My Cellphone My Terms

With the debut of the Android based T-Mobile G1 in October 2008, and the coming of the “revolutionary” devices HTC dream and HTC Magic to be launched on June 2, and with a possible 18 more devices before year end, there is a sense that Google is setting to dominate the Smartphone OS (operating system) space.  Can Google dominate the Smartphone market the way Microsoft dominates in the PC market?

Google is certainly taking steps to be a dominant player in the market.  While Microsoft was allowed to license its OS to OEMS during the PC boom and established its dominance in the market place, Google is trying a more “open” approach with its open Android platform. Google allows device manufactures to “license” its OS free with three options:

• Option 1: Device manufactures can download the OS for free and use it with no strings attached, except that they are restricted from loading Gmail or Google’s calendar
• Option 2: Same as above except the manufactures agree to a distribution agreement to include Google applications including Gmail and Google’s calendar among others.
• Option 3: To get the full “Google Experience”, including the company’s logo and applications, the device manufactures must agree not to censor or limit any application or program regardless of its “taste” and likelihood to offend.

The difference between Google’s approach and Microsoft is that Google is not in the software business and does not care about software sales – they are in the advertising business. So Google can afford to be open, free and literally give its OS away to device manufactures willing to form a partnership. And the incentives are certainly there, with a free OS, the overall cost of the device drops while opening the user to a wide range of applications and already existing Google apps. The drawback of course it that the user experience may be plagued with poorly developed applications and bugs, given how open the whole process is.
But Android is trying to do what Microsoft has failed to do, become the dominant OS for mobile devices.  According to Gardner Research,  Symbian (Nokia’s OS) led the mobile OS market in 2008 with 52%, down however from a 64% market share a year earlier. RIM’s OS is second at 17% market share gaining 7% in a year; Microsoft is third with 12% market share, flat from 2007. The upstart is the Mac OS X which gain 6% market share in less than a year and now stands at 8% of the worldwide market.

Source: Gardner Research, March 2009

What the table above indicates is that the OS market is very fragmented, and while Nokia’s Symbian OS has the largest market share, RIM and Apple are formidable players and at current pace will pass Symbian to be the leading players in this market.  None of these players are likely to adopt Google’s Android OS as their own.  Leaving a rather small number of device manufactures to go after.  In additions the conditions in the mobile OS space are a lot different than the winner take all nature of the PC market – there are no network effects, no real lock ins, no major learning curve and there seems to be little incentive at least now for the big manufactures like Nokia, RIM and Apple to go the Google Android route.

The only real way for Android to be a game changer is for customers to demands its OS – for that to happen Android has to be significantly better than its competitors, and from the support that iPhone’s MAC OS X has received, the “crackberry” nature of the RIM blackberry devices, its highly unlikely customers will mass migrate and demand Android. But may be time will tell.

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