Original URL: http://www.theregister.co.uk/2005/09/10/palm_os_futures_past/

What sealed Palm's software fate?

The whole widget

By Andrew Orlowski

Posted in Mobile, 10th September 2005 02:48 GMT

Analysis So, PalmOS ends up in the hands of an Japanese mobile browser company that almost no one has ever heard of. It's a sad sign that expectations for PalmOS software have been so low, for so long, that PalmSource stock leapt 70 per cent on the news.

The origins of this decline have been well documented here at El Reg, we'll only recap the key mistakes before raising a spectre that haunts this tale of Silicon Valley history: a spectre called Apple.

In 1999 Palm announced a partnership with cellphone alliance Symbian, promised joint roadmaps combining the best of both, but failed to follow through. An alternative history, where Palm brought its human interface expertise and US marketing strengths to a solid operating system, never materialized. Which is a pity. Although Nokia pretty much runs the Symbian show these days, its popular user interface still lacks the usability that has always been Palm's hallmarks. (Nokia's Series 60 wouldn't have survived the ruthless click monitoring that Palm enforced, ensuring basic tasks could be performed with as few steps as possible).

A year later Palm had changed its mind again: CTO Bill Maggs said that Palm didn't need a modern operating system at all, and Nokia and Symbian were wasting their time. After Maggs inevitable departure in 2001, followed by that of genial CEO Carl Yankowski, a group of engineers unsuccessfully tried to convince the company to use Linux, but couldn't convince the lawyers that GPL software wouldn't Pacman Palm's entire business. Wind on four years to today, and Palm software's future is firmly based on … Linux. It had nowhere else to turn after spending the interim period developing a modern operating system for smartphones - 'Cobalt' - that it couldn't persuade anyone to adopt.

So arrogance, ignorance and blind chicken panic played a large part in this story. But did it have to be this way, if Palm had ignored entreaties from all quarters, and refused to play the "platform game"?

Without taking away responsibility for these decisions from the executives involved, how much can we blame Wall Street's mania for forcing slice-and-dice horizontal models that resemble the PC industry on all technology companies it surveys? The PC business is one in which only two established monopolies (Microsoft and Intel) and one blessed assembler (Dell) make any money. Let's remind ourselves that today the hardware side of Palm is, on a global scale, a very modest but nicely profitable operation - and people love their Treos.

"We don't make software - we make a platform"

A "platform", by definition, is a technology licensed to third parties. Wall Street likes platforms because a new platform creates new markets - although these are often very short lived - and it believes vertical models harbour waste and inefficiencies - although horizontal models often simply transfer the cost to the customer, for example as buck-passing "technical support". Wall Street is rarely wise to the long-term consequences of its investment decisions, as we see from the bandwidth glut of the late 1990s, when capital poured into infrastructure that today no one can afford to operate.

So what we're really looking at is an ideological obsession that benefits one particular lobby - finance capital.

However, this has been the dominant ideology for two decades, and any successful software company that refuses to position itself as "a platform" finds itself punished in short order. And such is finance capital's cost-cutting, market-making mania, even successful web sites are forced to make compliant noises if they are not to lose analyst support.

For example, Amazon.com and eBay both live two parallel lives: running the direct retail operation themselves, and providing a market place for third party retailers too. Google's future, we're so often told by Silicon Valley "experts", depends upon turning itself into a platform. This is one of the subtexts behind those "Google is the new Microsoft" stories you may have been reading, and it's true that for Google-obsessives this is the stuff that wet dreams are made of. You may even have heard that Google is really preparing the 'Google OS'.

But for many companies, licensing the crown jewels is rarely easy, and very often the demand is quite absurd. Google's future doesn't depend on making itself a "platform", but by above all else maintaining the health and integrity of its advertising brokerage. Way down the list in second place comes the pipeline of new features needed to maintain the punter's interest in the site. So Google wisely pays no more than lip service to the platform concept - just enough to convince the bloggers that it's up to something.

Nothing but the whole widget

Back to Palm, which in 1999, finally saw its IPO from 3Com appearing on the horizon. Palm's executives were initially wary of the platform pitch. Why not stress the wholeness of the Palm product, a runaway hit?

Alas, they buckled, and went with the flow. So Palm was obliged to seek licensees, finding at first vertical industry OEMs like Symbol, and later, a marquee name in Sony. An ego-driven squabble that drove out Palm's founding trio also presented it with another, in the shape of Handspring. These indeed made Palm look like a "platform".

But should the Palm umbrella follow the platform logic and spin the software operation out? After a few strategy swerves, it eventually it decided it should, but by that time the market had changed. The PDA market was shrinking, and for phones Palm had a venerable OS that was technically suitable for, but too expensive to build into, low end phones. For high end smartphones it had a capable but immature and untested OS that made too many demands. And it found a market of phone manufacturers who weren't prepared to offer more than lip service to anything outside their core portfolios: witness the tepid interest in both Microsoft and Symbian outside of Nokia and outside a few flagship products. So Palm software found itself a "platform" at precisely the worst time: when it had nothing serious to offer the market.

And here Apple's recent experience offers us an alternative history. For twenty years, Apple only ever had one hit product, the Mac. For most of these twenty years it was being urged to become a "platform", too. When it attempted to do so, licensing the MacOS to rivals, the results were catastrophic. But today Apple has the mindshare across two new market categories that it wouldn't have had a hope in if it had followed the horizontal ideology. The iPod wouldn't have been such a success if it had been at the mercy of Windows Media Player. And the iTunes Music Store, not exactly a profit center to boast about, nevertheless wouldn't have gained the publicity it has without the iPod and iTunes. Both are examples of Apples ability "to make the whole widget" and both are triumphant rejections of the horizontal ideology.

Today PalmOS' new owner Access has vowed to continue offering its Cobalt and Garnet operating systems, but as critics have pointed out, it really bought PalmSource for its Chinese Linux presence - in which case $324 million looks like a bargain. But could Palm's fortunes have been any different if it had refused to play the platform game?

Remember that Wall Street's horizontal mania is based on an assumption that customers will not pay a premium for a product from a vertically integrated manufacturer. It supposes that we won't pay a premium even if that buys quality. And the world is awash with cheap rubbish.

Ironically, Palm Inc. in January 1994 was a small software company, warily facing the prospect of making its own hardware. Apple had spent $200 million on the flop Newton, and the tiny start-up had just $3 million in the bank. The decisions it took that year to bring 'Touchdown' - the original Palm Pilot - to market were exactly the limitations that made it a success. But limiting its capabilities also made it difficult to turn into two strong "platforms". Given the calibre of executive leadership, even the most enthusiastic PALM stockholderwill have their doubts things could have turned out any different. But do send us your alternative Palm histories anyway. ®