iPhone Key to Long-Term Success May Be In the Software

By Ken Hyers and John Byrne

The hype that is the iPhone, fed by a perfect storm of skillful marketing, media stories and an underlying desire from consumers for the ultimate media-centric mobile phone, finally culminated on June 29 when the iPhone went on sale. In the first weekend it was available, customers bought nearly every single iPhone available, with the handset selling out in every AT&T store, and nearly every Apple store. Whether or not the iPhone--in the long run--is ultimately a success is unknown but the device has already changed expectations about what a full-featured mobile phone is and what it should do.

The iPhone has the potential to change the mobile industry in ways that have been well discussed over the past few weeks and months. Yes, the features are really cool--the touch screen, the gesture recognition, the graphics, etc. But one area that has not received as much press attention as it should is the iPhone’s OS X operating system, which integrates with other Apple products including the iTunes website. This means that the iPhone’s software is able to be updated on a regular basis, and that these updates occur seamlessly, in the background, with very little input on the part of the user. While updating smartphone software is not unique to the iPhone, the ease of the process is unique. In contrast to the iPod experience, updating a Nokia N95 (for example) requires more than a dozen steps on the part of the user, including manual backup of contacts and other personal information, and a notice stating that interfering with the update process by disconnecting the phone during update will lead to “severe damage to your phone and it may stop working.”

As any iPod user knows, during the process of syncing with iTunes, software refinements are frequently sent to the device along with digital music and video files. Bringing AT&T into the equation raises the possibility of downloading new applications and features that take advantage of AT&T mobile connectivity. In effect, the iPhone is a mobile computer that is constantly adding new services and features.

While no one outside of AT&T and Apple knows exactly what features might be added, one can speculate about the applications that will appear on the device. It’s unlikely that Apple will allow the iPhone to include media services from AT&T such as video, or music subscription services such as Rhapsody, that bypass iTunes. But other services, such as navigation software that takes advantage of the iPhone’s built-in GPS capability and gaming products that use the device’s gesture recognition, touch-screen and accelerometer, are likely. VoIP could also be another possible application if AT&T decides to offer a service using VoIP over WiFi similar to what T-Mobile USA is doing with its recently-launched Hotspot@Home service.

The iPhone has the ability to be an industry-changing device, not just because of the features it currently has, but because of the ability to add new features. Products and services, some as yet not thought of, will appear on the phone. While the hardware of existing iPhones won’t change, their software will, making the current iPhone less likely to go out of date in a year or two. This is good, not just for AT&T and Apple, who will be able to drive new services through the device, but for early iPhone adopters, who paid substantially more for the iPhone than for nearly all other mobile phones available on the market today.

Ken Hyers and John Byrne are analysts for Technology Business Research, a company-focused high-tech research firm based in Hampton, New Hampshire. http://www.tbri.com/