Edited transcript of BriefingsDirect[TM] podcast with John Bruggeman of Wind River Systems on the Google Android platform and the Open Handset Alliance, recorded Nov. 12, 2007.
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Today, a discussion about a new platform for mobile development and deployment, as well as a large partnership endeavor. We’re going to be discussing the Android platform, proposed by Google, as well as the Open Handset Alliance (OHA).
To help us sort through some of the ins and outs of this and the implications for developers, ISVs, mobile carriers, and just folks like you and me, we have John Bruggeman, chief marketing officer of Wind River Systems. [Disclosure: Wind River has been a sponsor of BriefingsDirect podcasts.]
Welcome to the show, John.
John Bruggeman: Thanks, Dana. I'm thrilled to be here.
We've had fragmentation and a lot of complexity in choosing among silicon, platform, test, and development environments, as well as carriers. Is this Android approach a good idea, and am I right in saying that it is not really new?
Bruggeman: I want to give a little background, because I don’t know how much of the audience will be totally familiar with the recent history in the mobile handset space. The high-end of this market, where there are a lot of both business-focused applications as well as traditional home- or consumer-based applications, has predominantly been the space of Symbian and Microsoft, and both of those are proprietary platforms.
As such, you get all the goodness of a proprietary platform, things like control and predictability. The down side of a proprietary platform includes those things that might be most compelling to drive that marketplace forward -- and those would be innovation and cost.
Proprietary platforms are limited by the number of developers who can get deep access that allows them to understand them and drive innovation. As far as costs, proprietary tends to lock in and drive up the price.
Open source delivers the promise to tackle both of those obstacles to the growth of mobile phone-based applications and offers the promise to drive that growth from the high-end phones further down into the mid- and low-end part of the market.
The concept of wanting an open source-based mobile phone software platform has been talked about over the past couple of years, and many have tried to offer that. This particular one seems really interesting in that they might be the most likely to consolidate the space today.
Gardner: Now, we’re making this recording, John, on Nov. 12, 2007, and today, Google and the others involved released the software development kit (SDK) for Android. If you've had a chance to look at it, we might be able to hit on the news of what it means. It seems to include mobile, rich media, and browser. It seems fairly complete from what I've been able to see.
Bruggeman: I've had the opportunity to look at this harder than most. It is a very rich and complete toolkit for a developer to immediately start creating applications on the Android platform.
Bruggeman: I think it’s a tiny bit premature, Dana, because this will be a write once and run many different phone sets that have adopted the Android platform. But, the other big consortia is one called LiMo, and at the outset, the SDK won’t work on the LiMo platform. The promise in the industry is that will happen over time. [UPDATE: LiMo partners with Wind River.]
We’ve seen this happen a few times on the PC. We’ve seen it on the server, in some respects. Do you think that we have a fairly good shot at creating that, and succeeding where Symbian and Microsoft did not?
Bruggeman: I do, and it will for reasons that might surprise you. From a technological point of view, this was an incremental move forward for the marketplace. There is a little bit better tooling and a nice rich, tested platform, but that’s not new.
What’s new is the business models that open up, and the new opportunities. That’s going to fundamentally change the underlying fabric of the mobile phone space and it’s going to challenge the traditional operators' or carriers' positions in the market. It’s going to force them, as the supply chain, to address this.
The most fascinating part of this announcement to me was which carriers embraced and were initial members of the OHA. Carriers potentially are going to have to embrace completely new revenue and service models in order to survive or prosper.
Bruggeman: A couple of things. You have to look at it regionally. For example,
China Mobile has the potential for hundreds of millions of users or customers. In EMEA, it’s little bit more interesting. T-Mobile is one of three pan-European carriers and Vodafone is the biggest there so this was a move potentially for T-Mobile to make a strategic market strike inside of EMEA. The others you mentioned are all regional or for a particular country.
This is a chance for somebody like Telefonica to position themselves against a pan-European carrier. The absence of North American carriers is pretty interesting.
Bruggeman: It makes a huge difference, because, if you think about it, the traditional plays of Vodafone or Verizon and AT&T are true, or pure, carrier plays. A Google play is a natural for somebody who understands and thinks of themselves as a new type of ISP.
Clearly, the great promise of the Google phone platform is aimed more at an ISP mentality, where they make money on how we provision or enable new services or applications.
Bruggeman: I'll back you up just a bit. Clearly, the traditional carrier is a more connection-based business model. You pay for connection. This model will clearly evolve to be some sort of internet model, which today is typically an ad revenue-share model. That’s how I see OHA will play out over time. We’re going to have to adopt or embrace an ad revenue-share model.
Bruggeman: You bet! Because they’ve mastered that. What’s really interesting is a mobile phone has a very traditional supply chain, and it’s a deep supply chain that goes through multiple layers.
On the PC, that’s not necessarily true. In a traditional internet-based model, the supply chain isn't as deep. It’s easier for the supply chain to adopt or embrace that, but on this mobile phone what’s yet to play out is how the supply chain is going to get paid, especially because it’s Linux or open-source based, so you’re fighting a lot of issues here.
How do people make money in open source? When you're in open source, even if you figure out how to make money, Google has come in and turned it upside down again. It’s not only that you need to figure out how to make money in open source, but you need to do it under this completely new model. Any inefficiency in the supply chain better strip itself out, otherwise the economics aren’t going to work.
There will be different approaches in different markets, but it almost sounds, John, as if you're confident that the technology issues have been addressed, and that this is now really much more of a partnership, business ecology, monetization, and then, ultimately, a cultural behavioral adoption thing.
Bruggeman: It would be naïve to say the technology issues are completely solved, but I think a lot of the hard problems are understood, and there is a path to solution. Those will play out over the next 12 months. I see a clear road to success on the technology side. It will be easier for the technologists to overcome the obstacles than it will be for the business people to overcome the new models in an open source world.
It also seems fairly straightforward about how the folks that are creating the services or applications would play in that. They would have some association with the carrier, perhaps, or just go through a mobile-browser approach, or, being open, monetize on their own, and also be involved with Google. So the application-services carrier side seems pretty straightforward.
What’s less clear to me is how the software, stack, tool, test, and platform people make a go of it. How would a company like
Bruggeman: I want to answer that question, but I don’t want to slide past a couple of your base assumptions, which I think are not as clear when you un-peel the onion a couple of layers.
At the 50,000-foot level, I agree with everything you said about the carriers. I don’t think that the extreme is that improbable, that the actual connection price would go down to zero. I could have a mobile phone and pay a $0 monthly fee.
Bruggeman: The ad revenue is where the real dollars are here, as well as all the location-based value that you can do. This is the true delivery on the promise of the one-to-one marketer's dream. You’ve got your phone. I know exactly where you are.
Bruggeman: An IP address.
Bruggeman: And, I know physically where that IP address is. You are around the corner from Starbucks. Now, is Starbucks going to be willing to pay a premium to get you to drive or walk around the corner? Or, I know you're sitting in the airport terminal. All the possibilities become very powerful concepts.
The challenge is that the traditional carriers have built up a 100-year-old business model that says I charge per connection. Who is their sales force? Who is going to go sell, who do they sell to, how do they bill for that, and how do they account for the click-throughs? Companies like Google are totally familiar with this and know how to monetize.
This is going to be brand new for the carriers to try to solve. So in concept it's pretty easy. But in execution we've got to teach an old dog all kinds of new tricks. It isn’t as obvious once you start to think about it for a minute or two. It becomes pretty complicated.
Bruggeman: You bet, and there’s going to be a lot of pressure to drive down that connectivity price really quickly. I say that because I think you can’t ignore the overtones of Google being willing to buy their own bandwidth and become their own carrier. That threat is out there. As a carrier, I've either got to embrace or fight -- and embrace seems most logical to me.
Bruggeman: All types. The technology is becoming good enough that those are very viable alternatives. Now, I’ll go into the supply chain, because that’s where it's really interesting. There are different types of people inside the supply chain. If I write applications, and I want to be paid for my application or my service, that seems pretty straightforward.
The ones that are going to be harder are those people that make up the platform, the Android platform itself. How does a middleware provider get paid, or how does a Linux provider like
Bruggeman: Any of those types of people who are actually enabling or are part of the platform, as opposed to an end application developer. That’s an interesting one. Clearly, over the last week Wall Street has been confused. How are those companies going to make money? I'd like to make the banker’s job a little bit easier today, if I could.
Bruggeman: The whole challenge of open source is how does anybody make money?
What the mobile handset manufacturers, those people that make the phones want is to have their cake and eat it, too. They want the promise of open source -- fast innovation, low bill-of-material (BOM) cost, and a broad ecosystem around it.
Bruggeman: Those are the four originals. You can think of any of those four companies. They want that promise -- innovation, lower BOM cost, and the vast ecosystem. But, at the end of the day, they have to put out a commercial product.
So they need things like high quality, low risk, and fast time to market. It turns out that the promise of open source plus the promise of commercial are at odds with each other. Every time you have huge innovation, it typically challenges quality.
Any time you have lower BOM cost, you’ve got to give somewhere, and that give is in the form of time, quality, etc. Those two promises are competing, and the people who prosper and thrive on the Android platform are going to be those companies that can squarely plant one foot in the open-source promise and the other foot firmly in the commercial side of the equation.
Bruggeman: You've got it. Why are Red Hat and SUSE successful? Because they’ve figured out how to put their feet on both sides. Nobody prior to
Bruggeman: It was a good decision, and certainly we’ve found our way through that. I wouldn’t say it's easy, but that’s the key to success for us. Anybody else who’s going to participate successfully on the Android platform, such as mobile handset manufacturers, need to put out a product. It is their life blood.
They need basic things that you would expect from a commercial product. Those things are obvious once you think about it. But they also need the things like really great test suites for the software. They need documentation, training, support, maintenance and updates. They need roadmap protection, indemnities, and warranties -- and all the things that, when you buy a commercial product, you expect in spades.
Bruggeman: You bet. That’s what makes it hard, because how do you provide those values on code that you may or may not have developed? That’s the mastery of the open-source world ... and marry that to the mastery of the commercial world.
Bruggeman: Well, certainly above the semiconductor makers. They are selling a chip, and they need to know that the platform that will sit on the chip brings out the differentiation in the chip. That’s their bread and butter.
Each silicon manufacturer has their own area of specialty that they use to compete and win silicon business. They need to have the confidence that the Linux that sits on top draws out that differentiation. That’s a very hard thing to do technically, and it’s in
Bruggeman: And then the Android piece on top needs to know that the Linux is predictable, reliable, and stable, so that a developer ecosystem can emerge around it. That’s hard in open source.
The money trickles down to the handset makers through the relationship with the end user and through the developers, ISVs, and service providers, who then have to pick and choose the best technology on which to continue to provide the best applications and services. You're a player in that market and that’s how you monetize yourself.
Bruggeman: You got it.
Bruggeman: Well, I definitely believe that there is going to be broad-based market adoption of this platform. If you're going to be a major member of the mobile-phone supply chain, you've got to address this platform.
Bruggeman: You bet, and it’s what drove Linux originally. The Linux problem was fragmentation, and we see this as being a rallying point to defragmenting the existing environment, and any time you defragment a market, if you can have a major market share on that defragmenting platform, that’s a great place to be.
Bruggeman: That’s right!
Now, these devices, the converged mobile device in particular, something like an iPhone, strikes me as a stepping stone between a traditional PC, as we know it, and some of these mobile devices.
If I can get a lot of what I get through the PC free or low-cost through one of these mobile devices, the only real difference is the size of the monitor, keyboard, and mouse. Isn’t there an opportunity in two, three, or four years that I might say, “I don’t need that PC and all that complexity, cost and so forth. I might just use my mobile device for almost all of the things I do online?"
Bruggeman: PC manufacturers and those that are the traditional part of that supply chain are threatened by that every day now. You've hit it on the head. There’s an emerging market. Maybe the most important technology market to observe right now is the mobile Internet device (MID).
Many analysts are starting to pick up on it, and it could be viewed as the next generation of the mobile phone. But I think that’s underselling the real opportunity. If you look on the dashboard of your automobile, the back of your airplane seat, everywhere you go and everything you touch, it is a potential resting place for a MID with a 4x6 screen or a 3x5 screen, or all different kinds of form factors. That kind og use gives you the experience that is the eventual promise of the Android platform.
Bruggeman: We all should start thinking about and talking about the MID market pretty quickly.
Bruggeman: You bet!
We'll have to watch and see what happens with some of the other carriers and some of the other platform providers. But while we wait and see, what is going to happen next, John, that starts this MID buzz saw that can radically change the world?
Bruggeman: The first thing is we need to get some Android-based phones out there. Some time next year, you're going to see the first phones and that’s when we're actually going to have to see the operators who offer those phones address all the business model issues that you and I've have been talking about today.
So the next big step is that it’s got to move from the talk about to the reality of "here are the phones," and now we're going to have to resolve all these issues that are out there. That's not years away -- that’s next year.
Bruggeman: You bet!
Bruggeman: It was a fun conversation. Thanks a lot, Dana.
We've been talking with John Bruggeman, chief marketing officer at Wind River Systems. This is Dana Gardner, principal analyst at Interarbor Solutions. You've been listening to a BriefingsDirect podcast. Thanks and come back and join us next time.
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Transcript of BriefingsDirect podcast on the Android platform and the Open Handset Alliance. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.