How tech's giants lost the tablet and smartphone war, even if they don't know it yet

How tech's giants lost the tablet and smartphone war, even if they don't know it yet

Summary: The Kindle Fire, iPhone, and Samsung S4 show how upstarts have outpaced and out thought the dinosaurs of enterprise tech. The big question now is whether there can be any way back.

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It's no secret that the PC market is in a tailspin — worldwide shipments are expected to drop 10 percent this year.

And it's hard to see how things are going to get much better, as the old PC players are consistently outmanoeuvred by rivals with a totally different business model, and better designed, cheaper devices — and who, having dominated the consumer market, now want to sweep up the enterprise market too. 

This battle came out of the shadows when Amazon revealed it is adding enterprise management capabilities to its Kindle Fire tablets because they are increasingly being used for work as well as for play. That a tablet designed for watching Netflix and reading books is now a credible business device shows how rapidly the enterprise technology world has changed — and how the old guard of tech giants missed the boat.

Tesco takes on Kindle and iPad with Jelly Bean Android tablet Hudl

Tesco takes on Kindle and iPad with Jelly Bean Android tablet Hudl

Tesco takes on Kindle and iPad with Jelly Bean Android tablet Hudl

Apple's iPad, Samsung's Galaxy and Amazon's Kindle Fire are the top tablets used in business across the US, Canada, UK, France, and Germany — 53 percent, 18 percent and nine percent respectively (in the US the Galaxy and the Kindle Fire tied for second place).

And it's not just tablets, of course. The iPhone, once dismissed as a touchscreen toy, is now the de facto standard for enterprise smartphones. What these devices all have in common is that they were built for consumers first, and then retrofitted with management software to make them more business-friendly when their makers realised they had enterprise appeal too.

For example Apple has added plenty of business enhancements to iOS 7 and, although Samsung's S4 is very much a consumer handset, by adding tougher security via its Knox software the company has made it more attractive to business users. This is how consumer tech companies are remaking the market for personal devices — winning in the consumer space and then tailoring for business later.

What went wrong?

For too long the old guard of hardware vendors relied on old designs and old assumptions about technology, and about who buys it and why. Now not only are they struggling to compete in terms of innovation but even if they can come up with a decent product (which is rare) the margins on it are much lower than before — and the business model has changed.

When it comes to smartphones, tablets, and laptops, it's no longer relevant to talk about the needs of the 'business customer' first any more. That market still exists, but it's shrinking and changing as bring your own device becomes an everyday part of business tech usage. Lower cost hardware means the consumer market is the mass market — and the business-only device is becoming the niche.

The (four year plus) enterprise hardware refresh cycle means that businesses users, if they depend only on the hardware dished out by their IT department, will lag consumers. The innovation in hardware is happening in the consumer market in cheap hardware and then feeding back into the business world — the opposite of a decade back. But there are still plenty of big tech companies that haven't got the message.

The business model around personal devices is changing too: if you can control the hardware, you can channel customers through to your integrated digital services.

That's exactly why Amazon started selling its Kindles at cost price; it has no interest in making money on hardware but plenty of desire to make money out of streaming video and ecommerce.

It's the same reason why UK supermarket giant Tesco has started selling its own seven-inch Android tablet; not because it wants to make money on tablets, but because it wants to sell the online banking products, TV and shopping service that come as standard on the device.

Tech's giants are slowly understanding the problem; the hardware is improving but they're late to build the ecosystem play. How they rethink their business models over the next year will be critical to their future survival.

ZDNet's Monday Morning Opener is our opening salvo for the week in tech. As a global site, this editorial publishes on Monday at 8.00am in Sydney, Australia, which is 6.00pm Eastern Time on Sunday in the US. It is written by a member of ZDNet's Global Editorial Board, which is comprised of our lead editors across Asia, Australia, Europe, and the United States.

Further reading

Topics: Smartphones, Enterprise Software, Tablets

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183 comments
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  • insane

    I'm not one of these people who throws a tantrum at the mere mention of the term post-PC. I'm a believer, and I do think the iPad and its brethren have ushered in a new consumer computing paradigm and changed the way people interact with and think of technology. But the Kindle Fire is first and foremost a consumption device (consumption being the opposite of what one should be doing at work) and a gateway drug for Amazon products and services. Any CEO who wants to bring these things into his company needs to have his head examined.
    dsf3g
    • We throw tantrums for a reason.

      Not because we liked the way things were, but because the future shifted on us just when it was getting good.
      I expected powerful, integrated UMPCs that doubled as phones. I expected and wanted better, faster, stronger, more powerful, more customizable. What did we get instead? Puny ARM chips with burnt in uncustomizable appliance operating systems on unrepairable $500 devices we may very well not even own. Yes, I cringe at the term post-PC, but there's less cringing, and more rage as time goes on.

      This is not progress. This is a trap. I would be OK with tablets and their fisher price operating systems, IF I could change them out! This is the dissolving of freedom in the name of "progress". So I cannot see myself becoming any less rage filled.
      Subsentient
      • ARM chips "puny"??

        Subsentient said:
        "What did we get instead? Puny ARM chips with ..."
        If ARM chips are so puny, how come they dominate the mobile market with a share of 80%?
        To use an analogy, The ARM is nimble and uses very little energy, like a sports car compared to a juggernaut, Intel chips being the power-hungry heavy load carrying processors. It's horses for courses and whereas Intel is struggling to reduce the power consumption of its chips, ARM is coming out with ever more powerful (in terms of processing power) chips which are far more efficient than Intel's. Witness Apple's choice of a 64 bit ARM as the heart of it's recently released iPhone 5S, which I think nobody would criticise for being underpowered! With ARM's seriously lower power consumption compared with Intel chips, even Data Centres are looking at ARM based servers so that they can reduce their electricity costs - because with lower power consumption comes reduced cooling requirements which is a win-win situation, especially in this energy-conscious world.
        JohnOfStony
        • Well ARM grabbed the market before

          Intel knew there was a market there. Now Intel wants to get serious about mobility. Intel's is even moving the concentration of it most powerfull processors from performance to better mobile computing. The Haswell has a small perfomance increase and large mobile characteristics then the Ivy Bridge processors.
          Orlbuckeye76
          • Atoms

            Aren't anything to brag about
            marque2
          • Except...

            On a Chromebook. Ridiculously efficient in those machines.
            d20dad
          • truth

            love the chromebooks
            James Welbes
          • Not really. Atom processors appeared in netbooks before ...

            ... ARM was invented. These were the first low power devices in a lightweight case to be introduced into the market - and they came into being in response to the One Laptop Per Child project (to bring Linux computers and mesh networks to children living in the Third World), It turns out Third-World leaders preferred to put Windows in the hands of their impoverished children than Linux.
            M Wagner
          • Before ARM was invented?

            ARM has been around a long time. Heck, Intel even had it's own ARM design called the XScale. They were used in PocketPC/WinCE back in the days when mobile meant a $1,000 proprietary POS (no, not point-of-sale) that sported a touch screen with the sensitivity of a cheap, Wal-Mart "squishy" buttoned microwave oven, 32MB of RAM, 32MB of flash and an almost incomprehensibly slow ARM-based chip. Few wrote home about the battery life in these devices and their software was horrible (because it wasn't designed for touch...it was a desktop GUI masquerading as touch on a QVGA screen!)
            robradina9
          • Just about anything integrated is puny

            One of the things that MAKES the PC such a great device is the consumer's ability to customize it. Kind of like a car. Lots of people own them, not everyone customizes them, but you don't have to be a mechanic to own one.
            And regarding market dominance--big, fat, hairy deal! Since when do sales and market share become equivalent to technological performance? Bean counters be damned. The engineers are the only ones in the room who can give you the product. The rest of you are just puppets.
            Galidari
          • true battery life sucked

            But I had excellent experiences with my HP iPaq H5455 then moved to Siemens SX56 then to the SX66. Sure, they werent the best of mobile devices but the concept and execution for my work away from the office/field service use was on point. Grant it, they were pretty clever laptop alternatives as well (check emails, pull and send files via VPN, quick notes, pics, docs, music, etc.)

            this is just my opinion though. I'd say the ARM's (StrongARM-pre 2000 and Xscale-early 2000) chips packed a lil punch for that time frame.
            Free Webapps
          • A little prespective there, buddy

            "Before ARM was invented".... really? Just how many Atom processors did Intel ship in 1984? Because the first ARM processors were out in 1985. Twenty years later, there was at least one ARM processor in 98% of all cellular phones, most digital cameras, most portable media players. How many Atoms did Intel ship in 2005... sorry, still zero. The Centrino Atom came out in 2008.
            Hazydave
          • Happens a lot

            The mistake Intel made is a very common one in tech. It's the same mistake Xerox made when those little small-business office copiers from Japan appeared. It's the same mistake =every= computer company except IBM made when they first saw "the home computer."

            "Oh, that's low-end stuff; it doesn't concern us," they said. "Nobody's going to use a Radio Shack to do their accounting," they said.

            The thing is, this mistake is almost always fatal.
            Robert Hahn
          • oops, sorry.

            I went to hit "Vote" and hit "Flag" by mistake. They don't ask "Are you sure."
            nfordzdn
          • what a load of rubbish

            Xerox failed because the bums on the top running the corporation did not protect there Intellectual property and might of even sold it to the Japanese and other corporations. We see theft and graft and nepotism at the heart of the problem. Incompetence at the highest levels which let the tech slip over to competitors and have infighting.

            Intel is going to be around along time and know that low powered c+ap end of the market is low margins and low tech. Great place to compete. We see the idiotic apple with P/E 200? We see the fund managers throw away the wealth of members in market manipulation. It is like the folk have myopic eye and they are the smart folk and out smarting the rich folk. It is funny though. The king has no clothes. That is who they are. They think they are the king but have no clothes.
            johny bizaro
          • It's the same mistake =every= computer company except IBM made

            Except IBM!!!

            When PC hits the market in 83/84, the IBM corporation made predictions that they would never sell more than 3000 or 3500 units per year.

            What a mistake!
            douglas_john_ledet
        • Yes, PUNY!

          iOS and Android are simple operating systems well-suited for single-user devices like tablets and smartphones.

          They cannot begin to do what Windows, MacOSX, or Linux can do - BUT they do not need to! They don't need preemptive multi-tasking. They DO need long battery life and light weight. AND, they need to be simple to use and inexpensive to buy in order to make the technology accessible to more consumers.
          M Wagner
          • FYI

            Android is also Linux. It does preemptive multitasking, etc. Yes, simpler apps are written in Java for the Dalvik VM, native applications are also supported. Kind of the modern way, just as many if not Windows applications are written for the common application architecture VM.

            Android does not come with a full set of Linux shell tools, but you can run bash, Emacs, etc. You can do application development for Android on Android... that's impossible for either iOS or Windows RT... in fact, unless you have Microsoft's special powers, you can't even produce a compiler of any kind under RT.
            Hazydave
        • not even close

          To use your car analogy, an ARM is like a 1980's VW Rabbit Diesel. It get's 50mpg but it's slow and can't carry much. Like you said, the ARM is the choice in phones because it uses very little energy, not because it is so fast. Users will put up with a slow phone but they won't put up with a slow desktop computer. Like the Rabbit that will get you from A to B, but it won't be fun getting there and you make a lot of compromises.

          Except for very specialized uses, I can't see a real use for these devices in the business world. Who wants to type a letter or work on a spreadsheet with such a tiny keyboard and tiny low res screen?
          Al_nyc
          • You are correct, but....

            I agree with whatever you have said here, however this article does clearly say that business needs no longer matter that much. This para in the article explains it all:

            When it comes to smartphones, tablets, and laptops, it's no longer relevant to talk about the needs of the 'business customer' first any more. That market still exists, but it's shrinking and changing as bring your own device becomes an everyday part of business tech usage. Lower cost hardware means the consumer market is the mass market — and the business-only device is becoming the niche.
            GoForTheBest