There's an operating-systems war in the works, and it has nothing to do with Windows, Linux or Mac OS X.
In fact, this war has very little to do with systems (PCs and Macs, that is). The "war" I'm referring to will focus on cell phones, and smartphones in particular.
In order to put this battle into perspective, one must first look at Windows, Linux and OS X and their battle to be the OS of choice inside 250 million to 275 million systems each year.
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Add another 50 million to 70 million servers and you have what the industry calls a total available market (TAM) for these types of OSs yearly. And then there are the potential new markets, such as developing countries, which could account for another 200 million PCs annually by the end of 2012.
Last year, the cell-phone market saw sales from approximately 1 billion units sold worldwide, and we are on pace to sell about 1.1 billion this year. Some believe that by 2012 we will sell closer to 2 billion cell phones each year as more and more people around the globe jump on the bandwagon.
Of that market, only about 5 to 6 percent are what we define as smartphones. These include Windows Mobile phones, BlackBerrys, Palm OS phones, some Linux-based handsets and Apple OS X-based phones such as the iPhone.
So how many smartphones will be sold by 2010 and beyond?
At my company Creative Strategies, we believe that at least 18 percent of the phones sold by 2012 will be defined as smartphones, and the number will rise to between 35 and 45 percent by 2015.
Smartphones, by definition, need to have an OS that enables third-party development of applications. Smartphones need to do more than just answer phone calls, play music and videos or do SMS.
They should also offer Web-browsing features such as the browsing experience on the iPhone (not one like what's currently being offered on Windows Mobile or the BlackBerry). The phone OS war will be a battle to deliver a rich, full-featured multimedia environment for smartphones.
It's true that Microsoft makes a lot more money selling its PC OS than its Windows Mobile OS.
The company that provides the OS for smartphones, however, could potentially be in an even more lucrative position than the PC OS vendors, because there is an opportunity for smartphones to become a medium for distributing ads and specialized services.
Let's say the company that provides the OS gets a share of the revenue from every ad or transaction for the life of the phone. If our numbers are correct, then you can understand why this OS battle could be so important.
Another way to think about this is to see smartphones as a new computing platform. The PC was a platform that needed an OS, software development tools and third-party applications for it to grow and thrive.
If you look closely at Apple's iPhone, you quickly realize that this is really a mobile computing device. It requires an OS, developer tools, and third-party apps for it to grow and thrive as well. This is the future of all smartphones.
So which operating-system makers will be the major vendors vying for supremacy in the smartphone market over the next five to eight years?
Apple is already positioning itself to be one of the serious players in this space. It already has an edge over all of the competitors. The company has created a PC-class OS and packaged it in a smartphone. This OS is destined to be the gold standard in this area and will force other smartphone vendors down a similar path if they want to be successful.
However, history may be repeating itself again. Back in 1984, Apple had the best OS when it created the Mac, but it decided not to license it to other PC makers.
This gave Microsoft a chance to create a similar OS, and you know the outcome of that decision. Microsoft and its Windows now own 90-plus percent of the PC market.
It seems that Apple is at a similar crossroads. Does it stick with an Apple-only approach to smartphones, or does it license this version of Apple OS X to other handset makers, laying the groundwork for OS X dominance in the smartphone market? The way Apple deals with this question may eventually determine its long-term fortune.
Of course, Microsoft has the chance to be a big player here as well. Its decision to create a mobile OS (Windows Mobile) aimed mostly at business may be a good short-term strategy, but it must create an OS as rich as OS X and deliver it to a broader consumer market if it's to compete in this segment of the smartphone market.
To date, Microsoft has not shown that it can deliver an OS like this, or that it's even working on one.
Another player to watch is Palm, which was recently invested in by Elevation Partners. The company is reportedly working on a world-class OS for smartphones. Ex-Apple superstar Jon Rubenstein, the active chairman, will guide the company's efforts in this area. And of course there's Symbian, the market leader.
We could also see special versions of Linux emerge from various players. Even the folks at RIM might have something up their sleeves.
But there is one unannounced player whose name should send shivers down the smart OS vendors' spine. Google is reportedly working on a phone of its own, and many believe that the real advantage here will be a smartphone OS tied to its own Web-based search and services. We'll have to wait and see if the rumors about the G-phone are true.
Though the PC OS wars were brutal and delivered many clashes over the years, the smartphone OS war may make those battles seem tame. With the market for digital devices is four to five times larger in terms of units, this time the stakes are even higher.
Tim Bajarin is one of the leading analysts working in the technology industry today. He is president of Creative Strategies (www.creativestrategies.com), a research company that produces strategy research reports for 50 to 60 companies annually — a roster that includes semiconductor and PC companies, as well as those in telecommunications, consumer electronics, and media. Customers have included AMD, Apple, Dell, HP, Intel, and Microsoft, among many others. You can e-mail him directly at email@example.com.
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