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Wednesday, January 06, 2010

Google underwrites the mega trend of "HW is the Service"

One of the massive mega trends in technology is 'HW is the Service'. This sentence was first coined couple years ago by my colleague Chris Liu, when we were discussing the transformations in digital, with design, production of HW being in a way commoditized by the Asians and particularely by the Foxconns of the world and free services notoriously hard to monetize. The trend at hearth is that more and more service companies get into the HW business and monetize their services with HW. Any little start up can design and specify a piece of HW around a service take for example the Peek Twitter device. Heralded by Wired Magazine for a Gear of the year award. They can probably  sell a couple hundred-thousand devices.

A service business selling one million devices at the magical USD299 price point, seen as top of gifting range, is a nice USD300M business, far more than most services generate in revenue.

The iPod is the iconic HW is the service example, followed by the Kindle and now the Google Nexus One.

When players like Google enters the business in the physical world everything will change. High street advertising will change. Content on retail store shelves will change. The street scene will change. For me Googles foray into the HW business is a logical step, as controlling the whole end to end experience from customer care to silicon is what lies as a fundament for the experience economy in my mind.

In the short and medium term the players who play strong vertical games will get a huge pay off. Imagine if Google would sell 10M Google phones at 500, that is a 5BN business, building that in the service business has not been done too often.

There are several HW is a service opportunities around.

1.) Content & Media Pads. Essentially mobilizing, digitalizing the task of reading with an optimised solution. This is a super hot topic with the Kindle being taken on the by the Nook, and potentially Apples iPad or whatever they call it.

2.) Netbooks, netbooks to me are cheap, small fully connected laptops. Optimising both input and output. This a tool for education, work and play.

3.) Photo frames and ambient computers. These are connected devices that primarely show family pictures, but when approached can turn into personalized widget platforms.

4.) Connceted webcams, the webcams of the future which connects to the Internet and uses the TV as a screen. For rich virtual precense

5. Connected Cameras and video cameras. I do think that optics merit a unique object, I still love my Ricoh GX200, but a connected one would be better. Or a connected Flip.

Lat but not least one can think of mobile phones bing HW is the service with the subsidiesed phones. Interestingly now operators are painting themselves in a corner with lots of SIM only contracts, which is cheaper but carries no object to which one can have a relationship. 

Time to think differently!

03:34 PM | Permalink


I totally agree that it makes a lot of sense to a) include your own HW into the end-to-end chain in case you want to create a good UX and b) try to find new ways of monetizing on services.

Not sure whether "HW is the service" is a real trend though: selling HW is a tough job in terms of building a brand, getting shelf space allocated by Fry's, building up your demand supply chain, etc.

I will stand corrected as soon as I see people at Media Markt lining up for the first "CLindholm Camera" ;-)

Posted by: Antti Muka at Jan 6, 2010 4:51:43 PM

A service business selling one million devices at the magical USD299 price point, seen as top of gifting range, is a nice USD300M business, far more than most services generate in revenue.

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