Tablet Computing Marketplace (Archived Report)


Tablet Computing Marketplace (Archived Report)










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Archived Report:
Tablet Computing Marketplace

by Nancy Nicolaisen

Copyright 2013, Faulkner Information
Services. All Rights Reserved.

Docid: 00021164

Publication Date: 1305

Report Type: MARKET

Preview

In 2012, iPads accounted for better than
90% of enterprise tablet activations, and by Q4 2012 nearly three quarters of
Fortune 1000 companies were either planning, testing,
or had rolled out tablet based initiatives.  Fast forward to Q3 2013, and we see
consumers enjoying a broad spectrum of tablet device choices;  Android based tablets are closing the
early lead opened by iPad, continuing to gain market share at Apple’s
expense.  IDC estimates that 49% of
all categories of tablets shipped this year will run Android, with Apple taking
a second place 46% overall share. But as these devices gain traction in
enterprise, the big question is how much longer enterprise users will be
willing to tote a phone, a tablet, and a laptop around.

Report Contents:

Executive Summary

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On the ‘Black
Friday’ holiday weekend 2012, more than a quarter of all online purchases
were made from mobile devices; Of these, a little better than half were made
from iPads.

Related Faulkner Reports
Choosing
Mobile Devices for the Enterprise
Tutorial

This statistic says everything about the trajectory of tablet computing, and while
consumers are driving tablet adoption, it is by no means exclusive to them.  In 2012, iPads accounted for better than
90% of enterprise tablet activations, and nearly three quarters of Fortune 1000
companies were either planning, testing or had rolled
out tablet based initiatives.  Fast
forward to Q3 2013, and we see consumers with a great variety of tablet device
choices;  Android based tablets are closing
the early lead opened by iPad, continuing to gain market share at Apple’s
expense.  IDC estimates that 49% of
all categories of tablets shipped this year will run Android, with Apple taking
a second place 46% overall share. 
Windows /Windows RT will account for less than 5% and is making scant
progress amassing tablet app content.

Clearly, at
this point in time, consumers are driving tablet adoption. The Pew Internet and
American Life Project reports that one in four US consumers owns a tablet of
some description, with e readers like Amazon’s Kindle Series and Barnes
and Noble’s Nook devices heavily represented in this population. In any
case, the confluence of the tablet device population explosion and enterprise embrace
of BYOD ( Bring Your Own Device) policies during the great recession mean that
there are going to be a lot of tablets in both the workplace and the marketplace.
Employees, partners and customers want to engage, exchange information and
transact business using them. 

Going
forward, one key challenge for consumers, especially enterprise consumers, is personal
technology proliferation.  Users are
becoming weary of having to manage multiple devices which often overlap in
function, multiply exposure to security threats and increase cost.  Expect to see convergence devices that
combine the best features of small, 7.5 inch screen tablets and smartphones soon.  These devices should be a sweet spot for
enterprise users and offer significant advantages over either smartphones or
full scale tablets.

Market Dynamics

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Consumers and journalists may have different names for varying classes of tablets, but
they basically break down into three categories: pure-play tablets (like the
Apple iPad), media consumption devices (like the Barnes & Noble NOOK Tablet
and Amazon Kindle), and hybrid Tablet/PCs targeting high end users that are not
especially price sensitive. 

Pure Tablets: In the "pure
tablet" marketplace, Apple’s iPad and Android based devices from Asus and
Samsung are pitted in a marketshare battle. A key factor in this confrontation
is content holdings.  In March 2013,
ABI Research reported that worldwide, users would download 14 billion tablet apps
in 2013, clear evidence that availability of content drives device choices.  In round numbers, App Store holdings for
players in the enterprise tablet space break out like this:

  • GooglePlay/Android: 800,000
  • Apple iOS App Store: 775,000
  • Windows Phone Marketplace: 125,000
  • Blackberry World: 70,000

Given these statistics, it doesn’t leave a lot of room for optimism about the future
of Windows Phone or Blackberry in roles other than niche players.

E Readers: In terms of price points and
functionality, Amazon’s Kindle series and Barnes & Noble’s Nook
tablets make up the competitive landscape for media consumption devices. The key
competitors are taking the long view, expecting to reap profits from content
sales, rather than from the devices themselves. (Both vendors’ product offerings
are rumored to be priced at or near their cost of manufacture, making them an
easy buying decision for consumers.) 
This presents an opportunity for enterprises to realize significant
economies as they shift to e-reader formatted archive documents, technical
literature and other forms of information transfer.

Tablet PCs:  This product niche largely aims at high
end, business oriented users, with devices priced accordingly ( $1000-$2500 USD
from makers including HP, Lenovo, Asus and others) .  In effect, tablet PCs are hybrids that
convert between clamshell (PC) mode, and touchscreen tablets by swiveling
screen components to fold over keyboards. This makes them heavier and often
less battery efficient than laptops or tablets. Perhaps the biggest challenge
facing tablet PCs is lack of application software.  Developers have been lukewarm about
investing in projects targeting devices that are expensive and have not yet
proven they can claim and dominate a market space over time.

Getting to Pocket Sized: In Q1 2013, half of
all tablets shipped had screens measuring less than  8”.  This is a crucial trend, as consumers increasingly
demand a device that will provide both computing and communication in a form
factor easy to carry in a pocket or purse. Several Android devices made early
inroads in this niche, with Apple mounting a challenge in that space based on
iPad Mini.

Market Leaders

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The mid-2013 Yankee
Group forecasts call for the tablet marketplace to grow to better than 1
billion shipments worldwide by 2017, representing a compound annual growth rate
of 36%. Given that sort of sustained, steep growth, it is conceivable that a
broad spectrum of players could remain in the mix simply by staking out niche
markets and effectively leveraging them. 
Absent obvious pressures to consolidate, expect to see the tablet market
stratify into an upper tier of market leaders and a lower tier of market participants.

Market Leaders:

Amazon. IDC reported that
Kindle shipments fell below 4% of total market share in the first quarter of
2013, after grabbing just under 17% share in Q4 2012.  Observers theorize that effective
holiday promotions dramatically boosted sales near year end 2012, but Q1 2013 marketshare
stats seem to confirm the observation that the Kindle Fire may indeed be the  “fruitcake of tablets”: A
holiday item consumers buy for others, but don’t actually prefer to buy
and use themselves.

Apple. Apple’s iPad remains
popular in both enterprise and consumer segments.  iPad’s vibrant and innovative
software development community virtually guarantees availability of key
business process apps  for secure
access to e-mail, calendar, contacts, connectivity to private corporate
networks, and a variety of task and industry specific needs. 

Asus. Asus has proved
itself to be very nimble and adaptive in an era of shrinking form factors.  The company’s tablet devices are
aggressively gobbling up market share in Asia, and they are particularly strong
in India, where they expect to attain 15% share before year’s end. As of
Q2 2013, Asus’ Google branded Nexus 7 is fourth in total global tablet
market share, turning in a very strong performance in the Android tablet space.
(Details of device characteristics appear below under the Google topic.)

Barnes & Noble. For Barnes & Noble,
it has been rough sledding in the e reader space; The holidays failed to
deliver big sales of the Nook devices, which meant a second consecutive year of
disappointing sales performance.  However,
the company may have hit upon a credible salvage plan, recently announcing an
alliance with the Google Play App Store. 
As of May, Nook devices can access and operate the 700,000 plus apps and
games on Google Play.  (Barnes & Noble’s own market research
told them that lack of app content was creating a big barrier to sales, so this
may breathe new life into B&N’s tablet initiatives.)

Google. Although Google does
not produce the Nexus 7 itself ( it collaborated with Asus on its development),
the device is currently marketed through Google’s online store. The Android-based
tablet features a 7-inch screen, 1.2 GHz quad-core ARM Cortex-A9 processor, up
to 16GB of storage, and a 1.2 MP front facing camera. Although the product is
marketed as a full-fledged tablet, not a media consumption device, it is priced
at $200, a price point traditionally only available in the media consumption
segment, or from lower quality manufacturers. 

Research In Motion (RIM): In May 2013, RIM
CEO Thorsten Heins went on record with the prediction that tablets are a fad. “In
five years, there won’t be a reason to have one anymore” said
Heins.  RIM is looking toward the
takeover of ‘phablets’, convergence
devices that merge the advantages of smartphones and tablets in a single device
with a 6.5” screen. Since RIM still enjoys deep loyalty among veteran
Blackberry users, this may signal a move to stake an early claim on the
enterprise phablet niche.

Samsung. In Q2 2013, Samsung
claimed about 15.1% global tablet market share and an annualized rate of growth
of shipments of about 263%.  Samsung’s
Android based devices offer consumers a great many tablet options, and given
the IDC prediction that Android will surpass iOS market share in 2013, the
company remains in a strong position in the space.  Samsung is also well positioned to adapt
to the emergence of the ‘phablet’, with deep experience in the
smartphone space.

Market Participants:

Companies
that have the tablet technology experience, manufacturing capability and
engineering brain trusts to yet make a credible play in the market include Google/Motorola,
Huawei, LG, NEC, Sony and ZTE.

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Enterprise
Prefers iPads: Fully
94% of Fortune 500 companies were testing and deploying iPad apps in 2012, and
iPad accounted for over 95% of total enterprise table activations last year. In
an era of BYODs, iPads are and will remain a significant part of the enterprise
mobile computing mix into the foreseeable future

Mobility
Is a Key Business Asset:  The business process is accelerating,
mobilizing and becoming more collaborative.  In many ways, tablets are far superior
to smartphones as mobile business process support devices.  Expect to see broader enterprise tablet adoptions,
growing emphasis tablet based business process tools, and rising interest in
using tablet solutions to drive down smartphone related airtime expenses.

Content Is Key: It isn’t just
the tablet device that drives consumer choice;  It’s largely the availability of content
that determines which devices will dominate.  Expect to see more alliances between
content providers and device makers.

User Experience: As business process
tools, tablets often provide mobile workers a far better user experience than
either smartphones or laptops, simply because their size makes them more convenient
than either of the other device types. Possible exception: Older workers still report
a preference for keyboards when engaging in extensive text input and document
creation.

Convergence, But Not Consolidation: If enterprise
currently has one legitimate beef about user supplied mobile technology, it’s
that there aren’t just a lot of different kinds of devices; It’s also that individuals tend to have multiple devices. Both  IT departments and consumers are hungry
for a single device solution, and tech markets rarely ignore real demand.  Expect to see the first generation of reasonably
priced ‘phablet’ convergence devices appear in the near term.  Do not, however, expect to see any
significant increase in market consolidation around particular smartphones or
tablets. 

Outlook

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In short, the tablet future belongs to the three "Cs": connectivity, content, culture.
Other trends are discussed below.

Tablets might give
enterprise significant relief from excessive airtime costs associated with
smartphone use. One
key advantage of tablets versus smartphones as enterprise business tools is
their ability to preferentially connect to WiFi when it is available, as
opposed to using the sometimes much more expensive wireless carrier
network.  This is particularly true
for workers that travel extensively and especially for those that travel
overseas.  

iPad set the bar high,
both for breadth of content and for quality of the user experience: There’s an old
quip in the technology business: Apple
isn’t actually a hardware company; It’s a software company that
sells its products in really pretty, expensive boxes. Clever of course, but
also very true.  Evidence shows that
two things drive the adoption: User experience and access to a breadth of
content. Apple wisely delivered them as a seamlessly integrated package, a key
factor in the early success of the iPad. Similarly,  Android device adoption is being fueled
by rapidly increasing growth of the Google/Play catalog and a steadily
improving content experience.  The
quality of content delivery will likely be crucial in shaping next generation “convergence
devices”—the ones that incorporate the best qualities of both tablets
and smartphones. Whether these ‘phablet’ devices will come from tablet
manufacturers or mobile carriers is hard to say, but two things seem likely:
They will have a screen format no smaller than 6.5” in order to deliver good
content experience, and they will easily fit in a pocket or purse.

Mobile device culture
host a thriving virtual marketplace:
Mobile technology
is a lifestyle highway that doesn’t seem to have a lot of exit ramps, and
tablets are rapidly emerging as its preferred vehicles. Here’s an example:
During the Black Friday holiday weekend of 2012, about one fourth of all online
purchases were made using mobile devices; Fully half of this traffic came from
iPads. Post-holiday user surveys revealed that people feel safer making online
purchases from a tablet as opposed to a phone, and also find shopping more
convenient and satisfying on a larger screen format. The takeaway: The nature
of the shopping experience has changed for a lot of people.  How many people?  Kliener Perkins analysts estimated at
the end of 2012, 29% of US adults owned a tablet of some variety. This surprisingly
high rate of adoption is made more significant because as a demographic, tablet
owners tend to be affluent, influential, and well-educated.

The Net: Many observers believe
that tablets will be the ‘PC Killer’.  Probably. But if I were a smart phone, I’d
keep looking over my shoulder.

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About the Author

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Nancy
Nicolaisen is an author, software developer, and former Computer Science
Professor. She specializes in solution architecture for small mobile devices.

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