Wednesday, February 9, 2011

Will Nokia do Android? WP 7? Rise like a phoenix from ashes?

The big news buzz now is around a leaked internal memo sent out by Nokia CEO Stephen Elop to all employees. Engadget has published the memo, in which Elop has acknowledged the failure of his own company to act, and warned that they are standing on a 'burning platform';


"The first iPhone shipped in 2007, and we still don't have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable."

Any Nokia watcher, or Nokia loyalist would agree.Unbelievable. Especially here in India, where we hold Nokia close to our hearts. All of us who started using phones in the 90s have probably owned or used a Nokia phone at some point (if not through the years). I don't think any of us would dispute their huge expertise. It shows in every best selling model they have created through the years -  5190, 3310, 6600 and more recently, the e-series phones.

This expertise may have come at a price though - according to this blog post on Asymco, Nokia spent 9.3 billion dollars (13.4% of sales revenue) on R&D in 2010, almost 3 times what is spent by peers in the industry. Of course, this is across hardware and software platforms like MeeGo, Symbian, and so on. What pinches is the failure to stave off competition despite a headstart and these huge investments.

Anyway, Elop's wake up call is a welcome one and of course, the speculation raised by the memo is, what is the next action planned by Nokia to fight its way back to supremacy? Elop promises that a new strategy will be announced on Feb 11th and that it will be a huge effort to transform the company.

Clearly, the focus will shift from devices to the platform and the apps, as Elop points out;
"Our competitors aren't taking our market share with devices; they are taking our market share with an entire ecosystem. This means we're going to have to decide how we either build, catalyse or join an ecosystem."

So the choices are - Android, Windows Phone 7, Symbian, MeeGo...or something new? Each platform choice carries potential pluses and minuses for Nokia.

I think it is a tough strategic decision - but here are some of my thoughts. (Like everyone else, I am not willing to wait quietly till Feb 11th to hear what the company has to say)

1) Will Nokia abandon Symbian?
Joining an existing ecosystem eg. Android vs. building your own is a very big decision. Apple, with its focus on vertical integration, owns the consumer from handset to OS to app marketplace. Nokia has had a similar business model in the past. This model is hugely profitable to the company and ensures control over every aspect of the user experience.

Having nurtured Symbian through the years, Nokia does have an ecosystem  in place, which has been outpaced by the market.  It's one thing to urge Nokia to jump onto the Android or Microsoft bandwagon for now, but it is not an easy decision to abandon what you have built up. And equally, it is easy to say that Symbian can be developed into something awesome but time is of essence and I don't think there is a lot of it left.

One possible solution, is for Symbian OS to drive the budget handsets. If there is any gap in the smartphone market today, it is at the bottom of the market. The cheaper Android handsets, with their weak processors are somewhat half heartedly addressing the budget segment. Symbian with its superb optimisation to mobile hardware combined with Nokia's expertise in building low cost devices, can easily capture this 'smart feature phone' market. This was what Samsung was aspiring to do with bada, but it does not seem likely to happen. At the end of the day, operating system is only a platform to access the net and if it offers a good user experience, there is still room for Symbian to flourish.

2) What will Nokia do with MeeGo?
There are enough indications that mobile devices will be the future of internet access. For example, in India, there are barely 100 million broadband connections, but nearly 700 million mobile users, many of whom will taste the internet first on their cellphones. Nokia has already partnered with Intel to develop MeeGo, a Linux-based open source OS that is potentially a huge rival to Android. It has been a frustration that Nokia has barely released any devices based on this OS and has not even seemed interested in marketing them. Yet at this stage, it might be easier to abandon MeeGo than Symbian. In which case, the company can probably look to Android or WP7 to revive its flagging fortunes in the smartphone segment. Increasingly, the industry buzz is that the tie-up will be with Microsoft, rather than Android.

3) The future of non-touchscreen devices
By default we are being pushed into a touchscreen era  in mobile devices but I am not sure that everyone wants to join this party. I know a lot of people (and not necessarily budget phone users) who prefer a physical keypad, a QWERTY keyboard, and even some who are averse to touchscreen. This maybe a niche segment, but it will have takers. I just realised that there are NO non touchscreen high end smartphones - and display adds significantly to the device cost. There is another little pocket here that stretches across budget and smartphones, and is worth looking at.

I have said my little piece, and I will be waiting keenly to hear what Nokia does next.