless Knowledge (where Microsoft had significant equity investment) to safeguard its market interests in this area. Market watchers saw conflict in this strategy and divided loyalties. This led to Microsoft divesting its equity investment in Wireless Knowledge to Qualcomm. 

MobileInfo believes that a groupware server should support all popular backend messaging platforms, MS Exchange and IBM's Lotus Notes being the two leading products in this area. This is what Wireless Knowledge was and is trying to do. While we like Wireless Knowledge becoming independent from Microsoft, we are not enthused by Wireless Knowledge having Qualcomm as its major shareholder. This is not a good situation for its customers and therefore for Wireless Knowledge who could be under pressure to support Qualcomm's CDMA network first. As network scene changes around the world during 2002, GSM/GPRS network and device support is as important as CDMA support, as far as wireless data applications are concerned. CDMA may have more voice footprint in USA today, but this may not be the case with wireless Internet. This event demonstrates one important equity partnership risk to us i.e. an application vendor must not depend on a single network technology vendor as its shareholder. Applications must support all networks – current networks, CDMA as well as GSM /GPRS. Enterprises must exert as much pressure as they can to ensure multiple network, multiple device and multiple backend support. Seamless interoperability is something wireless network vendors like Qualcomm must accept and work towards.

Carriers will find it difficult to capitalize on the vertical applications for the enterprise directly because they require domain knowledge and application integration expertise which most of them do not have. They will have to form partnerships with application package vendors.

Location-Based m-commerce, Wireless advertising, Gaming and Entertainment

With e911 mandated in USA spurred by public safety concerns, there will be an opportunity to develop location-specific applications using more precise location based on e911. Early-adopters in younger age group will start experimenting with these applications. Uptake will be slow and revenues will be nowhere close to the numbers forecast by well-known research firms.


The industry has started feeling the need for standardization (defacto and dejure) in this space. But vendor focus has been limited to its own product component. Some standards did get good following. IEEE 802.11, SyncML, J2ME, GSM and XML are significant efforts but you need end-to-end mobile architecture standards. Nokia’s recent effort with a broader "Open Mobile Architecture" standard needs wide support. While major carriers and systems vendors have agreed to support it, we would like to see wholehearted and active support of these standards and products based on these standards to be preferred offering by these vendors. We do not want lukewarm support. Understanding the inherent process in standardization and behind-the scene inter-vendor rivalry means that this will not happen in 2002.

Wireless Security

Security concerns among mobile devices will only be amplified as device capability and data sharing increase

This continued to be the single most serious shortcoming in mobile devices and wireless networks (both wide area and wide area). As we rely on these devices for m-commerce and sensitive corporate applications, need for security becomes paramount. Even though millions of data-capable mobile devices are currently in use around the world, attention to mobile-device security has been minimal. This deficiency became very obvious with September 11 tragedy. A lot of attention is now being paid to this area. We do expect some of the shortcomings in wireless LAN security to be plugged during 2002. Implementation of VPN security in mobile devices will help. In this process, we would perhaps lose a bit of our privacy because network providers will know who you are and where you are, especially with e911 implementation. With September 11, 2001 events still fresh, consumers will accept this tradeoff.


Related Resources:
MobileInfo.Com's  Outlook for 2001
Market Outlook-2000
Market Trends -2000
Reports & Presentations
Market Metrics - As Reported in the Press
Interviews with Industry Executives


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