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Mobile Computing Outlook For 2003.

Review of Mobile Computing and Wireless Data Happenings During 2002 and Trends for 2003

It is traditional during the last week of December or the first week of January to take stock of events during the previous year and provide an outlook for the next year. We do not claim any super-natural powers to predict the fortunes of the vendors and call the industry future. We also do not conduct surveys among IT managers and ask them what they would like to do with this technology during the coming year. Instead, we rely on feedback from enterprise professionals who have to conceptualize, justify, plan, design and develop wireless solutions that work and produce economic benefits to the enterprise. 

We had claimed, in the past, to be more pragmatic and therefore more accurate in our predictions than many of industry surveys commissioned by vendors and conducted by hot-shot researchers who had never installed, in their entire professional life, a wireless project. However, experience of the past 18 months has humbled all of us. Forecasting technology trends is a risky business, especially when there are structural changes in the economy. But decision-making in deploying emerging technologies becomes riskier if you ignore technology trends. Trick is to figure out whose advice are you going to listen to when there are conflicting trends. We suggest that you should validate the motivation and methodology of researchers before heading their advice. 

General Review

We started 2002 with a major setback from September 11 tragedy and resultant economic downturn. Most of the industry went through a reality check in the first half but rebounded in the second half. During 2002, the hype was completely taken out of 3G as the wireless infrastructure of future. While in Asia and Japan, 3G did move forward, in Europe and North America, the interim network strategy based on 2.5G (GSM/GPRS and 1xRTT) became dominant. More 3G plans were put on hold or delayed than the ones that went ahead as scheduled.  I-mode and DoCoMo lost its lustre as the envy of the world. WiFi WLANs became extremely popular, giving real meaning to hybrid networks (wireless WANs and wireless LANs). Cellular voice continued to attract more attention from network providers than wireless data. 2.5G handset sales did not match highs of previous years. VC community continued to fund new products, especially in the WiFi arena, WLAN security space, homogenization of network architectures and Java platform development tools. Let us highlight these changes sector by sector.

Notwithstanding these short-term changes, we see 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 during 2002 as follows:

Fundamental Themes of Wireless and Mobile Computing

  • To us at MobileInfo.Com, fundamentals of wireless and mobile computing remain strong with a fairly valid business case for implementing enterprise applications (both horizontal and vertical) and a need for ongoing development in a number of product and service categories. To us, all forecasts – short-term, medium term and long term are bright. In a sense, this is what we said last year in the context of enterprise focus of wireless data. Short-term (12 to 24 months) outlook is bright because we have bottomed out. The worst is over. 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 suggest that hey should ask "Does wireless Internet give you enough value and can you afford to juggle your spending priorities to start using wireless data applications - Internet or Intranet during 2003?" 
  • 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 smooth step incremental technologies. If economic environment is not supportive, it will take even longer. Developers and startups with a faint 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, cellular handsets, WiFi wireless LANs, I-Mode (or its European incarnations), smart phones, handheld PDA devices, wireless e-mail, wireless content delivered to the consumers or location-based applications in isolation that this industry is all about. It is ultimately systems integration of these components into reliable, affordable and manageable solutions and applications for the enterprise and consumers.
  • 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 to 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 7-8 years.
  • While it is not technically very difficult to deliver content to consumers' handsets but managing this content delivery with required quality of service, scalability, accurate billing, secure payment systems and appropriate customer care services to support large a subscriber base takes time.
  • While we are moving towards mobile computing standards, there are still a lot of gaps in standards. Even in the wireless LAN arena, there are IEEE 802.11b, IEEE 802.11a, IEEE 802.11g standards vying for supremacy. 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 necessary in every sector – devices, networks and service provider organizations. While it has started, this convergence will take a while to complete. Please remember that till it is completed, the problem is not becoming simpler - it is becoming more complex. Therefore, let us not expect VoIP, a single always-on handheld device, a single network radio, a unified hybrid network and inexpensive wireless data pipes any time during 2003. We would need multiple devices, will have to deal with multiple wireless networks, require session persistency software to maintain application connection and invest in careful application design in the interim. 
  • It is not service providers' desire but pocket books of consumers and enterprise IT budgets that will determine the pace of wireless data deployment.
  • 2003 will continue to witness continuous caution in capital spending in the wireless/mobile arena. Enterprises will try to do more with less. Wireless data continues to be on the mind of CIOs and we can expect corporations to allocate money to wireless projects with a strong business case. Perhaps 2004 will see significant upward movement in demand and increased spending.

Wide Area Wireless Network Infrastructure Scene

This sector witnessed, by far, maximum changes during the second half of 2001 and whole of 2002. Public relations firms stopped contesting the hype behind 3G promotional efforts. 3G proponents acknowledged the realities of economic challenges in upgrading to 3G infrastructure according to the original time table. The hype of 3G in the trade press was replaced by more realistic assessment and network migration plans based on 2.5G GSM/GPRS and 1xRTT. Asian countries - Japan and Korea, snatched wireless leadership from the rest of the world and moved forward with several 3G deployments. We are not saying that 3G is dead - in fact, we want it to survive and flourish. However, time table will be more stretched than originally thought.

CDMA had lost some of its shine in 2001 in spite of superior technology and greater spectrum efficiency. But it regained it during 2002. GSM/GPRS networks in Europe started off with a bang but did not deliver in terms of efficiency and speed. CDMA gained in Japan and North America but made a respectable entry into Europe. CDMA gained in China and India as well. EDGE networks (2.75G, in our view) may come back into fashion as a migration strategy because of economics of 3G.

On a positive note, the world subscriber base crossed billion mark and reached 1.155 billion at the end of 2002. World ARPU continued to decline and at Q3 2002 was hovering above US$ 31. This was largely due to China reaching 200 million subscribers and becoming the largest market in the world, based purely  on numbers but not on ARPU.

These events of 2002 are precursors to network trends for 2003. During 2003, we see a continuous deployment of 2.5G (GSM/GPRS and 1xRTT), with a few network providers in Europe and North America moving ahead with 3G in selected high density areas. Japan and Asia The network vendors will benefit from faster speed and increased capacity. We expect that carriers will accept in 2003 what enterprises network professionals have been asking -  fixed price tariffs for a class of users in a given industry. This will take the fear away from network providers of some users hogging their networks. Network providers may find it attractive 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. 

What Does it Mean to Enterprise IT Professionals Developing Applications?

Major carriers around the world (North America, Europe, Japan, Korea, China, India and in other countries) now offer faster wireless data networks with reasonably national coverage. You can now plan to implement wireless applications with 35-40 Kbps (higher for 1xRTT) effective speed. 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. Consider using session-persistency software - software that maintains application session even you switch from one network to the other - primarily between WLAN and either GSM/GPRS or between WiFi WLAN and 1xRTT. Our website provides more information on this.

2.5G and 3G Handsets - Availability and Features

While the trade press covers this topic extensively, we do not think that the number of handsets sold during a particular year has much to do with the growth of wireless data applications for the enterprise. It does determine the financial bottom line of Motorola, Nokia or Sony-Ericsson as well as wireless carriers like Sprint, Verizon, AT&T, Vodafone and others. However, if an industry's business model and cost structure are so weak that it must have a 10% year to year growth to stay in the black, we suggest that the executives should rethink its long-term survival strategy. Unfortunately for manufacturers, handset business is highly competitive with decreasing margins. Should the industry blame the consumers if they do not buy new handsets before the old one is 12 months old. If the industry knows what features it intends to offer during the next few years, should the industry not design software or firmware upgradeable handsets that reduce the cost of acquiring new ones. Technologically, we think it is do-able. Those vendors who think we do not understand the difficulties should ask academic and research organizations to figure it out.

During 2002, industry saw a slight decrease in number of handsets (around 400 million, more or less) sold. This year, we may expect a few more million handsets. During 2003, we should see more camera-equipped, more Bluetooth-enabled and more GPS-equipped handsets. Recognizing the success of WiFi, high-end handsets for the mobile professional will get WiFi features built into the base phone. Cellular handsets will encroach on PDA functional territory more than the other way around. But the dream of a single converged device will stay a dream unless you are willing to compromise on voice-centric capabilities or data-centric functionality. It will be a tradeoff issue - what is more important to the user. We should also expect more 3G handsets available during 2003 for those who are lucky to be in the area where 3G networks are available. Disposable cellular phones will also become more widespread and these will replace cellular cards.

Geographical Coverage

Japan, Korea and Europe will continue to lead North America in terms of cellular penetration. Most national carriers will rightfully claim national (more than 90% of urban areas) coverage of their 2.5G networks. While in Europe, cellular phone has become the primary phone, this will not happen in North America during 2003 for the average consumer. For the upward mobile and younger crowd, yes but not for average consumer. We shall continue to rely on our reliable and almost ubiquitous fixed line phones as our primary phone.

WiFi and 3G Coexistence Debate Over

To us and most serious observers, the debate that we started  in our editorial in 2001 calling for hybrid networks as the wireless network architecture of future is over. The enterprise has voted overwhelmingly in favour of WiFi. In fact, we can endorse analysts calling 2002 as the year of WiFi. WiFi's success has been phenomenal.

IEEE's standardization work in WiFi arena is worth noting. The VC community and silicon vendors have come forward with inexpensive components and finished products. The price-point of WiFi radios and chips has come down drastically. This is good news. Speeds are going up with 802.11a and 802.11g. Even FCC in USA has recognized it and may even allocate more free spectrum for WiFi. We applaud the efforts of vendors like Intersil, Linksys, D-Link and Intel (for allocating 150 million VC fund) in this space. Hotspots are springing up everywhere. But we needed big players to consolidate this effort. IBM's recent announcement in conjunction with AT&T and Intel (Cometa Networks) has just done that - legitimatized this trend. 

We are pretty confident that wireless LAN implementation in enterprises and hot spots will continue. We predicted in 2001 and are glad to note that there is now a serious realization by network service providers and infrastructure manufacturers (Ericsson, Nokia, Lucent, Nortel and Motorola) that wireless LANs must form an integral part of future wireless architecture. We expect more serious involvement of wireless service providers in WiFi during 2003.

WiFi and Security Debate - Rightful but Vested

There was a huge debate over lack of security in wireless networks. The risks posed by insecure WLANs were well-exposed. This was legitimate and rightfully placed at unauthorized WLANs that had sprung up in the enterprise, unknown to the IT infrastructure management personnel who were caught sleeping while these were getting installed. SOHO installations could not care less because they could get Internet access wherever they went inside their offices.

The vendors and standards bodies have listened to this hue and cry and have moved fast on providing short-term and long term solutions. More secure user authentication and better encryption technology got implemented in the latter half of 2002.

We take wireless security issue seriously and advise all professionals to ensure security of enterprise data as it travels over the link and from unauthorized access. At the same time, we suggest to IT security professionals that they should evaluate the risks with wireless LANs and use available technology (Bluesocket, Reefedge, Air Defense and others) to address the problem. We should realize that wireless security is not a monolithic (one type of security fits all applications and users) issue or a binary (to allow or not allow WiFi in an organization) issue. You must apply your security policy but do so selectively and responsibly. Setting up a closed steel gateway that allows information to fixed line network users only and creating a scare among users may be misconstrued as being an obstructionist. This is not such a good IT security policy except in a few selected application areas like public safety. Your job should be to help users figure out how to secure their WLANs.

Bluetooth Coexisting with WiFi 

In our last annual outlook, we predicted "Bluetooth versus WiFi" debate to die. It almost subsided in 2002. The two technologies have now found their respective places and roles in the scheme of things. A few campus LANs, notably PALM in Mountain View, California, are trying Bluetooth Access Points. This year, we hope to get the score card and find if these will deliver the results. Bluetooth lobby has not made the encroachment on WiFi that some feared. Bluetooth has become the preferred and more affordable method of short-distance connectivity between smart phones and peripherals as also with drive-in kiosks, wireless ATMs and similar application-specific servers. High-end smart phones in 2003 will be equipped with both Bluetooth and WiFi chips. The former will give you hands-free capability and the latter will let you access e-mail and corporate information in a hotspot. 

SMS and Wireless Instant Messaging

2002 saw serious introduction of SMS in North America. Inter-carrier agreements to support universal SMS (versus within a single network service provider) in North America did happen. SMS and IM usage will increase further in 2003. IM has become an integral part of e-mail messaging systems like Exchange and Lotus Notes. 

Handheld Devices, Smart Phones, Communicators and Consumer Devices

During 2002, 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 selective voice capability - not as good as cellular phones but some. Always-on feature as implemented in Blackberry became a must-have feature in PDAs. RIM won in several intellectual property cases by signing agreements with Nokia, Handspring and Palm but lost an important one to NTP. It established its IP in thumb keyboard but its always-on email capability got contested by NTP. In the first round, RIM lost.

The big news with PDAs during 2002 was the entry of Dell in this space with its introduction of two models. This immediately put pressure on prices of PDAs. Palm's Tungsten and Zire products came out backed by a heavy advertising campaign but did not score well with the enterprise. In 2003, we shall find the real score. Toshiba and Sony became aggressive in their PDA strategy - in Pocket PC and Palm OS camps respectively. Sony went further by investing in Palm. 

Convergence between smart phones and PDAs moved forward slightly but there was no clear sign that it will solve the problem of multiple devices in 2003. Consumers should stop hoping for finding the ultimate single device that does everything well. 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. Business decisions are not immune to that.

We see continuing proliferation of wireless devices – more before we have fewer. Several new device startup ventures like Danger introduced a new breed of device that 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 Heavy 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, including Palm. While we would like to believe that speech recognition will come one day, it won’t come in 2003. 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 more powerful devices (processor-wise), better resolution color 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 2003. Symbian did loose its dominance slightly in smart phone area. Multiple platform support and device data transformation functionality in application servers will continue to be challenges for application designers.

Palm OS version 5 was introduced, giving Palm much-needed functional richness. However, 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. Organizational changes like separation of solutions and Platform groups, as also the acquisition of ThinAirApps by Palm during 2001 did help in turning Palm around but that is not sufficient to overtake Microsoft's Pocket PC 2002 initiatives.

Application Development - Wireless Data

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 consumer 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

During 2001 and first half of 2002,  there was much hype and hope for adoption of mobile applications like consumer m-commerce, location-based services, wireless advertising, wireless entertainment and wireless gaming, especially in Europe. The wireless industry incorrectly forecast huge uptake of these consumer applications. Their multi-billion dollar investment in consumer applications as primary source of additional revenue and increased ARPU was a bet with a high risk and low probability in our estimation. While reviewing and reporting on these forecasts, we pointed out that in a weak economy, consumers are less likely to spend their hard-earned dollars and Euros (some yens, may be) on these applications. Surprisingly to the service providers but not to us, it did not happen.

On the whole, we do not expect these applications to take off in 2003 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 2003.

Horizontal applications did gain more acceptance and adoption. Wireless email continues to be much sought-after application in the enterprise sector. Carrier wireless data plans on new 2.5G networks are attractive enough to allow more members of the enterprise to use messaging to stay in touch. Field service automation, Wireless CRM, Telematics will see more action in 2003. M-commerce will generate negligible revenue for most carriers. 

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 is trying to do. Its acquisition of Mobilocity in 2002 will give it the mobile consulting expertise in needs to market to the enterprise. While we like Wireless Knowledge support multiple messaging platforms from Microsoft and IBM, we would encourage it to support both CDMA networks (which it is doing because it is owned by Qualcomm) but also GSM/GPRS networks that will be around for quite some time. Groupware applications must support all networks – current 2G networks, 1xRTT CDMA networks as well as GSM /GPRS. Enterprises must exert as much pressure on application suppliers as they can to ensure support for multiple networks, multiple devices and multiple backends. Seamless interoperability is something that is in the long-term interest of wireless network vendors like Qualcomm. Superior wireless groupware application and spectrally-superior network like CDMA will gain more adoption if it had GPRS support than if it did not. We invite comments from Wireless Knowledge again in 2003 as we did in 2002.

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. We see increased awareness among carriers during 2003. This will be good both for the carriers and the enterprise.

Summary

Now we would like to list top ten trends that may be important for planning your mobile/wireless initiatives during the next couple of years:

1. On the wide area wireless network side, two standards (three, depending on how you count) will continue for a while CDMA 1xRTT and GSM-based GPRS (in some cases GSM-based UMTS/WCDMA). Ensure your devices will support both i.e. network adapters for both standards are available for the devices you choose and wireless gateways you select for the enterprise (if you are an enterprise or an ISP). 3G will be gradually deployed with 2007 as the target year when true 3G will become mainstream.

2. WiFi Wireless LANs will continue to proliferate. Security problem are being addressed vigorously and will be solved to the satisfaction of IT security professionals. Major (we did not say, all) vendors will support IEEE 802.11x standard (security and class of service). You must ask the selected vendor to tell you how it intends to upgrade its hardware and software to meet evolving standards.

3. All large wireless carriers will have to support roaming across WiFi and their wireless WANs. If your carrier does not support this type of roaming, do not waste your time with it.  Enterprise-grade WiFi access points should (and will) support all three WiFi standards - 802.11b, 802.11a and 802.g, as also 802.11x and 802.11i for security and QoS. 

4. Wireless broadband services will become increasingly attractive for under-serviced residential and SOHO customers.

5. Network carriers will offer selective fixed price plans per user for wireless data, based on vertical industries.

6.. Management of mobile assets and wireless networks will become increasingly important for the enterprise. You may decide to ignore it during the pilot deployment stage but it will haunt you later. You must recognize total cost of ownership as you deploy these devices across the entire enterprise.

7. Messaging  (e-mail and instant) will be the most popular application in the enterprise. Instant messaging will become integrated with many corporate applications. However, more  value will come to the enterprise from vertical applications. More ERP applications (SAP, PeopleSoft and others) will have integrated wireless front-ends.

8. While smart phones with PIM function might become the dominant converged device. These devices will dominate consumer and SOHO markets. However, serious mobile professionals will have to rely on multiple devices or PDA -centric devices with limited voice capability. The enterprise will likely adopt these devices for vertical applications. 

9. There will be general consolidation and rationalization among vendor ranks in all matured categories. Choose your vendor partner carefully. 

10. Wireless application deployment will continue to be among the top three priorities of CIOs.

- Chander Dhawan, Managing Editor and Principal Consultant, MobileInfo.Com

Do you want to make any comments on this editorial? Send us an e-mail.


Related Resources:
MobileInfo.Com's  Outlook for 2002
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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