Why the Consumer Market Doesn't Matter25 February 2002 If you believe everything you read in the media, you'd think that the Pocket PC's fatal flaw is that it's too expensive for retail consumers. Here's why that may not be a flaw after all. In a ZDnet AnchorDesk article recently, the author explained how he thought Microsoft could beat Palm with the Pocket PC. Most of his strategy seemed to hinge on making the Pocket PC more accessible to consumers: making it cheaper, more customizable, etc. Basically, he seemed to think that the Pocket PC as it stands now is just too stodgy and expensive to catch on. He just doesn't get it. Whenever I see people -- well, not bashing, really, but disapproving of -- the Pocket PC, the "it's too expensive/big/stodgy for the consumer market" complaint is always high on the list. I don't think these people get that Microsoft isn't worried about the consumer market just yet, and the only reason you can buy Pocket PCs retail at all right now is to generate "mind share" and general awareness of the platform. It's a lot more profitable to sell 5,000 Pocket PCs on one order than to try to sell to -- and later support -- 5,000 individual consumers. While I think Microsoft will go after this market eventually, it's too soon now. The important thing is to get palmtops taken seriously as business tools. A leopard skin faceplate is not going to do that. What will do that is a device powerful enough to handle the bulk of what a lot of corporations buy notebooks for now, at a fraction of the price, weight and bulk. Pocket PCs can do that. Palms can too, but as I've mentioned before, the total cost of ownership (TCO) for Palms in the enterprise can be higher because of all the extra software that must be added to them, and the support costs of getting all that software to work together. Microsoft is targeting the enterprise market with both barrels. Look at the two new announcements last week: the new Pocket PC Phone Edition and the Microsoft Smartphone 2002. The first is a collection of applications and libraries that allow Pocket PCs to double as phones, and new devices like the O2 XDA and the hp Jornada 928 look like they'll fill this role well. The Microsoft Smartphone is not a Pocket PC, although it is related. These devices will be the size of modern cell phones, and will be operated by the keypad and scroll wheel only -- no touchscreens. On a screen about the size of a Palm's, they'll provide access to your Outlook PIM and email data, allow you browse the web, send instant messages, and of course, play Solitaire (they do run Windows, after all). All this will be tied into Microsoft's new Mobile Information Server software, which acts as the middleware between the phones and Exchange. Now do you think Microsoft is really trying to oust Nokia from the consumer cell phone market with this? Heck, no, and I'd be amazed to see any consumer wireless plans even offer Microsoft Smartphones as an option. These devices are intended to allow mobile workers to stay in touch with their office, even if they're on the golf course. They will be purchased by corporations and issued to individuals, not purchased individually. And if you think about it, that's not a bad idea. Only recently have cell phones become popular consumer items, and even now they're still heavily subsidized by the wireless plan to which you subscribe. Consumers may carry around $200 phones, but you can bet they didn't pay $200 for them up front. For over a decade, cell phones were executive items, bought with company money. They didn't catch on with consumers until a) the business users had worked out all the kinks in the system, and b) widespread business use increased mind share to the point that consumers wanted them. Ten, fifteen years ago most people would have rather used pay phones than carry a phone with them everywhere they went. Attitudes changed when business users proved it was workable. It will be the same with PDAs. The first people that bought PDAs were the geeks, the early adopters, the visionaries. These people aren't numerous enough to get a product into "critical mass". And although retail PDA sales haven't stopped, I'd be very curious to see what percentage of people who buy PDAs retail now are upgrading PDA users vs. new users who have never owned a PDA before. I really think that most people who are going to buy a PDA for themselves already have one by now. The rest of the consumer market just doesn't see the need. Yet. If the Pocket PC really takes off as a business tool, proving that it can do the job of a personalcomputer better and cheaper than a laptop, I think a lot of consumers will flock to it down the road. And by that time, they won't care about the price, because their attitudes will have changed. $400-500 may be overpriced for a PDA, but it's dirt cheap for a notebook. Remember that Microsoft didn't start out trying to capture the consumer desktop OS market directly. Apple and even Commodore had strong footholds back in the 80s, so Microsoft and IBM focused on the business market. Over time, people wanted to use the same software at home that they had at work, and only then did DOS/Windows start to gain popularity in "home" computers. I think Microsoft expects the same trend to play out here. Joe gets a Pocket PC from his company for use while traveling, and he likes it. Since it's a PDA, he has it with him all the time, and his wife Mary and son Chip eventually end up getting Pocket PCs of their own so they can use the same software he does and share information. The consumer market follows enterprise, not the other way around, and companies that focus on the consumer market first (Palm, Apple, Commodore) end up losing marketshare over time. |