In-Depth

iTunes App Store: Mobile Revolution?

• By Kathleen Richards
• August 26, 2008

"Whoa, I've got to have that!" In the world of mobile devices, 'I've got to have it!' is a rallying cry that device manufacturers and service operators -- and developers -- can't ignore. Unlike desktop PCs and laptops, where users may feel some loyalty to an operating system, smartphone users often switch devices, OSes and wireless carriers.

Last month, Apple Inc. knocked the wind out of its competitors once again when it unveiled its second-generation iPhone 3G. The new models, released in 21 countries, sold more than 1 million units in three days. But perhaps the real KO was the buzz that Apple's App Store, launched a few days earlier, generated: the 25 million downloads heard round the world.

The company that put MP3 players into the hands of the masses and changed the way that we interact with music is courting software developers to build an industry around its iPhone 2.0 platform. The iTunes Store, which debuted in April 2003, now includes 1,100 or so apps for the iPhone 2.0 firmware, which is available on the iPhone 3G or as an upgrade for Apple's first-generation iPhone and iPod touch players. App developers will get 70 percent of revenues, Apple 30 percent.

To many developers, the opportunity is unparalleled. Mobile software developers that build apps for Microsoft, Palm Inc., Research in Motion Ltd. (RIM), Symbian Software Ltd., Nokia Corp. and mobile open source efforts such as Google Inc.'s -- through its Android alliance-face constant uncertainty and are subject to recurring negotiations because they need permission from operators and device manufacturers to get their apps on specific phones. Apple's captive iTunes audience and the company's unrivaled marketing is a big incentive. According to Apple, its iTunes Store had sold 5 billion songs as of mid-June. Sales of the iPhone 3G were double -- 1 million in the first weekend -- that of the original iPhone, bringing the total sales of all models to 7 million units.

Mindshare
Could the App Store do for mobile software what iTunes did for music and video? Ellen Craw, general manager of Ann Arbor, Mich.-based Ilium Software Inc., thinks so. Her company has built apps for Windows Mobile handheld devices since the platform launched 11 years ago as Windows CE.

"With Windows Mobile, even though third-party programs have been available from day one, it was not as obvious to people," says Craw. "Microsoft always sold them through third parties. It was never right on the device. It was never in ActiveSync. It was never in people's faces like iTunes is."

While Apple brags about its 1,100 apps, Microsoft has 18,000 Windows Mobile apps but people don't realize it, she adds.

Ilium's mobile consumers are leading-edge, extremely technical and in the habit of switching devices every few years, often when their service contracts expire. Ilium was faced with the decision of whether to make additional apps for Windows Mobile or branch out to other platforms.

Last month, the company began offering its popular personal security program eWallet on the iTunes App Store. Based on educational resources, it was relatively easy for the company's developers to get up to speed on Apple's iPhone Developer software development kit (SDK), says Craw. A third-party developer is finishing a BlackBerry version, expected to ship later this month.

"Windows Mobile is not a monopoly," explains Craw. "We have users who switch platforms either because they want to themselves or because their company decides, 'now we're all going to be BlackBerry,' or -- not yet, but we think this will happen -- 'now we're all going to be iPhone.'"

When it comes to the iPhone, Apple is definitely getting mindshare, even though market share favors Windows Mobile, which sold about 18 million licenses in fiscal 2008 worldwide, according to Microsoft.

"Microsoft, by being more open -- which is great for us as developers -- is not as easy for the less-technical end users," she says. "Apple has trained their whole big audience to go right to iTunes, and now suddenly they go to iTunes and they've got this big thing in their face that says, 'App Store.'"

Jim Wilson, president of JW Hedgehog Inc., an Exeter, N.H.-based consultancy that specializes in ASP.NET and Windows Mobile development, believes Apple's edge in brilliant marketing only goes so far. "The one thing that they really do nail is the user-interface aspect," says Wilson. "But from a feature standpoint, there's probably nothing they have that Windows Mobile, as well as other manufacturers, haven't had for years."

Fun, must-have devices would help gain consumer mindshare for Windows Mobile, says Wilson, who points to the new HTC Touch Diamond smartphone that uses Windows Mobile as its OS. Higher bars for functionality across devices -- GPS, for example -- is another issue that Microsoft could work harder to resolve, he says. In addition to HTC Corp.'s new smartphone, Microsoft singles out the Sony Xperia X1, Touch Pro and Samsung Omnia devices.

Capturing the Lines of Business
In the enterprise, the numbers are clearly on Microsoft's side. "With Windows Mobile, we've been at this for seven years, so we've definitely learned a ton in this space and that's why we've stuck with our strategy -- especially in the developer space," says Scott Rockfeld, group product manager for Microsoft's Mobile Communications Business, who estimates that there are about 35 to 40 million Windows devices worldwide. "We've been growing nearly 100 percent every year, outselling RIM, outselling Apple," he says.

Microsoft's dev strategy centers around return on investment over time, familiar tools, consistency and partners. About 70 percent of developers know how to develop on Windows, Rockfeld says, so they can also develop on Windows Mobile because it uses the same tools: Visual Studio, the .NET Compact Framework and SQL Server Compact Edition built right into the read-only memory.

"We have more than 125 open standard APIs," Rockfeld explains. "A developer can develop an app that works on nearly 140 different devices in the marketplace because the phones work with open standard APIs.

"This is a little different than the Linux world," he adds, "where you start to have this fragmentation -- how many instances of Java are out there?"

Apple's iTunes App Store may make sense as a consumer play, but not for enterprise users, he argues. "I really doubt that an enterprise is going to go, 'OK everybody, load a music application on your PC so that we can distribute an enterprise application,'" says Rockfeld. Microsoft offers the System Center Mobile Device Manager for IT departments to monitor and secure their networked devices. "Just like they do desktops," he adds.

Microsoft's largest U.S. distributor, Handango Inc., offers 18,000 Windows Mobile apps, but there are thousands more that haven't been counted, according to Rockfeld. IDC research indicates that 73 percent of corporations have or will have a Windows Mobile app this year, he adds.

	"With Windows Mobile, we've been at this for seven years, so we've definitely learned a ton in this space and that's why we've stuck with our strategy -- especially in the developer space."
Scott Rockfeld, Group Product Manager, Mobile Communications Business, Microsoft

Enterprise-Ready?
Regardless, with the iPhone 2.0 platform, Apple certainly has its sights set on enterprise adoption.

Apple launched its iPhone Developer Program and SDK in March. At that time, venture capitalist Kleiner Perkins Caufield & Byers (KPCB) announced it was allocating $100 million for an iFund to invest in companies pursuing iPhone app development. According to KPCB's Web site, the fund will invest primarily in "location-based services, social networking, mCommerce (including advertising and payments), communication and entertainment."

"When John Doerr, one of the top guys at Kleiner Perkins, announced the $100 million development fund for the iPhone, he made a comment in which he said the iPhone is the next PC," recalls Tim Bajarin, president of market researcher Creative Strategies Inc., based in Campbell, Calif. "That got a lot of us thinking that with the iPhone there was a significant technology shift. Number one, it sported a PC-class operating system as well as a PC-class browser, and the emphasis from Apple really was on extending Mac OS X to a mobile platform.

"And so in that sense, we're not thinking of this as just being another phone," adds Bajarin. "We're thinking of this as being the reincarnation of the Poqet PC. Only from the historical perspective, because back in 1990 there was an actual Poqet PC introduced and it didn't fit in your pocket -- it was like a mini PC -- a cool idea but way ahead of its time. But having said that, Apple actually is bringing to market what is in essence a full Internet experience and a fairly good representation of the PC experience to a device that's in your pocket."

At the company's Worldwide Developers Conference (WWDC) in June, Apple said 25,000 developers had applied to the iPhone Developer Program and 4,000 had been accepted. It wasn't until the WWDC that Apple's pursuit of enterprise adoption came to the fore, particularly during Apple CEO Steve Jobs' keynote. Jobs said that 35 percent of Fortune 500 companies were participating in the iPhone 2.0 beta program.

He also announced that iPhone 2.0 addressed several enterprise concerns. It adds support for Microsoft Exchange ActiveSync; support for Microsoft Office documents; enterprise security features such as remote wipe and better password protections; Cisco IPSec VPN support; enterprise rate plans -- though these are for AT&T only; lower phone costs, such as $199 for 8GB; and deployment options that let enterprises deploy applications through their intranet to company-approved phones -- only syncing through iTunes. Apple also introduced MobileMe -- replacing .Mac -- in June, which it markets as "Exchange for the rest of us."

Late to the Webfest Microsoft has a habit of being late to the party in Web development, and the company is again playing catch-up in the mobile space. While Apple's iPhone allows users to browse any Web site that supports Safari, Microsoft's devices require that sites be built for mobile Internet Explorer. "The browser on Windows Mobile devices isn't a standard browser, so it doesn't work with a lot of Web sites," explains Ellen Craw, general manager of Illium Software Inc. "The most important thing in a mobile [device] right now is really being able to get at every Web site that you want, so if a Web site doesn't recognize Pocket Internet Explorer, then that's not as useful as Safari or Opera Mobile. Microsoft could integrate Opera Mobile with their handhelds and that would be a better experience." Microsoft's tooling for developers is also lacking, says Jim Wilson, president of consultancy JW Hedgehog Inc. He complains that the platform lacks a visual designer for Web applications. "Hopefully, they realize that that's a problem and the next release of Visual Studio will fill that in," says Wilson. "But again, if we look at AJAX and rich Web as the next wave, I think Microsoft is going to get there. We're just not there right now." Microsoft says a full-fledged version of Internet Explorer 6 for Windows Mobile -- including support for the Flash 9 player -- will be ready in about six months. Silverlight 1.0 for Windows Mobile is also on the docket. "I expect good things," says Wilson. "You just want to watch the timing on your investment, because I just don't know when we're going to see Silverlight. To my knowledge, there's still not anything publicly available." Meanwhile, the iPhone has shortcomings of its own. Notably, it still doesn't support Adobe's Flash player. "We're still working to get the Flash player to work on the iPhone," says Adrian Ludwig, group manager for Adobe Systems Inc.'s product marketing, platform and developer business unit. "Once we do that we'll need to work with [Apple] to figure out terms to get it on the device." Adobe is also promoting its own Open Screen Project for mobile Flash apps with Nokia and other industry partners. -- K.R..

During Jobs' keynote, several medical applications and a few enterprise tools were demoed. Salesforce.com Inc., one of the enterprise app players -- whose Salesforce Mobile for iPhone is now available for licensed users through the App Store -- was among that group.

San Francisco-based Salesforce.com decided to port its customer relationship management app to the iPhone because of customer requests. "For quite some time, since the iPhone launched over a year ago, we've had our customers solicit recommendations that we support it. They were not just interested in accessing many of the Salesforce apps on the iPhone, but also any of the 72,000 Salesforce.com applications that are built on our platform," says Chuck Dietrich, vice president of Salesforce Mobile, which also supports Windows Mobile and RIM. Dietrich describes the App Store as a revolutionary way to distribute content and applications to mobile devices.

While naysayers contend that IT departments won't support iPhones, Dietrich holds a different view. "My perception of the mobile market is that end users of the devices play a huge role in what IT selects, and we see many organizations that have multiple devices deployed as opposed to one, strict standardization," he says. "So I think in the world of mobile devices, it's end-user preference that plays a huge influence in what the IT department supports -- a little different than, let's say, laptops, where a company will standardize on a certain laptop or a certain type of OS."

Apple as a force in the enterprise in the next year or two is still hard to fathom for many developers. "If you talk about enterprise apps, where the CEO checks his e-mail and keeps his calendar on there, you're going to see lots of that [on iPhones]," says Wilson. "But when it comes to, 'Hey, we're doing warehouse management,' or, 'Hey, we're doing tracking,' I think we'll see Apple do a few high-profile apps, but I'd be shocked if they became a major player in enterprise apps in that time frame. It's just not their culture, as much as they want to say it is."

One of the downsides to the iPhone platform is that it's closed, Wilson adds. "To me the thing that Apple tries to do, is they try to control things too much," he says. "They don't open their APIs up."

Apple did not respond for requests to comment for this article.

Wilson believes Microsoft offers a more desirable platform and better resources for developers, especially in the enterprise. "SQL Server Compact Edition is a really good database," he says. "People will talk about SQL Lite being a good database, but SQL Server Compact Edition has true transaction [support]. It has multiuser capability, so it's a real, live database. When it comes to developer tools, when you're talking about smart clients, Microsoft is doing a great job. When it comes to the Web, I think that's where we need to see them do just a little bit more."

"It will be clearer in the next 18 months," says Bajarin, who points out that Apple's enterprise SDKs were only made publicly available at WWDC in June. "The enterprise apps for the iPhone will start coming out and it will start becoming clearer."

Early App Store offerings for the business user include Oracle Business Indicators and Bloomberg, among others.

Bye-Bye Laptops?
The shift toward smartphones as computing platforms is clearly underway, and the iPhone may spearhead wider adoption in general.

"There's so much going on out there and everybody is jumping in, and it's a great space to be in," says Rockfeld. "It's an inflection point for smartphones."

For mobile app developers, the opportunities seem to be expanding. In October, RIM is holding its first annual BlackBerry Developers Conference in Santa Clara, Calif.

"There were MP3 players way before the iPod, but nobody made it big until Apple," says Ilium's Craw. "Research in Motion was looking at the PDA market and thinking, 'Yes, this is what it should be,' and then Apple showed people how huge it can be. We always believed it could be huge."