Tizen and Samsung’s Major Strategic Issue

Samsung has recently (April 16, 2014) once again stated its plans to launch a Tizen-based smartphone – this year. While we believe that the tipping point has finally been reached for Samsung to move ahead with Tizen in the marketplace, we do not believe that, even if Tizen is successfully introduced, it solves Samsung’s major strategic issue.

Tizen, the open source OS, is at the crux of a number of vital strategic issues for Samsung. Tizen may have in the past been a sort of media joke, because of its numerous delays, however, Samsung has reached a critical point where it must move ahead with Tizen.

Because of the success of Android and iOS there has been an assumption in many quarters that there simply is not room in the mobile market for a third major OS. We do not accept this assumption.

Samsung represents over 40% of Android smartphone sales. It is, in fact, hard to imagine what would have happened to Android absent of Samsung, since no other Android supplier has more than about 6-7% of the Android sales.

The primary possible contenders as new mobile OSs are: Tizen and Ubuntu. Tizen is an OS initially resourced by Samsung, with support by several other partners, notably Intel. (Tizen resides within the Linux Foundation.)

Samsung’s immediate motives are pretty clear. Its mobile segment accounts for over 50% of its revenue and nearly two-thirds of it operating profits. Its bottom line is deeply affected by the double-digit license fees, per device, that it has been forced to pay to Microsoft for Android, due to transcoding IP. In addition, Samsung is constrained as to the control structure of its own Android products due to Google’s OS control and certification rules. Last, but not least, Samsung in thinking that the global carrier community is their customer, permit the carriers to disenable key feature sets on their products. We cite a prime example of this later.

Essentially Samsung is beholden to Google as to where its product and services extensions can go in the future.

Google is obviously more interested in maximizing, Google search, Docs, Plus, and Drive than the ASP of Samsung’s devices. Android smartphones come with basic Google apps embedded by license agreement.

Tizen is as close as the global smartphone ecosystem has to an alternative to Android. Tizen started life with three evolutionary roots: 1) Bada was Samsung’s ill-fated attempt at a go it alone smartphone OS; 2) Meego was the last gasp of Nokia to create a competitive platform against iOS; and 3) Linux is of course the native common core for open source global OSs, initially designed for desktops.

In addition Tizen starts with HTML5 incorporation, in contrast to Android and iOS having to incorporate HTML 5 as they evolve.

The greatest weakness of a new OS in the smartphone market is the lack of apps. One begins 500 thousand to one million apps behind in the case of Android and Apple iOS, respectively. The answer for Samsung, being close to Android’s version of Linux, is a translation app.

One such translation app was announced in February 2014 by Infraware, a well established, South Korean software developer. The app ports Android to Tizen in executable format. The principal drawback, which may be a serious one for many developers: the Infraware price is reported to be $5,000 per license for a developer.

Two things need to be considered, if this is to be the holy grail that Samsung will need to have Tizen pose as a real challenger in the smartphone area. The first is, does it work well. Early reports say yes but there is a wide range of Android releases in the market and a wide range of matching Android apps. Therefore thorough testing is needed to note the limitations of this porting scheme.

The second is Google’s acceptance and support of certified Android developers and users promoting this porting activity. In addition will Google’s future Android releases make this porting scheme effective, both going forward and will it be backwardly compatible.

Other solutions are appearing for Android-to-Tizen app porting. For example OpenMobile, a Massachusetts-based company, has announced planned release of its Application Compatibility Layer for Tizen, which “enables Android apps to run on non-Android operating systems.”

In addition, Samsung has been spending resources on cultivating a Tizen-based ecosystem of apps developers.

While the motivation for Samsung’s wanting to plunge into the, admittedly high risk, area of a new smartphone OS is obvious, there are at least three other driving factors for it to pursue Tizen aggressively.

First is the Proliferation of New Types of Mobile Devices, most obviously led by wearables. This factor was evidenced by Samsung’s debuting Tizen at the 2014 MWC (Mobile World Congress) as the OS on the Gear 2 smartwatch. (Samsung has also (April 2014) indicated that it will use Android Wear in a forthcoming smartwatch and, on the recently released Gear Fit – activity tracker and watch – Samsung employed a realtime OS, not Android or Tizen.)

Second is the looming growth of the IoT, Internet of Things. The IoT is premised on the idea that all things will be intelligent and therefore that the intelligence can be accessed and used. It appears obvious to us that Samsung would clearly have to avoid paying license fees and agreeing to limiting terms and conditions relative to their almost endless array of consumer products – toasters, ovens, refrigerators, other white goods, et al. The same consideration applies to the emerging classes of mobile devices, such as wearables, discussed above.

Third is the fact that the tablet and phablet classes of devices are not mature. While Android and iOS clearly have their hooks into the tablet area, it is premature to simply lump it with smartphones regarding the outlook for alternative OSs. Our projection is:

Tablet/Phablet OS Outlook: 2014 vs. 2016+

Android/Chrome Chrome
Windows Windows
Ubuntu – Tizen

Samsung believes that Tizen has key differentiators from Android and iOS by its being able to alter key operating parameters, such as power consumption and feature sets to better conform to a particular device’s user requirements, e.g., a smartwatch. Jong Deok Choi, EVP and Deputy Head of Samsung’s Software R & D Center, publicly stated at MWC 2014, that Tizen is customizable to the device.

A further indication of the substantive nature of Samsungs’s Tizen plans are the comments of Hankil Yoon, Senior VP of Samsung’s product strategy team, who stated that Samsung will commercially deploy two Tizen smartphones in the second quarter 2014.

While we believe that the tipping point has finally been reached for Samsung to move ahead with Tizen in the marketplace, we do not believe that, even if Tizen is successfully introduced, it solves Samsung’s major strategic issue.

We label that key issue as the need for a marketing “wrapper.” Samsung is a company with great research and great products. However, to the extent that it relies on being a hardware producer, it will constantly face being commoditized in the marketplace.

Consumers, almost without exception, are undoubtedly unaware of the full range of services that Samsung offers today. The reasons for this lie partly in the company’s marketing area. It is, first of all, limited by its reliance on carriers for its marketing. With an array of services, such as chat, music, mapping, etc., it needs to establish, what we call a “wrapper” such as a “Samsung account” that the user can relate to. Samsung does have an iTunes-like account system; we have met no one who knows about it!

In Apple’s case, the obvious most notable example, the user must become an iTunes account holder when they activate their phone, creating a direct portal between Apple and the user. The user benefits from Apple’s certification of apps, the updates, and there is the efficient Apple back office.

It’s interesting to note that in the ongoing Apple-Samsung patent case, Apple maintains that Samsung needed to pilfer Apple’s IP to succeed, whereas Samsung says, no, we just had to copy your marketing.

A further example of the inability of Samsung to follow through with their marketing assets, is the recent launch of the Galaxy S5 with an outstanding feature known as “Download Booster.

Download Booster is a device capability on the Galaxy S5, which permits the simultaneous use of both LTE and WiFi channel resources for a download, thereby radically increasing the download speeds and therefore reducing the download time for a given user. This can easily mean halving the time to download a file or movie. Unfortunately this feature will be disenabled on Galaxy S5 sold byVerizon, Sprint and ATT, as of this writing. The carriers claim this feature needs more testing and evaluation.

We do not regard the issue of a wrapper as solely a marketing question. We think the issue is deeply embedded in the type of organization that Samsung is, which we acknowledge to be a very superior product developer and manufacturer.

The issue reaches down to the very question of who’s in the brain trust that brings the product together. The product today must be more than a combination of hardware and software.

In the Mobile Cloud Era, products are no longer just devices, they must be devices wrapped in software integrated with cloud computing services and applications. Samsung has to imbue this realization throughout its organization.

* Photo by Karlis Dambrans [CC-BY-2.0], via Flickr Creative Commons