At the recent Smartphone Summit at CTIA, I sat on a panel with Johan Sandberg, CEO of UIQ. When asked about what was needed to make mobile services more successful in the future, Johan smartly replied “we need to make it cheaper to fail”. I could not agree more. One of the major differences between the wireline Internet and the mobile Internet is that you can successfully start-up a wireline Internet company using a couple of credit cards. Development and distribution is relatively low-cost given that most people are reachable using one of three browsers supporting XHTML and AJAX technologies. If at first you don’t succeed, tweak it and try again. Everything is in a perennial “beta” state.

Compare this with the mobile Internet. The browsers are sorely lacking in features and fragmentation is considerable given the impossibility of most subscribers “upgrading” the browsers they already have. Network latency only compounds the problem, leading most developers seeking widespread adoption to look towards client-server architectures.

We currently support client development on Windows Mobile, BlackBerry, Palm OS, Java, Symbian Series-60, UIQ, BREW, and we are hard at work on the iPhone as well as on various interpretations of AJAX and Linux. I truly believe that you have to be willing to roll up your sleeves and do the hard work if you want to be successful in today’s mobile environment.

This week, Google finally made it’s grand entrance into the mobile arena with Android and the Open Handset Alliance. I have already had a dozen people ask me what I think about this move. My initial reaction was more of a “so what”.

This seems to be the case of a company not really understanding what the market needs. If I look at the current value chain or ecosystem and their needs, neither Android or the Open Handset Alliance seem to be nailing anybody’s need.

Let’s start with developers. There is no doubt that developers would like to have a deeper and richer programming environment on the phone. But if you spend time with the OS vendors for phones today, they will tell you that they could offer a richer programming environment but they do not for reasons of security and privacy — mostly brought on by the mobile operators that buy these phones to resell to consumers. Until the operator’s indicate that they will relax these concerns, I am skeptical that we will see widespread availability of truly open Android phones (vs. neutered Android phones).

Furthermore, Android says nothing about addressable market. Other than hobby shops and verticals, most developers need to focus their efforts on the devices used by their target demographic. For Android to be truly relevant, millions will likely need to be sold. Apple has done quite well with the iPhone, but consumers by the iPhone based on the form factor and user experience — not the operating system. Android will need to be in some really cool devices from really strong brands to see that kind of success.

Let’s look at the handset manufacturers. The handset manufacturers sell phones based on form factor, price, and 2-3 features understandable by the mass market. As I pointed out in a recent post, when I was in the UK a couple of weeks ago, the OS was not considered a feature of the handset — you could not tell what OS a phone used at the point-of-sale. For most manufacturers, most of the profit associated with a new handset comes in the first couple months of launch — when the price point is high and there are no competitors. As such, most handset manufacturers are incentivized to user mature operating systems for their big volume handsets — no sense in risking profit for something that has no material relevance at the point of sale. Hence Nokia’s allegiance to Series 60 and Motorola’s investment in UIQ. The one shining light for Android is if they provide a “killer app” that is exclusive to the Open Handset Alliance handsets.

Let’s look at the mobile operators. Mobile operator’s are looking for ways to differentiate from their competitors, increase subscribers, reduce churn, and increase ARPU. One way they do this is to get exclusive handsets or first mover advantage. So it is not surprising to see some operator’s on the list of partners. Traditionally, mobile operators have struggled with handset manufacturers to differentiate the handset. It was in the handset manufacturer’s benefit to keep differentiation low so they can increase volumes and reduce costs (one reason why GSM handsets are cheaper than CDMA handsets). Having an “open handset” is one way to get that differentiation. But “open” brings with it the challenges of “security” and “privacy” that I mentioned above. It cuts both ways. As such, I expect most operator’s to neuter Android handsets to meet their own requirements, subsequently reducing the addressable market for developers.

Lastly, we have the consumer. Consumers mostly buy handsets based on form factor and price within a “lifestyle” category — messaging, music, and photography being three of the more common. If the Android can create a new category that is meaningful to the consumer, then I think it has a chance. If not, then and Android phone needs to compete with the all of the other phones with respect to form factor and price.

Will Android solve world hunger for data services? I truly hope so. I’d love to reduce the cost and time-to-market for innovative services. I’d love to make it easy for subscribers to discover new services and developers to distribute the ones that they build. But nothing in the press releases or websites leads me to believe that they are solving problems in the critical path. I hope I am wrong and I am looking forward to the SDK for a glimpse on which way the wind will blow.