Can the Consumer Electronics Industry Regain Its Former Glory?

It’s been a rough few years for those firms selling consumer electronics; the lack of new formats and technology advances combined with razor-thin margins and increased competition from non-traditional competitors has taken its toll. Philips has finally thrown in the towel after years of struggle; Sharp is on a knife-edge; Sony has recently stemmed its haemorrhaging of money but is still making a loss; and Cisco has given up on its consumer aspirations.

What has caused this massive decline? Consumers are still buying “technology,” so someone is doing well. Why can’t CE firms compete?

  • “Hi-fi” and audio/visual component are obsolete. For many consumers, A/V components have become redundant. Low-quality MP3 files broadcast through dock speakers or [shudder] mobile phone speakers seem to be good enough for many consumers, particularly Millennials. Headphone manufacturers also do well out of this — Beats, Bose, and Sennheiser dominate — but again aren’t the CE giants.
  • TVs just don’t make money. Most households now have at least one large flat-panel TV and probably still watch predominantly standard definition content on it, so why upgrade? 3D hasn’t been the miracle cure that many manufacturers hoped for, and 4K resolution TV is still several years out from the mainstream. Even worse, when firms sell TVs, they often lose money; the margins are slim, shipping is expensive and retail stock is often discounted / returned.
  • Content has starting flowing across multiple devices. More importantly, new competitors like Apple, Microsoft, and even Amazon have stormed the market with newer, digital, connected devices that often have supplementary business models (iTunes, Xbox games, etc.).
  • It’s the economy, stupid. As chains like Best Buy and the UK’s Comet have discovered, it’s not just that consumer preferences have shifted; people are laser focused on reducing those big-ticket discretionary items. New TVs, appliances, and holidays — for which people often bought new cameras, MP3 players, and portable media like DVD players — top that list, unfortunately.

Can CE firms recover? There are two schools of thought here.

No they can’t:

  • Big-ticket, one-off, branded CE purchases are a thing of the past. Future consumer technology purchases will tie into an existing ecosystem far more than in the past. As such, those firms that own that ecosystem — Apple, Amazon, Google — will increasingly call the shots in terms of hardware.
  • Enthusiasts have moved on to Kickstarter and homebrew hardware. While there is still a market for niche hi-fi — firms like Sonos do quite well — this is a shrinking market consisting of consumers who buy a new turntable twice in their lifetime. More damningly, those hi-fi and electronics buffs who in the past would have supported new ideas from the likes of Philips or Sony increasingly look at interesting kit from Kickstarter projects or even put together their own hardware with homebrew equipment like the Raspberry Pi.
  • Scale and software are beating out quality and brand. As Samsung has demonstrated, you just can’t compete if you don’t have massive scale. “Quality” becomes a somewhat esoteric argument when the vast majority of your digital components are sourced from the same firms (often Samsung!) and assembled in the same Chinese factories as your competitors. Suddenly, the only differentiator ends up being the user interface and software (and OS) — fields where hardware-obsessed CE firms have repeatedly failed to show any aptitude.
  • Flexibility trumps quality. As content travels across ever more devices, arguably at lower quality than ever before — see streaming versus Blu-ray or MP3 versus vinyl/CD — the quality of the individual hardware components matters less. Why spend $2,000 on an HD TV when you end up watching most video content via iTunes on an iPad?

Yes they can:

  • There is still a place for well-designed and well-built devices. Many consumers want devices that will last for years (without the non-replaceable battery failing) or devices that perform single functions excellently rather than many functions adequately — still the case for digital cameras versus cameras built into smartphones. CE firms have excelled at these devices in the past and have only recently become obsessed with competing (unsuccessfully) with Apple.
  • Some firms are still doing OK. If you looked at Samsung’s results, you’d struggle to see the crisis. Similarly, there are some (admittedly weak) signs that Sony has turned the corner. What we are seeing at the moment is the weeding out of the weak and obsolete — firms that didn’t move with the times or (like Philips) have better chances/margins in other categories like medical and personal health devices.
  • Delivering seamless connected experiences without all that IT is still a pipe dream. The “IT” firms — and I’d count Apple, Microsoft, and Amazon among these — that have now encroached on the classic CE firm space talk a good talk about seamless experiences and streaming etc., but many of these components still don’t work as advertised or are prone to network and copy protection issues. Classic consumer electronics, on the other hand, were engineered to work in pretty much any operating environment without the need for a detailed knowledge of how to configure your router’s firewall.
  • CE firms are still best for truly independent content experience aggregation. CE has always been somewhat standoffish about “content” — opposing blank media taxes and generally taking the approach of “consumers can do what they want with our equipment.” Ironically, this makes them the ideal deliverer of content services from multiple sources like Spotify, Netflix, Amazon, iTunes, etc. Too many of the new breed of home technology providers — especially Apple — restrict what services are available on which devices because of commercial competitive reasons. Similarly, broadcasters and content producers have a vested interest (or legal responsibility) to impose barriers (either geographic or monetary) to open content distribution.

My take is that over the next couple of years we will see a state somewhere between these two (deliberate) extremes. More firms will disappear or become mere marque brands for other firms’ products (like Polaroid or Kodak). You will also see strategic withdrawals from toxic categories (TVs, audio components, digital cameras, game consoles); while this would have been unthinkable for the boards of CE firms in the past, doing so today is an acceptance of the new commercial realities.

But you will also see great products coming from CE firms, especially as the global economy picks up and our definition of consumer technology expands to encompass environmental, home infrastructure, and wearable devices. Traditional CE firms that can work alongside the IT and social media giants — that are always going to be better at software engineering and connectivity but will fall down on hardware engineering and ease of use — have the best chance of surviving.

 

Is 2013 The Year Of Android-Based Game Consoles?

Along with the Bluetooth forks, waterproof mobile phones, and massive TVs, one unexpected announcement for a product that might actually be useful was Nvidia’s out-of-the-blue Project Shield game console. Looking a bit like a Bluetooth controller accessories strapped to the bottom of a 5-inch touchscreen, it has impressive specs and is designed both as an Android gaming device and for streaming your PC games to an attached TV. Pundits have already started to weigh in on whether this will succeed and completely wreck the traditional game console market or just fizzle out; more interestingly, from a trending perspective, it adds to a number of other devices trying to bring Android gaming to console/portable console platforms. Four other notable examples are:

1)      The OUYO console. The OUYO is a very cute 10-c.m. cube. This $99 box was funded through Kickstarter in August 2012, and development kits are already in developers’ hands, with final units hitting the market in March 2013.

2)      The GameStick. Another Kickstarter project that has just hit its funding goal, this Android console takes a form similar to those “Android on a USB stick”-type devices seen here. It also slots away when not in use into its own retro-style controller — and it’s even cheaper than the OUYO at $79. The Kickstarter campaign doesn’t finish until the end of January, and first-run devices are promised in April 2013.

3)      The Archos GamePad. Surfing another trend — game-centric tablets — the Archos GamePad is a 7-inch Android tablet with additional controls for games. Coming in at $169.99 and available pretty much now, its spec is underwhelming and suffers from several of the usual Archos flaws — looks that only a mother could love and poor displays.

4)      The Wikipad. The Wikipad is a 10-inch Android tablet with gaming controls — like a bigger, less ugly Archos GamePad. Although it was due in October 2012, it was “slightly delayed” and still hasn’t seen the light of day. At $499, it is more similar in price to Project Shield or the even more expensive Razor Project Fiona rather than the cheap and cheerful Kickstarter consoles.

Of course, using an open source OS in a game console device isn’t new; the portable Pandora was announced back in 2009 and runs Linux. In those pre-Kickstater days, however, production was hampered by a bare bones “preorder” crowdsourcing model, which has led to ongoing issues with contract manufacturers. Some units (including a spruced up 1 Ghz model) have shipped, but it has been slow progress; mine has been on order since July 2010!

A more recently announced Linux game platform is the still-mysterious Valve Steam Box console, which is bound to attract a lot of attention as more details emerge.

Why Android?

Why is Android suddenly a go-to option for those looking to get into the (massively loss-generating) console hardware business?

  • It is free to use with a ready library of tools and functionality. Small startups don’t have the time, money, or expertise to build an OS from the ground up. Android is there for the taking and has already proven capable of simple smartphone games given adequate hardware.
  • It benefits from the Google Play and multidevice synergy. Similarly. Google Play offers a mature and varied marketplace for apps for Android devices (usually…see the downside below). If you are a game developer, the ability to target the OUYO, GameStick, GamePad, and Project Shield as well as all the non-game-focused Android tablets and phones via one store and one build is a big incentive. You also don’t need to jump through the fiscal and judgemental hoops that Apple, Sony, and Microsoft impose before getting on to their platforms — though this often leads to the Google store feeling more like the Wild West!
  • It’s optimized for ARM architectures. A key consideration for new hardware builders is how cheaply you can source decently performing components. The high volume of ARM CPUs shipping for tablets and phones — along with firms like Nvidia and Qualcomm continually pushing the price/performance envelope —means it is an obvious choice. Once you have ARM chips, what are you going to run on them? Well, it isn’t going to be Windows RT!
  • It has XBMC compatibility out of the box. XBMC is pretty much established as the media player solution across most platforms, particularly open source ones. It gives the user access to a host of media playback options along with network awareness — a nice extra to add to games on Android platforms.

There are downsides, too, of course. We already have a massively fragmented Android phone market; different OS versions, OEM tweaks, and varying hardware specs make development and deployment of game applications much more tricky than for the carefully controlled iOS ecosystem, for example. This could potentially undo all the synergy that being able to sell to multiple device owners can bring.

What does it mean for the wider videogaming market?

  • It puts price/functionality pressure on next-generation consoles. Sony and Microsoft are expected to announce their new home consoles this year, probably at E3 in June. These will doubtless offer more power and additional network capabilities, but what else — and at what price? Traditional console launch prices have been going up since the original PlayStation landed in 1994 for $299. Increased functionality, networking, and hard disk storage have created bloated devices more akin to a PC, with only Nintendo sometimes bucking this trend (see this great analysis by Gamasutra). It’s reasonable to assume that new consoles will be at least $400 to $500. Does that still stack up compared with an $80 Android console?
  • It furthers the cause of the free-to-play (F2P) market. Game developers have learnt from the Apple App Store and Facebook game development that giving your game away and charging for add-ons can be a great strategy when gamers are looking for entertainment for $0.99 or less. However, this can also go staggeringly wrong: see Punch Quest) as an example. Android consoles and Google Play will form a natural console home for F2P and casual games. Will Sony and Microsoft aim to compete in this space? We’ll see.
  • Sony has a stealth “in” here but doesn’t seem to care yet. Interestingly, Sony already has half a foot in this camp. Its PlayStation Mobile Android app supports a range of simple twitch and puzzle games, and it even used to have older original PlayStation games like Crash Bandicoot until Sony inexplicably dropped these last August. While graphically rudimentary, it may still offer better game play than Google Play shovel-ware clones. Better ARM processing power may also mean that PlayStation2 classics could appear on the platform — but only if Sony gets its act together and increases its support for more complex PlayStation mobile games. Surely these aren’t seen as being in competition with the (failing) Vita?

Cisco’s (Rumoured) Disposal Of Linksys Brings An End To The Firm’s Consumer Ambitions

Cisco has built a formidable business in data plumbing since its creation in 1984. This success with enterprises and the back-end provision of the Internet made Cisco a wealthy company but one with a problem: Where to go when you’ve wired up the whole world?

A major strategy that the firm started about a decade ago was to move closer to consumers (or SMBs) through the acquisition of firms that made consumer premises equipment (Linksys, Scientific Atlanta), consumer devices (Pure Digital Technologies – creators of the Flip camera, KiSS Technology), or services (Pure Networks, makers of Network Magic). Naturally, these firms only represented a fraction of Cisco’s 150+ acquisitions over the years, but they stuck out as firms that weren’t in Cisco’s traditional market areas.

Cisco is also renowned for its ability to embrace, merge, and get good results from firms that it has acquired – so what went wrong with those consumer acquisitions? Why hasn’t the firm built a more recognizable name on the high street, and what does this teach us about today’s consumer technology space. Cisco has:

  • No brand strategy. Cisco was never going to spend Apple-level money to build a consumer brand. Linksys has a good name in routers but only among those who understand/care about such things. And while most Cisco acquisitions could be brought in under the gold-plated Cisco business brand, this also was pretty unfamiliar to consumers. Back when Linksys was acquired, this wasn’t as big a deal as it is today, when branding from Apple, Samsung, and even Microsoft is so dominant.
  • Razor-thin margins. For a firm that made an excellent business of higher-margin enterprise and infrastructure hardware – with additional revenue from training certification and maintenance contracts – making do with the 5% or less margin that manufacturers of successful consumer technologies get was never going to be easy.
  • Increased competition from China. The past 10 years have also seen the emergence of stronger global competitors from China: Huawei and ZTE are the best known. While Cisco may be able to fend off much of the challenge in the enterprise space by playing the quality card or lobbying governments for bans on “security” grounds, stopping cheap home routers and mobile dongles (largely sourced by telcos and cablecos for rebadging and distribution to consumers) is far harder. A firm like ASUSTeK is even competing at the high-end with its excellent “Dark Knight” router.
  • Made bets that misjudged the market. Finally, Cisco made a number of strategic bets that simply didn’t pay off. Two spring to mind: 1) building Linksys music streamers and home servers to compete with the likes of Sonos – both markets have proven to be tiny; and 2) getting into dedicated point-and-click imaging devices just as mobile phones became equally competent and user-friendly for shooting YouTube clips.

So what’s next? It seems likely that if the rumors of a Linksys sale do turn out to be true, one of the other consumer networking brands like Belkin, D-Link, or NETGEAR could pick it up. But, ironically, a firm like Huawei or ZTE would benefit the most from the (limited) brand recognition that Linksys offers in the marketplace. The disposal will mean that Cisco retrenches to its heartland of enterprise networking, licking its wounds after an interesting (from an analyst perspective) decade of consumer experimentation.

For other corporate-targeted entities with ambitious consumer goals (we’re looking at you Microsoft!) this is a cautionary tale – being a great technology company that excels at integrating acquisitions isn’t enough to catch a break in the consumer technology world today.

The Surface RT Is D.O.A. — Few Consumers Will Buy Microsoft’s ARM Tablet

Oh dear: I had such high hopes of Microsoft’s Surface tablets — particularly when those rumors of an extremely aggressive price of $199 started circulating. Even the speculation around a $299 to $399 price point left some hope of success. Now that the pre-order service has gone live, it’s apparent that the price point Microsoft has chosen will restrict its sales to the usual fervent tech buyers and Microsoft staff (although they don’t get one free from the company, which is actually quite a good way to improve unit shipments).

Priced at $499 for a 32 Gb version — plus an additional $100 for arguably its best innovation, the keyboard cover — the Surface RT simply isn’t competitive. Sure, it’s a similar price to an iPad (but probably around twice the price of an iPad Mini) and may be similarly priced to the (unseen) 10-inch Nexus when released (but more than twice the price of the Nexus 7), but this ignores the installed base and apps ecosystem for the Android and iOS devices — and you don’t even get a full Windows experience on this ARM tablet. A cut-down version of Office is nice, and may be worth up to $50 for some consumers, but an Intel-based Acer Iconia W510 can be had for the same money. And arguments about differences in on-board storage make less an less sense as these devices increasing tap into iCloud, SkyDrive etc.

Microsoft is also ignoring the stage of development of the tablet market. We are now seeing third- or fourth-iteration tablets on rival platforms, and firms like Amazon are lowering costs by using differing business models. This isn’t like Xbox, where Microsoft could jump in at the start of a new generation because each generation effectively started from scratch; it’s not even like Internet Explorer, where the firm was late to market but used its sheer critical mass to drive the browser to No. 1.

It’s a depressing illustration of the position that Microsoft finds itself in – keen to be a “devices and services” company but tied to a variety of OEMs that it is desperate not to offend (at least in the short term). It has to price high and build hardware to “inspire” partners, but the trouble is that few are inspired by devices that fail to sell. Ironically, after all the efforts to port Windows to ARM architectures, Microsoft may have been better served by waiting a year or so until x86 tablets had established an ecosystem and then releasing the ARM device with better battery life and a more competitive price (as component costs fall).

As more and more OEMs release details of their Windows 8 touch devices, pricing trends are starting to become apparent: $499 to $649 for an x86 tablet (Acer, Lenovo); $500 to $800 for a touch-enabled laptop (pretty much all the OEMs); and premium pricing for large all-in-ones and innovative form factors (Asus TaiChi, Sony Vaio Duo 11, Dell XPS 12). All in all, this pricing is reasonable and demonstrates where OEMs are focusing: touch-enabling traditional form factors and sticking with x86 architectures. It will be these devices (with perhaps a couple of cheap OEM RT tablet) that businesses start to experiment with and that consumers buy as their “next PC” — not the failed attempt to jump on the ARM bandwagon that the Surface RT represents.

Don’t get me wrong: I think the Surface is a beautifully designed tablet with some excellent engineering and a novel UI — better than most of the existing competition. Doubtless, the couple of hundred consumers who buy them will love them to bits. Unfortunately, this all sounds depressingly familiar; perhaps Microsoft should have called it the Zune HD Surface.

Acer And Lenovo Price Their Windows Tablets: Not A Bad Start, But It Looks Expensive For Consumers

In what is likely to become a trend in the next month, two OEMs announce their Windows tablet pricing pretty much at the same time. Acer has bagged the “first!” title for announcing and getting journalist/blogger hands on its Windows 8 tablets; (I’m assuming, of course, that those leaked ASUS prices were simply a joke/placeholder). Shortly after, Lenovo unveiled the pricing for its raft of tablets. My initial impressions: not bad, some interesting innovation, still a bit pricey for consumers (particularly for an Acer), and it throws Microsoft Surface pricing into even more doubt.

Acer

As of November 9, you will be able to buy a Windows 8 tablet for less than $500. That price will get you the 10.1-inch, 32 Gb Acer Iconia W510, fully $100 cheaper than the equivalent iPad (although the screen resolution is much lower). But, disappointingly, to get a keyboard dock included, you need to get the more expensive 64 Gb version with a $750 sticker price; as yet, there’s no price for buying the keyboard dock separately.

Interestingly, Acer also plans to sell the Iconia W700 for $799 to $999. Wait, what? An 11.6-inch tablet using a “proper” Intel CPU, with a better resolution screen, twice the storage, a dock, and a Bluetooth keyboard will be within $50 of the keyboard version of the W510?

Lenovo

Lenovo seems keen to cover every conceivable base with its Windows tablet offerings:

  1. The ThinkPad Tablet 2 is broadly similar to the Acer Iconia W510 and starts at $649 ($799 with a keyboard dock). The ThinkPad name clearly indicates that this is a business-focused device.
  2. The ThinkPad Twist is another business-focused machine and is really a convertible laptop rather than a true tablet. It starts at $849 — a fairly aggressive price for a true laptop replacement.
  3. Similarly, the IdeaPad Yoga 13 is a convertible 13-inch that starts at $1,099 (yikes!). There is also an 11-inch IdeaPad Yoga 11 that — most interestingly — is a Tegra-based Windows RT device starting at $799.
  4. Finally, the IdeaTab Lynx is the consumer tablet (and a close relative to the Acer Iconia W700). It has an 11.6-inch display with a Clover Trail processor and starts at $599 (plus $150 for the keyboard dock).

What this means:

  • We’re unlikely to see x86-based OEM Windows 8 tablets for less than $500 — or $750 for keyboard versions. While it is trying its utmost to shed its cheap-and-cheerful image, Acer still tends to come in at the low end of the OEM pricing spectrum. Similarly, Lenovo’s consumer PCs tend to emphasize value, while the ThinkPad business range focuses on solid reliability. Here, we can see the two OEMs with probably the lowest prices. Sony, HP, Samsung, and ASUS will almost certainly charge more for their equivalent tablets, and even Dell is likely to be on par at best.
  • The low-end Windows tablets aren’t a great replacement for laptops. We must also remember that the Clover Trail-based tablets are basically rocking an optimized netbook processor. While this should guarantee good battery life and a cooler running temperature, we’ve yet to see how well this tablet configuration performs in real-world, multitasking use; it’s likely to be as good as other tablets, but it certainly isn’t a replacement for a decent laptop. True PC replacements will probably need: 1) Intel Core i3/i5/i7-based CPUs, which will likely be markedly more expensive (I did mention what a bargain the Surface Pro is looking to be!), and 2) systems based on the newly announced AMD Z-60, which will carve out a middle ground between the two Intel platforms.
  • Is the Windows Surface Pro really “only” $800? This pricing also makes Ballmer’s $300 to $800 price range for Microsoft Surface devices look shaky. The x86-based Surface Pro will be at the top of that super-wide range — but has a high-resolution display, 64 Gb or 128 Gb of storage, keyboard / cover and a Core i5 processor instead of the weedy Clover Trail Atom processor that’s in both the Iconia W510 and IdeaTab Lynx (warning: don’t use it on your lap!). That starts to look like a comparative bargain if it really is only $800. With an extended warranty, the Acer Iconia W700 already runs up to $1,049.
  • The $199 Windows Surface RT really was just wishful thinking. ARM-based Windows 8 tablets should be cheaper than x86 tablets, but how much cheaper? $299 to $399 or $399 to $499 seem to be the current bets (without keyboards), but we haven’t seen any offerings as cheap as this yet. Lenovo is obviously hoping that the innovative design of the IdeaPad Yoga 11 will command a massive premium! Let’s face it, a $499 Windows RT tablet isn’t going to fly with consumers, particularly when an x86 is the same price (for a lower spec potentially) — thats even assuming consumers can be dragged away from the Apple aisle. Even $350 to $399 is beyond the “impulse buy” price range that might help them fly off of the shelf. I’m not sure Microsoft will need those midnight openings to satisfy pent-up demand.
  • Obviously BOM (Bill of materials) is restricting how low prices can go. There is already some excellent analysis putting the cost of building a Microsoft Surface RT tablet at $300+, an x86 version would be slightly more. As Android tablet makers discovered, the display & touchscreen elements don’t come cheap – and that was when they didn’t have to pay for an OS! For a new product category without volume supply / manufacturing economies (like Apple has) there is precious little margin to be had if the retail price is to be attractive to consumers.

To be fair, it’s still early days. The Surface Pro isn’t scheduled to be released until early 2013, and Acer or Lenovo could adjust prices down as other OEMs lift the veil on their hardware. The most promising devices so far (that we know the price of) are those PC-replacement convertibles; they match the price of Ultrabooks and offer the best of both worlds, albeit in a more bulky package.

My guess is that by the end of the year, Clover Trail Windows 8 tablets (without keyboard) will be available from $399; “PC-replacement” tablets will be around the $799 mark; and Microsoft will still choose to price the Surface Pro at more than $800 ($899 or $999 seem most likely) to appease its OEM partners.

The Synology And Symform Partnership: The Future Of Consumer And SMB Storage

Last week, Synology announced a partnership with innovative cloud storage firm Symform. Finally, someone is combining the peace of mind and worry-free connectivity speed of the network-attached storage (NAS) drive with the convenience of cloud storage. Arguably, this is targeted more at small and medium-size businesses (SMBs) — those big enough to have a security and backup policy but too small (or too cheap) to build an enterprise relationship with a commercial cloud provider like Amazon. However, even with my consumer-focused hat on, I see a lot to like:

  • It allows a trickle update of cloud files. As anyone who has wondered what the hell Microsoft’s SkyDrive desktop app is doing as it whirs away for a couple of hours will know that syncing to the cloud is still pretty tedious — especially if your connectivity speed isn’t up to scratch. By adding a central repository of your data on the always-on NAS drive, you bypass this issue while still ensuring your files are available in the cloud.
  • It pairs two technologies that lack sufficient mainstream appeal, creating a compelling hybrid. As I’ve said before, NAS technology hasn’t hit the levels of popularity that I expected it to 5-8 years ago; it will ultimately be replaced by cloud storage — but not for many years yet. I’ve also said that in the long term, cloud storage isn’t really an “application” or a ”service”; it’s a facet or feature of other applications or services. Pairing lots of local networked storage with cloud back-up (or even just key directory duplication) means that you are getting the best of both worlds now rather than waiting for all-encompassing, super-reliable online services of the future.
  • Symform’s business model doesn’t limit the amount you store in the cloud (unlike its competitors). Effectively, Symform works as a coordinator of available peer-to-peer (P2P) storage: Agree to let Symform use some of your space hard disk space (either on a PC, a NAS drive, or a server), and it will give you half of that amount as cloud storage for free (on top of the initial 10 Gb allowance). Symform promises secure, regulatory-compliant, globally distributed cloud storage for little more than the price of adding a new hard disk to your rack/NAS /PC – and that’s if your storage is nearly full. Of course, you can pay as well . . . but that makes the offering significantly less attractive.

But, there are some bridges yet to cross:

  • It still means shelling out at least $500 for the local storage. Cost remains the biggest issue for consumers or small businesses looking at network storage. Why would you pay at least $400 for the most basic 2 Tb Synology NAS set-up (for example, the DS212j plus two Western Digital 2 Tb drives) when you can buy a 3 Tb Seagate external USB3 drive for $135?* Well, there are lots of reasons that a seasoned IT professional would recognise: availability, redundancy, multidevice access, file syncing, and management tools to name a few . . . but none of these resonate with mainstream consumers (oe even the small end of the business world). Let’s not forget that consumers are still failing to manage and back up the gigabytes of unique and irreplaceable content generated by their digital cameras.
  • Symform’s business model is both a blessing and a curse. While I commend Symform for coming up with something different from the largely interchangeable offerings of Box, Microsoft, Google, Amazon, and Dropbox, there are still some thorny questions that need answering:
  1. Can Symform make money if only a small fraction of users pay for storage? Of course, you could argue that the same can be said of Dropbox or Box; at least Symform doesn’t have to invest in building massive storage capacity to support its service.
  2. Can a P2P solution rival a big honking data center in Texas for reliability and speed? Again, there is a persuasive argument that P2P is more robust and efficient than traditional “client-server” models — just look at BitTorrent technology. As with BitTorrent, redundancy will be the key; its imperative that a user’s files aren’t corrupted if another customer’s storage node drops out of the pool.
  3. Is it legal? This is an argument that could run and run (and I’m not a lawyer…don’t even play one on TV). Government agencies already frown upon cloud solutions which store files/data outside their home geography. Does distributing tiny fragments of files globally make this better or worse? Similarly, can the US government ask for access to customers’ files as they can from other US cloud providers? Incidentally, it’s a myth that the 2001 Patriot Act makes the US the only country able to do this.
  4. Given the above, is Symform a long-term bet? Back-up is, by definition, all about peace of mind. You want your data to be secure both now and for the foreseeable future. This makes Symform a risky bet for businesses — although at least switching to a different service is easier these days than replacing actual physical back-up devices.
  • The security and confidentiality of cloud storage will continue to be an issue, especially given Symform’s business model. When it comes to cloud storage, IT pros rightly point out that file security and confidentiality can be a real issue; you are effectively transmitting your files (usually unencrypted) to a remote data centre protected by a single password. And you could argue that this issue is compounded by Symform then farming out the virtual data center to other individuals’ NAS drives.

Overall, I hope that Symform succeeds — they are trying something different and in theory offering a valuable free-ish service with little downside. The Synology partnership certainly strengthens its hand, while also making its NAS drives more appealing. There is bound to be a shake-up in the cloud storage market in the next 12 to 18 months; too many firms are offering free or low-cost storage with little differentiation. Symform at least has the advantage of a different infrastructure and business model.

* Of course, we’re not strictly comparing like with like here; the 2 Tb Synology set-up is offering RAID redundancy, and it could be configured as a 4 Tb storage option

Amazon’s Kindle Fire Raises The Table Stakes For Tablets

As expected, Jeff Bezos announced new Kindle products yesterday in Santa Monica — and what an interesting range of products these turned out to be! While the updated Kindle eReaders offer better performance and a lower price point for those dedicated eBook lovers, it’s the Fire range that really impressed.

In place of the low-powered, fairly low-spec, North America-only original device, there are now three to four devices — running the gamut from version 2 of the original all the way up to the 4G-enabled 8.9-inch Kindle HD with its own data plan. The pricing of the devices is even more intriguing — at $159 for the lower-end 7-inch tablet, $199 for the 7-inch HD tablet, and $299 for the 8.9-inch HD tablet (Wi-Fi only), these represent a new challenge to other manufacturers’ Android devices and Microsoft’s upcoming Windows 8 tablets. Additionally, European markets (the UK, Germany France, Spain, Italy) will get to see the 7-inch Fire devices (both version 2 of the original and the HD device) at more or less the same time as the US – no sign of the larger device, but that’s probably reserved for the US market while supply ramps up.

What does this mean?

  • Android tablets (aside from the Nexus) are dead in the water. With Google and Amazon both squeezing the price of Android tablets, its difficult to see how Samsung, HTC, etc. can compete in this space, especially given that they don’t have Amazon’s and Google’s alternate revenue streams to supplement loss-leader hardware. The Verge published a very good article on this prior to Amazon’s announcement.
  • Microsoft finds itself at a crossroads. Microsoft now has two options for the Windows 8 RT tablets:
  1. Stick to its “The Kindle Fire and the iPad are just for content consumption; Windows RT tablets will be for so much more” message that has been its mantra for several years and try to price high — a strategy that’s almost certainly doomed to failure if it relies on retail and mainstream consumers to understand the difference.
  2. Price the Microsoft Surface (RT version) competitively to hit Google and Amazon head on and undercut Apple. The downside here is that it means alienating those already-alienated Android OEMs as well (on the ARM platform at least). Also, Microsoft has very little content or advertising revenue to make its money back on hardware subsidies. So as previously mentioned, the $199 Microsoft Surface RT seems unlikely.
  • Apple needs to adjust its medium-term strategy. The iPad, iPhone 5, and (probable) iPad Mini will naturally continue Apple’s policy of premium pricing: Why would it slash margins when the competition hasn’t really made an impact? But it’s more important for Apple now to look at what price its tablets will be in 12 to 18 months’ time — a time frame that allows for Amazon Fire, Google Nexus, and even Microsoft tablets to establish a decent market share and application ecosystem. In a market of similarly designed — lawsuits allowing! — well-built devices with active developer support, Apple will need to adjust its pricing accordingly; consumer ties to the iTunes ecosystem can only be stretched so far.
  • For consumers, it’s win/win (after six months of pain). The upshot of all of this for consumers is that there will be much more choice in the tablet space, more competitive pricing, and a wide variety of capabilities and ecosystems to choose from. This won’t happen overnight, though. To get to this tablet heaven, we’ll need to go through a glut of dismal Android tablets dumped on the market by those OEMs boxed in by Google/Amazon; Windows RT tablets arriving with their confusing “It’s a proper PC, but not really a proper PC” messaging; and endless discussions about poor battery life, built-in obsolescence, and app stores.

What’s next? Apple’s iPad Mini announcement will mix things up again in the next month, and we’re still waiting on pricing details for Windows tablets.