Musings on the iPhone 5, market maturity and open systems

13 Sep, 2012

I like open systems. Always have, and probably always will. It's partly because open-ness begets more innovation, partly because open systems are easier for startups, and partly because I don't like the way companies that dominate closed systems bully the other participants. The last two points are illustrated well by Apple's recent ejection of the iKamasutra app from the app store – an app that had been in the app store for 3-4 years, and had grossed millions of dollars and 9 million downloads.

On this score at least the last couple of years haven't been kind to me. Apple's closed ecosystem remains very strong, Android has done well, but has itself become quite a closed system (although at least you can add unapproved apps to your phone, if you can find them), Amazon has made great strides with it's own closed ecosystem, and most recently HTML5 has been found wanting in comparison with native apps.

One of the side theories in Clayton Christensen's Innovator's Dilemma is that in periods of rapid product evolution then integrated supply chains dominate, but as the product evolution slows down the interfaces between different elements of the product can standardise allowing specialist firms in each area to come to the fore. He gave the PC as an example – in the beginning everything was made by companies like IBM, but over time it made more sense for them to buy more and more components from third parties – e.g. disk drives, graphics processors, RAM chips.


This logic suggests that as products become more mature then their ecosystems should become more open. The fact that hardware, software and key web services have remained integrated on mobile has made me wonder whether the pace of change is now so fast that products no longer mature in the way the PC did.

I'm now wondering if I was just didn't allow long enough for smartphones to mature.

Unless the first thing you do when you turn your computer on is read this blog (hello mum!) you will by now have seen details of the new iPhone5. The headline is that the improvements are incremental rather than revolutionary. Compared with the 4S the iPhone5 has a 9mm taller screen, is 20% ligher, 18% thinner, the processor is twice as fast, has three microphones instead of one, and a slightly better camera. There is nothing new. Techrunch thinks "It's not as earth-shatteringly different than the iPhone 4S, to be sure." and Adam Leach, analyst at Ovum, wrote that the incremental nature of the upgrade shows "how mature the product is".


If Leach is right that the iPhone is mature then the next version will simply be another incremental improvement, and smartphones from Samsung and others will similarly move forward in steps rather than leaps. This will create time and space for standardisation of the interfaces with app stores, media players and the like, which would enable third parties to play in these spaces, ushering in a period of greater open-ness in the ecosystem. That would be good for iKamasutra and other startups, and good for the consumer to. As evidence for this conclusion I would cite the fact that iTunes, the App Store, and Google Play aren't shining examples of great software development, and that app discovery is little better than you would get from a printed catalogue.

Nic Brisbourne is partner at DFJ Esprit, one of Europe's leading venture capital firms.  The post has been reproduced with the author's permission from his blog, The Equity Kicker.)

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