| November 6, 2008 - Vol. #210
On October 28, Microsoft announced plans to offer MS Office applications over the web as part of the company’s ongoing effort to increase its web presence. Word, Excel, PowerPoint, and OneNote will be available later this year on Office Live at http://www.workspace.officelive.com, which is currently more of a document sharing site. According to Microsoft, the applications will be “lightweight” versions of their Office Suite counterparts and accessible through a browser. There has been no clarification as to what lightweight means, but Microsoft has indicated that users will be able to create, edit, and collaborate with office documents using the site.
This could be a significant announcement for many of the emerging portable devices, including smartphones, Mobile Internet Devices (MIDs), netbooks, and other types of portable entertainment devices (PEDs) that typically run on non-Microsoft operating systems, such as Linux and Symbian. This would overcome a significant limitation on these devices to be used in business environments, which are dominated by the use of MS Office applications. Microsoft has not indicated if there would be any limitation in using these with other browsers or operating systems (OSs), but given that these will be web-based, it is highly unlikely that such limitations will exist. You can access the Office Live site using alternative browsers today. If this does live up to expectations, it could have a significant impact on the adoption rate of many of these new devices and increase In-Stat’s forecast for these devices. In-Stat has always maintained that business applications are the best launching point for these new devices because various vertical segments typically have the same form and function requirements, whereas consumer requirements can vary by location, application, or even person-to-person.
This could also have significant implications for Microsoft. If it uncouples the link to Microsoft OSs, then it opens the door for more competition in the OS. On the other hand, it aids Microsoft by increasing the company’s on-line presence while thwarting competitive threats to Office from other hosted document applications. In-Stat believes making these web-based applications as robust and open as possible to other browsers and OSs is in the best interest of Microsoft, because increasing the company’s presence on the web offers the greatest opportunity for growth. If you follow the money trail in the high-tech ecosystem, the content and applications is worth much more than any other segment. It also highlights what In-Stat believes should be the other half of Microsoft’s new business model – change the operating system to a true kernel that can scale from handheld solutions through standard servers. This OS strategy would also offer Microsoft significant growth opportunities to participate in all electronic devices with a scalable architecture, much like what Intel is trying to do with the x86 architecture that extends from the Atom processor on the low-end to the Core 2 processors on the high-end.
Making the OS a scalable kernel could also allow Microsoft to focus on innovation in the other critical portions of the software stack for mobile devices, the browser and the user interface, which could further aid Microsoft in gaining mindshare where it has had limited success in the past.
Microsoft has indicated that Office Live will generate revenue from advertising and subscription services. The impact to Microsoft revenues may be negative in the short-term. However, the more successful the company is at transitioning to a web-based model and increasing its position in content, applications, and services, the greater the long-term potential for higher returns.
The move to web-based applications like Office could also have significant implications for the rest of the industry. First, the move increases the capability of doing anything, anywhere through the use of the Internet, or more commonly referred to lately as cloud computing. It also changes the requirements on the hardware necessary to run these applications. The most basic PCs today have significantly more performance than what is required of these Office applications, but the size of the OS and Office suite places the storage and performance requirements higher than what the average handheld device can support. If these requirements are eliminated for these and other applications through the use of the cloud, then the system requirements for many usage models would be reduced significantly. This translates into lower performance processors, like Intel’s Atom, Qualcomm’s SnapDragon, or TI’s OMAP, and less memory and storage. This reduction equals lower priced devices, lower power requirements, and longer battery life. This may eventually cannibalize higher-cost devices, like desktop and mobile PCs, but as history indicates the older and more common usage models and solutions do not die off quickly and the lower margins are typically replaced by higher volumes.
In all, if Microsoft does effectively transition Office to a web-based model, it could be a significant step towards a true cloud computing environment and a positive direction for the high-tech industry.
In-Stat is focused on analyzing all the issues of the Mobile Internet as this dynamic market develops. We look at everything from enablers to disrupters and from the semiconductors and software to the devices, communication technologies, service provider, content, applications, usage models, and business models. For more information about In-Stat’s research and advisory services, please contact Elaine Potter at 480-483-4441 or email at: epotter@reedbusiness.com
- Jim McGregor - Principal Analyst
, E-mail:mcgregorj@reedbusiness.com
In-Stat expects the US enterprise market (firms with 1,000 or more employees) to experience double-digit growth in Web and application hosting services in 2008, with double-digit growth continuing through 2012. Spending on Web and application hosting is growing much more quickly than that for either managed infrastructure or managed network services, however, the largest area of enterprise managed services spending will continue to go to managed infrastructure through 2012.
Managed services spending growth is expected to be similar across the size of business segments within the enterprise market. The largest enterprise firms, those with 10,000 or more employees, though, will account for a majority of the spending in this market. Enterprises account for roughly two-thirds of all US business managed services spending.
The government vertical accounts for the largest portion of enterprise managed services spending. But it is the finance and insurance vertical that is expected to experience the greatest percentage increases in the coming years, as compared to other vertical industries. This is due to the increasing number of employees this vertical will support as well as the finance and insurance vertical’s comparatively greater use of managed services.
In-Stat’s Business Managed Services Spending Forecasts service data files present business managed services spending forecasts for 2007-2012 with size of business and vertical segmentation.
Other data from the enterprise managed services spending forecast data files include:
- In-Stat expects a 5-year CAGR of 20% for Web and application hosting spending among enterprises.
- Professional services enterprises are expected to account for 12% of managed services spending by 2012.
- Managed infrastructure remains the largest segment of managed services spending in 2008 at 42%, followed by managed network services with 35% and Web and application hosting with 23%.
For more information, be sure to check out In-Stat's enterprise managed services spending forecasts online:
Enterprise Managed Services Spending by Product and Vertical Industry, 2007–2012 (Data File)
Enterprise Managed Services Spending by Size of Business and Vertical Industry, 2007–2012 (Data File)
- Jeff Wilson - Senior Analyst
, E-mail:jwilson@reedbusiness.com
Over the next five years, combined MP3 player and portable media player (PMP) shipments are expected to increase. However, the growth rate, at which this once rapidly expanding market grew, will slow considerably. Low-end, audio-only MP3 players are now a commodity market because this market segment has very low barriers to entry and is crowded with literally hundreds of brands worldwide. But at the high-end of the market, the competition is better defined and the barriers to entry are much higher.
Apple still reigns as the PMP market leader with its powerful iPod lineup. Other manufacturers are striving to differentiate their PMP offerings by introducing products with enhanced features, most notably, Wi-Fi capability. The addition of a browser to a Wi-Fi enabled PMP allows users to access the Internet to obtain music, video and Internet-based television programming for playback on 4:3 and 16:9 displays.
The PMP/MP3 player market hit mass market status over five years ago. As manufacturers rapidly add enhanced features to PMPs, the difference between a PMP and other devices such as portable game players and even mobile phones becomes increasingly blurred. While this convergence has been happening for years, the usability experience is finally improving to the point where consumers are starting to demand multimedia functions on a number of handheld devices. And it is this growing demand that now represents a viable threat to the once rapidly growing PMP/MP3 player market.
For more detailed information regarding the PMP/MP3 player market, look for In-Stat’s upcoming In-Depth Analysis report on the topic in the company’s Portable Entertainment Device (PED) Service, located online at:
http://www.instat.com/catalog/mmcatalogue.asp?id=27
- Stephanie Ethier - Industry Analyst
, E-mail:stephanie.ethier@reedbusiness.com
Cox Communications announced last week that it plans to launch its own cellular network, but, isn't the trend to merge cellular networks with your competitors for cost savings and coverage gains? Maybe Cox didn't get the memo. Cox plans to rely on its partner Sprint for coverage and roaming until it can get its own network up and running.
Cox, along with the other cable operators, has had aspirations of building a wireless network for some time now, and they have had the fear that if they didn’t, they wouldn’t be able to compete with the likes of Verizon and AT&T. Cox built a small cellular network in Southern California and Las Vegas in the 1990's, but eventually sold the network to Sprint. Cox tried again, joining with Comcast and Time Warner in 2007 to launch Pivot, a Mobile Virtual Network Operator (MVNO) run in Sprint's network. The failed venture lasted just a year, with Comcast and Time Warner jumping ship to join the Sprint/Clearwire WiMAX express, and leaving Cox again without a wireless play.
Cox, undeterred, paid $550M in the AWS spectrum auction, and purchased 700MHz spectrum in some of the cities it services, but why a cellular network and why now? The glamour, the control, the excitement, the quad-play? Yes all those reasons, but it is very unlikely that Cox will be successful. Why? First of all, almost everyone already has a mobile phone, so Cox would need to snatch business away from the big guys, including it's partner, Sprint, and subscribers tend to stick with their operator unless their service is poor, or the price, or phone selection is much better somewhere else.
Second, Cox does not have the name recognition. Just look at Disney and ESPN. Both companies tried to launch their own cellular networks, and despite both companies having instantly recognizable names as Sports and Entertainment powerhouses respectively, neither company was known as a wireless company, and both ventures failed. Customers aren’t very willing to take a chance on a wireless network they never heard of before, one their friends don’t use. Mobile phones are just too important to users for them to gamble on an unknown.
Finally there is the issue of phones, or lack thereof. Cox plans to use CDMA on their AWS spectrum, which sounds reasonable until you realize that 700/1900MHz phones do not exist, and how likely is it phone manufacturers will build them for an operator with just a few million customers, if that many? Cox phone variety will never match the selection the big guys can provide. So to summarize, what is Cox thinking?
Allen Nogee, principal analyst, covering mobile devices and infrastructure will shortly be releasing the report “A Tarnished Silver Anniversary for Handsets – Worldwide Handset and Semiconductor Forecast, IN0804042WH” a five-year forecast of cell phone shipments, phone revenue, and phone semiconductor revenue – this report will be available online at:
http://www.instat.com/catalog/wcatalogue.asp?id=66
- Allen Nogee - Principal Analyst
, E-mail:anogee@reedbusiness.com
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