MOBLIN ZONE

Lisa Morgan

In today’s fast-paced environment, mobile devices are essential to the everyday needs of business users and general market consumers.  As always, there’s no shortage of technological innovation, but not all software developers, OEMS, ODMs, and service providers are equally successful at monetizing the emerging market opportunities.

Intel’s Atom family of microprocessors and the Moblin framework, a collection of technologies and tools designed to take full advantage of systems running mobile Linux for the Intel Atom processor, are serving as the basis for all kinds of innovations around the globe.  Two of the most common questions among developers, service providers, and OEMs/ODMS are:  1) How can we attract the greatest number of users; and 2) what can we do to maximize recurring revenue?

There are a number of ways to deepen relationships with customers while bolstering the bottom line; however the path to monetization differs from country to country, from industry to industry, from business model to business model, and from company to company.  Below are some examples of how the ecosystem players are making money.

What Software Developers are Doing

Several software revenue models have emerged over the years that are not necessarily mutually exclusive.  Which path a developer takes really depends on the company’s strategic objectives, the focus of its product suite, its existing customer and potential customer bases, and its ability to survive in the absence of immediate or even short-term revenue.  Here are some examples:

1.      The developer builds an application for an OWM as work for hire.

In this case, the hardware manufacturer owns the intellectual property and the software developer’s revenue is limited to the fee it charges to develop the software.

2.      The developer licenses the application to the OEM.

Pre-installing software on a device is one way to instantly increase a user base while adding value to a device.  If one partner is a brand name company or both of the partners are brand name companies, the joint endeavors can result in higher degrees of end user trust, credibility, and perceived value which often translate to competitive advantage.  The benefit of this approach for the ISV is reach and secondarily revenue as OEM/ODM licenses are deeply discounted compared to end user licenses.

3.      The developer sells the software as a service (subscriptions vs. licenses)

For years we’ve been hearing about the benefits of software as a service (SaaS) vs. packaged software and yet both models still coexist.  From a monetary perspective the difference is selling licenses and upgrades vs. charging a periodic (usually monthly) fee for the software which automatically includes upgrades, patches, etc.

Assuming the software product is “good”, the traditional licensing model can and usually does translate to recurring revenue; however, not all customers buy upgrades and even if they do, they don’t typically buy upgrades at the same time.  By comparison, the point of subscription models is regularly recurring revenue.  Although customers may not subscribe to SaaS applications forever, there are typically pricing incentives to sign up for longer-term subscriptions.  The benefit of tiered subscription for consumers is choice.  For software developers it provides a means of balancing revenue streams, customer acquisition, and customer retention.

4.      The developer provides a free version to seed the market

Have you ever wondered how some developers appear out of nowhere and attract millions of users virtually overnight?  Quite often they’re making a product available free. 

Over the short term, free software can help build a large user base very quickly.  Over the longer term some developers find that the wildfire adoption of a free product is not necessarily followed by the wildfire adoption of a commercial product.  To minimize that result, some do the following:

·         Before offering a product for free, they define a long-term revenue model

·         They ensure the differences in feature sets justify the existence of a commercial product

·         They pay attention to the competition, including features and price points

5.      The developer provides an ad-supported  free version

Despite the initial cultural stigma, ad supported software is becoming more acceptable.  Sometimes, a software product just doesn’t fit one of the other revenue models neatly or the software developer wants to seed the market but doesn’t have the financial resources to continue operating indefinitely in the absence of revenue.  In-product advertising is one solution to the problem.  However, the trick for developers is learning how ad-supported revenue models actually work.

 6.      The developer offers different features depending on the license or subscription type

This option started in the packaged software industry when it became obvious there were different markets for the same software product.  By offering different packages developers can address the needs of different audiences while creating multiple revenue streams.  From a consumer perspective the operative word is choice.

What OEMs/ODMs are Doing

If smart phones and MIDs didn’t provide access to applications and services, they would have little or no value.  Yes, they look cool, but their real value lies in what consumers can do with them.  OEMs and ODMs know this.

Not so long ago, cell phones and PCs/laptops had very specific functions.  Cell phones were used to make phone calls.  PCs and laptops were used to play games, access the Internet, and produce content (documents, spreadsheets, etc.).  Today, the lines are blurring and as a result consumers are accessing the Internet from smart phones, Netbooks, MIDs, laptops, and desktops.  And, it’s not uncommon for users to own all or most of these devices.  Some OEMs and ODMs are taking advantage of the multiple market opportunities by providing several types of devices.  They’re also teaming up with service providers to offer co-branded services with the goal of creating recurring revenue streams.

Expect to see even more device types in the future, including branded products that deliver specific types of user experiences.

What Service Providers are Doing

Service providers sell monthly subscriptions so devices and software applications are evaluated based on their long-term ability to deliver recurring revenue.

In the early 1990’s it became very apparent that the real value of a cell phone didn’t ultimately lie in the hardware.  Instead, the phone was merely an access point to services.  That’s why service providers began subsidizing phones based on long-term service contracts.

Today, service providers are taking service innovations to entirely new levels because they can.  Historically, service providers focused on the lower OSI infrastructure layer issues so voice, data, and other types of traffic could travel as fast and reliably as possible from one point to another.  More modernly, service providers are moving up the OSI stack because many of today’s applications are actually a form of services.  Some service providers are teaming up with OEMS/ODMs to offer co-branded services as noted above.  There are also revenue sharing opportunities with ISVs.

MIDs, Netbooks and smart phones are also ideal access points to cloud-based services because they’re lightweight, portable, and offer enough processing power to take advantage of the cloud, which represents yet another wave of revenue possibilities.  Instead of merely providing access, service providers are now in the business of providing experiences like everyone else in the value chain.  The shift in focus means new opportunities and new revenue streams, and a changing ecosystem.

Service providers as well as ISVs and OEMs/ODMs are re-evaluating their business models and finding entirely new ways to work together.  Bottom line, stay agile, innovative, and open minded because the rules of the game are changing and there’s money to be made.

­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­Lisa Morgan is an independent high tech management and marketing consultant who creates content and provides commentary to print and broadcast media.

Related Links

The Path to Monetization: Why Application Stores Will Further Fuel the Moblin Project Ecosystem
Why Application Stores Will Further Fuel the Moblin Project Ecosystem. Despite the broad adoption of mobile devices, the true power and value of the Moblin project-based mobile ecosystem has yet to be realized because it is still in its infancy.