Saturday, March 26, 2011

Challenging the iPhone, Part III

Wow, it's been nearly a year since I last wrote about this. Time really flies.

Today there are two giants in the smartphone arena: Apple's iOS and Google's Android. The market shares don't tell the full story, because other players with significant market share are in decline.

First, the Android dilemma. In many ways, this is a parallel of Microsoft Windows, which is why many observers are predicting for iOS the same fate as MacOS suffered against Windows. The main difference between Windows and Android is that Google doesn't make the bulk of its money from direct licensing, instead relies on advertising revenue, so it can afford to give away Android to manufacturers.

However, observers should also remember names like Gateway, Compaq, E-Machines, Packard Bell, et cetera, and ultimately IBM itself, which all fell to the wayside. It's hard to compete in a crowded market unless you have something unique to offer, such as Intel's CPU, or Microsoft's Windows OS, which is why these two are the big winners of the bloodbath. This is also why while the Android handset unit sales have overtaken iOS, Apple still takes home the bulk of the profits. If you're Motorola or Samsung or HTC, you know that competing on hardware alone is a race to the bottom, but you don't have the software capability to build something unique and desirable on top of Android. Android giveth, Android taketh away.

The other interesting thing is that Google has delayed the open sourcing of Honeycomb, their tablet-enhanced version of Android, because they admitted to taking shortcuts and don't want it used on the phone form factor. I find that entirely believable, and this may be the first external sign of some strain on developer resources inside Google. It also means that some significant effort will go towards unifying code for the two form factors instead of new features this year, slowing their heretofore breathtaking pace at least somewhat.

Microsoft has now shipped Windows Phone 7 to what appears to be some critical acclaim but lukewarm market success. It's had to pay Nokia US$1 billion to make handsets, which is the reverse kind of relationship that Microsoft would prefer. Nokia wasted years dithering among three or four possible challengers to iPhone, only to realize that none of them would catch up. I'm not hopeful that partnership with Microsoft will change anything. Oh, and I was right about the KIN: it turned out to be a footnote, pulled from the market after just weeks.

RIM bought QNX shortly before I wrote the previous post on this, so I'm a bit surprised I didn't mention it. Since then, RIM has announced plans to ship a tablet called the PlayBook that runs a version of QNX. However, it suffered several apparent schedule and spec changes and feature additions, most recently the inclusion of an Android compatibility mode. The chaotic SDK situation (five separate ways to write PlayBook apps) will make developers leery of committing to the PlayBook, and will diffuse their internal developer resources. While the Blackberry brand may help them sell to the enterprise market, the confused story will probably cost them in the consumer market, doomed perhaps by substandard ports.

Palm hasn't really done anything that is externally visible since the HP purchase. Presumably some time was lost to restructuring and replacing lost employees, but HP has announced that webOS will soon be used in a tablet, phone, and apparently be shipped with new PCs. Unfortunately, nothing will be available before "summer", which is quite a long time away in this market. I still think webOS is dead.

As for the iPad, Apple sold nearly 15 million of them in 2010, and has just started to ship iPad 2 to apparently warm reception. Earlier it also started shipping a CDMA version of the iPhone for Verizon to what seems to be disappointing demand according to some reports, although sales figures are not available.

To summarize, this market is still astonishingly vibrant. iOS and Android are now the two giants to contend with, while Microsoft/Nokia, RIM/QNX, and HP/Palm have started to consolidate in a bid for third place. I don't think more than one of these three will ultimately survive, and while the safe money is on Microsoft because of its resources, HP just might pull off something if the slowness back to market is made up for by serious innovation forward.

Diplomacy

Hillary Clinton's State Department should get a medal for the feat they pulled off. The Arab League unanimously asked for a no-fly zone over Libya, while China and Russia - two veto-wielding members of the UN Security Council traditionally leery of international interventions - took a step back and abstained to let the resolution pass. This is perhaps the biggest diplomatic coup for the US since President (George H. W.) Bush's State Department put together the coalition against Iraq in 1990, and this one did not involve the unprovoked invasion of a sovereign state, merely the threat of genocide by Gaddafi against his own people. These diplomats probably saved the US taxpayers billions of dollars in war expenses that other countries will now shoulder, not to mention American lives that are not risked.

Predictably, President Obama's critics couldn't just hand him a victory. People who were calling for a no-fly zone two weeks ago suddenly would not have intervened, people who had no trouble paying literally a trillion dollars (not to mention thousands of lives) to invade and occupy Iraq suddenly worried about cost, and people who championed unilateralism and exceptionalism now wanted consultation. Obama is simultaneously criticized as indecisive yet unwilling to slow down to consult with a congress at its most bitterly-divided state in recent memory.

But more importantly, the signal is that America isn't going to always show up in force anymore. Europe is now expected to keep the peace in its neighborhood, and since that includes northern Africa we can only assume it'll also include eastern Europe. South Korea and Taiwan should be taking careful notes right now, and seriously considering the possibility that the US isn't going to go all out for either of them.

Tuesday, March 15, 2011

Get Real

The House of Representatives has now gotten into the idiotic pattern of renewing government three weeks at a time. I don't work for the federal government, but anybody can easily imagine the chaos and low morale caused by constantly imminent threats of shutdown. Republicans think government is inefficient, but they're making it worse by making it difficult for even well-meaning people to do real work.

As far as I understand, even the most ambitious Tea Party politicians want "only" to cut about US$100 billion from this year's budget. This is a very big sum, but only a drop in the bucket of the US$14.2 trillion that we already owe, and not even a substantial slice of the US$1.2 trillion deficit. In other words, what we're witnessing is merely disruptive posturing. They complained that the health care bill was passed with too little discussion, yet they are wiping out substantial parts of agency budgets with far less thought, but not touching the truly costly programs.

Here's the problem. Even if you could erase the 2010 deficit with a magic pen, there's zero possibility that removing that sum from the economy would have no impact. Federal employees by the hundreds of thousands would lose their jobs. Houses would have to be sold or foreclosed. Wages in private industry would be depressed by the increased competition. These conservatives refuse to understand that we're talking about US$1.2 trillion of spent money, and even if we all agree it's wasteful (and we don't) doesn't mean cutting it abruptly is the right solution. Quite simply, a federal employee you lay off will soon be receiving unemployment benefits, so you would not see the savings you initially imagined. Worse, somebody you lay off or is laid off indirectly because of these cuts might commit a crime and end up in prison, costing all of us even more. People don't just vaporize when you cut their budgets.

Worse, since this is deficit money, nobody gets to pay a penny less in taxes without the government going into deficit again. So not even the ridiculous trickle-down theory (where rich people invest their tax savings in business, thus benefiting workers) can possibly apply.

What the Republicans need to do is grow up. The federal government didn't get this fat in a day, and it's dangerous to try to trim it down in a day. Government can grow and shrink depending on what the people think its role should be, but letting it grow for decades and cutting in one stroke is a shock that this economy probably can't take. What they need to do is to actually evaluate each agency, starting with the biggest spenders, but starting with next year's budget. What we need is a plan that gradually shrinks government over the next few years until we have a surplus, and actually pay down the debt. Right now, I see Democrats with little willingness to tackle the debt, and I see Republicans willing only to slash programs they already don't like, regardless of its share in the deficit. Either way, fighting over three weeks of government at a time is not what I would expect most Americans elected and pay them to do.