Over the past few years, Nokia has been gradually revealing pieces of a jigsaw. The mobile-handset behemoth announced a few days ago, its plans to launch the Nokia Booklet 3G, which will be powered by MS Windows. With this, Nokia is taking on Netbook manufacturers like Acer, Dell, HP, Asus, Lenovo and Toshiba, among others.
The Internet has become more mobile over the past couple of years, but from opposite directions: in the first case, users have taken the mobile route to the Internet, referred to as the Mobile Internet, by accessing websites from their mobile handsets. This has had its issues, since not all websites are geared up to fit into a smaller screen. The iPhone has helped address these form factor issues. On the other hand, the proliferation of Netbooks and laptops, which, helped by available WiFi networks and data cards, allows users to get the Internet experience on the mobile.
With the Booklet 3G, particularly by enabling GPS and a swappable SIM card on what appears to essentially be an Internet device, Nokia is marrying the Internet world with the mobile. The N97, which it calls a mobile computing device, was Nokia?s attempt at a similar connected device, but leaning more towards the mobile in the same manner that the Booklet 3G leans towards the Internet.
The other key piece of the jigsaw?and one that I don?t think has been executed well?is Nokia?s focus on becoming a services company.
Nokia began its transformation in 2008 by creating the devices and services business segments. At its last earnings conference call, Nokia CEO Olli-Pekka Kallasvuo spoke about bringing the devices and services segments together in a ?solutions? model. Kallasvuo expects the next billion users to access the Internet from a mobile device, not a PC, and this is driving the change in the way Nokia looks at itself.
There is more than just future-gazing behind this change. Services companies?particularly Internet services companies operating at scale?enjoy substantially higher operating margins as compared to handsets, particularly since handset margins have been driven down by intense competition in the low-price segment.
So it is not surprising that the Nokia Booklet 3G integrates some of the companies? own Ovi services?Maps, by virtue of Nokia?s acquisition of Navteq, synching of contacts and calendars between mobile and Booklet 3G, probably video and photo sharing by virtue of Nokia?s acquisition of Twango, and music downloads from Nokia Music Store. These services are built to work on both the Internet and mobile.
Nokia may be excellent at manufacturing connectivity devices, and establishing and managing supply chain and distribution networks, but it just doesn?t appear to be geared up for services. The Ovi suite of products itself lacks the finesse and usability of, say, the iPhone, or services from Internet companies like Google and Yahoo. Even though my username and password may be the same for both services, I still need to sign in separately to access my Nokia account and my Ovi account. Even the Ovi services listed at both account pages are different. If you?ve ever tried to embed a file uploaded to Ovi, you know how tedious it is. Services require an increased focus on the consumer and a focus on every little aspect of the usage of the service, and require quick adaptability.
Nokia?s advantage is its reach, and its dominance of the mobile market makes it essential for developers to create software for its platforms. Developers tend to be versatile and adapt quickly to consumer needs, and Nokia is encouraging both developers and content providers to create products for the Ovi store, while choosing to themselves focus on a few key services. Whatever the developers do, the success of Ovi will still be determined by the success of these key services. Keeping that in mind, Nokia is setting targets for its services business much like an Internet company?by measuring Active Users. The company has set itself a target of 80 million active users by the end of 2009, and as many as 300 million active Nokia users by the end of 2011.
But how does this play out for Nokia in the larger scheme of things? Think about Apple?s music service iTunes, and applications for the iPhones. Music on iTunes and applications on the iPhone are an incentive for buying iPods and iPhones. With competition increasing in the market, and the threat of the iPhone and phones from other manufacturers replicating its form factor, Nokia?s high margin high-end phone market is increasingly under threat. By focusing on Internet ready, high-end and connected devices, and then powering essential platform agnostic services like email, social networking, file sharing, maps and music Nokia is looking to give people reasons to buy and continue buying its devices, apart from higher margins for the services business. Services remain the most important piece of the Nokia jigsaw.
?The author is the editor of MediaNama.com