What Does "Post-PC Device Market" Look Like?

In one sense, we already live in a "post-PC" device market, if one considers smart phones as computing devices, which they are. But even in a more-restricted sense, considering only PCs and tablets, far more PCs will be sold in 2016, than tablets.

Of course, many will argue that developing markets are where much of the PC sales will occur. In developed markets, tablets will likely represent sales volumes much more nearly comparable with PCs. 

Tablets Boost Entertainment Video, Reduce Use of Everything Else

According to Forrester Research, people seem to read books less, use their PCs less, use their MP3 players less, watch shows on their TVs less and play games on consoles or portable game players less, after they get a tablet. The only thing they seem to do more of is watch online video, presumably on their tablets.

What Role for Key Devices in "Post-PC" Era?

So far, the “post-PC” era heralded by Steve Jobs, the now-deceased CEO of Apple, has been characterized by growing sales both of traditional PCs and tablets, though there had been indications tablet sales were cannibalizing PC purchases. That might still be true in some markets, though globally, sales of both devices, overall, are growing.

Global tablet sales to end users are forecast to total 118.9 million units in 2012, a 98 percent increase from 2011 sales of 60 million units, according to researchers at Gartner. At the same time, it appears that traditional PC sales also have grown. .

PC shipments worldwide, expected to grow 4.4 percent in 2012, will grow 10 percent in 2013, according to Gartner. That is a bit of a surprise, with all the attention now focused on tablet sales.

It would not be inappropriate to argue that the future growth trajectories for both types of devices, and smart phones, will be dictated by the primary use cases for the three broad categories of devices.

Juniper Research has projected that annual revenues from consumer mobile applications will approach $52 billion by 2016 as consumer smart phone adoption accelerates in tandem with the emergence of a mass tablet market. The forecast might raise some pertinent questions.

Much will hinge on how that new revenue is created, for all three categories of devices. At least two of the categories might be driven, in large part, by content purchases and broader mobile commerce apps..

Kip Cassino, Borrell and Associates EVP, argues that by 2016, most computers available to consumers are going to look and act just like today’s iPhones and iPads. That means they will be able to communicate like cell phones, they will all have built-in GPS, and they will feature cameras and touch-screen interfaces.

Most importantly, Cassino argues, they will depend on apps instead of expensive, bundled software  In fact, what we now call computers will have largely faded from the scene, except for some business and gaming applications. Personal computers will be replaced by mobile devices of one sort or another, Cassino argues.

You don't have to agree with the time frame to agree with the direction of the user experience Cassino describes.

“Touch” arguably is the preferred interface for transactions and content navigation. Mouse and keyboard still make more sense for “work” and content creation (writing, editing a movie, working with a spreadsheet, for example).

Ultimately, one might argue, touch will become the preferred interface for most consumer appliances, none of which are used for “content creation” applications more complicated than taking a picture, sending an email or text message, or content sharing.

Ways Cloud Computing Is, and Isn't a Big Revenue Driver for Telcos

Cloud computing was the fastest-growing category of U.S. service provider infrastructure spending in 2011, with a 28.4 percent increase, according to the Telecommunications Industry Association. 


The TIA also expects cloud computing will continue to be the fastest-growing category of network and facilities investment during the next four years, averaging 20.3 percent compounded annually.

As new cloud-based end-user services emerge and as existing services expand, end user spending will more than double to $12.1 billion in 2015 from $5.8 billion in 2011, according to the TIA. 


So cloud computing is a slam dunk opportunity for service providers? Opportunity, yes. "Slam dunk," perhaps not. Some reasonable caution always is in order when looking at cloud computing revenue. 


For starters, there are multiple types of revenue, not all easily earned directly by service providers. There is a reason industry observers talk about "infrastructure as a service," "platform as a service" and software as a service." They are different businesses.


Also, there are some businesses underpinning cloud computing, such as hosting, broadband access and transport, that might always represent more accessible revenue, in the cloud computing space, than the infrastructure, platform or software offerings.
In fact, most of the revenue upside appears likely to accrue to hardware and software suppliers, at least initially, according to a Morgan Stanley analysis. 


In other words, if Salesforce.com books revenue for sales to end users, can telecom service providers tap in? Maybe. But not automatically.

In the infrastructure end of the business, telecom service providers might make a business out of rental of computing cycles, storage and ancillary services. But what has to be done to market and support that business, and should effort be put elsewhere?

Keep in mind that cloud computing also is likely to reduce some existing telecom revenue streams, making its net revenue contribution more speculative. Any "cloud" moves by business customers that reduce needs to buy local access services or wide area private line services are examples.

In the telecom space, the analysts expect key winners to include Rackspace, Equinix and competitive local exchange carriers and metro bandwidth suppliers. In other words, hosting and access will be where the telecom revenue lies, possibly not in the infrastructure, platform or software as a service businesses.

The point is that assessing cloud computing revenue contributions for various ecosystem participants is complicated.

The core "cloud computing" business is about rental of computing cycles and storage, rental of development platforms, and rental of actual business apps. It isn't always clear that telcos have clear advantages, compared to other suppliers, in these businesses.

The software as a service business means suppliers will have to master what we used to call the packaged software business. Historically, telco and cable personnel haven’t been notably good at that. 


That is not to deny the attraction. One reason content delivery networks are an attractive business is that CDNs provide a new reason to buy transport services. It might turn out that cloud computing is interesting for telcos precisely because it increases demand for transport and access, and not because telcos actually sell so much IaaS, PaaS or SaaS.

Businesses of all Sizes are Adopting Cloud Apps, Studies Find

Cloud-based applications are 39 percent of Latin American enterprise apps, 19 percent of the average large U.S. company’s applications, 12 percent of European enterprise apps and 28 percent of Asia-Pacific enterprise apps, according to a survey by Tata Consultancy Services.


But other studies also show that small businesses and medium-sized businesses also are adopting cloud-based apps at a significant level. 


Some 39 percent of small and medium-sized businesses are expected to be paying for one or more cloud services within three years, an increase of 34 percent from the current 29 percent, according to a Microsoft study.


The clear majority of enterprise applications used in 2011, including 81 percent of apps used by  U.S. companies and 88 percent of European cloud apps, were resident on computers located on enterprise premises, the Tata study suggests.

In Asia-Pacific, on-premises applications were 72 percent of all applications in 2011, while 28 percent were based in the cloud. In Latin America, 61 percent of all corporate applications software were on-premises, compared to 39 percent that were in the cloud.

Tata expects matters to change by 2014, though. American company executives  projected cloud applications to increase from 19 percent of all applications (cloud and on-premises) to 34 percent by 2014. 


Microsoft predicts that the number of cloud services SMBs pay for will nearly double in most countries over the next three years.

The findings show an increasing opportunity for hosting service providers to profit in the cloud from offering services such as collaboration, data storage and backup, or business-class email.

SMBs paying for cloud services will be using 3.3 services, up from fewer than two services today.

The study also suggests that past experience with support from a service provider is a key driver of service provider selection among SMBs. Some 82 percent of SMBs say buying cloud services from a provider with local presence is critical or important.

The larger the business, the more likely it is to pay for cloud services. Some 56 percent of companies with 51 to 250 employees will pay for an average of 3.7 services within three years.

Within three years, 43 percent of workloads will become paid cloud services, but 28 percent will remain on-premises, and 29 percent will be free or bundled with other services, Microsoft also predicts.

The European companies surveyed by Tata expected that cloud applications as a percent of total applications would double, from 12 percent in 2011 to 24 percent  by 2014.

In Asia-Pacific and Latin America, cloud applications are expected to be at least half of total corporate applications by 2014, including 50 percent for Asia-Pacific companies and 56 percent for Latin American firms.

Precisely what that might mean for service providers offering cloud computing infrastructure is not so clear. Even where a service provider does not offer any hosting services, it gains when enterprises adopt cloud computing approaches, since cloud computing tends to increase the need for broadband in several forms.

Demand for mobile broadband grows, while fixed network capacity needs also tend to grow. In that sense, cloud computing drives bandwidth requirements and access and transport revenues.

When a service provider offers rack space and hosting services, it might benefit from customers using “private cloud services.” In other cases, some providers might offer customers rental of computing cycles and storage (infrastructure as a service).

But most of the revenue in cloud computing will be sales of hosted applications. In that case, a service provider has to become a retailer of business apps. The issue is whether this will prove to be a substantial opportunity for service providers, or not.

The Tata study predicts that, by 2014, 25 percent of all corporate applications will be in the cloud in Europe; about 33 percent of U.S. companies and about 50 percent of enterprise apps in Asia-Pacific and Latin American regions.  


source: Tata


source: Tata

I

source: Tata

Global Consumers Increasingly Trust Earned and Owned Media

Consumer reliance on word-of-mouth in the shopping process, on a global basis, has increased significantly over the last year, Nielsen reports. For marketers, the implications are that earned media and owned media potentially are more effective than ever. 

According to Nielsen’s latest Global Trust in Advertising report, which surveyed more than 28,000 Internet respondents in 56 countries, 92 percent of consumers around the world say they trust earned media, such as recommendations from friends and family, above all other forms of advertising, an increase of 18 percent since 2007. 

Online consumer reviews are the second most trusted source of brand information and messaging, with 70 percent of global consumers surveyed online indicating they trust messages on this platform, an increase of 15 percent in four years.

The survey also showed that nearly six-in-10 global online consumers (58%) trust messages found on company websites, and half trust email messages that they signed up to receive. 

On the Web, four-in-10 respondents rely on ads served alongside search engine results, 36 percent trust online video advertisements, and one-third believe the messages in online banner ads—an increase of 27 percent since 2007. Sponsored ads on social networks, a new format included in the 2011 Nielsen survey, are credible among 36 percent of global respondents.

"Post-PC" Era Doesn't Slow PC Sales, Data Shows

Global tablet sales to end users are forecast to total 118.9 million units in 2012, a 98 percent increase from 2011 sales of 60 million units, according to researchers at Gartner. At the same time, it appears that traditional PC sales also have grown. .

PC shipments worldwide, expected to grow 4.4 percent in 2012, will grow 10 percent in 2013, according to Gartner. That is a bit of a surprise, with all the attention now focused on tablet sales.

In the first quarter of 2012, PC shipments climbed nearly two percent to 89 million units, thogh analysts had predicted a 1.2 percent drop. Those figures might suggest that tablets and PCs now are distinct products in the marketplace. Though substitution will occur in some cases, much as smart phones displace PCs in some cases, all the products will develop specific niches in the computing appliance market, one might argue.

Apple's iOS continues to be the dominant media tablet operating system, as it is projected to account for 61.4 percent of worldwide media tablet sales to end users in 2012, with Android-powered units representing about 32 percent of sales, Gartner says. By 2016, some 369 million tablets will be sold, Gartner estimates.

By way of contrast, IDC predicts that PC shipments will climb from 353.3 million to more than 500 million in 2016. However, the bulk of the growth will come from "emerging markets" not "mature markets", and from portable PCs rather than desktops, IDC forecasts.

In fact, IDC predicts that shipments of portable PCs in "emerging markets" will almost double from 110.0 million in 2011 to 214.7 million in 2016.

One might therefore infer that tablets will represent about 25 percent of “PC” sales in 2012. By 2016, one might argue, tablets will represent 42 percent of “PC” sales.

"Despite PC vendors and phone manufacturers wanting a piece of the pie and launching themselves into the media tablet market, so far, we have seen very limited success outside of Apple with its iPad," said Carolina Milanesi, research vice president at Gartner.

"As vendors struggled to compete on price and differentiate enough on either the hardware or ecosystem, inventories were built and only 60 million units actually reached the hands of consumers across the world. The situation has not improved in early 2012, when the arrival of the new iPad has reset the benchmark for the product to beat."

   Global Tablet Sales  to End Users (Thousands of Units)

OS	2011	2012	2013	2016
iOS	39,998	72,988	99,553	169,652
Android	17,292	37,878	61,684	137,657
Microsoft	0	4,863	14,547	43,648
QNX	807	2,643	6,036	17,836
Other Operating Systems	1,919	510	637	464
Total Market	60,017	118,883	182,457	369,258

Source: Gartner (April 2012)

Verizon, Time Warner Cross sell in Kansas City, Cincinnati and Columbus, Ohio and Raleigh, N.C.

Verizon Wireless and Time Warner Cable are offering financial inducements to new or existing customers of either company in Kansas City, Cincinnati and Columbus, Ohio and Raleigh, N.C. Both firms are selling video, mobile, Internet and TV services offered by either firm.

But the deals seem to be aimed as much at encouraging existing customers to buy additional products from each of the companies, as the offers are aimed new customers.

Either firm earns a commission if it sells the other company's products. But the structure of the deals also encourages purchasing of incremental services by any current customer.

The initial markets are, as one would expect, places where Verizon does not compete with the cable operators for fixed network services.

For Better or Worse, People Want to Use Their Own Devices at Work

Nearly 60 percent of employees surveyed by iGR say they use their own smart phones, tablets or PCs for work, at work, with the full support of their employers. iGR defines a small or medium business as having 10 to 499 employees.

Enterprises are seeing the same trend, according to Juniper Research.

Why "Over the Top" Mobile Voice Isn't Growing as Fast as it Could

Mobile VoIP provided by over the top providers are as big a revenue threat as over the top services are for fixed network providers. But some would argue that adoption of mobile over the top voice faces headwinds for a reason shared by other apps on mobile phones, namely the drain on batteries.

Softphones aren’t making inroads onto smartphones or the desktop because the former lacks battery life and the latter take too long to start up, according to Jamie Romanin, ShoreTel regional director for Australasia.

Battery life now appears to be a constraint for VoIP clients as it already is for users who avoid using other smart phone features to save their batteries.

But those same behaviors might well help mobile service providers provide another element of value for using carrier-provided voice services.

"Headwinds" for U.S. Mobile Service Providers

Mobile data services have for the better part of a decade been the clear near-term driver of revenue growth for mobile service providers, roughly driven by smart phone adoption. So, oddly enough, we now see carriers making tough decisions about how fast they actually can grow those smart phone businesses.

A key issue in recent years has been the practice of subsidizing the retail price of smart phones to spur adoption. But operators seem to be rebelling at the idea of continuing to do so at current levels. In some cases that might mean new fees when upgrading to a new smart phone.

In other cases, carriers will try to convince customers to buy devices that are easier to subsidize. Some will even try to stabilize smart phone adoption rates, adding new accounts, but not as many as might be added if carriers conducted more aggressive marketing.

Those steps will help carriers protect their dropping profit margins, but at the risk of slower smart phone adoption.

"Over the longer term, we believe the wireless industry faces the twin headwinds of 100 percent penetration and, eventually, decelerating smartphone additions as the base reaches saturation," Jefferies' analysts wrote. "Voice revenues are already in decline. We believe a material drop off in the growth rate of data revenues from slowing smartphone adoption, particularly in 2H12, is a growing risk," Jefferies says.

Mobile and Broadband Spending by Consumers Will Grow 18% in 2012

Overall U.S. communications and media spending by consumers, marketers and institutions is expected to reach $1.4 trillion by 2015, giving it a compound annual growth rate of 5.7 percent, according to a new forecast from the private equity firm Veronis Suhler Stevenson. That’s substantially faster than GDP, which has a projected CAGR of 4.4 percent over that period, the report suggests.

The fastest growth by far is in consumer Internet and mobile services, expected to grow 18 percent in 2012.

What Would a "Revolutionary" Apple TV Experience Include?

It's hard to say what Steve Jobs actually mean by “I finally cracked it” when referring to the issue of television experience and appliances, the latter being extremely important for Apple, whose business is selling appliances that disrupt and dramatically improve end user experience.

The answer to the question also is important to the rest of the video entertainment ecosystem as well, as entertainment television could represent the next big growth opportunity not only for Apple, but a huge risk of ecosystem change for nearly every part of the TV business ecosystem.

Was Jobs referring to some new software and navigation method only? Did he mean some new relationship with the content producing part of the ecosystem? Or did he mean some change in TV design and hardware, or some combination of all of those elements?

BTIG Research believes that “cracking” television would entail tying together computer, mobile devices and the living room TV, along with its cloud-based storage system (iCloud). 


Some might argue integrating online and video TV subscription services, to unify the content experience, would be part of the experience. Some might argue that is an interesting first step, but only a half step.


The big awaiting revolution is creation of a "fun and easy to use" experience that allows consumers to watch what they want, when they want it, program by program, without having to buy whole channels they never watch, and do not want. 

Smart Phone Subsidies: Changes Coming

A broad debate has been growing among mobile service providers about the financial impact of high smart phone subsidies on profit margins, and that concern now seems to be headed in the direction of lower subsidies. That could have important ramifications for device suppliers and customers as well as service providers.

For service providers, the effort is to maintain profit margins that have in many cases been hammered by the cost of the subsidies. But the new policies also should slow iPhone sales, and should boost sales of other devices. Consumers will slow the rate of device upgrades and will face higher prices.

The impact on application and device innovation is less clear, but could lead to some slowing of device upgrades, with uncertain but clearly negative impact on new applications that depend on device features and capabilities.

Up to this point, for example, Verizon has not charged a fee to its subscribers when customers decide to upgrade to a new device. But Verizon now will institute a $30 fee when that occurs. For Verizon Wireless, that could add up to $1 billion to Verizon’s annual earnings, and also boost profit margins, BTIG argues.

Smart phones have been very helpful for mobile service providers, boosting average revenue per user by driving mobile broadband subscriptions. But the subsidies generally used to spur sales are bcoming a major drag on earnings, and change is coming. Basically, service providers will have to risk lower sales growth, and less mobile broadband revenue growth, to limit handset subsidies. It might be a Faustian bargain.

In fact, what seems to have happened is that user behavior has changed, with users upgrading those “expensive” smart phones faster than they had generally been upgrading their feature phones, analysts at BTIG say.

As a result, U.S. mobile service providers plan to take steps to reduce handset upgrades as a way of raising operating margins. That is likely to affect sales of Apple iPhones, generally considered the most-expensive device to support.

AT&T, Sprint, Deutsche Telekom, Vodafone, America Movil and Telefonica are among firms planning to take steps that will slow iPhone sales in the coming year.

In the United States, BTIG expects iPhone sales to decline four million sequentially to nine million with the largest impact coming from AT&T, Apple’s largest customer.

In 2011, AT&T represented 17 percent of iPhone sales for the year and 19 percent in the fourth quarter of 2011.  Apple iPhones represent fully 37 percent of AT&T’s post-paid subscriber base and 47 percent of post-paid service revenue, BTIG says.

BTIG estimates 65 percent of AT&T’s post-paid customers either own an iPhone or are in a family plan with at least one iPhone user.  

For AT&T, the financial impact of iPhone subsidies is clear. AT&T profit margins had grown for five straight years beginning in 2005, but reversed in 2010, apparently related directly to iPhone 4 demand and subsidies, BTIG argues.

In January of 2011, AT&T tightened its upgrade policy and eliminated the popular one-year upgrade offers for iPhone owners. BTIG argues the iPhone subsidies have reduced AT&T margins by at least 10 percent in 2011.

So unless AT&T tightens its upgrade policies, company earnings per share would drop. In fact, AT&T says it has built its business model for 2012 around the idea that it will sell no more smart phones, overall, than it did in 2011, about 25 million units.

BTIG analysis suggests something quite significant. Despite the importance of smart phone accounts for growth of key broadband revenue, AT&T has decided to essentially cap smart phone sales to preserve its profit margins.

The impact should be clear: fewer iPhones sold by AT&T, and possibly fewer iPhones sold by other mobile services providers. That could lead to market share gains by other smart phone makes and models, or could spur Apple to produce lower-cost iPhones.

What the carriers hope for is the ability to sustain average revenue per user growth, and higher profit margins.



source: Yankee Group and CNet

Are Tablets "Naturally" Mobile Products?

During 2011, some 33 percent of all tablets sold globally had the ability to use mobile broadband networks natively, according to ABI Research. According to Chetan Sharma, only about 10 percent of all tablets in use actually used mobile broadband networks.

That illustrates both the tablet upside and challenges for mobile service providers. Mobile phones have little value without a service. Tablets likewise have little value without Internet connectivity, but can use any Wi-Fi connection to do so.

In other words, tablets are more naturally suited devices for mobile broadband services than desktop PCs, perhaps only slightly less well suited for mobile broadband than notebook PCs, but not "naturally connected" devices such as mobile phones. U.S. mobile data generated $67 billion in mobile data revenues in 2011, accounting for 39 percent of the overall revenues. For 2012, Sharma expects mobile data revenues in the U.S. market will reach $80 billion.

That is one reason retail mobile stores always sell phones, sometimes feature tablets, but never try to sell PCs, though some have tried to bundle notebooks and mobile broadband services.

That might change, marginally, once more service providers decide to sell mobile broadband plans the way that fixed network providers sell their broadband connections. Essentially, fixed broadband with local Wi-Fi  inherently supports multiple devices on a single account.

Tablets won't become more interesting for mobile service providers until the equivalent "family data plans" are available.