Services, not specs, will win the day in smartphones

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BARCELONA, Spain--Trade shows like Mobile World Congress are often as notable for what is announced and displayed as they are for what is not mentioned. I think that's the case this year as far as mobile devices go. There have been a flurry of device announcements but very little in the way of services to accompany all of that flashy hardware, which could pose a serious problem to OEMs as they try to differentiate themselves.

Coming into the show we knew that there would likely be devices announced sporting beefy specifications, including the first quad-core processors. And sure enough, there have been numerous devices with Nvidia's Tegra 3 quad-core chipset inside, including versions of HTC's One X, LG's Optimus 4X HD and ZTE's Era smartphone. However, while the performance of these devices may be impressive and immersive, they do little to add value to the user experience that OEMs can latch onto and drive home to consumers.

Understandably, some companies, including Huawei and ZTE, wanted to make statements that they can produce top-of-the-line devices that have the latest and greatest screen technology, processors and other bells and whistles. Yet it's becoming more clear than ever before that feeds and speeds alone are not going to cut it, especially when OEMs seem intent on slimming own their portfolios (more on that in a little bit).

With a few notable exceptions--HTC's ImageSense and Music Hub, Nokia's (NYSE:NOK) Reading and Transport among them--services have been largely absent from the discussions of new devices. 3D or true HD screens, LTE data connections and quad-core processors are all great talking points for devices, but competing solely on hardware differentiation is a losing game. Sooner or later, all hardware innovations become standard. What creates "sticky" customer experiences, brand loyalty, market differentiation and, in my mind, ultimately respect, are value-added services on top of that hardware. OEMs need to be thinking about this as a top priority, now more than ever. "Specs do get a lot of noise," Chris Weber, the head of Nokia's operations in the Americas, told me. "I think at the end of the day, consumers care about experiences, and we're very focused on that."

Part of the reason services will become so crucial is that OEMs seem intent on simplifying their portfolios and reducing the number of SKUs they have to develop and market. HTC has said its One series will be its premier product line this year as it slims down its portfolio. And Alain Mutricy, Motorola Mobility's (NYSE:MMI) senior vice president of portfolio and product management, told me that starting at the beginning of 2011 Motorola made a conscious decision to begin slimming its device portfolio.

If handset makers release fewer products (in order to maximize their marketing and reduce clutter), then their products will need to be that much more effective. That means vendors will need to offer truly differentiated services and not just me-too hardware. In other words, devices need to be not just a purchase, but an experience. I hope they can deliver. --Phil

P.S. Here are some the tidbits I have heard at the show so far:

  • HTC CEO Peter Chou said he knew Nokia would try to top the camera on HTC's Titan II, which sports a 16-megapixel camera. Sure enough, Nokia announced the 808 PureView, which has a 41-megapixel sensor. At the keynote they shared, Nokia CEO Stephen Elop took Chou's picture with the 808 while he told the story.
  • Due to student protests, the GSMA closed the Plaza Espanya exit, which is the main entrance and exit to the Fira. "The police have the situation under control, and attendees should go about their business as usual in the Fira de Barcelona," the association said.
  • AT&T's Ralph de la Vega provided two excellent examples of the future of machine-to-machine communications during his keynote speech. He said a current project is fitting sensors within the roots of crops to let farmers know when best to water them, and, in a separate example, he said trash dumpsters are being fitted with monitors that will let garbage trucks know when the bins are full and ready for pickup.
  • According to a survey cited by Vodafone, 33 percent of respondents would rather give up sex than their mobile phone for a week.

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