Posts tagged Dominance
Ubuntu dominates the cloud. According to TheCloudMarket.com, which measures operating system adoption on AWS, Ubuntu holds 54% market share in terms of guest images on the dominant IaaS platform. Within the rising OpenStack ecosystem, users choose Ubuntu 55% of the time as their host operating system, according to a new survey.
What Ubuntu does not dominate is cloud spending. Long popular with developers running Ubuntu on their desktops, Canonical, the primary sponsor of Ubuntu development, has yet to turn its developer dominance into revenue dominance. It’s unclear whether the cloud changes this, as a maturing cloud market is going to ask for the same enterprise readiness that has led it to Red Hat in other markets.
Can Canonical break the cycle with OpenStack?
A Brief History Of Ubuntu’s Popularity
Popularity has not been kind to Canonical. For years it was the operating system of choice for developers, offering a powerful yet easy-to-use alternative to then error-prone Windows. Running Ubuntu gave a person instant geek cred. Even my non-technical daughter found that sporting an Ubuntu t-shirt to school made her queen bee among the techie types.
But starting around 2007, the Mac began displacing Ubuntu in the hearts and on the desktops of developers. Why? It was even easier-to-use, yet gave the same quick access to the command line that developers craved.
About the time that I was serving as chief operations officer at Canonical (2010), Ubuntu pulled away as the clear leader on AWS, at least in terms of guest images. No one else even came close. At the time, however, no one but Amazon was making any money selling cloud services, meaning Ubuntu’s cloud popularity gave us bragging rights, but little else. It felt like the desktop all over again: adoption skewed toward test and development workloads that Canonical couldn’t easily monetize.
As CSC strategist and cloud pundit Simon Wardley posits:
It’s reasonable to say that Ubuntu dominate cloud. The trick is now monetizing this effectively. Overall, it’s better to dominate a market and be looking to find ways of improving your monetization (Canonical) than to find yourself a minnow in the market (RHT) with a record of successful monetization in a past market.
Maybe. But are there signs that Canonical has learned from past mistakes?
Is OpenStack Different?
Ubuntu’s popularity on OpenStack feels different, however. Back in 2012, Red Hat’s then cloud chief, Scott Crenshaw, deprecated Ubuntu’s cloud popularity by suggesting, “When it comes to heavy lifting—building ‘serious scale’ clouds—spending hundreds of millions of dollars on proprietary software and making it open source, they [Canonical] are not anywhere in the same ballpark as Red Hat.”
And he was right. But he’s not today.
After all, 55% of OpenStack users are running Ubuntu as their host operating system, and not merely as a guest OS. The next most popular host platform, CentOS, a Red Hat Enterprise Linux (RHEL) clone, only claims 24% of users. This suggests greater trust in Ubuntu as a stable platform upon which to run mission-critical clouds.
However, it may also suggest that OpenStack users aren’t yet building serious clouds, not dissimilar to IBM claiming to power 270,000 more websites than AWS, with those websites far smaller in significance than AWS sites, as Gartner notes. One can be dominant without actually winning.
RHEL accounts for a mere 10% of OpenStack clouds, after all, which number seems out-of-keeping with the Linux leader’s position in the server market. This is confirmed by the second-most popular Linux server OS, SUSE, relegated to the “Other” category, claiming under 10% of users. While it’s possible that enterprises are abandoning RHEL and SUSE as they move to cloud workloads, it’s hard to believe that the shift would be so dramatic, especially in light of the work both companies have done to make their OSes cloud-ready.
And then there’s the problem of what will happen as OpenStack adoption matures. Currently, according to a Coleman Parkes survey of UK enterprises, cloud is often relegated to small-to-medium-sized enterprise workloads, with large enterprises not yet entrusting their serious workloads to IaaS or PaaS vendors. As IBM product manager Savio Rodrigues argues:
— Savio Rodrigues (@SavioRodrigues) November 5, 2013
In other words, Canonical has a lot of work ahead of it if it wants to turn its OpenStack popularity into riches.
Contributions Turn To Currency In Open Source
In open source, money tends to flow to the companies that contribute most. This makes sense, as prospective buyers prefer to buy from the vendor that shows the most leadership on a project. In OpenStack, that leader is Red Hat, and by a wide margin. Canonical doesn’t even show up in the list of top-10 code contributors. Over time, this doesn’t bode well for Canonical’s ability to monetize OpenStack.
Put simply, Canonical needs to contribute more OpenStack code if it wants to generate more OpenStack cash.
In other areas, however, Canonical demonstrates that it has learned from Red Hat’s example. It has built service orchestration and other tooling around OpenStack to make managing Ubuntu and other services much easier. Canonical has also placed some partner bets, announcing this week that it will build around CloudFoundry’s PaaS platform, as The Register reports. An early bet by Oracle on Red Hat separated RHEL from the pack. Canonical no doubt believes EMC/Pivotal’s blessing will prove equally fortuitous in the cloud.
In sum, Ubuntu’s cloud popularity may go the way of its desktop popularity, vanishing in the face of demanding enterprise workloads. Or not. Canonical’s efforts around partnerships and management tooling such that it has learned its lesson and could yet turn OpenStack momentum into real revenue.
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NoSQL databases are well-known for their speed and scalability – useful traits when dealing with the size and complexity of big data and hyper-fast transaction requirements. But one thing they have lacked has been strong data consistency: the ability to ensure that an update to data in one part of the database is immediately propagated to all other parts of the database.
A startup database vendor launched this week is making claims that its database, FoundationDB, finally delivers on the promise of true data consistency for a NoSQL database, without a huge loss of speed or flexibility.
Understanding why this is such a big deal in the Big Data (or any) sector requires a little background on how NoSQL, or non-relational, databases work.
Solving The ACID Test
When talking about relational databases, like PostgreSQL, MariaDB, Oracle and the like, there’s one acronym that keeps coming up: ACID. ACID stands for Atomic, Consistent, Isolated and Durable – core aspects that must apply to all data within a relational database. Data is broken down to atomic values (name, address_1, city…) while remaining consistent across the database, isolated from other transactions until the current transaction is finished, and durable in the sense that the data should never be lost.
The infrastructure of a relational database is well-suited to meet the ACID criteria for data: Data is held in tables connected by relational algebra, and transactions are performed in a way that is consistent with ACID principles.
But for non-relational databases, such as Bigtable, MongoDB or Dynamo, ACID has always been sacrificed for other qualities, like speed and scalability.
This tends to freak out some companies, stopping them from moving to NoSQL because they can’t give up ACID. Especially the “C,” because not having data consistency is a particularly terrifying prospect for companies dealing with financial transactions.
Yet non-relational databases are being used by firms like Amazon and Google every day, with great success. Amazon, in particular, needs to track millions of sales transaction on any given day – how does it get away with inconsistent data?
The short answer is, it has to. The trade-off would be a relational database that could never keep up with the speed and scaling necessary to make a company like Amazon work as it does now. Recall that non-relational databases are structured to sacrifice some aspect of ACID to gain something in return. In the case of Amazon, its non-relational DynamoDB database is willing to apply an “eventually consistent” approach to the data in order to gain speed and uptime for the system when a database server somewhere goes down.
Bringing Back Consistency
It’s not that having ACID compliance on a NoSQL database is impossible, explained David Rosenthal, one of FoundationDB’s co-founders. It’s just that most people think that applying ACID to NoSQL systems would come at a huge cost.
That’s certainly what Werner Vogels, CTO of Amazon, thought in a 2008 paper that described the company’s Dynamo database and it’s relationship to consistency.
Data inconsistency in large-scale reliable distributed systems has to be tolerated for two reasons: improving read and write performance under highly concurrent conditions; and handling partition cases where a majority model would render part of the system unavailable even though the nodes are up and running.
Translation: Requiring ACID on non-relational databases would make that database too slow and inflexible.
For the longest time, everyone using NoSQL systems was resigned to this eventual, or “weak,” consistency model. After all, they had money to make and data to analyze. Who cares if consistency was not at the top of the priority list?
It turns out, quite a few people, including the founders of FoundationDB, Rosenthal, Nick Lavezzo and Dave Scherer.
After a successful start up with Visual Sciences, a technology that’s now part of Adobe as the Adobe Insight product, the trio turned to developing another successful project, and hit on the lack of ACID-capable non-relational databases as a goal.
“We weren’t satisfied with any of the data guarantees on non-relational systems,” Rosenthal explained, even as they understood that the needs of many potential clients would preclude relational systems like MySQL or Oracle because of performance limitations.
Non-relational systems seemed to wear their weak consistency model like a badge of honor, but in the secret origin story of FoundationDB, the team saw weak consistency as a bug, not a feature. ”Not having transactional integrity is not a good thing,” Rosenthal emphasized.
They’re not the only ones. Google’s up-and-coming Spanner database, a second-generation distributed database that could ultimately replace the search engine company’s Bigtable systems, is being built on the premise that transactional integrity has to be a part of that database, too.
Side Effects Include…
Establishing consistency in transactions within a NoSQL database is worthy news in itself, but the implications extend beyond that core news.
FoundationDB uses a key-value-like storage engine core that’s surrounded by layers of whatever data model that’s needed, which will in turn enable developers to much more easily code their apps to reach into the FoundationDB. These layers, according to the founders, can’t be used on other key-value systems, because without consistent transactions, it would not work.
Also, since data is going to be consistent, applications won’t have to be built to “wait” for data to catch up within a given transaction – thus making apps less complex and easier to build.
The best news of all concerns the so-called performance penalty that many in the NoSQL world said will be incurred if ACID was applied to non-relational database systems. According to FoundationDB, performance is hampered by only 10%, which seems a very small price to pay for consistent transactions.
The FoundationDB database, which was launched into public beta on Monday, is available for download now.
Image courtesy of FoundationDB.
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My parents named me after the famous Welsh poet, Dylan Thomas. It was an interesting choice when you consider that the man, despite being the creator of famous sonnets such as “Do Not Go Gentle into that Good Night” and “Under Milk Wood,” was widely considered a drunk and a womanizer. It was a lot [...]
The post How I Disrupted Poet Dylan Thomas’ First Page Dominance appeared first on Search Engine Journal.
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In 2010, Apple blindsided Microsoft – and most everyone else – with the phenomenal success of the iPad. That success is now eating away at Windows PC sales. While Apple’s innovation took Microsoft down for the count, the software giant has regrouped and is trying to come back by shifting the battlefield from consumers to businesses.
To turn the tide, Microsoft is counting on business users, a market where Apple remains relatively weak and CEO Steve Ballmer’s crew retains several critical advantages. Microsoft’s counterpunches will include Windows 8 and Office 13, a combination Apple can’t match in the business world.
“This is Microsoft’s edge and either through policy or actual purchases businesses have the capability of being kingmakers here and could cause Apple to be eclipsed again,” said Rob Enderle, principal analyst for the Enderle Group.
Since the iPad’s introduction, businesses have been dabbling with the tablets, mostly because employees were bringing the devices to work and putting pressure on companies to support them. Without a strong alternative, many businesses went along – at least supporting employee devices and creating pilot iPad-adoption programs. While the iPad has found a home in specialized niches such as real estate and hospitality, sales and engineering, it’s unclear how much mainstream corporate IT departments really want to support the iPad. When Microsoft releases the various versions of Windows 8 and its new Surface tablet, a lot could change.
Microsoft Office Makes a Difference
That’s because Office 13, set to ship early next year, finally brings the productivity suite still used by more than 90% of businesses to the mobile world. The new software supports touch and stylus interfaces, as well as the traditional keyboard and mouse. When running on top of Windows 8, Office becomes even more powerful through its integration with email servers, document management systems and databases. Despite their popularity and many advanced features for individual users, Apple’s Mac OS X and iOS still don’t play as nice in business computing environments.
People who doubt the market strength of Office need only look at Microsoft’s second quarter results. The company reported July 19 unearned revenue of $20.1 billion, as businesses placed multi-year orders for Office and databases. (In accounting, unearned revenue is what companies collect for products they promise to deliver in the future.)
Businesses are likely to give Microsoft the foothold it needs to challenge Apple in the tablet market. Sales of Windows tablets will grow from roughly 5 million this year to 44 million in 2016, or about 12% of the market, according to Gartner. Apple’s share is projected to fall from 61% this year to 46% in four years, while Android tablets rise from 32% to 38%. That leaves Microsoft still in third place by a wide margin, but perhaps with enough momentum to block Apple from the lucrative business market – a market that Apple also missed out on during the PC boom in the 1990s.
To go further in the tablet market, though, Microsoft will eventually have to win over consumers. “If someone wants to create or modify Microsoft Office files on their tablet or use other Windows applications, Microsoft has a definite advantage,” said Ezra Gottheil, analyst for Technology Business Research. “Otherwise, the iPad will be perceived to be the superior consumer tablet.”
Microsoft may also have an opportunity to leverage developer interest in creating apps for enterprise users. Research in Motion once owned that market, but Apple currently leads it while second-place Android appears to be fading. Full compatibility with Windows computer applications is something that many corporate IT managers want in a tablet. (For more on enterprise app developer preferences, see Dan Rowinski’s [Survey] Developer Interest in Enterprise Apps Likely to Benefit Microsoft.
Turnabout Is Fair Play
While Microsoft gains share through business, Apple will continue attacking the tablet market through entertainment, where Apple has a very strong position dating back to the introduction of the iPod music player in 2001. While it’s possible to create documents and do other business-related chores with the iPad, the tablet is about fun and games for most people. A study by research firm Consumer Intelligence Research Partners found that for 40% of 1,000 iPad buyers surveyed, surfing the Web was the number one activity. For a third of the buyers, watching video, listening to music and looking at photos was the top activity, and for 27%, it was playing games.
Just as Apple used entertainment to make its way into the office, Microsoft will use the business market to open a road into the home. Once familiar with Metro, Windows 8’s new touch interface for mobile devices, people will be able to comfortably take such devices from the office to the living room, to cafes and where ever else they do their computing on the go.
The Ultrabook Issue
Microsoft no doubt hopes to use its tablet strategy to jumpstart ultrabook sales against Apple’s MacBook Air, a market leader in light notebooks. (Ultrabooks are defined as being less than one-inch thick, able to turn on instantly, always connected to the Internet and have eight hours of battery life.) First to market, the Air has outpaced the industry as a whole in sales. That dominance will be challenged in October when PC makers release their first serious ultrabook competitors with the release of Windows 8.
Intel, which makes the processors that power ultrabooks, has spent a fortune on marketing and technology to try to convince consumers ultrabooks are the next great innovation in the PC industry. The company believes the thin-and-light devices can account for 40% of consumer notebook sales by the end of 2012. “We said all along, 2011 was about getting into the game, and 2012 is about taking it to the masses,” Intel spokesman Jon Carvill told CNNMoney.
The big question is whether ultrabooks will be smaller laptops or more powerful tablets. Computer makers, such as Lenovo, Asus and Samsung plan to release tablet-ultrabook convertibles. Apple has said its tablets and notebooks will remain separate devices. PC makers see that as an opening.
The upshot for consumers will be a smorgasbord of devices, many of which may leave people wondering whether the product is a tablet, an ultrabook or something else entirely. “The big picture is that over time, consumers are buying more and more computing devices, but those devices take different shapes, and only some of them are PC-shaped,” said Sarah Rotman Epps, analyst for Forrester Research.
The worry for Microsoft, of course, is that consumers will see tablets not as smaller ultrabooks, but as bigger smartphones. While Microsoft is also working hard on Windows Phone 8, it really hasn’t made a dent in the smartphone market. Microsoft partner Nokia reported last week that sales of its Lumia smartphone, today’s flagship device running Microsoft’s Windows Phone software, doubled from the first to the second quarter to 4 million units – far behind sales of the iPhone and Android models.
Of course, Microsoft will be battling more than just Apple in the tablet and smartphone markets. With the completion of its acquisition of Motorola Mobility, Google is ready to make a serious entry into manufacturing hardware – not just supplying reference designs. But because the Motorola deal just closed in May, it’s still difficult to predict what impact Google will have on the mobile hardware market. In releasing financial results last week, Google’s Chief Financial Officer Patrick Pichette said the company is evaluating all of Motorola’s business segments.
So while Microsoft may be coming back technologically, and the company has some structural advantages in the business market, there’s no guarantee Ballmer and company can convince consumers to take Windows 8 with them when they leave work.
A lot depends on people loving Metro as much as they do Apple’s iOS. That’s a tall order, given Microsoft’s failure to woo mobile consumers in the past. But the company has to be aware that failing this time could keep Microsoft a prisoner in the business world for a long time to come. “IT (departments) can’t override their users as successfully like they previously did with PCs,” Enderle noted. “But if Microsoft has a hit, IT could turn that hit into market dominance.”
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With smartphone usage growing by leaps and bounds each year, payment providers are grappling to win control of the mobile payments market. Since total mobile purchases are expected to exceed $600 billion in 2013, it’s not an insignificant contest. Who are the current leaders? Who is best positioned to gain market dominance? Mobile payment platforms [...]
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How has Yandex continued to hold off Google in Russia? Anton Popov, head of sales and marketing at Yandex, discusses Google vs. Yandex, the continued growth of Yandex, advertising, and implications for marketers in the Russian market.
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If there were any uncertainty that Google’s acquisition of Motorola would be approved by regulatory agencies across the world, one only has to look at the fourth quarter of 2011 to see why it never was in danger. The last quarter of 2011 showed us which companies really control the smartphone market and Motorola was certainly not one of them. Between Apple and Samsung, the two behemoths controlled 95% of mobile phone profits worldwide, according to Canaccord Genuity analyst Michael Walkley.
The pincer formation at the top of the ecosystem means that no regulatory agency can deny Google its $12.5 billion purchase. Life has also become extremely difficult for all the other OEMs and mobile platforms trying to make a dent in the market. If you are not making an iDevice or some type of Galaxy product, Apple and Samsung are squeezing you out of the market. The clock is ticking.
By the Numbers
According to Walkley, HTC had 3% of fourth quarter profits, Nokia and Research In Motion each had 2% while Motorola and LG both were flat on the quarter. Sony Ericsson showed a 2% loss. Apple had 80% while Samsung had 15%.
Do not expect Apple to maintain 80% of profits in the mobile ecosystem on a quarter-by-quarter basis. The blowout by Apple may never be seen again (or, perhaps one quarter a year when a new iPhone is released). The third quarter of 2011 may be more indicative of Apple’s place in the ecosystem at 56% of profits. That is dominant but not quite as mind numbing.
Samsung takes up about 40% of the Android ecosystem. HTC is a solid second and Motorola third with LG and Sony Ericsson bringing up the long tail. Samsung also sells Windows Phones (with HTC and Nokia) and its own Bada system (which competes with Nokia’s S Series across the world).
The world needs a strong No. 3 in the mobile ecosystem. Ostensibly, that is Nokia with its dominance in emerging markets. Profits do not necessarily come from emerging markets though and Nokia’s push to reclaim territory in North America goes to show how important the high-end smartphone market is to the OEMs. Apple has 8.1% of the global mobile market but its profits are 10-times that number.
The statements made by European Commission VP Joaquin Almunia in regards to the Motorola acquisition by Google are very telling of the state of the mobile ecosystem: “We have approved the acquisition of Motorola Mobility by Google because, upon careful examination, this transaction does not itself raise competition issues. Of course, the Commission will continue to keep a close eye on the behaviour of all market players in the sector, particularly the increasingly strategic use of patents.”
Key phrase; “this transaction does not itself raise competition issues.” Well, of course it does not. Motorola would have to have major market share to be considered a competitor to the likes of Samsung and Apple. For the past several years, that has just not been the case. Any notion that Google would favor Motorola over other Android ecosystem players has become laughable.
If Google favors anybody at this point, it is its largest partner in crime, Samsung. The Korean cellphone maker is Google’s biggest hedge against the absolute domination by Apple and the best Android evangelist on the planet. It is no mistake that Samsung has been awarded the last two Nexus devices, Android’s flagship handset.
The Carriers’ Conundrum
Mobility is exploding. We hear about it every day from a variety of industry segments. Advertising, analytics, publishers, frameworks and tools makers, cloud services, “as a service” providers, social networking, payments, games and gamification, e-commerce, deals, offers, retail, local news (retail, advertising etc.), transportation, healthcare … to name a few. Yet, the companies that provide the mobile infrastructure are actually shrinking. Android and iOS are locking just about everybody out. The figureheads behind those platforms – Samsung and Apple – are vacuuming all the profit (and much of the incentive) out of the industry.
In its last quarterly earnings call, AT&T promised that it would have to institute harsh data rate penalties because of its so-called spectrum paucity. Users with grandfathered “unlimited” plans are now seeing their data speeds throttled after about 2.3 GB of usage (depending on the “top 5%” in a given area). AT&T sells a 3GB plan for $30, the same as the unlimited plan. Verizon has also instituted similar data throttling. The carriers have to squeeze more average revenue per user out of the ecosystem because their profits are being cut into by the OEMs that force them to subsidize devices like the iPhone and Galaxy. Since Apple and Samsung drive sales, the companies can dictate terms to the carriers and the end result usually is not good for consumers.
One of the reasons that the carriers are so interested in developing their own personal clouds, apps stores, enterprise solutions, payment processors, content delivery and other variety of value-added services is because they fear being turned into dumb pipes for the ecosystem created by the OEMs and software developers. Users often balk against this kind of pre-loaded carrier “bloatware” but it is an action to affect control of an ecosystem that it otherwise has little control over.
For OEMs, Time Is Running Out
Other OEMs are feeling the pain of Apple and Samsung’s dominance. Research In Motion (while mostly responsible for its own fate) has fallen off the grid with BlackBerry. Hewlett-Packard’s webOS was open sourced after HP bungled its first series of devices and cut the cord on the project. Nokia’s MeeGo was doomed when it thought it would rely on x86 chips from Intel and Symbian is nearing its own end of life. These are all examples of companies making mistakes and getting buried by the top performers.
Microsoft made the strategic decision to dump its aging Windows Mobile CE line and rebuild with Windows Phone. It was a necessary but ill-timed switch coming in the middle of Apple and Android’s explosion. Samsung, HTC and Nokia are on board to create Windows Phone devices either as a hedge to Android reliance or through some type of deal with Microsoft. Windows Phone is not just some side project for Microsoft and it has committed billions of dollars to the project. While Microsoft does feel the squeeze coming from Apple and Samsung’s Android division, it has the money to ride out see its plan to fruition. It is the perfect counter-example to the rest of the mobile ecosystem that does not have the money to survive in an environment where two giant companies eat all of the profits.
That is why time is running out for many of these companies (RIM is especially put on notice). There is only so long a company can float along without making serious profits in the mobile ecosystem. Motorola and Google will have some time if the two stick together and Google will be fine by itself as the purveyor of Android to the masses. Yet, if Google spins off the Motorola handset division, the OEM likely will not last more than a couple of years against Apple and Samsung at the rate the two companies are gobbling up available customers and cash.
When it comes down to it, the European Commission and U.S. Department of Justice could find no real reason to turn down the MotoGoo merger. All of the major players are now well stocked with patents (which is a separate but important story here) and the economics of competition show that MotoGoo can only make a nominal dent, if Google retains the handset division.
While many consumers and pundits may praise Apple and Samsung for building strong business practices and dominating market share in mobile, the top-heavy structure of the market will not be good for the long term viability of many other players in the ecosystem.
Top image courtesy Shutterstock
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Apple is the king of mobile. With an expanding market share, Apple is poised to break records yet again in 2012; though they must improve their iAd inventory to compete with Google. Here are the implications for mobile marketers.
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The king of digital devices is ready to impose its will on the rest of the ecosystem in 2012. It is lining up billions of dollars in investments and is rumored to be in on every significant acquisition or partnership. Its empire sprawls across televisions, smartphones, laptops and computer processors. What is Apple doing now, you might ask. That would be the wrong question. The biggest influencer of the entire digital ecosystem does not hail from Cupertino. Look across the Pacific to South Korea. There, you will find Samsung.
Billions In The Pipeline
Yesterday two bits of interesting news popped up around Samsung. Foremost, Boy Genius Report said that BlackBerry maker Research In Motion was pushing hard to be acquired by the Korean manufacturer. While we have come to discount BGR and its never-ending line of “sources close to the situation,” it is a testament to Samsung that it would even be considered in such a large and ambitious acquisition. Today, Reuters reports that Samsung has no interest in purchasing the woeful Canadian smartphone manufacturer.
While Samsung purchasing RIM is an oddball blip in the frenetic technology news stream, the real news from Samsung yesterday has a much more tangible impact. According to the Wall Street Journal, Samsung has money to burn. The company plans on investing $41.6 billion in 2012 to help drive growth to its various verticals, including smart televisions and smartphones. That is a rise from $36 billion the company spent last year.
“Samsung has decided to make the biggest-ever investment of 47.8 trillion won ($41.6 billion) this year in order to solidify its dominance in key businesses in the global market and to dominate new growth areas in advance,” The Wall Street Journal reported.
Purchasing RIM would probably not constitute a “new growth area” for Samsung. It is the leading smartphone manufacturer in the world and second largest cellphone maker behind Nokia. BlackBerry is a dying platform and device line that would be a great weight around Samsung’s neck much like Motorola will weigh down Google if the search giant does not spin out the device manufacturer if the acquisition is approved.
No other company outside of Apple in the device ecosystem has the type of clout and cash to back it up as Samsung. Look at what Apple does with its billions to control its supply line for components in iOS devices. One of the reasons that the iPhone and iPad are so profitable is that Apple makes large deals for components looking years, not months, down the line. It makes Apple very hard to compete with when it has a steady supply of displays or processors locked up at reasonable prices. Samsung is the manufacturer of the A5 chip that runs the iPhone 4S and even though the two companies are battling in patent courts around the world, The Wall Street Journal says that business relationship is still in tact.
The report says that Samsung is likely to spend many of those billions of dollars locking up components. It is a page straight out of Apple’s playbook. For a company that is often accused of copying Apple, this may be one the smartest acts of mimicry Samsung could make.
Putting Pressure On The Ecosystem
Samsung does not just thrive because of its prominent place within the OEM environment, but also in how it effects the business decisions of other companies trying to compete with it. As we noted last week, Samsung has set the standard for how the Android/Windows Phone ecosystems deals with the mobile carriers in the United States. By accepting the desire of the carriers to have differentiated Android devices on shelves, Samsung forces the hands of other manufacturers such as HTC, Motorola and LG to come out with different and unique smartphones and tablets. To a certain extent, this is not a bad thing. One of the reasons that Android does so well is that it competes against itself. There is depth and differentiation in the Android ecosystem and that is not a bad thing. Fragmentation is a different issue.
What Samsung, like Apple, does is cast itself as a leader. The game is now to follow the leader. When you have to chase a strong frontrunner to a certain extent you have to play by the rules that the leader sets. Either that or differ from the leader so wildly so as to be seen as “unique.” Examples of that would be how T-Mobile and Sprint try to differentiate themselves from AT&T and Verizon (which are much more symbiotic than you would guess at first glance) by having different data plans and devices.
Samsung dominance is not all about smartphones and processors though. The company is the leader in television manufacturing as well. Our founder, Richarrd MacManus, was impressed with how the company “doubled down” on smart TVs during the Consumer Electronics Show last week in Las Vegas. Samsung dominance in TVs and its ability to connect them to the Internet via Android or other software makes it very hard for new entrants into the ecosystem, such as Apple. Samsung is likely trying to lock down as many device components to smart TVs for years to come in the same way that Apple does with its iOS devices. That is the most tangible way a company can protect its most profitable vertical.
The fact of the matter is that Samsung is strong, getting stronger and will dictate to the rest of the market, not the other way around. Depends on your perspective, but that could be good or bad for the rest of the ecosystem.
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