TIME Big Picture

How Communication Will Evolve Through Digital Touch

It’s not hard to look back at innovation cycles to see how technology advancements have impacted how we communicate. From the pencil to the printing press to computers to the Internet, and more recently, our smartphones, each has evolved communication in some way.

Each innovation has brought with it the ability to communicate both verbally and non-verbally in new forms. The telephone itself made verbal communication possible from a distance. Computers brought non-verbal communication into the digital era, evolving physical written letters into a digital form capable of traveling at near real-time speeds. The cell phone made long-distance verbal communication possible from any location. Smartphones further made the full spectrum of verbal and non-verbal communication possible from just about any location.

However, what do we learn when we study these technological advancements and how they have evolved our communication methods? We learn that ultimately, we have enabled new context in which to communicate digitally. In essence, technology has brought more communication options.

For example, prior to cell phones, many of us had pagers. The pager was basically an extension of the fixed landline. Someone could page you with a number and you would go to a fixed-line phone and call the person back. As teenagers, we created numeric codes to send messages: 43770 was “Hello,” for example; 143 was “I love you.” Effectively, every number or number combination had an alphabetical-letter equivalent. Looking back, this was essentially an early form of text messaging which, in and of itself, was a new option for communication. Not all conversation requires a lengthy voice dialogue. More often than not, short messages can suffice. It is the options that technology brings us that allow us to communicate in different ways depending on the context of the conversation.

Many of you will also remember your first experiences with a BlackBerry. There was something profound about being able to see your email from a device other than your personal computer. We learned very quickly that, for some emails, quick responses would suffice and that the BlackBerry was great for this. But for other emails, a more lengthy response was necessary. For these tasks, we would return to the PC. The context of the response dictates which device we use in a multi-device world. This is what I mean by technology giving us options. Prior to the BlackBerry (or Palm Pilot, etc.), the PC was our only option for both long- and short-form email communication. As innovations like the BlackBerry were created, we were presented with more options.

Digital Touch

There are plenty more examples I can dig into but I wanted to frame the points above to turn our attention to smartwatches in general and the Apple Watch in particular. While dozens of questions remain about the Apple Watch, it is perhaps its potential to add a new communication element I find most intriguing at this point. Despite what I mentioned above about humans communicating through verbal and written forms, I left out another vital communication tactic: the physical one.

As part of my continuing study of humans, I became aware of some of the modern research on the science of touch in human communication. This article in particular from Berkeley is a good starter on the subject, and this line is one of the most interesting:

In recent years, a wave of studies has documented some incredible emotional and physical health benefits that come from touch. This research is suggesting that touch is truly fundamental to human communication, bonding, and health.

The physical connection has been proven time and time again to be essential to healthy relationships. A series of studies highlighted in the report showed how people, even strangers, can communicate emotion through touch. Touch is an essential part of how we communicate. It is very personal and very intimate, yet is foreign to the digital world.

What Apple is presenting with the Apple Watch appears like it may be the start of bringing digital touch as a communication method to the digital age. And if we think about the type of device that makes this type of digital touch communication possible, it makes sense it is done through a device we wear rather than one we keep in our pockets or bags.

While Apple may lead this effort initially, this is something that could expand even wider as the idea expands. A leading company in haptics named Immersion has been working on similar haptic communication as a language for years and could bring that solution to any wearable device.

In the same way technology has expanded our communication options, it has still not replaced many of our existing communication methods. In a way, communication has been extended through technology, but not all prior forms have been made obsolete. Similarly, digital touch will not replace human contact, but when we are away from our loved ones, digital touch has the potential to extend that unique and intimate communication method in ways not possible before.

Bajarin is a principal at Creative Strategies Inc., a technology industry analysis and market-intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.

TIME Big Picture

If the World Was a Village: Tech Edition

Earlier in the year I wrote an article called Computing’s S-Curve. We are on the path to connecting the planet via pocket computers. This is so incredibly significant that it’s difficult to overstate.

In many of the presentations we give at Creative Strategies, we emphasize that we are still early in the technology age. We point out that the first 25 years of computing were focused on bringing computers to business. The next 25-plus years will be focused on bringing computers to every person on the planet. Much of this is driven by Moore’s Law.

When presenting to more PC-focused audiences, this is a favorite slide for emphasizing the role Moore’s Law plays in bringing computing to the masses:

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Ben Bajarin / Creative Strategies

We still have a long way to go but as Benedict Evans points out, this opportunity to connect the planet is hugely beneficial from humanity’s standpoint.

So where are we when it comes to connecting the planet today? Using a range of statistics I gathered, I made a chart showing a few of my favorite data points, asking, “If the world was a village of 100 people, how many would be using what technology?”

Ben Bajarin / Techpinions

What strikes me about these statistics is that only one of them is over 50%. The mobile phone (not smartphone) is in use by 63% of the global population. Many of these mobile phone users have multiple subscriptions, which is why the latest data from the ITU pegs total mobile subscriptions at nearly 7 billion.

What makes mobile phones — with 63% percent of the global population owning one — interesting is that by 2020, those will all be smartphones. To help drive that transition, we now have smartphones that cost $33 and we will have $10 smartphones by 2020.

Yet, we still have a long way to go. I made this chart using some new data from the TNS Connected Life survey:

Ben Bajarin / Creative Strategies

This chart shows the percentage of smartphone users and non-smartphone users in each of these large global markets. I’ve added their respective population as well in order to see the opportunity for growth and scale.

As we embrace this shift, we realize how valuable these mobile phones are, particularly to those in emerging markets. Internet-connected mobile phones have given rise to the WeChat businesses, Instagram businesses, Facebook businesses and more. People like to argue that you need a PC to do work. Tens of millions of consumers (and growing) in emerging markets prove this wrong every day.

As we empower billions of new consumers with pocket computers ubiquitously connected to the Internet, it is bound to have an impact on the economies of these emerging markets. Economists estimate that bringing connectivity to a market can increase the GDP of that region anywhere from 1-3%.

The Internet has been one of the most critical and disruptive inventions of our era. Bringing the Internet to nearly everyone on the planet may be even more disruptive when all is said and done.

Connecting the Planet, Reshaping Industries

Mobile’s impact will be widespread. Note this chart from Chetan Sharma Consulting.

There are 14 global trillion-dollar industries; mobile has the potential to invade, change and impact them all. In this white paper, Chetan argues that we are entering a new era of connected intelligence. He is correct, and it will be driven by two fundamentals: the connecting of the planet via mobile devices and the connecting of nearly everything else to the Internet.

When we state that the technology industry’s best days are ahead, it is for the above reasons and more. While we explain that the next 25-plus years will be focused on bringing computing to the masses, the next 50-plus years will be spent bringing computing to nearly everything.

This article was written by Ben Bajarin and originally appeared on Techpinions. Bajarin is a principal at Creative Strategies Inc., a technology industry analysis and market-intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.

TIME Big Picture

The Future of Tablets? Market Segmentation

The tablet market is one that has greatly polarized many who follow the technology industry.

The initial debate centered around whether the tablet would kill the PC. Then, the tablet market began to slow from its once triple-digit annual growth rates to much more modest single-digit growth rates. The market for tablets is still growing in terms of annual sales, just not as much as it did in 2011 and 2012.

The tablet remains an important product and it will continue to evolve, but one trend we see happening may shed some light on what we can expect for the future of tablets.

It appears the tablet is segmenting. This is something our firm has been highlighting for some time in our tablet presentation:

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Creative Strategies

We are starting to see tablets being built for kids, tablets being built just to consume content and media, tablets that can replace PCs, and now with the latest entrant from Nvidia, we see tablets being specifically built for hardcore gamers.

The market appears to be segmenting. Part of this has to do with the diversity of the pure-slate form factor. The design itself opens up the possibility that, through software, tablets can appeal to a wide range of use cases. This is what makes the tablet form factor so exciting.

Segmentation in many markets is not new. Specifically in the PC market, desktops and notebooks are examples of purpose-built segmentation. PC gaming machines are another example of segmentation. So it isn’t surprising that we’re seeing segmentation in the tablet market as well.

People often criticize segmentation without realizing that these are very good business moves. The Nabi kids tablet, for example, sold nearly two million units in the U.S. during the holiday quarter last year. Nvidia’s creation of the Shield tablet may be an even smarter move still. The hard core PC gaming market may not be the largest one but it is still lucrative. DFC Intelligence estimates there are upwards of 270m core PC gamers.

However, to target these segments, companies have to truly understand the market they are building for and make products uniquely tuned to fit their needs. The Nabi tablet includes custom software for kids. They offer a range of tablets targeting at different age groups and create custom experiences just for those age groups.

The Nvidia Shield tablet has a hardcore gaming processor and can stream games over a Wi-Fi network from the gamer’s computer to the tablet, which can in turn connect to a TV. By giving gamers access to all their PC games in mobile form on a tablet, Nvidia has custom-built experiences for its tablet that check the necessary boxes for serious PC gamers.

I expect more segmentation to come as hardware manufacturers discover parts of markets that are underserved or not served at all. Ultimately, this segmentation is what can continue to fuel the tablet market. There are all types of every day use cases for tablets: Many will be general purpose like the iPad, but many will target certain verticals like the ones I mentioned above. Despite anyone’s opinion on the tablet market, I remain bullish on its future.

Bajarin is a principal at Creative Strategies Inc., a technology industry analysis and market-intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.

TIME Big Picture

Tablet Growth Hasn’t Peaked

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Getty Images

In its recent quarterly results, Apple surprised people when it reported a dip in iPad sales. This was followed by a lot of hand-wringing by some industry observers and analysts, who suggested that overall tablet growth has slowed or even plateaued.

I don’t dispute that tablet growth has slowed, but I’m not at all as concerned as other analysts about the industry going forward. In fact, I think tablet sales will accelerate again soon.

We are at an inflection point with tablets. In many developed markets, PC penetration is high and smartphone penetration is high. The role of the tablet in between these two screens is not yet clear in the minds of many consumers. For example, today in most U.S. homes, the tablet is a communal device that members of a family access and share.

According to recent data we (Creative Strategies) gathered, over 50% of tablet owners indicate that they share the device with at least one other person. This dynamic has added to the tablet sales slowdown, along with a refresh cycle that’s closer to that of a PC than that of a smartphone. People don’t buy new tablets as often as they buy new phones.

Another interesting observation is that the bulk of tablet purchases in 2013 were in the seven- to eight-inch screen size. When you look at the growing size of smartphone screens, ranging all the way from four to six-and-a-half inches, then it begs the question as to why a small-screen tablet is better than a big-screen phone. My gut tells me that the growing screen sizes of smartphones have also played a role in slowing tablet sales.

But I don’t believe this will be the case for long. In reality, it’s hard to look at a one- or two-quarter slowdown and claim it as the new norm or a long-term trend. There are many dynamics at play with regard to tablets that look to set them up for more prime growth.

Bigger Is Better

One is the trend of larger-screen phones I mentioned above. We believe that larger tablets, meaning those closer to 10 inches or larger, are primed to be a growth area. Since a great deal of smaller-screen tablets represent a large portion of the install base, it seems reasonable that larger screen tablets become more attractive, especially if someone already has a large-screen phone.

Look for this trend to play out on the business and enterprise side as well. From salespeople making both impromptu and formal one-on-one presentations, to managers working with documents and spreadsheets, bigger screens offer more value.

If this happens, we believe more consumers will see the value of the tablet as a legitimate PC replacement. Tablets have been largely supplemental to PCs up to this point, part of the reason being because smaller tablets are not viable PC replacements. However, data point after data point suggests to us that once consumers get their hands on larger tablets, they begin seeing their value as a primary computing devices.

Great Deals

The other dynamic that could bring tablet growth back is connectivity. To date, most tablets purchased are W-Fi-only models. However, we believe this may all be about to change. Carriers are looking to make tablets a growth area for themselves, and we hear that there’s interest to either heavily subsidize tablets or even move to an installment plan model.

What this means is that for very little to no upfront cost, consumers will be able to get a connected tablet from their carrier and just pay a small fee per month for the hardware and the data plan. Carriers looking to do aggressive bundles with hardware tied to their services is a major trend we see coming.

For IT managers, this could mean even more consumers wanting to bring their tablets to work. More importantly, these tablets that would be connected at all times, not just while on Wi-Fi.

If we are right and there is a trend moving toward larger, connected tablets, then a new opportunity for hardware and software companies may be shaping up, along with new use cases for enterprise users.

Tablet sales may be leveling off in the short term, but to say their growth has peaked is way off target.

Bajarin is a principal at Creative Strategies Inc., a technology industry analysis and market intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.

TIME Big Picture

The Death of Phones

StarTAC
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I remember my first cell phone. It was a hand-me-down Motorola StarTAC from my father.

As many who had cell phones during this time will remember, there was a liberating feeling in being able to talk to any one, any time, any place.

Smartphones didn’t exist at this point in time, and as the cellular industry grew, it went on a run where the central value of the device was telephony. Those days are gone. The phone as an app is the popular way to think about the role of telephony on a mobile device today.

While telephony still exists via an app on mobile devices, it’s not the central reason for buying a smartphone in today’s world. What are consumers buying? This is where the taxonomy breaks down. They aren’t buying a phone. While we call it a “smart phone,” those words are just labels.

When you sit down and really watch people use their smartphones, what are they doing? They take pictures, watch movies, check in on Facebook or Twitter, read the news, play games and more. So what if instead of buying a smartphone, consumers are buying cameras, mobile gaming consoles, portable TVs, newspapers, and whatever else the smartphone can turn into thanks to software?

While this may seem obvious, I’m not sure it’s obvious to consumers: Rather, it’s very subconscious. They may not realize cognitively they are shopping for a pocketable camera, game console, or TV, but they know they want those features and they want them to be great.

I think Benedict Evans summed up my thinking on this in this very poignant tweet:

Mobile is eating consumer electronics. The most personal device paired with diverse software allows it to eat as many use cases as the hardware and the software will allow. The death of the phone as the primary use case is the rise of the mobile camera plus connected sharing apps like Facebook, or the rise of the mass market mobile gaming console, or the rise of the portable TV.

This same thinking applies to tablets. What tasks the tablet absorbs are still being fleshed out, but we are seeing it absorb the load from the PC, the TV, magazines, books and more. The use cases the tablet can take on are only limited by its hardware and software evolution.

What makes all this interesting is that prior to smartphones, we bought a telephony device and that was it. Now consumers are buying this AND that, AND that, AND that, AND that all wrapped up into one product. As we look to how the landscape may evolve, we simply need to figure out what the next AND will be.

Bajarin is a principal at Creative Strategies Inc., a technology-industry-analysis and market-intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.

TIME Big Picture

For Smartwatches to Hit It Big, Context Is Key

Samsung Gear 2
A Galaxy Gear 2 smartwatch sits on display at the Samsung Electronics Co. pavilion on day two of the Mobile World Congress in Barcelona, Spain, on Tuesday, Feb. 25, 2014. Simon Dawson--Bloomberg / Getty Images

A while back, I talked about health and fitness wearables and my failure to see how they appeal to a broader market. This week, I want to talk about the potentially lucrative category of smartwatches.

If we count Microsoft’s Smart Personal Object Technology (or SPOT) watches as smartwatches, then I have been using these kinds of devices for many years. However, even the current (or soon to be shipping) crop of smartwatches leaves me puzzled. I still question how big of a market the smartwatch category could be. Honestly, I’m on the fence.

To dive deeper, I think it would be helpful to look at a few current and future value propositions related to smartwatches. We have to start with this question: What is the value of a smart, easily viewed, small screen on my person? Answer this and we’re getting somewhere.

The key is that the smartwatch screen is always in view. Unlike other screens – my smartphone, tablet, PC, TV and others – this smart object on my wrist is easily viewable throughout the day as long as I’m wearing it. To answer my question, we have to look at some things I may personally care to be notified of, regardless of whether I’m looking at any other screen. The key to this is context.

When am I not looking at my smartphone, PC, tablet or TV? When I am driving, at a lunch or dinner meeting, or walking around the mall, for instance. These are the times a smartwatch must deliver value beyond keeping time.

Currently, the proposed value is in notifications. The smartwatch will notify me of an email, text or Facebook message, Twitter mention, incoming call, and more. Any app that pushes a notification to my phone can and does push a notification to my wrist.

More often than not, I find this more distracting than helpful. I get a lot of email, text messages, Twitter mentions, and calls throughout the day. My wrist buzzes quite a bit, mostly with notifications that aren’t useful to me. The reason? The watch (and even my phone, for that matter) doesn’t understand context.

I may not want to see all my emails, but if I’m waiting for an important response from a client, it would be useful to see certain messages. I don’t want to be notified of all phone calls; only ones that are urgent – say, from my wife.

This goes beyond a filter. It is all about context. The device needs to know more about me and my situation to be useful. Smartwatches and notifications need to get a lot smarter if they are to be useful on the wrist.

For example, when I’m in a meeting, I don’t want to look rude as I check my watch 15 times over the course of an hour every time it buzzes. But what if my phone or watch knew where my next meeting was and would alert me of any traffic issues I should be aware of that may change the time I need to leave in order to not be late for my next appointment?

This is what makes some of the proposed use cases of Android Wear somewhat interesting. Google Now does a decent job of focusing on contextual data that’s useful at a glance. This could be location data, traffic data, and a host of other things that can equip us to take action and make decisions. Ultimately, this type of contextual data that’s useful in helping us make choices is where the value of a wrist-worn smart screen may lie.

My biggest misgiving is that we will experience notification overload. Even though I test some smartwatches that have useful filters for which apps notify the watch and which don’t, I still suffer from notification overload. My concern is that if we open the wrist screen to notification from solicitors – trying to get our attention with deals, discounts, and coupons – we again suffer from notification overload. There will have to be an intelligent way for much smarter notifications to reveal themselves if the smartwatch category is to go mainstream.

Part of me feels that the smartwatch is still a solution in search of a problem. But another part of me feels that there’s value to be found on a screen that’s more easily viewed than a screen in a pocket or a purse. Many seem to believe that smartwatches may be the next hot category. I still have my doubts. Mass market appeal and convenience is what the smartwatch needs to find. Until then, it will be a niche market.

Bajarin is a principal at Creative Strategies Inc., a technology-industry-analysis and market-intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.

TIME Big Picture

How Mobile Changed the Game — and Questions About Its Future

Mobile Future
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Mobile ended Microsoft's dominance, saved Apple, made Facebook and could upend Google. So what's next?

When I first started doing industry analysis in 2000, my focus was heavily on mobile computing. Our firm has a legacy of PC industry analysis, and at the time I joined, we were embarking on the major shift from desktop computing to mobile computing.

Mobile computing in those days referred to notebooks and laptops, which were really nothing more than portable desktops. That era set us up for the massive global mobile computing era we are now entering into, where the shift is from notebook computing to truly mobile computing with tablets and smartphones. Reflecting on these paradigm shifts helps me appreciate not just how much has changed over the past 10 years, but also how much will again change in the next 10 years. Mobile changes everything.

What’s Changed?

Mobile ended Microsoft’s dominance. The once near-monopoly on desktop and laptop computing was completely broken by mobile computing. Along with Microsoft’s monopoly ending, so too has the old guard of PC computing been challenged by mobile. Intel, for example, is still struggling to be dominant in the mobile computing era, while Qualcomm has taken its place. Once dominant PC vendors like Dell and HP now only serve a small market, while Apple, Samsung, Lenovo, Xiaomi, Huawei and ZTE are the hardware darlings of the mobile era.

Mobile saved Apple. One could argue the iPod was a key player in ushering in the mobile computing era, as it paved the way for key technologies to be miniaturized and commoditized. That served as a catalyst for smartphones to become possible. The iPod led to the iPhone, which is the business that drove Apple’s recovery.

Mobile could upend Google. Think about some recent data from Flurry that shows how apps have overtaken the mobile web in terms of engagement. Who does this impact the most? Google. Google’s business is heavily built on the web and a web browser. Declining usage of mobile web browsers and web browsing in general is not good for Google’s core and largest business. I’m fond of the observation that Google de-emphasizes apps, because time spent in an app is not time being spent using Google’s search engine. In fact, this observation explains quite clearly why Google is not pushing tablet apps the way many believe the company should be. Tablets still drive significant web browsing time as the usage of tablets more closely resembles that of PCs than smartphones. If Google was to emphasize tablet apps, which could possibly cause web searches from the platform to go down in favor of app usage over web usage, then again, Google’s biggest business is hurt.

Mobile made Facebook. Facebook in the desktop era was nothing compared to Facebook in the mobile era. Facebook will be a key part of bringing the next billlion consumers into the online conversation. These customers will be mobile-first and mobile-only. It’s conceivable by the end of 2015 — and almost certainly in 2016 — that Facebook could have over 2 billion mobile users. Facebook’s present and future hinges on mobility.

What’s Next?

These are just a few of the dramatic changes mobile has enabled. Many more are to come over the next two years. Will the current dominant players in mobile survive the shift from one primary mobile connected device to multiple devices per person? Apps took over the mobile web but what will overtake apps in the near future? What is the role of an operating system or a platform in the future? Or is there one? Do apps move to the cloud or stay native? Do operating systems move to the cloud or stay native? How many modems driving connected experiences will we have per person? How many touch-based interactive glass screens we will have on our person, in our homes and in our cities? All these and more are questions I like to think about.

I’ve been working in this industry since 1997. I’m also related to one of the foremost technology industry historians. I’ve been taught to view this industry as a journey. On a journey, the scenery changes. Mobile has been a driving force of disruption, causing sweeping changes in the dominant players from yesteryear. “Post mobile” will bring about many new changes. Crystal balls are not necessary. The only sure way to survive is to recognize paradigm shifts and embrace them when they happen. Innovation brings about change. Both are constant.

Bajarin is a principal at Creative Strategies Inc., a technology-industry-analysis and market-intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.

TIME Big Picture

Don’t Give Up On Tablet Innovation

As I survey the tablet market and its trends, I am continually reminded that tablets are still in the early stages of development. We talk with consumers and enterprise customers alike, and there still seems to be some perceptual nuance surrounding tablets. People are just starting to get their heads around what a piece of glass that’s bigger than their phone yet smaller and more portable than their PC means to them.

Laying all my cards on the table, I use the iPad Air with the Zagg iPad Air Folio case. I take this setup out into the world to meetings, or to pop into a Starbucks to get some work done in between meetings, and I constantly get the exact same question: What kind of computer is that? People see this device and realize that it is, in fact, a computer. This fundamental point is where the paradigm shift to tablet computing is about to happen.

The amazing thing about a tablet that sets it apart from every device I use is that it has more computing capabilities than my phone and is more portable than my PC. I can sit reclined on my couch or in bed and learn, work or play. I can take it to the office and work. I can use it as portable TV or DVD player. I can use it to make music. I can take it to the lake and capture video of my family water skiing, editing and creating the video right there on the lake. I can keep going with these scenarios, but you get the picture. The tablet is more capable than my smartphone and more portable than my PC. This is why I believe it has the most potential of any form factor out there with regard to the future of computing.

A point that often gets made is that most people just need their smartphone — and once bigger-screen phones are more popular, people will simply choose to use a bigger phone and a traditional PC over a tablet. I don’t doubt that there will be a certain percentage of the market that chooses this solution. However, I feel more people will choose a phone (of any size) and a larger tablet solution. If there is any device that I feel may be threatened when five-inch-and-larger phones become the norm, it’s smaller tablets, not bigger ones. The best way to think about this is that bigger smartphones will challenge small tablets the same way tablets challenge PCs. Larger tablets, however, are poised to become the dominant computing form factor. All of this is because of both its unique form factor and the developer ecosystem behind it.

In 1978, something important happened. In those days, personal computers were in their infancy. Most viewed the desktop personal computer as a hobbyist toy. But in 1978, a piece of software called VisiCalc was being developed, and overnight, its business and productivity value was grasped. The rest was history. Where we are with tablets feels very much like 1978 for personal computers. We have a few showcase apps, mostly from Apple with iWork and the iLife suite of applications for iPad. We also have a number of great apps from third-party developers for music creation, art and any number of genres. But the list of showcase apps to drive home the value of the tablet as a personal computer are still in the minority.

Whenever people ask my how I get away with using my iPad as my main PC, I always show them the above types of applications. I show them how I can capture video and make a movie right on the spot. I show them how I can write my columns and even post to my blog. I show them how I can use it to create spreadsheets and presentations, all with as much ease as if I was on my notebook. Every time after I give these demonstrations to someone, they always respond with a kind of profound tone in their voice: “I didn’t know you could do all that with an iPad.”

This is the point. As consumers catch on that these devices are more capable than their smartphones and more portable that their PCs, the floodgates will open. Developers will similarly begin re-imagining entire categories of new applications and new software to drive this unique form factor forward as a computing platform. Hardware manufacturers will continue to enhance the tablets features, from its optics, biometrics, sensors, chipsets, and displays. We really are just getting started with tablets. And more importantly, the tablet is going to help many consumers — both existing tablet owners and new ones just getting started with computing.

Bajarin is a principal at Creative Strategies Inc., a technology-industry-analysis and market-intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.

TIME Big Picture

Where Computing Is Headed, from PCs to Smartphones

The PC industry’s doldrums continue, yet many seem to be scratching their head as to why. The common answer is to blame tablets.

While there is truth to the tablet’s role in the shrinking PC market, some important context is still missing from this puzzle.

What many don’t initially observe is that since about 2007, the PC market — specifically the notebook segment — began to over-index to the consumer segment. Meaning that, gradually, more notebooks sold around the world each year were to the consumer segment rather than the corporate segment. Note this chart from Benedict Evan’s slide deck Mobile Is Eating the World.

 

During the PC’s run when more PCs were shipped to corporate segments than consumer ones, the corporate buying cycle was like clockwork — every two to three years. Refresh cycles were predictable. As PCs and notebooks became more saturated in enterprise environments, the PC’s run continued as it bled over into the consumer segment. Consumers, who either only used a desktop PC at work or had no PC at home, started to bring PCs into the home.

The observation that gets lost is that the consumers who caused the PC to over-index to the consumer segment were not early adopters. If you are familiar with the concept of the diffusion of innovations, you know the late adopter parts of the market are much larger in terms of volume than the early adopter parts of the market.

As the late part of the early majority and the following segments started buying PCs, we saw growth, but more consumer PCs were sold than corporate PCs as a part of the overall mix. The trouble with this, which the past few years of PC decline has evidenced, is that people in the later years of these consumer markets behave differently with electronics. Many in this late-state early majority, late majority and laggards buy tech based more on needs than wants. More to the point, once a product is acquired, these people generally don’t replace it until it’s “beyond repair.” Technology products’ life cycles are extended when this very large part of the consumer segment gets into the market.

By this time, the market is to the point where it’s fully mature and reaching “post maturity.” Around this time as well, costs for components also come down, become mature, and generally can and will last longer. The perfect storm hit the PC industry where a significant part of the install base bought their PCs, and the maturity of the hardware allowed them to last for quite some time, dramatically extending the life cycle of the product for customers who won’t replace it until it breaks.

This is where we are today: The PC segment has reached a fully mature replacement market and growth is declining. So what observations from the fully mature PC segment can we glean for mobile?

While the PC is not a “one per person on the planet” product, the smartphone, for the most part, is. The total addressable market is significantly larger. The PC install base will settle around 1-1.2 billion, while the smartphone install base will settle around 4-4.5 billion. However, we have an install base of around 1.5-1.6 billion smartphones now, with the bulk — approximately 70% — in full replacement markets.

Because of this, I divide the smartphone market into two segments: There is a mature segment, rapidly going to post maturity, and there is an immature segment, which is the quarter to half a billion first-time smartphone owners coming on each year for the next few years. The two largest markets from an install base standpoint of smartphones are China (approx 525m currently) and the U.S. (approx 225m currently). Per my PC observations, I’ll focus on these two markets.

The U.S.

This market has been a defining one for mobile in many of the same ways it has for the PC. With smartphone penetration nearing 70% in the US, we are well into a mature replacement cycle market. But to get to where we are now, we have a huge install base of the late-state early majority, late majority and laggards who are in the market and will increasingly become so during 2014 as we drive saturation to 80-85%.

As in the PC space, we are already seeing the “I’ll replace it when it dies” mentality impact smartphones. This is stalling year-over-year growth, and making it harder for the likes of Apple and Samsung to drive the masses to their latest devices. While the refresh rate of smartphones will remain approximately 24 months for a percentage of the market, I sense there is a growing percentage who will wait a bit longer. Perhaps 2.5 years will be more common rather than two or less, as it will be for some segments.

The issue? Are there more people who will need to be persuaded to upgrade than there who will do it routinely because of their love of technology? This last bit is tricky but there is hope. For example, it is for the reasoning I just laid out that the time is right for Apple to release a larger-screen iPhone. That, plus perhaps longer battery life, enhanced security thanks to 64-bit and a few other simple features, could significantly move the needle for Apple in the U.S. (Note this ChangeWave survey indicating nearly half of all smartphone buyers who are intending to purchase a smartphone plan want to buy one with a screen size around 5″.)

The U.S. is an iPhone-dominated market, with Samsung gaining ground little bits at a time with each new Galaxy release. Both need to start moving the needle or we will continue to see refresh rates extend. Every PC OEM we speak to regularly follows the “give them a reason to upgrade” mantra. This is a key theme for consumer markets and applies to PCs, smartphones and tablets once they reach maturity.

China

China is crazy. It’s unlike any market I study in-depth. The swings of market-share as a percentage of quarterly sales by different vendors is staggering.

Xiaomi, in less than two years, is shipping more smartphones than Samsung each month. China is saturated with half a dozen and growing key Android OEMs all going after each other with new device releases every quarter or so.

Could you imagine in the U.S. having six to eight smartphone manufacturers releasing new devices every quarter? Or even twice year? It would seem like overkill, but in China it isn’t. Selling a few million each quarter is being fueled by rapidly releasing hardware. The average smartphone lifecycle in some parts of China is 11 months, and in upscale areas it is seven months. While the smartphone market in China looks and feels mature — and in some cases even post-mature — it really isn’t. While Xiaomi is all the rage, we have no solid data about what Xiaomi’s loyalty rates are. Are consumers jumping to different brands just to try the hot thing every year? The question of what are fads versus what are sustainable trends is much harder to predict in China.

While I sense many of the same PC market observations apply to mobile in the U.S., they are not applying to China. Significantly, China has more smartphones than PCs and is largely now a mobile-first (and for a growing percentage, mobile-only) market. All of this is to say that mobile can learn nothing from the PC segment for China, which is a point in itself.

Perhaps the strategic dynamics of a mature market, and eventually a smartphone-saturated one like China will behave fundamentally differently than the U.S. If this is true of China, will it also be true of India (where PC penetration is less than 10%), Indonesia, and Brazil? I suspect this is the case, but we are in such early days that it’s hard to tell. Which makes it fascinating.

If you are interested in diving more deeply into where computing is going, I’m speaking at a conference called Post Modern Computing on June 4th in San Francisco. I encourage you to check it out.

Bajarin is a principal at Creative Strategies Inc., a technology-industry-analysis and market-intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.

TIME Big Picture

Still in the Making: Don’t Wait for Tech History to Repeat Itself

Apple I
This was the first computer made by Apple, which became one of the fastest growing companies in history Getty Images

When it comes to the tech industry, I’m not going to try to convince you that history does not repeat itself. In some cases, it does and it will. Rather, I’m going to tell you why any claim being made today that we are waiting for history to repeat itself is premature.

I speak with VCs, C-level executives, pundits and other opinionated types about things related to the theory and philosophy of the technology industry. My most valued discussions come from those who have been in this industry since the beginning. Time and time again, their observations are often the most accurate.

The theory of the industry’s cyclicality is often brought up, and most often about Apple. I hear things like “the smaller ecosystem always loses.” Or, “closed always loses in the end.” Or, “vertically integrated companies always get phased out.” I know my industry history well enough to understand their logic, but I continually think these claims are premature.

Claiming history is ready to be repeated, rather than still being made, discounts the point that most of this industry’s history has been focused on commercial markets instead of consumer ones. And most of this history has also been focused on developed, affluent markets instead of developing ones. We’ve been talking about millions of consumers up to this point, and we can make some sound observations about the industry’s history. But can we make the same observations once we start talking about billions of consumers? I’m not so sure.

Uncharted Territory

I say history is being made rather than repeated because I believe we are in uncharted territory. Those who like to make points about tech history repeating itself are primarily using the history of the mainframe, mini computer, and desktop/notebook PC form factors to make it. When analyzing these segments, points get made about open vs. closed, integrated vs. modular and so on. But using “PC” industry history as our sole basis has flaws.

We are in the midst of an enormous global rollout. Consumers are getting their first smartphones and, in many cases, they’re the first types of computers these consumers have ever used. Billions and billions of people have leapfrogged the PC and jumped straight to having their computers in their pockets. They have no concept of what it was like to grow up with a PC, or even in a PC-saturated region. They didn’t have PCs in their schools to learn computer literacy; they haven’t had to deal with the Microsoft Windows monopoly; they’ve never dealt with corporate IT bureaucracies. In the very near future, the number of people in the market who had nearly zero contribution to tech industry history will dwarf the number that did. So how can we, with any degree of intellectual honesty, claim so boldly that we know how this will play out?

I feel a proverb is appropriate. It’s one I’ve heard time and time again from those who have been around since the beginning: “The market is the ultimate arbiter.”

How much is industry history a predictor of the future? We can debate theory and philosophies all we want, but ultimately the market will decide. My hypothesis is that, unlike the PC era we know so much about, we have no idea how these next several billion consumers will dictate the winners and losers.

For example, I like to use the analogy that Facebook and WhatsApp are serving as the emerging-market equivalent of America Online — connecting these consumers to the Internet and to others digitally for the first time. Yet in the PC era, consumers outgrew the walled garden approach of AOL. Do we know for sure these emerging market consumers will outgrow the walled garden? Maybe walled gardens win in the end. We have no idea. These consumers are coming online with very different social, national and economic backgrounds.

We are observing mobile device usage in places like China, India and other markets we have never seen before. If we see things that are new, how can we apply industry history to it? What will a smartphone be in the future? Will native apps or web apps win the future? What’s an app in the future?

All of these questions and more are subjects where industry history is used to attempt to shed light on what we’re witnessing. I have no problem with that. It’s useful and, in some cases, I imagine history may repeat itself. The problem is that we don’t know which will repeat itself.

If we’re having this discussion 20 years from now, I feel the “history will repeat itself” mantra would be more applicable. We simply don’t have enough industry past under our belt to claim that what we do have is the part that will repeat. We are still in the middle of this journey from analog to digital. We are still bringing the masses online for the first time. They will still play a role in writing the history we are observing today. In all likelihood, the history that may “repeat” still has yet to happen.

Bajarin is a principal at Creative Strategies Inc., a technology-industry-analysis and market-intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.

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