In case you missed it this holiday season there were a lot of releases of new portable devices. New tablets from Apple's Ipad Mini to quad core hi-resolution Droids. There was a new major OS release - Microsoft 8 Slate. There was a slew of new cell phones from the Apple iPhone 5 to the Samsung Galaxy Note II. And there were a lot of commercials touting the new products. Commercials are an interesting exercise in product value deconstruction. The advertising companies typically pick A FEATURE and focus everything on it. In years past we've seen a lot of commercials on mobile devices and hardware features. Faster chips, accelerometers automatically changing screen orientation, hi-resolution screens, 3G and 4G.
In the most recent couple of years the commercials feature software. Yes, they still mention hardware but it's in passing if it's mentioned at all. When Apple introduced and promoted FaceTime and then Siri it was a major indication that differeniation in the market place and value add for consumers is in the software space, not hardware. The latest iPhone 5 featured a panaramic shot feature. A feature new to Apple but has existed for many years with simple $1 apps. And we'll see software become center stage for years to come.
The challenge in the space is a lack of major hardware innovations that are affordable enough for mass consumer products that will create that new "gee whiz" feature consumers feel they just "gotta have". If you are wondering where is the 3D holographic screens, the textured finger response feedback and mega-bass built into a tiny space then you'll have to wait for it. Apple sucked up all the "low hanging hardware fruit" five years ago. That was the golden age (as short as it lasted) of hardware put together and used in a completely new way - touch screens, power efficient processors, motion sensing and internal solid state memory. We're now in an innovation lag between new technology, consumer pricing and company's accepting the risk of incorporation.
In the meantime look to lots of small software companies to be snapped up by hardware makers as the push for "value add" will lie in software features. For companies in the software space applications that improves user experience and makes it easier to connect will be in high demand over the next couple of years. Also look to a lot of pressure to be placed on Apple in the next two years as their premium pricing will face stiff competition against much lower priced products of comparable or superior hardware quality.
If anything the lesson is - software is where the big value and profits lie in the long run. We've seen this with personal computers and now we're seeing history repeat itself in portable devices.