Software allowing mix of applications is key

By Chris Nuttall and Richard Waters in San Francisco

Published: June 6 2008 22:39 | Last updated: June 6 2008 22:39

A 3G iPhone may grab the headlines at Apple’s global developer conference on Monday, but new software is likely to have a more lasting impact.

The conference is expected to mark the arrival of third-party applications for the iPhone from Apple developers, in what is being seen by analysts as the creation of an important software platform for the mobile age.

“You get this sense that Apple is redefining mobile computing,” says Tim Bajarin, principal analyst at the Creative Strategies consultancy.

“What caused products like the original IBM PC and the Apple II to take off [in the 1970s and 80s] was the software applications, like WordStar, Lotus 1-2-3 and VisiCalc.

“Software has always been the key, and what Apple is doing represents the beginning of a rich new computing platform in mobile.”

Three months ago, Steve Jobs, Apple chief executive, identified its developer community as the source of fresh impetus for iPhone sales. In a “Software Roadmap” event at Apple headquarters, he announced a software development kit (SDK) for the iPhone that would enable them to build programs for it.

A group of partners demonstrated applications that they had put together in just two weeks. Electronic Arts showed off a version of its Spore game, taking advantage of the iPhone’s motion-sensitivity, Salesforce.com showed an application for sales representatives, and AOL demonstrated an instant-messaging program.

Mr Jobs also announced a virtual “App Store”, similar to the iTunes store, for the next 2.0 software update for the iPhone. It would be the one place where users could buy software approved by Apple, with the company taking a 30 per cent cut of sales by developers.

At the same event, John Doerr, a partner at venture capital firm Kleiner Perkins Caulfield & Byers, announced the launch of a $100m “iFund” to invest in companies developing applications and services for the iPhone.

Apple has seen more than 200,000 downloads of its SDK since the event, and Kleiner Perkins has received close to 2,000 business plans from entrepreneurs.

“It’s pretty darn exciting,” says Matt Murphy, the KPCB partner vetting the process. “That’s easily a factor of 20 more than the plans we would have received without announcing the iFund. It’s a leading indicator of the swarm of activity that’s going on.”

Software developers are faced with a much harder task than those who have created more than 1,000 web applications for the iPhone since last year.

Apple has been protective, imposing restrictions such as allowing only one application to run at a time.

Nick Piggott, head of creative technology at GCap Media, the UK commercial radio group, is one of those disappointed with the SDK.

“We were hoping the SDK would allow us to write an application that would allow users to listen to the radio on the iPhone while doing something else [on the device]. All the evidence is that the SDK doesn’t allow you to do that,” he says.

Mr Murphy says he is confident the problem of not allowing applications to run in the background will be resolved.

Apple has already claimed a 5 per cent share in mobile operating systems, little more than a year after entering the market with the iPhone. But it has a long way to go before it can claim leadership of the mobile software market.

Symbian, the mobile software company in effect controlled by Nokia, continues to dominate the sector.

As the world’s leading mobile phone maker, Nokia is the dominant force in smartphones, the sector that Apple is targeting with the iPhone. The Finnish manufacturer accounted for 45 per cent of the 32m smartphones sold in the first quarter of this year, according to Gartner.

Apple also faces competition from Microsoft and Google in the shape of the Windows Mobile and Android platforms. Google hinted last week that it would open its own version of the App Store, and Microsoft could do the same.

“We do it with Xbox, we do it with Zune, it would be logical to do it with [Windows] mobile,” says Robbie Bach, president of Microsoft’s entertainment and devices division. “Carriers already have limited versions of this, for things like ringtones.”

Mr Murphy says about 85 per cent of the applications for the iPhone he is seeing are aimed at consumers. He says the best groups will show originality in bringing together people, places and events.

“We think most, if not all, of those companies are being formed right now in this area of open mobile. The scale we are looking for is what will be the Ebay, the Amazon and the Google of the mobile internet.”

Additional reporting by Tim Bradshaw in London