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PalmOS Tech Articles > #6, April 2002

The Future of PalmOS
What is Palm Doing Anyway?

What a roller coaster ride! The year 2001 seems to have been a turbulent year for Palm, filled with organizational and management changes, the death of the dot-com economy, lackluster product releases, and the onslaught of the Microsoft marketing juggernaut. Many people have started asking, "Hey, what is Palm doing anyway?" and wondering how strong Palm's grip is on the handheld market. Even the PalmSource developer's conference seemed to lack the big announcements and excitement of prior years. And yet, in the background amongst the chaos, Palm has been quietly been laying the groundwork both technologically and structurally for a major assault in the handheld commerce battlefield.

Palm's Product Line
In the last twelve months or so, Palm has brought some new members to the PalmOS family, including the m500, m505, m125, and i705 handhelds. While generally healthy, well-received additions sporting new expansion capabilities, always-on wireless access, and color in the smallest form factor yet, the new units were sometimes eclipsed by their flashy cousins brought to the party by other PalmOS licensees Handspring, Handera and Sony.

While it's only natural for our excitement about a company to be tied to its hardware releases, it's important to remember that the Palm name also represents software--the PalmOS operating system--the digital backbone behind all PalmOS-Powered handhelds. A Better Business Model
The hardware business is tough--a business plagued with razor-thin margins, inventory headaches, supply shortages, and product obsolescence. Most analysts would agree that making software is often a much better business. There are often no cost-of-goods, warehouses, or raw materials to worry about. And yet, the futures of software and hardware developers are inseparably tied together. Software programs are useless without the devices to run them, and most hardware platforms owe their success to one or more "killer apps" which made their purchase worthwhile. How would the Apple-II have sold without Visicalc... the IBM/PC without Lotus 1-2-3... the Nintendo without Mario?

The software developers who make those killer apps want to be successful too. After all, someone has to afford all those new-fangled gadgets and devices that keep the whole ball rolling. So developers tend to write programs for platforms that can offer the biggest crowd of program-using, registration fee-paying customers. And "lots of customers" requires "lots of devices;" typically more devices than a single company can create and market on its own.

Palm, in all their wisdom, has realized that their ultimate fate depends not just on the sales of individual devices, but on the success of the platform as a whole and the widespread adoption of PalmOS as a defacto standard. In July 2001, Palm announced that it would separate the hardware and software components of its business into separate companies, a process that has recently completed. The hardware company kept the "Palm" name, while the software group responsible for the operating system is now called "PalmSource."

More than just a move to clarify the operations of the two groups, the division was meant to help attract experienced electronics and cell phone manufacturers. Otherwise, they might feel they would be competing directly against one half of Palm while supporting the other half. Indeed, the success of new devices from Handspring, Sony and Samsung testify not to shortcomings in Palm's ability to innovate, but in their success at expanding PalmOS beyond a one-company standard.

Another large change will be coming this summer in a new update to PalmOS. Version 5.0 expands beyond the classic Motorola Dragonball processor used in current handhelds to support faster ARM chips. Often seen simply as a way to boost high-end performance to compete against PocketPC devices, the significance of the change is often overlooked. After all, do we really need our Datebook apps to run any faster than they already do? More importantly, the new operating system makes PalmOS a multi-platform operating system, helping to welcome more manufacturers into the PalmOS fold. After all, it gives them more choice, and many cell phone manufacturers already have a sizeable investment in ARM technology. Perhaps more significantly, it doesn't lock them into buying a key component from Motorola, a big do-everything company which makes amongst lots of other products... a line of cell phones of their own.

Widening the Market
Microsoft, which is now aggressively pushing their alternative PocketPC platform, is no doubt very familiar with this widen-and-conquer approach. After all, no one has benefited more from the dominance of the PC platform than the Bill's behemoth. Will history repeat itself in the handheld space? Perhaps. But would that necessarily mean that Microsoft would win? Perhaps the ultimate soothsayer--history--can help us discern the answer.

Stanley Steamers
At the turn of the century (no, the one before that), two competing technologies jockeyed for the lead in a race for dominance in a new, emerging product market. The battle was over horseless carriages, and whether steam power or the gasoline-powered internal combustion engine should drive them. The Stanley twins of Massachusetts were major players in the field, building their first light steam car in 1897. Their "Stanley Steamers" enjoyed brisk sales, with good reason. Steam cars offered many benefits over gasoline-powered cars, including mechanical simplicity, better reliability and power, and the ability to run on virtually any fuel, including coal, kerosene, natural gas, or even wood.

And yet, even with strong early technology, by 1915, steam cars were clearly losing the race to their gasoline counterparts. A key reason for the change was the emergence of the Ford Model T in 1908. The Model T's success came not from technological superiority but in how it was made; Ford invented mass production techniques to create Model T's cheaply, while Stanley Steamers remained crafted one at a time by hand. Because Model T's were so affordable, they were sold in great numbers, making them, and their gasoline-powered engines, the "defacto" standard of the day. This market dominance nurtured the growth of a nationwide network of supporting gas stations, further solidifying gasoline's lead over steam. More importantly, the increased momentum accelerated research in gasoline-based technology, so that even the early advantages steam power held were eventually surpassed in the following years.

Apple Computer
Nearly a hundred years later, a similar situation played itself out on the desktop battlefield between rival computer operating systems made by Microsoft and Apple Computer. In the early 90's, Apple's elegant Macintosh operating system enjoyed a clear technological lead over Microsoft's early Windows 3.0 PC product, which was at best a feeble copy of the Macintosh OS. With such a clear difference between them, Macintosh supporters expected consumers to embrace the new devices wholeheartedly, leaving clunky PC's behind. However, against the objections of some within the company, Apple priced their computers at a premium, pricing no offerings at the level of their PC counterparts. Rather than growing their market share by making inexpensive machines or licensing their operating system to clone manufacturers (which they eventually did too late), Apple executives gleefully followed slogans such as "fifty-five or die", referring to the demand for a 55 percent profit margin by then Apple-France president Jean-Louis Gassee.

In the long term, this strategy would prove shortsighted, as the lower price of PC's helped solidify their dominance in the market, allowing history to repeat itself. In the same way the Model T helped drive innovation in internal combustion engines, the dominance of the PC helped drive and fund development of PC-specific peripherals, software, and even the operating system itself. As a result, PC's and Windows have steadily improved in the years since, to the point that technological superiority on either side is an arguable point, something unthinkable just a decade earlier. Today, while Apple still maintains a small loyal following, it now has no reasonable hope of unseating PC's running Windows, and the once real hope of capturing the dominant position in the desktop computer market has long since faded.

Deja Palm
Today, the PalmOS platform finds itself in a similar race with its PocketPC rival. Oddly enough, this time, Microsoft finds itself in the underdog position against PalmOS, an operating system created and supported by many ex-Apple veterans, supporters and developers. Like the Macintosh of the 90's, PocketPC handhelds are often perceived as being more powerful than their counterparts, PDA's running PalmOS. This time, however, Microsoft is the one burdened by inflated prices--this time not a choice but a consequence of high minimum hardware requirements needed to run the bulky PocketPC operating system.

As a result, PocketPC manufacturers have made little headway breaking below the $400 price barrier, the cost of a basic desktop computer. Entry-level handhelds running the relatively svelte PalmOS operating system, however, face no such limitation, routinely selling for less than $100, a far more consumer-friendly price for people with bills, car payments, children, pets, and other numerous money-eating expenses.

While PocketPC's have made little progress on the low end of the market, PalmOS forces continue to advance on the high end, giving even the most financially-capable strong new choices in the PalmOS camp. The past year has seen the appearance of no less than three PalmOS-powered phones, high resolution displays surpassing those found on PocketPC's, and countless innovative software releases, including a few from companies with pleasant colors in their names. If this momentum continues, and there's no reason to believe that it won't, there's a good chance history will repeat itself yet again.

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