ALL FOR ONE, ONE FOR ALL

In the race to make the ‘Frankenstein phone’ – a pocket-sized machine combining the functions of a mobile phone, a PC and more – the IT and telecoms industry are pulling together as never before. But will they create a product with monster app

By the turn of the century you will be carrying a pocket-size computer that will double as a mobile phone. Probably voice activated, it will connect you to the Internet, handle all your e-mail, do all your banking at the touch of a button and, if the creator is not restrained, it will even give you a wake-up call and make the tea.

Or at least that is the hope of the great and good in the IT and telecoms industries. Because if we are not, the multimillion pound investments they are making to produce such a machine – already dubbed the “Frankenstein phone” – will be wasted.

The two sectors are sharing unprecedented amounts of information and knowledge in the pursuit of what is fast becoming the latest hi-tech holy grail – a machine that combines the functions of a PC with the instant communication of a mobile phone. It was also the stimulus for Psion’s failed 230m bid to buy Amstrad earlier this year – Psion chief executive David Potter wanted Amstrad’s consumer electronics mobile phone arm Dancall.

Some observers actually believe the Frankenstein phone will replace the mobile phone if it can be made small, light and cheap enough. Limited examples of what are snappily known as Personal Digital Assistants (PDAs) already exist. But the conversations about how to market and advertise this pocket-sized variety are only just beginning.

“I remember talking to telecoms companies three years ago about PDA technology as if it was only six months away, but there is still a long way to go,” says Paul Stobart former European chairman at the branding consultancy Interbrand but now business development director at the Sage Group, a computer software company.

“To market these products the companies will have to stay right away from the technology – it is too frightening,” says Stobart. “If Sony is the first to market, it might try a ‘Walkman tactic’ and create a descriptive brand under the Sony wing. But if it is a manufacturer that the consumer has never heard of it will have to try to create a generic product.”

Finnish mobile phone company Nokia is the first to make an all-in-one mobile phone and palm-top computer. The Nokia 9000, the most advanced product on the market at the moment, sells for just under 1,000 and comes with a GSM (Global Systems for Mobiles) phone.

It receives faxes, sends e-mail, gives Internet access, as well as offering the usual organiser functions. But it is too expensive, too bulky to fit into the pocket and – as yet – too limited.

Philips, Motorola, and Ericsson will all launch advanced PDA versions next year. Sony, Sharp and Hewlett-Packard are also understood to be eyeing the market. Earlier this year Microsoft, along with 40 manufacturers, announced it will develop an operating system for palmtops called Windows CE – an adaptation of its PC system.

“In the long-term, this market will start to get very interesting,” says SBC Warburg telecoms analyst Pers Lyndberg. “The Nokia product is very much a trial product, but then again, Nokia is a distinct leader in this field.”

He believes the PDA will represent a serious challenge to the mobile phone within five years, which goes some way to explaining why the likes of Cellnet, BT and Vodafone are in the middle of this information exchange. “Increasingly, the simple mobile phone will be seen as obsolete when, by comparison, there will be a lot more functions on your PDA,” says Lyndberg.

Research group International Data Corporation valued US sales of PDAs at 132m last year. It estimates that the figure will reach 157m in 1996 and more than double by the end of the century. The global PDA market is currently estimated at 750m but even that represents a tiny return on the amount that is being spent to develop the machine.

But some observers believe the technology could be outstripping demand and that the money is not being well spent. “There is a lot of technology floating around without a proven need for it,” says one industry source, “there has to be a question mark over whether a market for the Nokia 9000 actually exists. Markets are pretty conservative and these machines are being developed by people who know how they work without much reference to consumers.”

But Mika Halme, global product manager for the Nokia 9000, says that although the launch has been low-key, the company stands firmly behind the product. “This is the direction the company is going. In the future we do not think there will be such a call for regular phones, people will want more functions.”

Most observers think it will have to cut its price by at least half to attract anybody other than “techies”. Consumers will not necessarily want all of the available functions and trial-and-error will dictate which ones prove most popular.

“There is a sense of all the players watching each other,” says Cellnet spokesman William Ostrom. “The first into the market will not necessarily have an advantage. It will create a demand and the others will catch up quickly.

“We are conscious of not creating a Frankenstein’s monster by putting everything together in a sellotape and elastoplast way. We have to assess the functionality of these machines and build that into the network so that once they come out we will be able to respond quickly.”

Nokia, and the other players, are also looking at electronic payment systems to allow users to place their credit and payment cards into machines and pay directly for goods and services – exploiting the explosion of online banking. But that opens up security issues over money transfer which many people believe will not be resolved for at least four years.

“The strange thing is that everybody is working with everybody else sharing a great deal of information behind the scenes,” says Stobart. “The telecoms companies are desperate to get into bed with the hi-tech companies, both for software and hardware. Partnership has become the name of the game.”

However, Psion claims it is in no hurry to find or acquire a GSM partner. Marketing director Paul Lubbock says that this is an option but only “one of many we are considering”. However, Psion is expected by its rivals to make an entry to the market next year.

Lubbock claims Psion’s market research reveals that people want simple, cheap machines, to carry around with them and that the demand for more sophisticated machines is, at best, patchy. It launched two new products earlier this month. One is the series 3c, an upgrade of its palm-top range, the other, an organiser called Siena, part of a market Psion has not been involved in since the mid-Eighties.

“Size, portability and price are crucial in this market,” says Lubbock. The Nokia 9000 is undoubtedly very advanced but it is also rather bulky and expensive. People want something they can put in their pocket.”

And that is the prize. All of the companies want to be first to market the pocket-sized all-in-one. They want to create the next Walkman phenomenon, but nobody can do it alone.

All of which underlines the problem for Psion, says Lyndberg. “Psion will face increasing challenges. Nokia has a large and sophisticated network. It is much easier to replicate what Psion does than the kind of thing that Nokia does on its network. Psion still needs to hook up with a major telecoms player.”

There is a lot resting on the birth of the Frankenstein phone. It is not about a single product or category. The development of these products is having a structural impact on companies in the IT and telecoms sectors as they create partnerships and trade information that will have an importance way beyond the year 2000.

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