Meta trend
Through 2003, integration and extension of mobile, wireless, and enterprise applications will require specialized IT skills and resources. By 2004/05, mainstream application platforms will incorporate pervasive middleware, consolidating the market and requiring tradeoffs between short- and long-term strategies. By 2006, wireless access to enterprise applications and portals will be common, with solutions supporting smart and thin clients, synchronized for connected and disconnected users.

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One device
During 2002-07, we expect smart phone devices to emerge as an alternative for enterprise users who wish to carry one device for both communication and personal information management (PIM) capability. This will be precipitated by the emergence of higher-speed wide-area networks, primarily 2.5G/3G cellular but also "hotspots" built on the 802.11 industry standard wireless local-area networks, as 802.11 access becomes embedded in these devices through 2004/05. We do not expect smart phone devices to eliminate the need for independent phones and personal digital assistants (PDAs), especially where standalone but connected PDAs provide increased capabilities (e.g., in screen size, memory, and expandability) for higher-end users. However, the smart phone will enable PIM functionality for less-demanding business users. Consumer acceptance will come later, due to prohibitive initial pricing ($400-$600). Ultimately, as prices fall (2005-07) to a subsidized $200 or more per phone, and as connections become more available, reliable, and lower in cost, the market will expand dramatically.

The primary PDA platform vendors (Microsoft and Palm) have targeted smart phone devices as the next area of expansion for their respective operating systems (OSes), while traditional phone manufacturers (e.g., Nokia, Motorola, and Siemens) are exploring their own paths. Symbian, a traditional supplier of phone OSes, will attempt to capture a large share of the next-generation smart phone market through relationships with Nokia, Ericsson, Siemens, etc. By 2006/07, however, we expect Palm to capture 20 to 25 percent of the market through partnerships with Handspring, Samsung, Sony, Kyocera, etc., while Microsoft will capture 10 to 15 percent market share through partnerships with major players yet to be defined, but including Samsung, T-Mobile, and HP. Proprietary systems will capture share as well (e.g., small footprint Linux, Motorola), while J2ME (Sun) and BREW (Qualcomm) also compete for share. In addition, vendors will attempt to establish working relationships with carriers (e.g., Microsoft's recent announcement of a working relationship with AT&T) as a way to leverage greater market penetration.

Palm will generate revenue primarily from OS licenses. Microsoft will obtain licensing fees from smart phone sales, but it is focused on selling the back-end software to support wireless systems. Indeed, much of the battleground will move toward the back end, where synchronization (e.g., Microsoft's Mobile Information Server, soon to be incorporated as an integral part of Exchange) or application services (e.g., its .Net Framework) will give Microsoft an advantage that will help push more users in the direction of the Microsoft Pocket PC-powered smart phones. Even Lotus Notes, with its competing position to Microsoft Exchange, will have an effect on the smart phone market by determining which devices it will ultimately support as fully synchronized clients. The partnerships IBM makes with its WebSphere Everyplace platform (a competitor to .Net, with IBM recently signing a joint marketing agreement with Palm) will also have an effect on this market; the suite will likely support Palm, Pocket PC, and Symbian platforms.

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