Information Age: News, analysis & insight for IT & business leaders

Perhaps more than any other technology sector, the telecoms and wireless industry has been through a torrid time.

But the majority of mobile application developers are now destined for a long period of prosperity. So says Forrester Research, which argues that there has been a notable increase in interest from enterprises and the rate of adoption of mobile applications has never been more rapid.

This is due to several reasons. Emerging technologies - including Linux, Java and .NET - have created new opportunities for developers. The adoption of wireless local area networks (LANs), the proliferation of hotspots, a better end-user experience on 2.5G networks and improving economic conditions in the US and Europe have driven demand. And the downturn has helped to weed out suppliers with the weakest business plans and technologies.

That might be good news for the large enterprise application companies such as PeopleSoft, SAP and Oracle. But what about the niche providers - many of which have been targeting vertical markets with specialist products and services? "Many small vendors continue to struggle and some will still fail before the end of 2004," says Carl Zetie, a Forrester Research analyst. "Nevertheless, small vendors that have managed to successfully ride out the worst of the past two years of retrenchment are, even for those who are not yet profitable, well poised to reap the benefits of the emergent upturn."

It is a view not shared by everyone, however. Many sceptics still believe that the market faces some fundamental challenges. Rather than mobile application technology providing a catalyst that allows companies to revamp business processes and free workers from their desks, the pessimists argue that mobile IT will be limited only to improving the efficiency of workers that are already mobile. Put another way, the majority of mobile uses have already been discovered - and they are not in sufficient quantity to support a large software market.

But Zetie is certain that the market is poised for growth. "We are optimists and don't believe this will happen," he says.

Even so, Ovum, the telecoms research consultancy, argues that the enterprise sector is a tougher, more complex and smaller beast that many people in the mobile industry fail to appreciate. Becky Clark, CEO of NetDespatch, a provider of web-based application services that enable collaboration between transport and logistics providers, agrees. She believes that the market is not about to take off quite as optimists are forecasting. "But it should be a significant market as long as developers manage to convince companies that they actually need what they are selling," she says.

Telepartner, a UK-based supplier of mobile data software for field workers, argues that there has been a shift within the industry to a much more realistic view of its prospects. "The market just isn't as big as was originally forecast," says Lindsay Kennedy, managing director of Telepartner. "I believe that there's a healthy scepticism out there now. Overall, the market is continuing to grow and there is still a significant opportunity for providers, with the right offerings, to grasp."

Others think the process of market consolidation has a long way to go. Rob Loughan, CEO of Dexterra, which offers a suite of field force automation applications and a mobile enterprise platform for customers, argues that, despite the retrenchment, there are still far too many niche application providers. "It's very much like what we saw in the CRM [customer relationship management software] marketplace a few years ago," he says. "Back then, there were almost 100 companies; today it's no more than about 10 worldwide. I reckon we'll see something along similar lines in the mobile applications space."

Loughan, however, does believe that life for the larger players and a few niche providers will be pretty good in the near term. "Mobile applications are starting to enjoy a decent enterprise adoption rate with software becoming more affordable and less risky for companies to try."

Growing challenge

The challenge for both large and small providers, argues Jeremy Green, an Ovum analyst, is to pacify enterprises' desires concerning cost reduction and control. This includes products that enable the organisation to take more control over user behaviour - such as limiting or preventing some phone calls, products that reduce the cost of calling company mobiles and offerings that bring some mobile traffic back into the corporate network.

He also warns that products that provide benefits to the business by extending mobility and connectivity to parts of the workforce (but that consequently increase mobile costs) will tend to be received with only a passing interest by most enterprise customers.

Additionally, Green argues that enterprise users can be split into two groups: management and knowledge workers, which are likely to be provided with sophisticated devices; and the truly mobile users. The latter group, surprisingly, is often not even provided with wireless devices despite the fact that their need for communications on the move is arguably stronger than the first group. Green adds that employees in many cases are not truly mobile (even in apparently 'movement-orientated' industries, such as transport) and enterprises are often reluctant to spend here.

Imogen Harris of Forrester Research argues that, although more than 70% of firms have experimented with mobile projects, only about 2% have gone to the trouble of 'mobilising' their existing enterprise applications. Uptake has stalled, she says, because suppliers have focused on sales automation instead of addressing process improvement, knowledge management and customer interaction that arguably offer a better return on investment.

Meanwhile, a strong cash position (which includes the ability to fund expansion as prospects improve) and unique selling points (especially key to niche players differentiating themselves from their competitors) are - according to Giga - also of paramount importance to developers.

Partnerships are the smaller suppliers' biggest concern for now. This is because bigger companies can help them with sales and marketing, systems integration and project management. Many have signed agreements with mobile operators, PBX vendors, fixed-network operators, IT vendors, value-added resellers, systems integrators and consultants that focus on specific forms of enterprise mobility in their target markets. Forrester has found that the majority of large enterprises will not deal with mobile application companies with fewer than $50 million in revenues or deal sizes below $100,000. "This rules out virtually all niche enterprise mobility vendors unless they form reseller partnerships with tier one vendors," argues Harris.

Big companies are helping in other ways. According to Telepartner's Kennedy, the most critical area of the provider's marketing is at seminars and exhibitions. "The best response that we get for our applications tends to come this way," he says. "Direct face-to-face salesmanship like this is the best way to address customer concerns regarding cost, implementation, whether the application will work and if the company can cope with the change in its working practices which the application will create."

However, partnerships do come at a cost. Large fees and revenue-sharing arrangements tend to draw most of the revenue to the senior partner, while there is a question about which partner truly 'owns' the customer.

Technical barriers

The market must overcome a number of obstacles before mainstream enterprises are confident enough to invest. Concerns about mobile security remain high on this list of concerns. There is also a sense that underlying technologies keep changing: early adopter enterprises have found they have had to alter their software so it can cope with new platforms.

The fragmentation of mobile operating systems has not helped. Enterprises have a choice of Symbian, Microsoft, Palm, and, increasingly, Linux. The delays in the rollout of 3G (third-generation cellular) services has also held back adoption.

The fact that there are multiple variants of mobile Java - Java 2 Micro Edition, more sophisticated J2ME variants (like CDC Foundation and Personal Profiles) and one for high-end PDAs - has caused yet more difficulties for developers. Plus, the emergence of mobile applications has triggered the development of an ever-wider range of mobile development and delivery tools.

But many analysts warn that, although tools are maturing, developers should still consider them as tactical purchases, to be replaced within 36 months.

"Overall, tools and practices are improving, but applications are becoming bigger and more complex, and platforms are competing for leadership," says Jones. "The key to developer success will be agility and a tactical perspective."

If these barriers can be overcome, the mobile application sector may truly be able to live up to Forrester's bold claims. But for now, at least, it remains a big 'if'.