Apple’s Most Serious Threat Is Amazon, Not Android

Amazon Kindle

The term platform is overloaded with meanings in the technology industry and this is particularly the case in mobile telecommunications where it has been used to describe carrier infrastructure, hardware devices, operating systems and most recently, a commercial framework for publishing and selling content.

For some time mobile operators have tried to work out how to provide service delivery platforms (SDP). They have been pushed from one end by the vested interests of their telecoms equipment providers and from the other by falling voice call revenues and the need to build new lines of business around data. While this infrastructure is as critical as other choices as to how networks are plumbed, its functional differences have little direct impact on end subscribers.

Companies that have a legacy of building mobile phones think more about the hardware – the mobile devices. These started off as straightforward cellular phones with some of the spare processing capacity originally turned over to some data activities and then matured into devices with two connected cores of functionality – one a compute engine, the other a radio communications engine.

These devices have typically been tuned to the needs of the primary customers, mobile operators, who have expected to have them tailored to sell particular features and services to their customer base.

Next, IT companies entered the mobile space thinking about software architectures. These offer application programmer interfaces (API) of an operating system to developers just like on traditional computer platforms to be exploited by independent software vendors (ISV) to build and sell applications. There have been many mobile operating software systems including cross platform tools such as Flash and Java, but all require an ecosystem of serious developers to exploit them.

These traditional telecoms and IT industry models have been turned on their heads by the whole service approach, first popularised by RIM with the BlackBerry. With this, device hardware, the applications they run and the back-end service infrastructure all come together to form something different – a platform that delivers a commercial service. Early (and even current) BlackBerry users were not buying into particular hardware, software or mobile operator service, but a holistic email and personal information management (PIM) delivery service.

Where BlackBerry was the forerunner, the company that really exploited this approach to the max is Apple, and despite the marketing and technology efforts of many other players – Samsung and HTC with hardware platforms, Google with AndroidApple’s market strength and mindshare dominance remains. It doesn’t matter if others have better hardware or software, Apple’s strength comes from the completeness of the offer – it’s a commercial publishing, not simply technically oriented, approach.

With this approach it has evolved the concept of the application from something heavyweight and overly serious into the ‘app’. Apps now are content and short service delivery vehicles, hence Apple’s widely repeated tagline, “there’s an app for that”. While they still must pass Apple’s criteria and checking process, they can be developed by individuals or smaller teams within organisations, and are then published to a readily available storefront, the App Store.

Apple takes its margin as the publisher on its commercial platform – many would say too big a margin – and the developer makes money. True, some apps have been iTat and frivolous, but the overall numbers have been so gigantic that almost everyone in the industry – operators, hardware and software vendors has tried in some way to bolt the concept on to their own offerings. The reason they mostly fail is they do not realize how core the commercial model is to the overall offer.

For this reason the more serious contender Apple faces is, perhaps surprisingly to some, Amazon. Here is a company that has gone the other way by starting with the solid foundation of a popular commercial content delivery platform and building device capability onto the edge. Unlike the massive disruption and dislocation Apple caused with the mobile operators, Amazon has worked its mobile magic differently.

True, most iPhones and a percentage of iPads are sold with cellular contracts, but these devices are network resource hungry; carriers struggle to deliver sufficient bandwidth and subscribers may suddenly realise there are service gaps, caps and additional costs, especially while roaming.

This is a serious capacity crunch that many regions are struggling to deal with. At a certain point the cost of delivering rich media will have such an impact on networks that it must be reflected in the cost, as it was in the early days of mobile music and mobile TV. What is uncertain is whether consumers will pay – if they don’t there will obviously be a commercial impact on Apple and its would be imitators

Amazon amortised the mobile network element into the cost of the media it sells, and in particular for books with the Kindle this works very well. The communications element is seamlessly hidden and content neutral, but this is a difficult model to extend to ever-richer media and for example into large volumes of high definition video. Amazon needs to continue its push into the device space, but without compromising in ease of use and access to its media and content.

As Amazon continues to extend its commercial proposition into more functional hardware, and Apple pushes further into media and controlling its publication, these two industry giants will increasingly be in direct competition. Whereas the past of the mobile industry has been focused on features, functionality and technology aspirations, its future will be concentrating on content, contracts and commercial realities.

Rob Bamforth is a Principal Analyst working with Quocirca, focussing on the areas of service provision and mobility. His experience couples a number of years he has spent in sales and marketing, with an in-depth understanding of technology deployment and service delivery, which together give him an approach that focuses first on the business need, with technology as the supporting service.