One-on-One with PalmSource CEO David Nagel

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At this week’s PalmSource Developer Seminar in San Mateo, California, I was privileged to spend some time one-on-one with the President and CEO of PalmSource, David Nagel. We had an engaging conversation that covered many areas of the mobile computing industry, including challenges for software developers, the roadblocks to ubiquitous wireless, and what comes next from PalmSource. I’ve tried to capture the gist of our conversation, not verbatim as some of my previous interviews with industry leaders. When you’re finished reading, be sure to join us in the Brighthand Forums to discuss some of the issues raised in this article.

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David Nagel David Nagel worries about developers. Specifically, he worries about the legions of developers writing software for the Palm Platform, and their ability to make a living. After all, as head of PalmSource, Mr. Nagel is the Alan Greenspan of the so-called Palm Economy.

The Palm Economy, or “ecosystem” as Mr. Nagel has taken to calling it, is comprised of device and accessory manufacturers, chip makers, and, most of all, thousands of software developers, many of which are small companies — no, make that tiny companies. (Yes, the Free Agent Nation espoused by Tom Peters and FastCompany magazine remains in full swing in the Palm world.)

But along with opportunities come problems. And the problem with small developers, as Mr. Nagel sees it, is their inability to tame the distribution channel. In other words, they’re adept at creating software but struggle getting it into the hands of millions of handheld users — a point echoed by developers I spoke with at the seminar.

The reasons are clear. Packaging and marketing software through current retail channels simply isn’t easy, or cheap. And while online stores such as Handango and PalmGear provide an excellent channel for small developers, the entire purchase-download-install process is relatively complex to ordinary consumers, and must be greatly simplified if we expect to move to a ubiquitous wireless world. And it’s wireless that Mr. Nagel believes “may be able to fix the channel problem” for developers.

Enter Palm OS 6. Palm OS 6, which will make its way into devices in early 2004, brings more integration between the standard PDA functions found on a handheld and the wireless ones that have begun to surface. Mr. Nagel envisions a day when downloading an application or content, say an e-book of French phrases, to your Palm Powered smartphone is as simple as checking a box.

So what’s the delay with wireless?

But it’s going to take more than just Palm OS 6 to address the entire wireless problem. According to Mr. Nagel, there’s a “complex inertia” hindering the growth of wireless. He says it stems from a variety of factors, including a lack of capital in the technology sector, issues related to roaming agreements, and concerns over device and platform support. Plus, carriers simply have no track record of what wireless services will sell.

The good news is that carriers now see the carrot at the end of the stick — and the carrot is green. Carriers have found that smartphone users are less likely to switch providers, resulting in something the industry calls a “low churn rate.” Since the typical acquisition cost of a cellular customer currently stands at nearly $200, churn has become a huge issue for carriers. Also, smartphone users tend to generate more net revenue per customer than cell phone users.

So with all the positives associated with wireless — a richer yet simpler experience for users, a better distribution model for developers, and increased revenues for carriers — why does PalmSource estimate that will it take until 2007 for it to gain critical mass? One reason, according to Mr. Nagel, is the price of convergent devices. “Device prices must go down, without a doubt,” says Nagel. Smartphones, which account for less than 1% of handset sales, currently average around $500. While price points have been drifting downward, they must reach the $100 to $200 range of cell phones (which equates to the typical cost of customer acquisition) before carriers can begin giving them away for free.

Still, there’s no doubt with Mr. Nagel, or anyone else I spoke to at the seminar, that wireless devices, applications and services are the future — a future that’s becoming clearer as we move closer to it.

VGA, Mini-tablets and more

Looking to the future of mobile computing, Mr. Nagel remains excited. He recalls that in the late 1980s, while at Apple, they worked on a state-of-the-art Cray supercomputer that encompassed an entire room. There were actually only a few of them in the world. Now, only 15 years later, we’ve got handhelds with XScale processors that match the Cray’s processing power.

So what’s next from PalmSource? While not revealing too many specifics, Mr. Nagel did mention that the fruits of the acquisition of BE, Inc. and its talented group of engineers will soon be seen, specifically in the area of multimedia. He said that new technologies capable of displaying photo realistic images on 4″-5″ VGA screens will also have a major impact on handhelds, likely in the next 6-8 months. And eventually we’ll see “mini-tablets” — instant-on devices that do a few things, do them extremely well, and are simple to operate. People are absolutely moving away from complexity, according to Mr. Nagel.

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