iPhone: It's the apps, not the gizmo By Andy Ho
Publisher:The Straits Times - Publication Date: 28-06-2008



Many want the new iPhone that becomes available in Singapore and 69 other countries only in a few weeks' time. Apple continues to command a considerable portion of the public's mindshare.
But while the 3G iPhone scores on elegance, it is merely the second edition of a phone that came on the market a year ago without many of the features that Nokia and Samsung 3G phones have had for three years.
Its touchscreen interface is nice, but its camera remains low-resolution. It still lacks video recording, it has no expandable memory and its battery life remains short.
Users of the first-generation iPhone swear, however, that you can surf the Internet very nicely with its miniaturised version of Apple's Safari browser. Though few websites are mobile-ready, Safari optimises the format of websites for great viewing on the go.
By contrast, the formatting of websites frequently goes 'off' when surfing on the go with handsets using competing platforms like Blackberry or the Symbian on Nokia.
Internet access, a major part of 3G, enables a mobile lifestyle of work and play. If everyone wants one, the web-centric iPhone may well make consumers finally understand what 3G is. That can only help Nokia, Samsung and Motorola sell more smartphones. So, could the iPhone radically change this market the way the iPod did MP3 players and music retailing?
In 1999, makers of MP3 players sold very few sets. But after the iPod appeared in 2001, sales exploded. The iPod changed the way we listened to music; and iTunes, the online store where you buy music for the iPod, is changing the music industry itself.
Though Apple has three primary lines now - the Mac, the iPod and the iPhone - it is the iPhone that promises to go beyond being just a communication device. It has the capacity to morph into the centrepiece of personal technologies for computing, viewing videos, music, gaming, road navigating and other things.
This is because its Safari browser enables 'cloud computing'--using web-based software, data storage and data processing--on the go. That could have the effect of persuading many to regard Apple as an easy-to-use format. Users may then want what works on their iPhone to also work on their desktop (Mac) and/or laptop (MacBook). As the iPhone is seamlessly inter-operable with either, Mac sales could go up too.
In contrast to its premium market approach with its other products, Apple has cut the price of iPhones drastically, hoping to go mass-market. But more important than just selling more hardware, Apple also a new software strategy that few, besides investment analysts, have paid much attention to.
Called AppStore, which could be worth US$1.2 billion by next year, it will sell 'apps' separately from hardware. These apps, or applications, include business software, games, navigation software and virtual widgets. The latest US survey data show that 45per cent of smartphone users play games on their handsets at least once a month.
The more iPhones sold, the bigger the potential market for apps, so more app developers will jump in to create new ones. Developers set the price and keep 70 per cent of the revenue, while Apple gets the other 30 per cent.
All app developers need is an iPhone and a software development kit Apple gives them for free. (By contrast, those developing apps for the Blackberry, say, have to pay the owner, RIM, hefty upfront fees to be able to work with its proprietary network.)
The AppStore business model depends on having many independent app developers, the basis of Microsoft's success the world over to date. A diversity of software developers means more varieties of apps, so more apps are likely to be sold.
For decades now, PC and game console users have typically spent more on software than hardware. So if the PC and game console markets are any guide, sharing revenue from every app sold may beat getting more money upfront from pricier handsets.
This is why Apple makes such a great case for MBA students to dissect. Its competitive advantage lies in creating an ecosystem through oversight of its own design in hardware and software so they are integrated. Those synergies are further enhanced by a marketing strategy that moves both hardware and software forward simultaneously.
Naysayers argue that users can already install apps on other 3G phones. Ranging from games to navigation and business software, these apps can be bought online from stores like Handango. Yet, most people don't. Apple fans say this is because the competitor platforms are not as intuitive as the iPhone, thus the mental block. So, it could all come down to the iPhone experience.
Detractors say that while Apple is undeniably innovative, its products have not, save for the iPod, dominated the industries they helped create. Yet, Apple could well have learnt valuable lessons from using iTunes - which carries the catalogues of all Big Four music labels - to lock iPod users in. Apple must be hoping AppStore will do for iPhone what iTunes has done for iPod.
What could throw a spanner in the works though is not the copycat handsets, like the Samsung Omnia or HTC Touch, that competitors have rushed to market. It is the Open Handset Alliance, a group that includes Google and about 30 other technology and mobile companies that is developing Android.
Android will be the first open-source, device-agnostic mobile platform that is free of charge. As it is open source, its pool of independent app developers could become even larger than the iPhone's.
How Apple deals with such competitive issues will continue to keep many a business professor on the edge of his seat. The rest of us just want an iPhone right now.

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In NZ, the iPhones coz $199 for the handset, but prepaid is not allowed and contract over 2 years is around $6000. I mean, wtf? And there are actually stupid people who buy them...

Six grand?! Sure that's correct??

I think that's off by a few zeros. They sell it for $199 on contract but a basic monthly plan runs $60/mo for all the services. I would check again. More than most people would spend on gas a month.

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Yea, I tried the apple phone at a store. Wasn't as responsive as I thought. The internet isn't all that fast and those keys are too small. The links are touch sensitive but if there's many closely knit you miss the one you want. argh. I kept hitting the one next to it, the bugger! lol. But that's just me..