The end of hardware as a mobile business

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editors note: author Caroline Gabriel will be speaking and chairing several sessions at AI World in San Fran, Nov 7-9. Catch the results of her new research into Enterprise AI Adoption – http://aiworldexpo.com/speakers/caroline-gabriel/

Exploding handsets aside, Ericsson’s crisis shows the need for all players to accelerate their shift towards software and services

It’s been another week of exploding smartphones, and the growing fall-out from the problems with Samsung’s Galaxy Note 7. Once a flagship product and a genuinely innovative design, the latest Note has turned into a nightmare. Samsung has halted production and the recall and refund process – and more importantly, the loss of future sales – may hit its profits to the tune of $5.3bn.

Of course, Samsung is a big enough company to weather this storm, despite the awful timing, just as its handset business seemed to be in recovery mode. This will likely see it redouble its efforts to shift revenue and profit to non-smartphone businesses like memory, processors and displays, and to try to boost its efforts in software.

The trouble is, while the company is having some success with services like mobile payments, the classic software/content model for a device maker is to use those services to drive additional usage, and upgrades, to the smartphones, by creating an optimized and highly usable experience. Apple is the star at this, and the failure of the new Note – whose pen interface can support some interesting applications – will be a blow to Samsung’s hardware/software hopes.

Google is also chasing that integrated device/services dream with its new Pixel smartphones, just when the model is set to decline. The ascendant players will not be the hardware/software providers, which lock users into a particular device or brand. They will be the web content and applications firms, which can create a differentiated and attractive user experience across a whole range of current and future gadgets.

Amazon is leading the way, because this is its natural territory – despite the Kindles and Fires and Echoes, it is not a device maker and those products exist purely to drive more usage of its content and stores. That also gives Amazon a whole different approach to margins compared to actual hardware manufacturers. As it hurls its rocks at Apple and Samsung – it new low cost music streaming service, tied into its Echo and Prime platforms, is the latest example – it is even more strange that Google, which could go head-to-head in this game, is being distracted by the old-fashioned world of devices.

It isn’t just the device end of the mobile market where the old guard are being squeezed out. Network vendors and operators are faced with painful adjustments too – Ericsson’s huge job cuts of last week were followed this week by news of 3,200 layoffs at Verizon.

Read the source article at Rethink Wireless