Enterprise market fails to roll out the welcome mat.
Will the iPhone turn out to be the mobile device that rocks the industry? Apple and AT&T certainly hope so, as do hard-core Apple fans. The path ahead, however, is far from clear. Apple, aside from spawning a host of changes in how other makers of mobile devices design their wares, is hoping for a repeat of the iPod’s success and praying that the iPhone will not follow the footsteps of the Lisa and Newton Message Pad, both innovative devices that were somewhat ahead of their time and expensive.
And will Apple become a player in the enterprise space, a lucrative market with the potential for millions of sales in the next few years?
In less than one day, the iPhone will go on sale in the United States with a two-year mobile phone contract from AT&T. The device is due to appear in Europe later this year and in Asia in 2008. The market in the U.S. for $500 and higher mobile devices is quite small, perhaps 1% of the total market. Clearly, with its sales projections of 200,000 sales in the first two days and as many as three million in the second half of 2007, Apple is counting on pent-up demand and hoping that purchasers will overlook the high price and mandatory two-year contract (as well as contract termination fees some customers may pay if they switch to another mobile operator before the end of their contract).
The iPhone, as revolutionary as it appears, is not the first touchscreen of its kind. LG and HTC beat Apple to the punch with the Prada and Touch respectively. But the iPod wasn’t the first music player either; it just turned out to be the coolest, easiest to use device with better infrastructure (iTunes) behind it. The iPhone ups the ante in the mobile phone multi-function space, with optical-quality glass and a 3.5″ display, and software that allows users to control the iPhone with a tap, flick, or pinch of the fingers. However clever this may be, the lack of a real (thumb-operated) keyboard may be its most glaring weakness, as more and more users see such devices as e-mail and SMS appliances.
Apple isn’t the first to provide visual voicemail, either. A quick search using Google revealed that dozens of companies already offer what Apple calls an “industry first”; in fact, just today I installed SimulSays, a free, downloadable visual voicemail application for newer BlackBerry devices, that provides functionality virtually identical to what Apple promises.
The iPhone, with a choice of four or eight gigabytes of storage, won’t replace most people’s iPods, since many users have filled their 30- or 80-gigabyte drives with favorite music.
And the corporate world isn’t rolling out the welcome mat either. Many companies and government agencies don’t like iPods to begin with, since they see them as just another external storage device that could allow a person to walk out the door with gigabytes of confidential information.
The iPhone cannot send or receive e-mail through corporate mobile e-mail systems, a market dominated by three companies, Research in Motion, maker of the BlackBerry, Microsoft, and Good Technology, owned by Motorola. Still, Apple will most likely want to compete with RIM, Palm, and Nokia on the enterprise device front since that represents the higher-priced segment and companies tend to buy hundreds of devices at once.
Of course, the creative user could forward e-mail messages via a third-party Web mail service (such as from Google or Microsoft) but that would also compromise security and violate myriad rules. Corporate security departments consider the iPhone too risky at this junction given its lack of the bullet-proof security features that are considered de rigueur today, such as remote wipe. Thousands of mobile devices are lost each day and most are unlocked, potentially releasing proprietary and valuable information to third parties.
Most CIOs we’ve spoken with in the past few months have indicated that they have no plans to add support for the iPhone but expressed some interest if Apple were to make it simple for them to license software from Microsoft or RIM that would allow the iPhone to act like a virtual BlackBerry or Windows Mobile device. Just today, Visto announced a version of its Visto Mobile secure mobile e-mail platform for the iPhone that will support Microsoft Exchange and Lotus Domino and Notes. I’m sure others will follow suit but few if any companies will switch mobile-mail platforms midstream.
The silver bullet might eventually come from Cisco, owner of the iPhone trademark. In resolving its trademark dispute with Apple, which came a month after the iPhone was launched, the two companies announced they will “explore opportunities for interoperability in the areas of security, and consumer and enterprise communications.”
In the meantime, the crowds will start lining up outside Apple and AT&T stores by the time you read this.
Jonathan B. Spira is CEO and Chief Analyst at Basex.