News Item: Earlier this month, Microsoft previewed Pocket PC 2002, the new version of its Pocket PC operating system for handheld computers. On October 4 (the official launch date of the new OS), Hewlett-Packard, Symbol, Compaq, and other manufacturers will introduce Pocket PC 2002 devices. The new OS version introduces features that Microsoft asserts will make Pocket PC handhelds more useful for corporate workers. These include support for virtual private networking, the ability to control a PC or server from the device via a local wireless network, an upgraded Media Player, and application changes intended to make the devices easier to use. With Pocket PC 2002, Microsoft is also introducing stricter device requirements, including an ARM4-based processor and flash memory. Devices that use Pocket PC 2002 will be targeted at the corporate market and are expected to be priced from $400 to $600.
Situation Analysis: Corporate buyers might be less price-sensitive than individual consumers, but they are still reluctant – especially in the current cost-conscious environment – to spend significant money on products that do not make a tangible contribution to the revenues or profitability of their companies.
IT and business executives are rightly skeptical about the value of buying handheld computing devices that are being used as nifty gadgets – for example, accessing an e-mail account via a wireless local-area network (LAN) from a conference room. For many users, the limitations of the handheld form factor (e.g., small display) make it a questionable substitute for a desktop or laptop computer that is already sitting on their desks or carried in their briefcases.
At $600 per device (which approaches the cost of a low-end PC), in addition to the cost of supporting a wireless LAN and providing help desk resources, handheld computers must be more than just functional and interesting. These devices need to either reduce costs or add to the average revenue per employee – and these benefits must be tangible, not just vague statements about “personal productivity” – for the business to be willing to invest in them.
Handheld computers (like other pervasive computing form factors) have demonstrated their value for repetitive data entry/access tasks for mobile users in manufacturing, healthcare, travel, retail and distribution, field sales/service, etc. Compared to the Palm, the expanded memory capabilities of the Pocket PC are well suited to these functions, and this is generating the current momentum for Pocket PC devices (e.g., Compaq iPAQ) in the corporate market. Currently, these well-defined tasks are often handled by periodically uploading data from the handheld device to the network via a docking station, rather than wireless connectivity.
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“If companies have already invested in wireless LANs – and they have a valid business reason for deploying and managing that network – then handhelds that can integrate to that network are interesting,” says META Group analyst David Cearley. “Companies need to match their requirements against the features and characteristics of various mobile computing form factors and devices to determine which devices make the most sense for their users.”
Although the Pocket PC 2002 release provides new rich media capabilities and other interesting features – and the Pocket PC has gained ground as a rival to Palm – we view these as incremental improvements rather than innovations that will shift the handheld market into a higher gear.
“The growth of the handheld market will not accelerate until an expansive mobile display peripheral can be provided at a low price,” says META Group analyst Dale Kutnick. “That would be a breakthrough with the potential to double or triple the size of the market.”
Although some individual corporate users find Pocket PC or Palm devices to be useful accessories when they are away from the office or as a note-taking device in meetings, etc., IT organizations (ITOs) must balance the support needs and wishes of these users against the overall investment priorities of the organization. However, even if handhelds are purchased by individuals for their own use, policies and standards should be established governing how these devices can interact with individual PCs and the corporate network, and what level of support will be provided.
“It is not possible for IT groups to simply bury their heads in sand and say that they are not going to support these devices,” says META Group analyst Jack Gold, “especially because many of the individuals who are buying them are high-level members of the organization. There needs to be a support plan in place for these devices, regardless of whether the corporation is buying them. And the ITO must make the support costs clear to business users so they can decide whether the business value warrants the investment.”
From a processor standpoint, the fact that the new devices in the Pocket PC arena will support only the ARM4 chip provides a major boost in the handheld marketplace for Intel. All these vendors of Pocket PC 2002 devices are building their products around Intel StrongARM chips. So, we are seeing a very significant uptick in Intel’s market share in the handheld space, where it previously had only a limited presence.
User Action: Companies should restrict purchases of pervasive computing devices to circumstances where these devices deliver a clear return on investment. When responding to support requests from business units, IT groups should educate business executives on the true costs of supporting handheld devices (purchase price, wireless modem, networking equipment, support, etc.).
To accommodate and manage individual users purchasing their own handheld devices, the ITO should provide guidelines, policies, and standards that enhance these devices’ usefulness in interacting with the corporate network or data while minimizing support costs and potential security risks.
When buying handheld devices (or other pervasive computing devices), companies should aggressively seek discounts from manufacturers eager to build the size of this market.
Group analysts David Cearley, Dale Kutnick, Val Sribar, William Zachmann, and Jack Gold contributed to this article.