Welcome to ZenUnwired; a blog dedicated to tracking developments in technology and strategy, and to deciphering the impact of these developments on wired and wireless ISP's, device manufacturers, OS and application developers, and most importantly - you.

Tuesday, June 8, 2010

iPhone 4: Why Apple's strategy is flawed

As you have undoubtedly already read, Steve Jobs formally demo'd the latest iteration of the iPhone, dubbed the iPhone 4 at the WWDC conference in San Francisco yesterday. As the world marvels at the gitzy new device, bloggers and journalists are poring over the details to analyze whether Apple has 'done it again'. Here is my take on the iPhone 4 and why I think Apple's strategy is flawed.

First off, let me cover the eight things about the iPhone 4 that Steve Jobs decided to highlight at WWDC.
  1. The iPhone 4 is supposedly the world's thinnest smartphone ever. It has stainless steel for strength, optical quality glass for scratch resistance and a built-in antenna that goes around the case.
  2. The iPhone 4 has a new display called the "Retina Display" that displays 326 pixels per inch, making viewing webpages, pics etc. on the iPhone 4 a treat to watch.
  3. Apple’s A4 chip. While Jobs talked about the new chip, he did not provide any details about the processor itself. The iPhone now is capable of up to 32 GB of storage, quad-band HSDPA/HSUPA, with speeds of up to 7.2 Mbps down.
  4. The iPhone now sports a new three-axis gyroscope along with the other sensors already on board like the accelerometer, etc. I bet this makes for a better gaming experience but not much else.
  5. Camera enhancements. The iPhone 4 has a 5-megapixel rear camera, with a backside illuminated sensor. This camera also records HD video. Full 720P at 30 frames per second and users can edit their movies using iMovies for iPhone (a $4.99 app available via the app store). The iPhone 4 also has a front facing camera that users can use for video chatting via 'Facetime', a proprietary Apple app that works iPhone 4 to iPhone 4 only - and that too over Wi-Fi only.
  6. The iPhone 4 uses a (new) operating system called iOS 4, that has some 1500 new developer APIs. Additionally it now supports multitasking and folders.
  7. iBooks Store - it joins the App Store and iTunes as the third Apple Store.
  8. iAds. Enough said!

By all counts, these are impressive enhancements. But a brief look at CNET's comparison of the iPhone 4 to the HTC EVO, clearly shows that the EVO beats the iPhone 4 in almost all categories. And remember, the EVO is currently running Android 2.1. When the impending OTA upgrade to Android 2.2 Froyo comes along, the iPhone 4 will have no room left to run. In other words, this is the first flaw. The iPhone 4 is evolutionary - not revolutionary. We all know that the first generation of the iPhone as well as the iPhone 3G were truly revolutionary devices that changed the mobile device landscape, the world over. But the iPhone 3GS and the iPhone 4 have just incorporated marginal improvements over their predecessors.

So what are the some of the features that Apple could have incorporated but didnt?
  • Over-The-Air (OTA) updates. Someone needs to remind Apple that the iPhone is a 'wireless device'. So having to connect your iPhone to your computer anytime it needs to be updated is so last generation.
  • Voice Input: Although certain applications on the iPhone allow voice input, this isnt as seamless or unified as the voice input mechanism on Android. Having to deal with multiple voice input mechanisms depending on the application that is being used, just inst user friendly
  • Free navigation. You have to pay a lot of $$$ to download and use navigation on the iPhone. In the world of dedicated GPS devices and Google Navigation, it is clear that Apple just doesn't get it.
  • Google apps: It is clear that the war between Google and Apple is getting fiercer. It is my opinion that the lack of Google Apps like Google Voice, Translate, Goggles, Shopper and Skymap is really going to cost Apple in the long run.
  • Widgets: The iPhone UI was phenomenal when it first came out. But it hasnt been updated since, and is beginning to look really dated. The lack of customizable widgets to place on your 'device-top' like the Sense UI on the HTC EVO is truly disappointing.
  • Menubar/Statuses/Alerts: If Palm could do this, cant Apple? Do we really have to dig through individual apps to figure out whats going on in each?
  • Hotspot capabilities. Tethering clearly isn’t enough. Seriously, once again, if Palm and HTC could figure this out, cant Apple?
  • Video Calls: As I mentioned earlier, Facetime is iPhone 4 to iPhone 4 only - that too just over Wi-Fi. Lets see how this works in reality. So if the friend you are calling from your "cool" new iPhone 4 is using an iPhone 3GS (or any other device other than the iPhone 4), you're out of luck. Also, if I'm already at home with access to my desktop and webcam, why would I be trying to call people using my iPhone 4 (given its compatibility issues)? Why wouldnt I rather use Qik like on the HTC EVO?

The brief list above illustrates the second flaw in Apple's strategy. Apple is so accustomed to 'telling' its customers what they need, that it seems that they dont really care about what the customers 'want'. We all know that the stories of companies that drown out their customers voices with visions of their own grandeur dont really end well. 

Finally, the iPhone 4 is a GSM device (again!). Lets analyze the implications of this by just considering the US market. On the one hand, the iPhone 4 is all about speed and data. On the other hand, AT&T recently announced that they are doing away with unlimited data - unless you area already a customer with AT&T that has unlimited data (you are "grandfathered in"). So this means that anyone intending to go to AT&T for the new iPhone 4 is subject to data caps. This is akin to giving someone the keys to a Bugatti Veyron but asking them to drive at 25 Mph. Whats the point of having all that muscle if you dont have the road to run? Making a (huge) assumption that AT&T is able to fix its network issues, it looks like the only folks who can take advantage of the iPhone's prowess are the folks who are grandfathered in. This is the third flaw in Apple's strategy. By tying the knot to AT&T, Apple has chosen to ignore about 200 Million subscribers who are currently with other carriers like Sprint, Verizon and T-Mobile. With AT&T's data caps in play, these folks have a lesser incentive to move to AT&T. I think Apple shareholders should take  a serious look at this flaw especially given their previous experience of how the Mac Vs. Windows wars played out. No one wants to see Apple head back to the brink.

So how will these major flaws play out in the marketplace? Do I expect that the iPhone 4 will be a flop? Not really. I expect that the iPhone 4 will sell - and sell quite well. That said, I expect that within the US, the iPhone 4 will be less of a hit that its predecessors. Also, I predict that most of the iPhone 4 buyers will be 'upgrade' customers rather than 'new to AT&T' customers. Lets see how these predictions play out in the coming quarters.

On a personal note, I am quite thrilled at how the EVO has been performing. It is being widely reported that the EVO's sales were beyond Sprint's expectations. The momentum has continued even beyond the iPhone 4's announcement and it has helped that Sprint announced it has no plans to introduce data caps right now. GO SPRINT!