Bright Future for Apps Seen Outside ‘Store,’ but Mobile Has Money Problems

SEATTLE -- Applications will break the bounds of “stores” operated by Apple, Google and others as Web technology advances, a Motorola director told the TechNW conference. Other company representatives agreed apps aren’t simply a passing “fad,” but said mobile growth could be hampered by problems including bandwidth crunches, unproven monetization strategies and small screen sizes.

Yahoo’s search engine started as a directory, a format basically adopted by mobile application stores, said Sandeep Sinha, Motorola director of strategy and business development. The rollout of HTML5 and improved search capability will make app stores obsolete, but “discoverability is really challenging” for now, leaving app makers dependent on stores, Sinha said: “Anybody who can crack the code of search” will reap rewards in the app market.

"There’s almost a democratization of the business model” for app makers, said Tyler Davidson, vice president at Amdocs, which manages “customer experience systems” for service providers. A new wave of “garage startups” is finding success, such as Mobiata, whose TripDeck application manages travel itineraries and recently converted from paid to free, he said. The line will blur between mobile applications and Web services as 4G service expands, said Jeff Giard, director of strategy at Clearwire, which provides 4G through WiMAX. He said the Android Market would serve as the app store for Clearwire-powered devices, declining to answer whether Clearwire would start its own app store.

But apps that are hard to use on a small screen will hamper the future of mobile, said Alex Tokman, CEO of Microvision, which is building projection technology to better display content from mobile devices, such as magnifying a screen by 200 times or projecting a screen to a pair of networked glasses. Multimedia content is the hurdle for devices because so many components determine how content will perform, Sinha said: A slow processor will frustrate HD content on a device with a high-res screen, and 5-to-7 inch screens may not correctly display content devised for 3-to-4 inch screens.

The challenge for service providers is making money from wireless customers whose apps increasingly hog bandwidth, Davidson said: “There’s still some wrangling going on there” among service providers and device and app makers on revenue splits. “You can only put so many banner ads on a YouTube video” to cover the cost of streaming, he said, predicting “more TV-like advertising” to raise ad rates within applications.

Tiered data plans are likely to emerge, Giard said: Carriers start losing money when a customer uses more than three gigabytes of data a month. “The networks aren’t able to keep up” with demand, he said, proving the value of Clearwire’s 4G service -- its customers use seven gigabytes a month on average, much of it streaming video. Clearwire doesn’t consider Wi-Fi in cafes and other locations to compete with its service, so much as “complete the service offering,” Giard said. Customers may also “snack on a 4G network” if the Wi-Fi at their local Starbucks is overloaded.

Microsoft has a similar monetization problem in getting adoption of its pending Windows Phone 7 software, in contrast to Google, whose Android software is free, said Tricia Duryee, editor of mobile content blog mocoNews.net. “You should never count Microsoft out,” Giard said: “They are scrappy and have deep, deep pockets,” and could convert to free mobile software to challenge “one-trick pony” Google. “Microsoft doesn’t appeal to our reptilian brain as well as Apple,” Tokman said, predicting Microsoft’s strength would remain in enterprise software -- but also that Apple “mindshare” would stall in the next few years as Android devices and apps take a commanding lead. Nokia has a “tremendous opportunity to reinvent itself” and its Symbian OS, having recently poached a Microsoft executive for its CEO and heavily recruited engineers in the Northwest, Sinha said.

The competition between companies in the San Francisco and Seattle areas for engineering talent is partly a result of wireless industry’s changing nature, Davidson said. Duryee said telecom-related employment in the Seattle area, home to T-Mobile and a large AT&T presence, had largely stayed flat in the past six years. “The job classification has changed,” with more focus on software and less on the network itself, Sinha said: Microsoft and Amazon are just as much mobile players as T-Mobile. “The entire local industry has changed,” Davidson said, pointing to Rhapsody’s spinoff from RealNetworks and focus on mobile business. “It’s almost the start of another boom” as application development costs plummet -- developing and shipping a product in the 1990s started at about $5 million, Davidson said.

TechNW Notebook

The biggest challenge facing cloud computing is “legacy” resistance, executives told the TechNW conference in Seattle. Traditional information technology workers are afraid for their jobs, and too few new workers are learning the skill sets necessary for the cloud, said Simon Crosby, chief technology officer at Citrix. “The legacy has enormous legs,” he said, pointing to a major airline’s continued use of Windows 3.1, first released in the early 1990s. Doug Hauger, Microsoft general manager of Windows Azure, said he tries to change the “mindset” of customers who fear the cloud means less security and compliance problems. “You can answer many of those” fears by getting certifications from standards groups, but the “nebulous fear” of losing control over data is still the biggest obstacle to adoption, mainly for large enterprises, he said. It’s not for lack of effort by big software companies that the cloud is faltering, said Werner Vogels, Amazon Web Services CTO: Oracle, SAP and CA have all collaborated with Amazon for AWS-hosted applications. Consumer familiarity with mobile computing devices such as smartphones will drive enterprise adoption of the cloud, as consumers come to expect the same advanced features in business applications, Vogels said. This year has actually seen “dramatic action” in enterprise cloud adoption, with companies moving their human-resources platforms to the cloud and one pharmaceutical company in particular closing a data center and moving those applications to the cloud, he said. Hauger pointed to retail banking applications built on Azure and the banks managing their own security compliance. It’s also good for customer confidence that so many cloud providers are competing for their business, so no one feels boxed in by a single, untested provider, Hauger said. Crosby said the biggest loser in the move to the cloud could be Microsoft: “There’s this thing that’s paying the bills and it’s not Azure,” a reference to Microsoft’s dominant Windows business. Hank Skorny, senior vice president of media cloud computing and services at RealNetworks, said the company is “trying to reinvent” its core businesses, despite its long familiarity with the cloud as a streaming music provider. Speaking of the RealNetworks’ engineers, he said: “The fear that I see in their eyes at the new products I'm building … is just massive.” IT will become a “more intellectual business” focused on intelligence and analytics, Skorny said: “I don’t know why anybody would install a [Microsoft] Exchange server anymore.” Hauger didn’t respond to the jabs at Microsoft. What’s most important is ensuring there’s no “vertical requirement for integration on a single technology,” he said, allowing the use of Azure-hosted applications on an iPad, for example.