Aberdeen InSight: With New PDAs, It's High Time for Wireless

By Isaac Ro

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Overview: The core value proposition for first-generation personal digital assistants has been the availability of popular Personal Information Management (PIM) clients in a sleek, affordable, and mobile form factor. However, the current downturn in IT spending, coupled with an increasingly competitive marketplace, demands that hardware vendors offer more robust devices with a clear return on investment (ROI) to potential enterprise customers. Against this backdrop, later this year vendors will finally begin to offer integrated wireless PIM and secure, push-delivered e-mail functionalities. In this InSight, Aberdeen reviews the latest wireless devices and highlights the impending arrival of packaged enterprise mobility solutions.


Growth Potential Remains Strong
In 2001, roughly 11.8 million PDAs were shipped, creating a market worth $2.9 billion. Though growth for this sector has remained strong compared to that of other hardware markets, it is clear that non-wireless devices, particularly those running Palm OS, have experienced steady price erosion. That erosion has resulted from new licensees (such as Sony) aggressively expanding offerings through 2001 to cover the entire pricing spectrum. Thus, gross margins for traditional leaders Palm and Handspring were directly and negatively impacted.

However, Aberdeen research indicates that the market for data-only PDAs will sustain a compound annual growth rate (CAGR) of approximately 19.6% through 2005. Growth potential remains strong thanks to the impending arrival of second-generation devices, which will extend beyond basic PIM applications and universally offer built-in wireless connectivity.

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Enhancing the Value Proposition
Although PIM is a valuable business application, it is not enough to drive enterprise adoption. As a result, chief information and technology officers (CIOs, CTOs), as well as line-of-business (LOB) managers have to date seen little benefit in the purchase and deployment of non-wireless PDAs. The major demands among key decision-makers for mobile devices also include wireless access to corporate e-mail, over-the-air (OTA) synchronization, and real-time access to enterprise databases.

Research in Motion has capitalized on a portion of this market demand with its Blackberry solution, which offers reliable and secure wireless e-mail functionality. As a result, the Blackberry phenomenon highlights a key market dynamic: Whether the functionality offered is corporate e-mail, OTA synchronization of PIM, access to enterprise data, or some combination of each, enterprise buyers will accept these solutions if they are robust and easily deployed. Other hardware vendors, green with envy, have come to recognize the power of a Blackberry-type value proposition and are feverishly rushing to supplant Research in Motion's offering with more comprehensive solutions.

The Contenders
While Pocket PC and Symbian-based wireless devices will rapidly emerge in the second half of 2002, several second-generation Palm OS-based devices are already available.

Within this class of handhelds, there already exists significant differentiation between the leading suppliers, hinting at the growing complexity of the market. Vendors such as Palm have opted to deliver wireless, data-only-enabled PDAs. Handspring, among others, has chosen instead to pursue the holy grail of mobile devices: a single voice- and data-enabled communicator. Still others - Motient, for example - believe in a world in which add-on cards or sleds offer maximum flexibility.

Palm i705
Launched in January 2002 after several months of delay, the Palm i705 represents an update to the company's earlier wireless offering, the Palm VII series. Although it suffers from a handful of key design flaws - namely, the lack of a built-in keyboard, color display, and increased memory - the i705 is a solid improvement. It delivers push delivery corporate mail along with rudimentary Web access and traditional Palm OS applications. The i705 represents a good first step toward a viable enterprise solution, but ultimately it falls short due to the limitations of the current Palm platform, both software and hardware.

Handspring Treo 180
With the introduction of the Treo series, Handspring has once again changed the rules for the handheld market and reinvented itself as a supplier of cutting-edge communicators. These wireless voice- and data-enabled devices will be the fastest growing segment of the handheld market through 2005, and Handspring knows it. However, the Treo 180 is a first attempt - and it shows. Although the device delivers appreciable voice and data functionalities, it is far from being a robust enterprise solution.

As a result, Handspring may fail to capture a significant portion of the enterprise market unless it forges strong partnerships with systems integrators that can package future Treo devices as part of a larger enterprise mobility solution.

Motient MobileModem for Palm V Series
The Palm V series accounts for the largest end-user segment of Palm OS devices. Thanks to its compatibility with this large installed base, Motient's MobileModem holds a unique position as one of the few solutions that allows users to upgrade a legacy device with a wireless push-delivery corporate e-mail solution. This value proposition, though limited to a steadily shrinking installed base, is a clear and viable one. Enterprise buyers can expect to see a steady proliferation of similar offerings targeted at adding value to legacy and single-use devices alike. To achieve success in this market, vendors such as Motient will have to continually isolate the shortcomings of existing devices in order to deliver added value with modular solutions.

What's Around the Corner...
While the Palm OS platform currently boasts a wider range of wireless solutions now available, it remains the underdog in the battle for enterprise-targeted handheld computing solutions.

Working with a more robust computing platform, Microsoft OEMs have already begun to offer packaged solutions targeted toward the ROI demands of enterprise buyers. For example, Compaq's Mobile Enterprise Framework delivers the hardware, software, and services needed to deploy a line-of-business mobile solution at a defined cost and within a short time period.

This trend will accelerate, and hardware vendors who fail to partner with consultants and systems integrators (C&SIs) will never penetrate the enterprise market, regardless of new device offerings. Hardware engineering may experience more innovation within the Palm OS camp, but design will ultimately matter far less than demonstrated ROI with less exciting Pocket PC-based devices.

Aberdeen Conclusions
The promise of wireless connectivity brings new hope to hardware-makers seeking to establish higher profit margins, solidify market share, and finally enter the enterprise market through the front door.

In order to justify any new IT expenditure, however, a clear and short-term ROI is critical. More specifically, a handheld solution must address a pain-point or solve a given business problem to be viable. C&SIs rather than hardware vendors frequently solve these issues.

Additionally, devices that deliver all-in-one wireless functionalities remain a pipe dream. By contrast, the success of the Blackberry story underscores the demand for great end-to-end point solutions and should inspire hardware vendors to continue innovating with that in mind.

To be successful in the enterprise market, it will be critical for hardware vendors to evolve their go-to-market strategies specifically with C&SI partnerships in mind. More than any others, these two constituencies will push mobile devices high enough up the mobile value chain to hasten corporate adoption.

Isaac Ro is Research Associate in the Emerging Technologies Intelligence Group at Aberdeen Group, an IT market analysis and positioning services firm based in Boston. For more information go to www.Aberdeen.com.