Where's the Tablet headed?

SUBHASH P. SR. RAJA V. SRIDHAR | Updated on January 23, 2011

85 iPad clones were unveiled at CES this year.

Thanks to the disruptive entry of Apple's iPad, the Consumer Electronics Show held in Las Vegas this year witnessed the unveiling of 85 iPad clones, the highest number of new introductions by any standard.

Microsoft introduced Ultra-Mobile PC (UMPC) with its Windows XP operating system and pen interface, way back in 2001, positioning it as the “second PC”. Much to its chagrin, it was Apple — through its unique twin-touch interface, iStore housing millions of compelling applications and superior branding — that broke the barriers for mass adoption of its iPad. Since its launch in January last year, Apple has sold more than 10 million iPads.

Seeing the success story of iPad, many major PC and laptop manufacturers such as Asus, Dell, HP and Lenovo and mobile device vendors such as Samsung, and RIM, have entered the already crowded Tablet market. Is this another bubble and what will it take for the competitors of Apple to sustain themselves in the market place? What could be the next big move by Apple, now that tablets are being commoditised?

While Apple's strategy is to build the product from hardware to applications on its own and hence retain control in the initial stages of the device launch to attract the early adopters, “challengers” such as Samsung don't have the luxury of doing so.

Much like in Smartphones, it is a two-sided market in the case of Tablets also. The content provider on one end of the market reaches the end subscribers through the Tablet maker as the intermediary. The indirect externalities necessitate that the content provider gets the captive subscribers of the Tablet vendor. Apple, through its iStore, managed to create strong network externalities for the content providers to build more and more interesting applications. The applications, in turn, increased sales of iPad, leading to the spiralling growth. However, the challengers are less fortunate as the market is competitive and fragmented by the time they enter. The emergence of Android as the default open operating system platform and the applications that run on it pose barriers to the challengers for possible vertical integration.

Though Samsung came up with the 7-inch version of Galaxy Tab (compared with 9.7- inch iPad) and hence pocketable as one of the distinguishing features, the “closely replaceable” aspect, along with lower price, is the strategy that is fetching it the scale. Much like Samsung, Lenovo has distinguished its Tablets by supporting both Windows and Android operating systems, and thus leveraging to use the network externalities of millions of Windows applications and subscribers. The not so “close replacements” in the likes of Asus, break the price barrier with lesser feature set for majority adoption.

Content and user experience

While applications ruled the roost in the iPhone-disrupted Smartphone market last year, in this year of tablets, it will be content — whether it be audio, video or e-books that will distinguish the challengers. Exclusivity in copyright content with the publishing, audio and video houses is likely to create some market space for the challengers. However, we expect that this is a short-run phenomenon as copyright exclusivity and bundling will be broken as low-price Tablets enter the market for mass consumption.

Do we see saturation for the challengers? The Smartphone market, which witnessed sale of more than 50 million last year, is still growing at an exponential rate. Similarly, the market for the challengers is really huge, provided it is tapped appropriately through innovative design, content development ecosystem, and associated price disruptions.

In all these discussions, the mobile operator is conspicuously missing! iPad just did that by meeting the network connectivity requirement through public Wi-Fi unlike iPhone that was closely dependent on the participating operator's 3G/4G network. The unbundling of iPad from the operator's clutches has brought smiles for both the content developers and users alike. Is this a trend for the future — breaking the walled garden of the mobile service providers?

What could be the next disruption unleashed possibly again by Apple? The next year might well be the year of “user experience”.

With devices, content and application available in plenty, it is the user experience that will finally dictate which combination will be consumed by the end users. We expect that 3D and augmented reality will enhance the user experience in the years to come. Apple might be working on that magic device (let us call it iThreeD) that is in the works to take user experience to greater heights.

The authors are with Sasken Communication Technologies. Views are personal.

Published on January 23, 2011

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