Android is in its death throes! In three years please remember you heard it here first.
What? You ask. Android is the top selling smartphone OS. How could you ever be predicting its demise?
Well I do. And here is my prediction:
By the end of 2015 the standings of the top smartphone OSs will be:
- Apple's (NASDAQ:AAPL) iOS (the iPhone)
- Microsoft (NASDAQ:MSFT) Windows Phone 8 (or next version)
- Research in Motion (RIMM) BlackBerry
- Google's (NASDAQ:GOOG) Android (and fading)
- Note: positions 2 and 3 may be reversed.
Windows Phone 8
As a long time Apple aficionado I am no great fan of Microsoft, but what they have going for them is staying power also known as deep pockets. It's not that Google does not have deep pockets. Rather it's that Microsoft has this AND a product that is not inherently flawed. (See below.)
- Caveat - this argument is predicated on the supposition that Window Phone 8 is NOT a complete disaster. If it turns out to be another Vista, then all bets are off on this horse.
We will not see the new BlackBerry 10 phones until January 30, but RIM seems to have many interesting ideas. Most notable is the BB Balance which divides the phone into two, separating personal and business apps and data. This will be perceived as a huge benefit in the BYOD world. The new OS has many other features, but that is not for this article.
Once again, however, the devil is in the details, and we will have to wait to see just how well it all works out. As I noted in my post here, BB10 will have to produce a solid, smooth experience to be accepted AND it will need to overcome the resistance to new entries in an already crowded field, although it does start with a very strong fan base. Still, once again, if the OS proves to be a bomb, then it will lose.
(For an analysis as to why RIMM has fallen so far, I believe it is due to one simple word.)
Still, you must be crazy…
Android is the top of the heap. How can you predict its demise?
I do so for two reasons:
- Inherently flawed product
- Not free
Android offers a thorough, robust operating system that serves well the needs of their community. The fact that its main purpose is to deliver ad revenue to Google has largely been ignored by users who do not mind ever-present ads in exchange for free apps. While this means that some software is written first for iOS where the revenue stream is far better for the developers, this is of little import when so many thousands of apps are available.
A major advantage of Android is that there are so many OEMs that there is a wide selection of phone styles to choose from to suit one's personal needs.
But the fly in the ointment is that the very thing that gives the system its allure - its supposed "openness" - is at the same time its downfall. There are too many security risks with the system. See, for example:
- FBI: Android Owners Beware!
- Android 2.3 Gingerbread is the Most Commonly Attacked OS, Claims Kaspersky Labs
- More Android Security Issues Exposed - This Time From Apps Already Installed On Your Device
These are just a few of innumerable stories on the issue.
A Verge article correctly raises issues with some of the claims by software security firms which certainly have a stake in increasing sales of their products. They note that:
About a year ago, McAfee partnered with Sprint to offer exclusive Android security apps to the carrier's customers for $20 or $30 per year, depending on the level of service you were interested in.
Hardly impartial here when they make dramatic claims to the risks of Android. Yet still the Verge continues:
Mikko Hyppönen of F-Secure echoes this sentiment - he told us via email that average Android users don't need to be concerned with malware, "especially if you don't install Android applications from alternative markets." That said, Hyppönen still believes "Android users still have some real-world problems compared to iPhone or Windows Phone users, who currently have no malware problems at all." [emphasis added]
A truly serious problem is that the issue may be systemic. Linux Insider reports:
Android as a platform is viewed as inherently less secure than iOS because it is an open platform, but there are other issues as well -- some of which are intensified by the weak SSL issue. [Secure Socket Layer - ed.]
Sebastien Marineau, the senior vice president of BlackBerry OS may be far from impartial, yet this does not mean his comments are invalid. He is quoted on TechRadar:
"I call it architectural integrity; maintaining integrity of the architecture and for that you need to deeply understand that architecture…"
"In the case of our microkernel it's about 100,000 lines of code, give or take ten thousand and that's the core code that has to be absolutely bullet proof. If you look at something like Linux, … it was up to 14 million lines six months ago. That code all runs in privileged space and one line in that can take down the whole system or be the vulnerability that people exploit. It's very difficult to test to prove that that amount of code is secure and bug free."
"A day of reckoning will come. Because as more and more of our lives migrate from desktops and laptops to mobile devices, we will have to solve the problems around security, privacy, anonymity, access to data. If we want this true seamlessness between devices, it means that the underlying plumbing has to share all this data and the only way to do it is going to be to actually solve these hard problems. I am sure there will be some spectacular security breaches - and then people will wake up." [emphasis added]
Thus, it seems that there are issues that are endemic to the platform. These issues are both (NYSE:A) up at the application level, and (NYSE:B) at the base OS level. That is, any user can load apps from non-trusted sources (although Amazon (NASDAQ:AMZN) store seems to block this on their Kindle Fire tablets), and these sources potentially carry malware infected apps. (Even Google's own store has had malware slip through.) Additionally, there appears to be some serious OS design issues.
The consequence here is that this is going to eventually produce a very serious resistance to Android in the enterprise. In the past this was less of an issue because Android was the only real competition to the iPhone, and as we all know, there are many people who have an irrational antipathy to anything Apple, and so they will go with a problematic platform just to avoid the iPhone. (You can see my discussion of the issue and why investors should avoid decision making on these terms: Of Cults & Cool…)
But now there are other alternatives for those who eschew the iSystem.
- Windows Phone 8 offers an app store restricted in much the same way as Apple's.
- RIM's new BB10, is offering some very serious security features that will endear it to the enterprise.
If either or both of these provide a good user experience, and are reasonably reliable, then they will offer a serious threat to Android in the critical enterprise arena.
The above discussion relates to why users - particularly enterprise users - will avoid Android devices as long as they have acceptable alternatives. This will definitely be more pronounced should there be a serious security event in the Android system, as Mr. Marineau suggests above.
#2- Not free
In 2007 Apple released the iPhone and initiated a revolution in the industry. Essentially, they created the design of the modern smartphone. (Apple: Success = (O + V) * F). All existing players were caught flat footed, and both Windows and BlackBerry are just now recovering with what appear to be serious OS entries. So at the time, only Android provided a realistic alternative to iOS. (Palm and its WebOS went off and died altogether.) This means that Android was the only option for several years for the handset manufacturers.
Another big plus was that Android is free. The OEMs do not have to pay OS license fees to Google.
That has just changed! The new HTC/Apple cross licensing agreement was a big win for Apple, especially if the rumors are correct that Apple will be receiving up to $8 per device sold. Some manufactures are already paying an estimated $5 to Microsoft, so this means - should OEMs settle with Apple accordingly - that there will be a $13 fee to the handset makers. This is in an industry where build cost of a smartphone is in the $170 range.
The total fees thus become a significant part of system costs.
1- Enterprise implications
A report by Forrester Research on Information Workers found that they are:
- More likely to adopt new technologies and new technology behaviors.
- More likely to be thought leaders and influence other workers and customers.
A- This is the important part: people who work with technology are more likely to influence the decisions of average consumers.
B- Couple this with the fact that it is natural that a majority of users will want to stick with the system they know - i.e. the one they are given (or allowed) at work. (History has shown this. Windows became the standard in businesses, they became equally the standard with consumers.)
Therefore: Given A & B,
- IF it should happen that other systems come to dominate the enterprise,
- THEN Android will slowly lose acceptance by consumers as well.
2- Not Free
Android at one time was the darling of the of the OEMs. It was the only significant option to combat iPhones, it was popular, and it was FREE.
Android is still popular, but no longer the only viable option (again assuming WinMob 8 is not a bomb). It is still popular, but it is no longer free.
If Android should lose out with businesses, then the popularity overall will begin to fade. This will leave little reason for the manufacturers to continue the line.
A Parting note:
Android is NOT going away anytime soon. Even if the scenario should play out completely as I describe, there will always be a strong base of fans for the platform. There will be those who will want the image of geek-cool, and there will also be a base of hobbyists who want to open up the hood of their phone and tinker, and this can be most easily done with Android. This is a good thing. To tinker is good (assuming you want to do so). So someone out there will be making phones for them.
Personally, I see two ironies in this. The first is that if Android slips to very small market share, they will be deserted by the malware hackers who are causing the problems to begin with, as too small a population to be worth the effort.
Second, if Android becomes the domain mainly of the tinkerer type, then many might start tinkering with the code itself, and Android may, in the end, turn into a truly open system, rather than the pseudo-open one that it is now.
Coming soon: Android Is Dead, Part 2: What It Means For Google
Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.