Analyst Blogs

Blog

June 15, 2012, 5:53 a.m.
Dominique Bonte Vice President and Practice Director

​

The location industry got shaken up this week by Apple’s announcement to include free turn-by-turn navigation as part of its next iOS 6 release. Actually, this was long overdue. Clearly Apple could not stay behind on Google and Nokia both offering free navigation as part of their platforms. Just relying on Google maps (just maps, not turn by turn navigation) increasingly looked like one of the weakest points of Apple’s strategy and a major gap that had to be closed urgently. The main issue obviously was where to get good maps. Whereas Google has been building its own digital maps in the US and Europe for many years, it was clear Apple was going to have to source their maps. With TomTom the only remaining independent high quality map provider, rumors about a possible acquisition have been circulating for more than a year. Finally, it turned out Apple decided to enter into a major licensing deal with TomTom. At least for the short term. Let’s not rule out Apple will still attempt to build their own maps as offering a free service doesn’t really allow for having to pay suppliers – though Apple certainly could fund/subsidize their free navigation for a very long time. So while this deal certainly represents a (temporary) windfall for TomTom, the long term effects might actually be negative. Just remember Skyhook Wireless, Apple’s former provider of Wi-Fi based positioning only to be dropped as soon as Apple had developed their own technology.

At the same time, with the 3 major mobile OS platforms/ handset vendors Google/Android, Apple, and Nokia/WP all offering free navigation and location services, it will become increasingly difficult for these players to use location as a differentiator. However, this is exactly what Nokia seems to be doing, counting on location as a major sustainable competitive advantage as recently confirmed by CEO Elop who plans to ramp up investments in this area. Bad timing and unlikely to remain a winning strategy. Is Nokia once more betting on the wrong horse? Real differentiation is now a much more subtle play, one that Apple understands very well: eye for detail, high quality, super user experience and intelligently leveraging the third party developer ecosystem. With navigation, Apple is again launching something most other players have been offering for a long time. But clearly they are going to give it an Apple twist in terms of the user experience, displaying 2 navigation instructions ahead of time and super-fast route recalculation just representing 2 small examples.

What are the repercussions of this? In the first place, navigation application vendors – including TomTom - will see the lucrative iOS platform (the last) lose a lot of its appeal, both for applications and content. Location simply is too much of a strategic area to let it be controlled by third party providers. It’s a logical and natural industry cycle: ultimately innovations make it into free standard components of platforms. For application developers this means they need to get to the next wave of innovations, and fast.

Another less discussed but equally important announcement is the integration of Siri Eyes Free natural language voice technology in vehicles via a dedicated steering wheel button with car OEMs BMW, General Motors, Toyota, Mercedes-Benz, Honda, and Audi apparently having committed to implementing this . Apple finally seems to realize the potential of automotive and the role smartphone integration will play. However, this goes against increasing awareness about common standardized approaches such as MirrorLink being the way forward for the automotive industry to avoid fragmentations and enticing developer communities. But resisting the Apple temptation will be difficult for many car OEMs.