Phone Wars

With the launch of the latest iPhone, which offers a faster 3G connection at a far lower entry price than the original version, Apple is clearly looking to widen its attraction to consumers in the coming months. However many of the other improvements made to the iPhone show that the Californian company has also set professional and business users firmly in its sights – a market segment that will not be easily conceded by its rivals.

Over 32 million smart-phones were sold worldwide in the first quarter of 2008 alone – up nearly 30% on sales in the same period last year. The strongest player globally was Nokia, which took 45% of sales during this time. Research In Motion (RIM), which produces the well-known Blackberry device, catered for 13% of the market while Apple took third place with 5%, an impressive performance for a company that did not even have a phone on the market in Q1 of 2007.

Such a strong showing from Apple’s iPhone came despite the previous model’s major flaws from a professional consumer’s point of view. Its use of the inferior EDGE network meant slow web access, for example, while its lack of compatibility with the Microsoft Exchange email client prevented many from keeping on top of business emails while on the go.

The new 3G model, available from as little €50 on the O2 network, seeks to remedy both of these problems amongst many others as Apple looks to make its iPhone as much of a must-have device for businesspeople as the Blackberry has been. But they can be certain that the incumbents will do anything but rest on their laurels.

Nokia, a company that has dominated the smart-phone market for some time, draws much of its strength from the choice it offers customers looking for a high-end device. Its E-series, which is focused specifically on the professional user, has eight different models available at present with more being added every few months. These devices have a wide range of styles, making the Nokia business model the antithesis of Apple’s single device, single feature-set approach. But while each device may look very different to the next, Nokia is keen to maintain consistency in critical areas.

“We have a number of different devices to cater for different preferences but they largely all support the same applications and have the same interface so users can switch from one to the other without having to adapt every time,’’ said Eoin Cruise, Head of the Go To Market Department at Nokia Ireland. “In that respect we wouldn’t have a single iPhone competitor but a number of devices with different selling points.’’

So far Nokia’s decision to sell a number of comparable devices side by side has worked, as is indicated by the company’s market dominance.

“Nokia phones sell extremely well for us,’’ said Astrid Smyth, Senior Product Manager at Vodafone Ireland. “Particularly those that are basic ‘candybar’ style with straight-forward features like voice, text and email.’’

From August, 3 Mobile will begin to carry one of the most sophisticated E-Series phones to date in Ireland – the E71. In addition to the bare essentials expected with a smart-phone nowadays this device will also have assisted GPS navigation, a physical keyboard which echoes the style preferred by RIM and a front-facing camera for video conference calls – a feature oddly absent from the iPhone.

The E71’s physical form shows it as a clear attempt by Nokia to keep the pressure up on the Blackberry however it is certain to be somewhat inspired by the iPhone too, which has shown that form and function can co-exist on even the most feature-laden of smart-phones.

“Naturally we’ve always tried to design attractive phones but the iPhone has certainly focused the mind in that respect,’’ said Mr. Cruise. “For example we’re now looking at more metal cased devices and the E71 is one such model.’’

Blackberry-maker RIM is also doing what it can to keep itself at the fore of the smart-hone market and is preparing a three-pronged response, the first of which is the Blackbery Bold.

The challenge posed in competing with the iPhone is arguably more difficult for RIM than competing with Nokia. The iPhone began life as an mp3 player with phone functionality and is only now beginning to develop attractive business features. The Blackberry is on the other end of the spectrum and must now incorporate multimedia functionality if it wishes to remain competitive.

“18 months ago all business users were concerned about was whether the device did email or not – now there’s a more convergent view and people want a single device that does everything,’’ said Mr. Cruise. “We found that people are using their business phones in their personal lives too and they want a decent camera to take some pictures of the kids and a media player to listen to music in their spare time.’’

So in addition to the brand’s well-known email connectivity, the Blackberry Bold also offers a suite of business applications for document and spreadsheet editing on the go as well as housing a media player to compete with the iPhone’s strongest selling point.

The other two aspects of RIM’s strategy are still very much under wraps, with the company giving little away about their so-called ‘Thunder’ and ‘Kickstart’ phones at present. What is known at present is that the ‘Kickstart’ will be a ‘clamshell’ or flip-phone design, a first for the company and another sign of an attempt to broaden the appeal of Blackberry beyond its currently limited audience.

But while Apple did not invent the touch-screen phone, its use of the technology in the iPhone has seen many others follow suit in recent times. RIM will do just that with the Blackberry ‘Thunder’, the first time the company has shunned a physical keypad since its inaugural device in the mid 1990s. Both new Blackberry models are expected in the coming months.

“You’re going to see a lot of ‘me too’ touch-screen devices coming out in the next few months, particularly in the run up to Christmas,’’ said Ms. Smyth. “A lot of companies are now incorporating it and trying to attract consumers and ‘pro-sumers’ [professional consumers].’’

Some of the other touch-based smart-phone devices on the market include the LG Viewty, which is an unashamed attempt to beat Apple at their own game, and the more business-focused HTC TyTN II, also known as the HTC Kaiser, available from 3 Mobile.

However rather than being purely touch-based like the iPhone and Viewty, the Kaiser device is an attempt at bridging the gap between the iPhone and Blackberry. In addition to a large touch-screen on the front of the device, the Kaiser also houses a slide-out physical keyboard underneath. The device is actually more of a Personal Digital Assistant or pocket PC with a built-in mobile phone, however it is lacking in areas like media player functionality.

The touch-screen based smart-phone Vodafone and others are pushing to compete with the iPhone is the Samsung F480 Tocco, which trumps the Apple device in terms of its camera and adaptability but is let down by its lack of WiFi and built-in GPS. Vodafone hope that the Tocco has enough positives to attract interest, however, and feels that the contract options available with it could be the deal-maker.

“The iPhone comes with an 18-month contract from O2 – how many business people are going to want to commit to something for that long?’’ said Ms. Smyth. “We think our Perfect Choice bundles stack up well against what O2 offer in their price plans.’’

Despite being the exclusive carrier of the iPhone in Ireland, even O2 carries phones that are clearly trying to mimic the Apple device; including the Samsung Tocco, LG Prada and XDA range.

To date the majority of device manufacturers have at least experimented with touch-screens on their smart-phones; in fact Nokia is one of the few major manufacturers to not release a touch-screen device so far. However Mr. Cruise said a number were in the pipeline including a business-orientated device in the first half of 2009. He also alluded to a device that would “change how QWERTY input is delivered’’ although went no further in explaining what that meant.

But while business users are increasingly looking for smart-phones that do everything, some of the most popular business phones in Ireland appear to be the ones with the most stripped-down approach.

One example of that is the Nokia E51, which houses little you could describe as cutting edge. For Vodafone, however, the E51 and other simple business devices like the Nokia 6500 Slider are some of their best sellers, proving that many of their business users are not looking for a device that does everything, just one that does a few things well.

“A lot of thought and effort went into the E51,’’ said Mr. Cruise. “There was a lot we weren’t going to put in the device and we really had to think about what we wanted in it.’’

However Cruise said Nokia were not tempted to pack the device with features just because they could because they knew the market they were looking to attract would not be convinced by gimmicks.

“The majority of professionals would be happy with a straight-forward phone,’’ said Ms. Smyth. “There will always be a certain percentage who want something more stylish and more feature-heavy however and we hope we can attract them to devices like the Tocco instead of the iPhone.’’

But while some professional users will not be interested with the style and media applications of the iPhone, many others will and companies like Nokia and RIM are moving fast to address this. It remains to be seen if the devices they produce can convince their customers to stay loyal in the face of such strong temptation.

An edited version of this feature was published in Business & Finance magazine on the 18th July 2008.

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