Smartphones Get Smarter, Thanks In Part To The iPhone

Dual-mode smartphones -- much anticipated but seldom used -- are fast becoming a real option for businesspeople. Few IT departments support these flexible devices, which work over cellular networks and wireless LANs. But if CIOs paid attention to last week's smartphone fiasco at Duke University, they're kicking into gear.

Duke's IT administrators learned the hard way about one of the downsides of iPhone fever. As many as 150 students and staff showed up with Apple's Wi-Fi-enabled devices, causing the campus wireless LAN to jam repeatedly and become inaccessible as the iPhones automatically attempted to link to access points, according to the Durham, N.C., News & Observer.

It's understandable that Duke's network administrators were caught off guard. Dual-mode smartphones are seldom seen in the United States, mainly because cell carriers have blocked the technology for fear of eroding their cellular business (see "Cell Service Providers Get A Wake-Up Call").

The iPhone, released three weeks ago, seems to have changed that overnight. Research In Motion last week released its first dual-mode BlackBerry (not counting a Wi-Fi-only 2004 model), and Dell and Hewlett-Packard are jumping into the market, too.

"The iPhone has pushed all vendors to rapidly transition from basic limited-function cell phones to converged smart devices," says analyst Carmi Levy of AR Communications. "By the end of the year, you won't be able to get a basic cell phone from the major vendors."

BlackBerry loyalists, who now use cell service for voice calls and e-mail, soon will be able to access wireless LANs and public Wi-Fi hotspots for e-mail and Web browsing, as well. The BlackBerry 8820 will be available overseas in the coming weeks and from AT&T in the United States later this summer. Since the 8820--like the iPhone--can only be used for Web access and data over Wi-Fi, it represents no immediate threat to AT&T's cellular voice business. Nevertheless, AT&T has put the dual-mode wheels in motion, and other cell carriers will be forced to get going with a technology that customers clearly want. T-Mobile recently started a national rollout of a dual-mode service for consumers, HotSpot@Home, for the Nokia 6086 and Samsung t409 phones.

Employees at asset management company Fairfield Greenwich Group use BlackBerrys and Palm Treos with GSM cellular technology, which means those devices work anywhere in the world. What those smartphones lack is built-in Wi-Fi for high-speed Web access, and director of IT Jason Elizaitis would like to change that. "If you have Wi-Fi, you can build comprehensive apps because you can stream more data to devices," he says. For instance, the company's CRM application would be able to support more data fields as a result of Wi-Fi's gigabit-speed transmission.

Likewise, General Motors hasn't purchased dual-mode devices, but internal teams have begun looking into them, says Fred Killeen, CTO of the automaker's information systems and services unit.

DELL SMELLS AN OPPORTUNITY
Major computer companies have taken notice of the heightened customer interest. Dell has begun selling Nokia's dual-mode E and N series mobile devices on its small-business Web site. Sold unlocked--not tied to a specific carrier--the Nokia N95 and N80 are high-end multimedia consumer devices, while the E61 and E61i are aimed at enterprises.

Dell is rumored to be building its own dual-mode smartphone, possibly in partnership with Quanta Computer. The February arrival of former Motorola executive Ron Garriques to head Dell's consumer group has bolstered expectations of a Dell push into converged mobile devices this year.

HP already is in the mobile-device business with its iPaq pocket PCs and handhelds. Last week, HP said its iPaq 510 Voice Messenger, the first of the line built on the Windows Mobile 6 operating system, has begun shipping. Like the Nokia devices, the iPaq is sold unlocked, at a list price of $320. It runs over GSM and Wi-Fi networks, but it's not available at your local electronics store. HP is selling the devices directly to business customers or via resellers and integrators.

Third-party software vendors are devising ways to make dual-mode devices shift seamlessly from cell to Wi-Fi, even during voice calls. IP-telephony provider Avaya last week rolled out software, designed to work with Nokia E-series devices, that hands off calls between business Wi-Fi networks and cellular networks. "We're seeing a lot more devices that now have Wi-Fi, particularly business devices for connection to data," says Geoffrey Baird, general manager of Avaya's appliances, mobile, and small systems division.

There's no mystery about where this development hits hardest: carriers' revenue. "The biggest benefit is the cost savings we'll see once we fully roll this out," says Bret Jones, managing director of technology operations and engineering at George Washington University, who is deploying Avaya's new software on the university's Washington, D.C., campus.

The convergence of cellular and Wi-Fi technologies "will have a profound impact on the way businesses use smartphones and PDAs," predicts GM's Killeen. "There's a built-up demand. When you add capabilities such as voice-related applications, presence and 'follow me' services, collaboration, and unified communications, there will be a major industry-wide migration to these technologies." That may have just begun.

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Analyst Take: Prepare For Dual-Mode Smartphones