Wednesday, December 19, 2007
Listen to the podcast here. Sponsor: UPS.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions and you're listening to BriefingsDirect.
Today, a sponsored podcast discussion about the peak holiday season for retail shopping -- online and via television -- and the impact that this large bump in the road has logistically and technically for some major retailers.
We’re going to discuss how Alibris, an online media and bookseller, as well as QVC, a global multimedia shopping network, handles this peak demand issue. The peak is culminating for such shippers as UPS this week, right around Dec. 19, 2007.
We’re going to talk about how the end-user in this era of higher expectations is now accustomed to making a phone call or going online to tap in a few keystrokes, and then -- like Santa himself -- having a package show up within a day or two. It's instant gratification, if you will, from the logistics point-of-view.
Helping us understand how this modern miracle can be accomplished at such high scale and with such a huge amount of additional capacity required during the November and December shopping period, we’re joined by two guests. We’re going to be talking with Mark Nason, vice president of operations at Alibris, and also Andy Quay, vice president of outbound transportation at QVC. I want to welcome you both to the show.
Mark Nason: Thank you, Dana.
Gardner: Tell us a little bit about what’s different now for Alibris, given the peak season demands, over just a few years ago. Have the expectations of the end-user really evolved, and how do you maintain that sort of instant gratification despite the level of complexity required?
Nason: What we strive for is a consistent customer experience. Through the online order process, shoppers have come to expect a routine that is reliable, accurate, timely, and customer-centric. For us to do that internally it means that we prepare for this season throughout the year. The same challenges that we have are just intensified during this holiday time-period.
Gardner: For those who might not be familiar, tell us a little about Alibris. You sell books, used books, out-of-print books, rare media and other media -- and not just directly, but through an online network of independent booksellers and retailers. Tell us more about how that works.
Nason: Alibris has books you thought you would never find. These are books, music, movies, things in the secondary market with much more variety, and that aren’t necessarily found in your local new bookseller or local media store.
We aggregate -- through the use of technology -- the selection of thousands of sellers worldwide. That allows sellers to list things and standardize what they have in their store through the use of a central catalogue, and allows customers to find what they're looking for when it comes to a book or title on some subject that isn’t readily available through their local new books store or media seller.
Gardner: Now, this is a very substantial undertaking. We're talking about something on the order of 70 million books from a network of some 10,000 booksellers in 65 or more countries. Is that right?
Nason: Roughly, that’s correct. Going in and out of the network at any given time, we've got thousands of sellers with literally millions of book and other media titles. These need to be updated, not only when they are sold or added, but also when they are priced. Prices are constantly changing. It’s a very dynamic market.
Gardner: What is the difference in terms of the volume that you manage from your slowest time of the year compared to this peak holiday period, from mid-November through December?
Nason: It’s roughly 100 percent.
Nason: In this industry there are actually two peak time periods. We experience this during the back-to-school season that occurs both in January and the latter-half of August and into September.
Gardner: So at the end of the calendar year you deal with the holidays, but also for those college students who are entering into their second semester?
Nason: Exactly. Our peak season associated with the holidays in December extends well into January and even the first week of February.
Gardner: Given this network and the scale and volume and the number of different players, how do you manage a consistent response to your customers, even with a 100 percent increase at the peak season?
Nason: Well, you hit on the term we use a lot -- and that is "managing" the complexity of the arrangement. We have to be sure there is bandwidth available. It’s not just staffing and workstations per se. The technology behind it has to handle the workload on the website, and through to our service partners, which we call our B2B partners. Their volume increases as well.
So all the file sizes, if you will, during the transfer processes are larger, and there is just more for everybody to do. That bandwidth has to be available, and it has to be fully functional at the smaller size, in order for it to function in its larger form.
Gardner: I assume this isn’t something you can do entirely on your own, that you depend on partners, some of those B2B folks you mentioned. Tell us a little bit about some of the major ones, and how they help you ramp up.
Nason: In the area of fulfillment, we rely heavily on our third-party logistics partners, which include carriers. At our distribution centers, typically we lease space, equipment, and the labor required to keep up with the volume.
Then with our B2B partners -- those are the folks that buy from us on a wholesale or distribution basis -- we work out with them ahead of time what their volume estimates might be and what their demands on us would be. Then we work on scheduling when those files might come through, so we can be proactive in fulfilling those orders.
Gardner: When it comes to the actual delivery of the package, tell us how that works and how you manage that complexity and/or scale.
Nason: Well, we have a benefit in that we are in locations that have scalable capacity available from the carriers. That includes lift capacity at the airport, trucking capacity for the highway, and, of course, railheads. These are all issues we are sensitive to, when it comes to informing our carriers and other suppliers that we rely on, by giving them estimates of what we expect our volume to be. It gives them the lead time they need to have capacity there for us.
Gardner: I suppose communication is essential. Is there a higher level of integration handoff between your systems and their systems? Is this entering a more automated level?
Nason: It is, year-round. For peak season it doesn’t necessarily change in that form. The process remains. However, we may have multiple pick-ups scheduled throughout the day from our primary carriers, and/or we arrange special holiday calendar scheduling with those carriers for pick-up, perhaps on a Saturday, or twice on Mondays. If they are sensitive to weather or traffic delays, for example, we know the terminals they need to go through.
Gardner: How about returns? Is that something that you work with these carriers on as well? Or is that something you handle separately?
Nason: Returns are a fundamental part of our business. In fact, we do our best to give the customer the confidence of knowing that by purchasing in the secondary market, the transaction is indemnified, and returns are a definite part of our business on a day-to-day basis.
Gardner: What can we expect in the future? Obviously this volume continues, the expectations rise, and people are doing more types of things online. I suppose college students have been brought up with this, rather than it being something they have learned. It’s something that has always been there.
Do you see any prospects in the future for a higher level of technology need or collaboration need, how can we scale even further?
Nason: Constantly, the improvements in technology challenge the process, and managing the complexity is what you weigh against streamlining even further what we have available -- in particular, optimizing inter-modal transport. For example, with fuel costs skyrocketing, and the cost of everyone's time going up, through the use of technology we look for opportunities on back-haul lanes, or in getting partial loads filled before they move, without sacrificing the service interval.
These are the kinds of things that technology allows when it's managed properly. Of course, another layer of technology has to be considered from the complexity standpoint before you can be successful with it.
Gardner: Is there anything in the future you would like to see from such carriers as UPS, as they try to become your top partners on all of this?
Nason: Integration is the key, and by that I mean the features of service that they provide. It’s not simply transportation, it’s the trackability, it’s scaling; both on the volume side, but also in allowing us to give the customer information about the order, when it will be there, or any exceptions. They're an extension of Alibris in terms of what the customer sees for the end-to-end transaction.
Gardner: Fine, thanks. Now we’re going to talk with Andy Quay, the vice president of outbound transportation at QVC.
QVC has been having a very busy holiday peak season this year. And QVC, of course, has had an illustrious long-term play in pioneering, both retail through television and cable, as well as online.
Welcome Andy, and tell us a little bit about QVC and your story. How long you have been there?
Andy Quay: Well, I am celebrating my 21st anniversary this December. So I can say I have been through every peak season.
Although peak season 20 some years ago was nothing compared to what we are dealing with now. This has been an evolutionary process as our business has grown and become accepted by consumers across the country. More recently we’ve been able to develop with our website as well, which really augments our live television shows.
Gardner: Give us a sense of the numbers here. After 21 years this is quite a different ball game than when you started. What sort of volumes and what sort of records, if any, are we dealing with this year?
Quay: Well, I can tell you that in our first year in business, in December, 1986 -- and I still have the actual report, believe it or not -- we shipped 14,600 some-odd packages. We are currently shipping probably 350,000 to 450,000 packages a day at this point.
We've come a long way. We actually set a record this year by taking more than 870,000 orders in a 24-hour period on Nov. 11. This led to our typical busy season through the Thanksgiving holiday to the December Christmas season. We'll be shipping right up to Friday, Dec. 21 for delivery on Christmas.
Gardner: At QVC you sell a tremendous diversity of goods. Many of them you procure and deal with the supply chain yourselves, therefore cutting costs and offering quicker turnaround processing.
Tell us a little about the technology that goes into that, and perhaps also a little bit about what the expectations are now. Since people are used to clicking a button on their keyboard or making a quick phone call and then ... wow, a day or two later, the package arrives. Their expectations are pretty high.
Quay: That’s an excellent point. We’ve been seeing customer expectations get higher every year. More people are becoming familiar with this form of ordering, whether through the web or over the telephone.
I’ll also touch on the technology very briefly. We use an automated ordering system with voice response units that enable my wife, for example, to place an order in about 35 seconds. So that enables us to handle high volumes of orders. Using that technology has allowed us to take some 870,000 orders in a day.
The planning for this allows the supply chain to be very quick. We are like television broadcasts. We literally are scripting the show 24-hours in advance. So we can be very opportunistic. If we have a hot product, we can get it on the air very quickly and not have to worry about necessarily supplying 300 brick-and-mortar stores. Our turnaround time can be blindingly quick, depending upon how fast we can get the inventory into one of our distribution centers.
We currently have five distribution centers, and they are all along the East Coast of the U.S., and they are predominantly commodity driven. For example, we have specific commodities such as jewelry in one facility, and we have apparel and accessories as categories of goods in another facility. That lends itself to a challenge when people are ordering multiple items across commodities. We end up having to ship them separately. That’s a dilemma we have been struggling with as customers do more multi-category orders.
As I mentioned, the scripting of the SKUs for the broadcast is typically 24 hours prior, with the exception of Today's Special Value (TSV) show and other specific shows. We spend a great deal of time forecasting for the phone centers and the distribution carriers to ensure that we can take the orders in volume and ship them within 48 hours.
We are constantly focused on our cycle-time and in trying to turn those orders around and get them out the door as quickly as possible. To support this effort we probably have one of the largest "zone-jumping" operations in the country.
Gardner: And what does "zone-jumping" mean?
Quay: Zone jumping allows me to contract with truckload carriers to deliver our packages into the UPS network. We go to 14 different hubs across the country, in many cases using team drivers. This enables us to speed the delivery to the customer, and we’re constantly focused on the customer.
Gardner: And this must require quite a bit of integration, or at least interoperability in communications between your systems and UPS’s systems?
Quay: Absolutely, and we carefully plan leading up to the peak season we're in now. We literally begin planning this in June for what takes place during the holidays -- right up to Christmas Day.
We work very closely with UPS and their network planners, both ground and air, to ensure cost-efficient delivery to the customer. We actually sort packages for air shipments, during critical business periods, to optimize the UPS network.
Gardner: It really sounds like a just-in-time supply chain for retail.
Quay: It's as close as you can get it. As I sometimes say, it's "just-out-of-time"! We do certainly try for a quick turnaround.
Coming back to what you said earlier, as far as the competition goes it is getting more intense. The customer expectations are getting higher and higher. And, of course, we are trying to stay ahead of the curve.
Gardner: What's the difference between your peak season now and the more regular baseline of volume of business? How much increase do you have to deal with during this period, between late-November and mid- to late-December?
Quay: Well, it ramps up considerably. We can go from a 150,000 to 200,000 orders a day, to literally over 400,000 to 500,000 orders a day.
Gardner: So double, maybe triple, the volume?
Quay: Right. The other challenge I mentioned, the commodity-basis distribution that we operate on -- along with the volatility of our orders -- this all tends to focus on a single distribution center. We spend an inordinate amount of time trying to forecast volume, both for staffing and also planning with our carriers like UPS.
We want to know what buying is going to be shipping, at what distribution center, on what day. And that only compresses even more around the holiday period. We have specific cutoff times that the distribution center operations must hit in order to meet the customers' delivery date. We work very closely on when we dispatch trucks ... all of this leading up to our holiday cutoff sequence this week.
We try to maximize ground service versus the more expensive airfreight. I think we have done a very good job at penetrating UPS’s network to maximize ground delivery, all in an effort to keep the shipping and handling cost to the customers as low as possible.
Gardner: How about the future? Is this trend of that past 21 years sustainable? How far can we go?
Quay: I believe it is sustainable. Our web business is booming, with very high growth every year. And that really augments the television broadcast. We have, honestly, a fair amount of penetration, and we can still obtain more with our audiences.
Our cable broadcast is in 90 million-plus homes that actually receive our signal, but a relatively small portion actually purchase. So that’s my point. We have a long way to go to further penetrate and earn more customers. We have to get people to try us.
Gardner: And, of course, people are now also finding goods via Web search. For example, when they go to search for a piece of apparel, or a retail item, or some kind or a gift -- they might just go to, say, Google or Yahoo! or MSN, and type something in and end up on your web site. That gives you a whole new level of potential volume.
Quay: Well, it does, and we also make the website very well known. I am looking at our television show right now and we’ve have our www.qvc.com site advertised right on it. That provides an extended search capability. People are trying to do more shopping on the web, in addition to watching the television.
Gardner: We have synergies on the distribution side; we have synergies on the acquisition, and of using information and how to engage with partners. And so the technology is really in the middle of it all. And you also expect a tremendous amount of growth still to come.
Quay: Yes, absolutely. And it’s amazing, the different functions within QVC, the synergies that we work together internally. That goes from our merchandising to where we are sourcing product.
You mentioned supply chains, and the visibility of getting into the distribution center. Our merchants and programmers watch that like a hawk so they can script new items on the air. We have pre-scripted hours that we’re definitely looking to get certain products on.
The planning for the television broadcast is something that drives the back end of the supply chain. The coordination with our distribution centers -- as far as getting the operation forecast, staffed and fulfilled through shipping to our customers -- is outstanding.
Gardner: Well, it’s very impressive, given what you’ve done and all of these different plates that you need to keep spinning in the air -- while also keeping them coordinated. I really appreciate the daunting task, and that you have been able to reach this high level of efficiency.
Quay: Oh, we are not perfect yet. We are still working very hard to improve our service. It never slows down.
Gardner: Great. Thanks very much for your input. I have learned a bit more about this whole peak season, what really goes on behind the scenes at both QVC and Alibris. It seems like quite an accomplishment what you all are able to do at both organizations.
Nason: Well, thank you, Dana. Thanks for taking the time to hear about the Alibris story.
Gardner: Sure. This is Dana Gardner, principal analyst at Interarbor Solutions. We have been talking with Mark Nason, the vice president of operations at Alibris, about managing the peak season demand, and the logistics and technology required for a seamless customer experience.
We’ve also been joined by Andy Quay, vice president of outbound transportation, at the QVC shopping network.
Thanks to our listeners for joining on this BriefingsDirect sponsored podcast. Come back and listen again next time.
Listen to the podcast here. Sponsor: UPS.
Transcript of BriefingsDirect podcast on peak season shipping efficiencies and UPS retail solutions. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
Tuesday, December 11, 2007
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.
Listen to the podcast.
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.