CCS Insight: Jolla's Sailfish OS takes on the mobile goliaths

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Geoff Blaber

Jolla is a startup dedicated to building a mobile operating system based on the MeeGo platform created by Intel and Nokia. In November, it showed off its Sailfish OS in Helsinki. The firm plans to launch Sailfish OS phones in 2013, with a focus on the Chinese market.

Jolla is a collection of ex-Nokia employees, many of whom worked on Nokia's first and only MeeGo device, the N9. The presentation event was ostensibly Jolla's formal unveiling of its strategy as well as the introduction of key components of Sailfish OS.

The user interface of the Sailfish OS is centred on the concept of seamless multitasking. It attempts to addresses a common complaint about today's operating systems and specifically Apple's iOS, which has been criticised for its heavily single-function, app-centric design. Jolla's approach is consistent with Nokia's original vision for MeeGo, which is apparent on the N9, and ironically, Sailfish OS also shares some of the goals of Microsoft's Windows Phone, which Nokia has embraced.

A demonstration showed multiple applications, such as the phone dialler and music player, being selected and then pushed to one side of the display to minimise the function as a widget on the home screen. This enables users to navigate around the phone while retaining full and immediate control of multiple applications and functions. Notably, the ability to quickly move between applications also echoes the "glance and peek" design ethos of Research In Motion's forthcoming BlackBerry 10 platform.

We believe Jolla's work further enhances a strong component of the vision for MeeGo. In contrast to the "tile" philosophy of Windows Phone, Sailfish OS widgets provide significantly greater levels of functionality. For example, users can access call controls and the dialler within the widget without having to fully open the application. This functionality is also available to third-party applications.

The demonstration also revealed the ability to use a single photograph to customise the theme permeating the user interface. This reinforces our view that over the next two years, innovation in user experiences will stem from new software platforms. However, innovation in user experience alone is not sufficient to establish a new operating system and its supporting ecosystem. Jolla faces a host of formidable challenges that will need to be overcome if it is to fulfil its ambition of becoming "a product company that sells great products with a great user experience and operating system."

In Helsinki, Jolla presented the familiar claim that the market needed another player and another ecosystem to balance the supremacy of Apple and Google. Although we believe Android faces fundamental challenges that threaten its ability to dominate the smartphone market in the long term, not least of which is a lack of profitability among licensees, creating and growing a viable alternative are huge undertakings.

This is the biggest single challenge facing Jolla. Microsoft and its partners, even with big advantages of scale, distribution, financial muscle, supporting services and content, and an established community of developers, are still struggling to develop a platform in Windows Phone that can compete effectively with Android and iOS.

Aware of the enormous task it is facing, Jolla argued that the lack of a legacy business is an advantage that will enable it to be a game-changer. CCS Insight believes this is a laudable argument, but only to a limited extent.

It is logical that ex-Nokia employees appreciate the disadvantages inherent in a large established company, particularly given the struggles MeeGo suffered in development within Nokia. By contrast, a nimble outfit of fewer than 50 employees will manage the development of Sailfish OS.

Yet Jolla's belief that it could disrupt the market runs counter to a shift in the balance of power toward Internet giants such as Amazon, Facebook and Google. It is no longer just manufacturers that are disrupting the mobile industry, but increasingly those from outside that are subsidising a presence in mobile to extend other business models such as advertising.

This is the new world in which Jolla must find a way to operate profitably. With the exception of Apple and Samsung, very few manufacturers are currently making money. While Jolla sees this as an opportunity and evidence that the industry needs an alternative, the company faces the same challenge. It must make a profit from hardware sales despite the disadvantage of high-cost, small-scale manufacturing.

Jolla's decision to target China is an obvious step: this market offers significant potential for growth. However, it will also be a priority for many other suppliers in 2013. Jolla will be competing either as an unknown brand or as a provider of "white label" devices against several manufacturers that have the benefit of much lower costs.

As much as the market may like the idea of diversity and choice, consumers are unlikely to be willing to pay a premium for it. A deal with distributor D.Phone indicates early signs of channel demand for Jolla devices, but whetting consumers' appetites will be far more difficult, particularly without a competitive range of third-party applications.

This suggests that licensing may bear more fruit. Although the software is open-source, Jolla will be counting on demand for its own custom implementations. In our view, demand for such offerings is questionable. And Sailfish OS has not shown that it is successfully building support from a vibrant range of developers.

In addition, there is also the question of intellectual property. Jolla is unlikely to have a significant war chest of patents, and this could leave potential licensees exposed to claims that elements in the software violate existing intellectual property.

Jolla's statement that Sailfish OS is "more than an ecosystem...it's a movement" is a bold claim. While the platform has a passionate community of enthusiasts, translating that into a scalable business is a huge challenge. If Jolla can successfully identify pockets of demand and tightly manage its costs, it may create a sustainable niche. Should it be even moderately successful, Intel and Nokia will look back wistfully at what could have been.

Geoff  Blaber joined CCS Insight in 2007 from IDC, where he established a reputation for informed qualitative analysis on industry dynamics, company strategies, product positioning and market forecasts. He is a well-known member of the analyst community and provides regular commentary to leading organisations such as Reuters, the Financial Times and the BBC. A longer version of this article was published as part of CCS Insight's Hotline service. For more information please see www.ccsinsight.com.