Saturday, September 27, 2008

Google's Android - The Promise

So Google's Android mobile platform is finally here.

I'm not going to add to the cacophony of voices discussing the technology itself. There are far more competent people doing that already.

Stepping back from the technobabble for a moment, I have a sense of déjà vu. I feel this is a moment rather like the one back in 1981 when IBM launched the PC.

The personal computer era can be neatly classified into a BC-AD kind of history with the launch of the IBM PC corresponding to the birth of Christ. Before, it was all about proprietary hardware and proprietary software. After, it was all about open hardware and, uh, proprietary software.

Even with its partial openness, the IBM PC proved to be a neutron bomb that eliminated all its rivals in short order. Only Apple survived (although it suffered a near-death experience in the mid-nineties).

The echoes of the IBM PC's debut are still reverberating through the IT industry today, its megatonnage a direct result of its comparative openness. [Of course, the fact that the IBM PC was from IBM didn't hurt, but I wager it wouldn't have done anywhere near as well if it hadn't been for its openness. After all, the IBM PS/2 (which was meant to be the PC's successor) bombed badly because of its proprietary MCA (Micro Channel Architecture) bus, which lost out to the open ISA (Industry Standard Architecture) bus. The PC moved on, leaving IBM behind, proving that it was openness rather than pedigree that was responsible for its success.]

With Android, Google is out-IBMing IBM. It's an open platform all the way. Android itself is released under an Apache license, like its underlying Java Virtual Machine (more correctly, the Dalvik Virtual Machine based on Apache Harmony). The Linux kernel underlying both of them is covered by the GNU GPL. Unlike Apple, Google will not attempt to control the application ecosystem on top of the platform either. This is true openness.

Where will this lead us? Let me make a prediction. This obviously sounds audacious in late 2008, but I'm betting it will appear obvious in hindsight by 2010. I'm predicting Blackberry/iPhone capabilities in devices costing $10. That's right, ten dollars. The hardware's made in China, the platform's Open Source, the applications are downloadable free of charge. How much does a cheap plastic LCD wristwatch cost? That's how much a mobile device will cost within 2 years, thanks to openness.

Update 30/09/2008: The first comment on this entry was a very well-informed one warning of the very different economics and market constraints in the mobile market compared to the PC market. But you know what? These are mobile devices we're talking about, not just mobile phones. They're basically wireless-capable PCs in a smaller form factor. If the existing mobile players are exploiting their natural monopoly to essentially charge rents, I think they're about to have an unpleasant deflationary surprise when for example, Google moves the action away from the telco-dominated mobile phone network onto the wireless Internet. Google has a habit of introducing game-changing features into their products. Think Suggest for Google Search, Street View for Google Maps (itself a game-changing product), and Google Documents, the online office suite. Google also has an interesting way of slipping products rather unobtrusively into the market with ultimately unpleasant consequences for their competitors. 

How could Google fight the established players in the mobile phone market? Let's think. The bulk of mobile subscribers are in cities. The 80-20 rule means that investing in relatively few Internet Wireless Access Points in major cities will cover the bulk of subscribers, and the rest can be switched through the regular mobile network. ISPs, not telcos, could be the main carrier partners of the device manufacturers who go with Android. Google can use its huge additional advertising revenue to provide cross-subsidies and hide any differences in economics by having to use different networks. And the subsidy required will keep decreasing as WAP coverage increases. This is something that just occurred to me as a casual afterthought, so I'm sure the Googleheads have even better ideas.

The bottomline to the consumer is that massive reductions in cost-per-MIPS began to occur with PCs as soon as an open platform appeared. Can this happen again with mobile devices? I think it can.

But even if Google breaks the telco oligopoly and creates an Internet-based mobile device ecosystem, it still faces a formidable challenge because it can't stop other players from exploiting this more open network.

This time, Apple is far stronger as an incumbent than it was in 1981. The challenger (Google) is just as new to the battleground market segment as IBM was in 1981 but just as deep-pocketed and determined as IBM was.

Will Android's openness be sufficient to overcome Apple's brand, technical sophistication, polish and level of entrenchment in the market?

That's not the only challenge before Android. There is an open competitor as well. Will LiMo queer the pitch for Android?

Well, I'm both pro-openness and pro-competition, so the more the merrier :-). And I'll save my money till the price of a mobile device drops to about $10. That's me not putting my money where my mouth is!

Go, Android!


Unknown Programmer said...

The mobile market is completely different. It is tightly controlled by operators, governments, restrictive data plans, and a good number of very entrenched mobile phone companies.

Running the mobile networks is very expensive and the bandwidth is limited. You can't add new 'wires' to have more bandwidth so this resource will always be expensive to own and those who own it will charge you a lot. Using a device like this will always be expensive and it is much more expensive to use something like an iPhone.

Also, the components used to build these devices are the most sought after parts around. These markets are tightly controlled by the mobile phone manufacturers like Nokia. Even if you wanted to build a lot of phones, you just can't because there are no parts.

There are 1.15 Billion mobile devices sold yearly. Nokia controls 35% of that cake, for example. That is 300-400 million phones yearly sold and they operate in 160+ countries. Apple will likely sell 10 million iPhones this year. It will take Apple another decade to become a serious player - if they last. Right now they are in the peanut category and will stay there for a long time.

There is a lot of hype around these devices and the reality gets lost in it all.

Ganesh Prasad said...

Thanks, these are excellent points. Your comment got me thinking. If it's really that hard to reduce prices in this market, then it calls for a Gordian solution. Google should probably not even try playing by these rules but change the game entirely. And they should probably try leveraging the Internet rather than the telco network. I've updated the post to reflect the angle you've brought up.