Paradigm Shift: PalmSource's Future

After covering the rumors of a possible future Treo running another OS such as Windows Mobile or Linux, we have finally found out that there was some truth to these rumors after all.

PalmSource last Wednesday announced the acquisition of China MobileSoft (CMS) a leading mobile phone software company operating in the single largest and fastest growing mobile phone market in the world (China has over 320 million mobile phone users) and which has been developing a version of Linux optimized for mobile devices. 

Where PalmSource has taken a strong lead in the development of a robust OS for current and next generation high-end smartphones such as our Treo, CMS has for its part been developing a version of the Linux operating system for low to mid-end mobile devices.   The rationale for PalmSource's acquisition is to combine the companies' development efforts so as to provide existing and prospective licensees an end-to-end portfolio of mobile phone software capable of powering the entire spectrum of mobile phones - from 'basic' phones (voice calling only) to 'feature' phones (camera, video, MP3, movies, etc.) to 'smart' phones (all-in-one communications, information and entertainment).

Following this announcement, some people commented that they saw PalmSource's move to Linux as a final 'desperate' attempt to rescue the company's fledging fortunes.  For my part, I view it as a very smart and exciting strategic move and one that I envisage will completely and positively transform PalmSource, the PalmOS and the Palm community at large.

Perhaps some of the negative comments stem from the fact that until now PalmSource's software has been synonymous with "PDA" software.  Since the PDA market is now stagnant or in decline, people have thus viewed the future of the company as uncertain.  However, I believe that PalmSource's strategic move has not been analyzed in the right context, nor been given the benefit of some imagination and overall misses to identify significant future opportunities.  It appears that many are suffering from "Marketing Myopia" and this may be the perfect occasion to revisit Theodore Levitt's seminal work.

Context, Imagination and Opportunities

While it may be true that within the context of the PDA market PalmSource's prospects are not bright, this assumes that there is no other context in which the company can successfully compete.  It would however be wrong to think that PalmSource is limited to compete in the PDA market alone.

There are in fact a great many huge new markets within PalmSource's reach that have only recently emerged and which the company has only begun to exploit.  Our Treo and the overall smartphone market is but one example where the PalmOS has demonstrated its ability to take a leadership position.

So, if future opportunites for PalmSource are not to be found in its traditional PDA niche where will they be?  My answer: the PalmOS will be everywhere there is a need to power handheld devices.  Mobile Phones, MP3 Players, Portable Movie Players, Portable Game Players, Digital Cameras and eBooks are but some of these handheld devices.

Across the world, there are three industries that manufacture and need the software to power these handheld devices and PalmSource could become a key partner to all of them.

First there is the mobile phone industry and palmOne, Samsung, GSPda and Qool are but a few of its existing licensees in this space.  Nokia, Motorola, LG, SonyEricsson meanwhile are among the leading worldwide manufacturers.

Second is the consumer electronics industry with behemoths such as Sony, Samsung, Philips and RCA who typically produce most if not all of the previously listed handheld devices.  An increasing number of small independent players typically develop just a few of these handheld devices.

Third is the computer industry with players such as Dell, HP, IBM, Sony and Apple who have developed PDA's and/or MP3 Players and have shown (to the exception of IBM) a strong interest in expanding their reach across the consumer electronics market.

However, as you will have undoubtedly noticed, something revolutionary is happening across these three industries.  Namely, they are "converging" and increasingly competing across each others' boundaries.  Apple, a computer company, develops the iPod, a consumer electronics device.  Dell does the same.  Nokia, a mobile phone company, develops the nGage, also a consumer electronics device.  These are but a few of the largest representative examples but the trend is growing rapidly and new players seem to appear almost on a daily basis.

The name typically associated with this revolution is Digital Convergence.  I believe that it opens gigantic new opportunities for PalmSource and its move to Linux will significantly help the company in its efforts to exploit these.

It is becoming increasingly obvious across all three converging industries that the successful development of handheld devices requires a near perfect integration between hardware and software (but also content and services) so as to deliver a simple, feature-rich and user-friendly consumer experience. 

The problem that nearly all mobile, consumer electronics and computer manufacturers face however is that their core competencies typically lie only on the hardware side.  They are struggling to develop their own software internally and all too often end up delivering products that are overly complex and which by extension have performed poorly in the marketplace.  A comparative exception has for example been Apple's iPod since the company benefits from both superb hardware and software development competencies.

Without strong internal software development skills, players in the digital convergence space will increasingly seek to license it from third parties.  Symbian, Linux, Windows Mobile and naturally the PalmOS are but some of the software solutions available for distinct handheld devices.  Nevertheless, thanks to the flexibility, large dedicated community and development speed of Linux, PalmSource may within a relatively short period of time be the only company with the capabilites to offer a robust handheld software portfolio with a tested and proven UI providing a 'unified' look-and-feel and spanning all three converging industries.  CEO's currently struggling in their digital convergence efforts across the mobile, consumer electronics and computer industries should undoubtedly pay PalmSource a visit or two.

Exploiting Digital Convergence

To a large extent, PalmSource, its many developers and licensees have already done a proof-of-concept of how to exploit many areas of digital convergence - particularly on the entertainment front.  For example, palmOne's Treo is clearly the leading smartphone, most 3 million PalmOS devices shipped this year have built-in MP3 playback and increasingly video playback as well, the PalmOS is the single largest eBook platform in the world overshadowing both PocketPC and Symbian, digital cameras are slowly becoming standard on its devices and Tapwave has built a successful portable game player on the PalmOS with its Zodiac but there are many, many others.  Imagine how much more could be done with a little imagination.  I would love to see a purpose-designed handheld like a 40GB PalmOS combo MP3/Video player or 5GB combo eBook/MP3 player among many possibilities.  Hopefully palmOne will also some day build our Treo Zen.

Without a doubt, one of the most important benefits of PalmSource's decision to put the PalmOS on top of a Linux kernel is that it will have removed one of the single largest barriers to adoption of its software and its quest to see the PalmOS adopted by the widest number of licensees to power an even wider array of handheld devices.  The barrier in question is the complete paranoia on the part of many manufacturers to 'lock' themselves to a proprietary operating system.  By choosing Linux, a 'free' open source operating system, there is no doubt that PalmSource's appeal will increase significantly among existing and prospective licensees particularly since many of them have already invested and experimented with Linux powered devices.

All that remains now is for PalmSource and its licensees to work in close cooperation to develop and conquer the market for the next generation of handheld devices.  It won't be done overnight, will take a great deal of effort and may ultimately fail but then again that's what revolutions are all about.  I feel that those companies putting the right amount of innovation and entrepreneurship to work will have a very good shot at success - I personally wouldn't mind licensing the PalmOS to develop the first successful standalone eBook so I'm off to write my business plan and raise a few millions to get started...

Read PalmSource's Press Release

Treonauts build the future...