Steady Growth Projected For European Mobile Apps

Despite Europe's global leadership in mobile telecommunications, the market for mobile applications within the region has not matched expectations. While end users have been wary of returns on investment and operating costs, operators have been apprehensive about the levels of traffic and revenues that mobile applications can generate.

However, according to analysts at Frost & Sullivan, the enterprise segment is presenting key revenue generating opportunities for operators in the mobile applications market.

While not directly contributing to an increase in average revenue per user (ARPU), business data traffic is forecast to grow steadily. A consequence of increased mobile data is expected to be the augmented use of voice services by business users. Although limited in comparison to voice and consumer data, business data is still expected to consume network capacity. As the total European mobile applications market expands, restructured pricing tariffs are likely to be critical to leveraging growing business data traffic.

Currently, most operators have been offering flat pricing rates.

"At this developmental stage, such transparent pricing structures allow business to calculate return on investment more easily and hence encourage business to adopt mobile applications," explains Frost & Sullivan analyst Andrew Tanner-Smith. "However, as usage rises, these flat pricing schemes will need to adapt to allow operators to realize the value of increased business data traffic."With software vendor-mobile operator relationships still at an early stage, the systems integrator (SI) is currently the prevailing route to market. Very few mobile applications implementations are being sold directly by mobile operators.

At the same time, large software vendors have pursued both independent routes to market and partnerships with SIs. Pure-play vendors have, however, inevitably entered into partnerships to reach the market. The market is set to undergo consolidation as large enterprise application software vendors move to acquire pure-play mobile software vendors for their technological expertise. Siebel Systems, Inc., currently leads the European mobile applications software market. However, its lead is expected to diminish as other applications are introduced into the market.

Locally focused mobile operators and operators that have penetrated new geographical markets are performing strongly. With a projected 19 per cent market share in terms of number of business data subscribers, Vodafone Group is set to lead in 2004 followed by T-Mobile with an estimated 16 per cent and Orange with 14 per cent. Operators that can merge a robust local business presence with a strong presence in key market verticals are expected to consolidate their market position.

In 2003, the highest levels of mobile applications penetration were in utilities, manufacturing and transport and communications verticals. "The surprising vertical market take-up is being driven as much by the existing market focus of SIs and vendors as by inherent need," says Mr. Tanner-Smith. "As the market begins to grow, this is likely to change as bigger opportunities and economies of scale allow SIs and others to target specific verticals."

Competing technologies such as W-LAN, are expected to create a major challenge to the adoption of mobile applications software. Indeed, the high penetration of notebook PCs and demand for flexible access to network services have made the enterprise the key market for WLAN.However, both technologies are expected to coexist due to the particular benefits offered by each. For instance, as in the case of mobile applications software, the improved robustness of carrier networks has translated into ever-available connection for users. The potential decline in data traffic costs due to increased use offers yet another advantage. At the same time, the growing versatility of handsets has helped avoid the time-consuming task of rebooting a laptop.

In terms of devices, flexible 'smart phones' and sophisticated mobile handsets are expected to test the dominance of PDAs. The ubiquity of laptops combined with their computing power is expected to underpin their continued relevance to mobile applications.

Scandinavian countries are emerging as early market leaders, but are expected to lose share as the market matures. Simultaneously, strong demand from the sizeable business populations of the United Kingdom, Germany, France and Italy is expected to support market growth in these regions.