Future of mobile: How Nokia shows what's really important - and it's not apps

Smartphone hardware continues to become more and more similar, with minor, iterative improvements being added as time progresses. 

Whatever your phone is nowadays, if it's a smartphone, it will have the staples of Wi-Fi, mobile data (3G/4G), Bluetooth, a camera, and an app store where, regardless of what platform you're on, the top apps will be pretty similar. However, where manufacturers continue to expend more and more effort in order to differentiate themselves is through the mobile features and services they offer.

For example, if you saw the articles I wrote about the good and bad elements of the Nokia Lumia 920, you'll know that I spend most of the time while I'm out and about using Nokia's Mix Radio feature. Similarly, for the 'out and about' part of that sentence, I use Nokia Maps, Transport and Drive, and despite my reservations about some of the public transport routes suggested, they're all excellent apps and have quickly become my preferred mapping service.

Unexpectedly, for me, it's not the hardware or the apps that matter, but those services.

Now, fast forward a few years to when ample bandwidth means you're no longer tied to a specific handset, and you could see a very different smartphone ecosystem developing - one where you don't necessarily have to be a handset maker to be a big player in mobile.

Nokia's services play

This is interesting for players like Nokia. Unlike almost all of its rivals in the smartphone space, Nokia doesn't have a platform of its own to support in the long-term: it's using Windows Phone for the foreseeable future, leaving OS development and updates in Microsoft's hands.

On the plus side, Nokia has worked hard to get the services on its handsets up to scratch, and as a result now has market-leading apps for mapping, free music and has arguably some of the best imaging software in a phone in the form of the PureView system.

Maps is one of Nokia's most interesting services to look at. The company has a long history with mapping and in 2011, it introduced 3D modelling. Since then it's continued to develop the services, adding public transport and driving navigation to a growing list of features, which also includes offline access.

Most recently, Nokia's mapping services were rebranded as Here, bringing the introduction of an HTML5 web-based version of the maps, accessible via an iPhone or iPad. This has been its smartest move for a while, and one that could be a precursor to appealing to a wider market and deriving more money from what is currently a key asset.

Carolina Milanesi, a mobile analyst at Gartner, agrees that Nokia is making the right moves in the services business.

"Maps or now 'Here' certainly has a bigger opportunity to draw money for Nokia outside of their own devices," Milanesi told me. "The multi-platform approach, now supporting iOS and Android and working with companies like Amazon, proves that Nokia has bigger plans for its location and commerce business."

Can services add enough value for Nokia?

While its achievements with mapping are no small feat, the company isn't being fiercely protective of the service. Instead, it's allowing rivals to offer a slightly cut-down version of its maps software on their own devices, indicating that the company can see the value in mapping far beyond that on its own handsets.

It's done a similar thing with its cameras too, adding Nokia-specific features and image processing software to create a range-topping, if not class-leading, camera experience on smartphones. However, unlike its mapping moves, Nokia hasn't made a sound about allowing other manufacturers to include its image processing engine or other photo-trickery, but that doesn't mean that it won't one day.

Putting a figure on the value added to a Nokia handset by the inclusion of its maps, imaging or camera software is hard, but it's the stuff that is keeping Nokia releveant to the market right now.

Nonetheless, even with Nokia's solid moves in services, it's not a segment that's making the company any money.

In its last financial quarterly statement, Nokia's Location and Commerce units posted a total loss of €56m, which is a less than stellar performance. Even so, and in the face of a year-on-year decline in revenue for the unit, Nokia's fortunes here are actually improving, albeit slowly.

Despite the slow progress, Nokia clearly believes in the value of having plenty of fingers in plenty of pies. Since 2009 alone, it has acquired Bit-side, Cellity, Plum, Dopplr, MetaCarta, Novarra, Motally and Smarterphone, all of which are service-based companies.

This move to services is almost as applicable to RIM, than Nokia, after all, in RIM's most recent financial quarterly figures, nearly 40 percent of its revenue came from services and software. However, with the trajectory that the two companies are on, the outcomes are potentially very different - Nokia has the potential to 'go big or go home' in the consumer space and RIM has the potential to dominate a niche market.

"As an asset [Nokia's] location and commerce platform is more relevant to where the market is going than RIM's back end," Milanesi said.

Even with Nokia's strides to differentiate its products from competitors by delivering unique services or features, its future without hardware wouldn't be easy. It will need to continue to developing its non-core activities massively if it wants to secure itself a future in the mobile market, with or without handsets.