Wireless ownership: E-mail is today’s skirmish, platforms are tomorrow’s war

By Jessica Figueras

Wireless e-mail has become the new catch-all application for wireless network and portal operators. It appeals to both business and consumer customers, and plenty of revenue-generating potential. But this simple application is also proving to be one of the most interesting examples of convergence in action, as wireless e-mail vendors from completely different parts of the industry start lining up to offer their wares to the operators. This isn't a new battleground in itself. Ultimately, software vendors are looking far beyond wireless e-mail, with a goal of owning the underlying wireless platform. Those without a platform, beware.

A year or two after the launch of mainstream wireless Internet services, things are starting to get interesting. Wireless operators—primarily network and portal operators—are conscious that consumers no longer form the only constituency: Business customers are starting to come on stream, with quite different applications in mind. Web browsing and gaming clearly will not appeal to everyone, so wireless e-mail has become the new catch-all application for operators, some of whom are beginning to offer broad portfolios of wireless e-mail services for both consumer and corporate customers.

Plenty of vendors are willing to supply operators with the underlying wireless e-mail software. But that market is still so immature, and its borders so fluid, that it looks more like an open-ended collection of tiny sub-markets. There are big differences in emphasis depending on what background the vendors come from; all have different business models and target different customers. The main players are:

• Microsoft and Lotus—enterprise messaging vendors that offer wireless extensions to their corporate customers via operators;

• wireless e-mail specialist RIM RIM, which sells a package comprising the Blackberry device and enabling software to corporate and consumer customers via operators;

• Openwaveand Comverse, which sell their wireless e-mail software directly to operators, which use it to create mainly consumer-focused services;

• specialist OEMs such as Mobeon, which licenses its wireless e-mail platform to other operator-focused software vendors.;

A market converging on the operator space

What distinguishes these players from each other is their customer focus—essentially, whether they sell their products to operators for hosting or via operators. Today's hosted offerings tend to be aimed at consumers, while corporate customers are usually served by the latter group.

The vendors' backgrounds have a strong influence here, and some are having to move quickly to adapt their channel models to the new market. The most noticeable—if unsurprising—trend is the extent to which operators are becoming the focus of attention for all of the vendors.

Openwave, for example, has a historically strong position in fixed e-mail for portal operators stemming from Software.com, but the merger with Phone.com that created Openwave gave the new company an opportunity to target wireless operators with the same messaging platform. Openwave, like Comverse and Mobeon, has no relationship with the users of its wireless e-mail software. All three companies offer products that fit a pure one-to-many hosted solution model.

Microsoft and Lotus partner with Vodafone

On the other hand, Microsoft and Lotus have always targeted enterprise customers directly or via their traditional resellers. But to ensure that their customers have access to packaged—rather than DIY (do it yourself)—wireless e-mail services, they have had to form partnerships with operators virtually from scratch. Both vendors have started the process with Vodafone UK, which now offers a secure, managed wireless e-mail service for customers using Lotus Notes and Microsoft Exchange. The infrastructure is semi-hosted, meaning that equipment must be installed at both the customer's and operator's premises. With that arrangement, Vodafone and the two vendors share the job of marketing, selling, implementing and supporting the offering. Both vendors are now focusing on expanding their partnerships to operators in every region where they have customers—a major task indeed.

RIM's current model is similar to that of Lotus and Microsoft. It partners with wireless network and portal operators—Motient, Cingular, Bell Mobility and Rogers AT&T in North America, and BT Cellnet, Telfort and Telecom Italia Mobile in Europe—that offer a semi-hosted, managed service to corporations, built around the RIM Blackberry device plus server software to wireless-enable Microsoft Exchange-based e-mail. RIM does have some customer-facing operations, but is moving toward a pure operator focus in order to increase scale and reduce costs. Its operator partners can provide the sales and marketing, customer services and geographic presence that RIM cannot afford.

A fractious, unsettled market

So what do those differences of emphasis mean? One of the most interesting implications is the effect of convergence on market dynamics. And in the short term, those effects look unsettling from an operator's point of view.

One of the characteristics of a mature market is that it is relatively easy to see where one's interests lie. There is generally direct competition between players, and partners' business models tend to be complementary, which fosters stability. In contrast, few of the players providing wireless e-mail software compete directly, and experimental business models mean that it is often difficult to work out who is partner, supplier or competitor to the operator.

The difference between Openwave and Microsoft is, perhaps, the most telling example of that. Openwave has always been a highly operator-friendly vendor; its product range is completely focused on helping operators to keep control of the wireless data traffic on their networks. It prioritizes features that are suited to a centralized, one-to-many model such as provisioning and billing. Even better, Openwave does not seem to have any ambitions to threaten operators' customer ownership. Those are some of the reasons why Openwave has been so successful in targeting operators for business.

Microsoft, on the other hand, was born out of a philosophy that puts the user at the center of everything, emphasizing local control and functionality. It has been hugely successful in the free-for-all of the fixed Internet world. The philosophy works against that of the wireless operators, which are happy to provide access to any service or content so long as the user pays them for it. The conflict of interest that produces is illustrated by two deals that Microsoft has signed with wireless network hub owners, MobileSys (mobilesys.com) and MobileWay (mobileway.com). They allow users of Microsoft's corporate wireless e-mail solution to roam abroad, while bypassing operators' lucrative roaming charges. Great for users, but a problem for the operators.

Another question posed by convergence is whether there are any opportunities for synergy between wireless e-mail for consumers and corporate users. At present, the two seem to be worlds apart: on one side, a pure hosted model for consumers offered by Openwave, Comverse and Mobeon; on the other, a semi-hosted model for corporates offered by Microsoft, Lotus and RIM. On that basis, it is not a particularly viable option for operators to offer a common wireless e-mail platform from which to serve both communities. After all, consumers are unlikely to start buying their own mail servers in the near future.

From wireless e-mail to wireless platform

Given those differences, it may not sound as if the market is ripe for convergence any time soon. You could think that the operators would do better to forget all about convergence and to steer clear of any opportunities offered to them by dangerous adventurers such as Microsoft.

But here we must broaden our focus outside wireless e-mail, because it is only one part of a much more important end game. That end game is ownership of the underlying wireless platform—a software offering that can wireless-enable any application, for any device, on any network. In the context of the platform battle, it will soon become obvious that wireless e-mail is barely more than a side issue.

Once we start looking beyond wireless e-mail to platforms, it is clear that not all of today's vendors can deliver—or even compete. Microsoft, Openwave and IBM/Lotus are clear contenders, but the way is less certain for specialists such as RIM and Mobeon, which have open platforms but little market clout. They will also have to compete with platform heavyweights such as Oracle and BEA, wireless middleware specialists such as Brience, Aether Systems and 724 Solutions, plus in all likelihood wireless infrastructure providers such as Nokia and Ericsson.

Blurring the divide

While the divide between operator-focused and enterprise-focused vendors still exists to various degrees among that group, during the next few years it will start to blur as genuine convergence of the underlying platform starts to take place.

For instance, Openwave has been extending its offering to create a coherent platform, Services OS, which provides infrastructure services that could, in theory, be extended to a wide range of applications—not just consumer applications. Although Openwave does not target enterprise applications today, it has recognized the future importance of that market with its strategic investment in (and right to buy) Brience, the enterprise wireless middleware vendor.

Arguably, Brience partnered with Openwave to get an opening into the operator market (more specifically, ASPs and portal operators); but as economic conditions improve, the two are likely to step up their joint focus on enterprises. Together, the two companies have a powerhouse of a platform, with strengths in both operator and enterprise fields, hosted and non-hosted services.

In contrast to the relatively channel-specific platform provided by Openwave, Microsoft and Lotus operate (or want to operate) in a truly multichannel environment where the same underlying platform can be adapted for any use. In Microsoft's case, that is the .NET platform (comprising servers, operating systems and development tools); in Lotus', the IBM WebSphere platform (comprising servers, database, development tools and management).

So it is not surprising that both companies have a very different type of wireless platform from Openwave. For both Microsoft and Lotus, the software that enables wireless access to their e-mail platforms (and other enterprise applications) is little more than a thin logical layer that relies heavily on the functionality provided by the platform back at the enterprise: that is, the platform that also underpins fixed applications. But there are few reasons why it should not be an operator platform as well as an enterprise platform.

That goal is exactly what Microsoft has in mind. The company is already using its early wireless e-mail offerings as a springboard to get into the operator community and open platform discussions. For example, Microsoft's .NET My Services initiative (previously known as Hailstorm) would allow operators to create new hosted customer services based on a set of Microsoft-hosted Web services. Operators that adopt the initiative could feasibly use it to create their own wireless platforms, allowing easy wireless access for both consumer and corporate e-mail users, as well as for a whole raft of other consumer and corporate applications.

Whether that scenario will take place depends heavily on Microsoft's ability to do something more specific for the needs of the operator community. Operators may not want to become Microsoft cheerleaders, when they could be the customers of more compliant suppliers such as Openwave. But the point is that those companies are starting to compete directly, on equal terms, when not so long ago they operated in entirely different markets. Convergence is happening, after all.

End of the end game

With convergence comes consolidation. The sheer number of potential players in the market for platform ownership makes consolidation inevitable; most of the smaller specialists will be swallowed up by platform owners looking to plug gaps in their offerings. Standardization will also play an important part: As wireless standards gradually converge with those in the fixed world, there will be less need for dedicated wireless infrastructure.

The main process of consolidation will be mostly complete by 2004. But until then, today's wireless e-mail competitors still have everything to play for. To ensure survival, competitors need to be sure about where they stand in the platform battle. It is unlikely that small vendors with standalone wireless e-mail offerings will be able to survive independently, unless they can carve out niche specialist markets for themselves. Such vendors will need to have viable exit strategies in place—wise partnerships with major players could be the best option here.

But potential platform owners also have a major task on their hands. They will need to invest significantly in building complete, open and flexible platforms, which can handle the wide range of applications that will be required over the next five years. To do that, they need to balance the relative merits of partnership, in-house development or acquisition. Those with application offerings (such as wireless e-mail) will also need to decide whether to invest in expanding their range, or leaving it to third parties. Building strong strategic partnerships is the key task for all players. In the short term, the wireless operator community is the most important focus, as those players form the gateway to the market. But as today's technology offerings mature into mainstream service offerings, the enterprise market will also become a viable target as corporations start to take advantage of stable standards and cheaper prices. Vendors that wish to survive convergence and consolidation need to partner wisely, to enable them to target both constituencies.

Jessica Figueras is an analyst with Ovum (ovum.com), e-mail jmf@ovum.com