Has Dell learned from the Axim or the iPhone?

Speaking before an audience in Tokyo Tuesday, Chief Executive Michael Dell dropped a few hints that his company might be looking to release a smartphone.

"For the last three years, we have integrated 3G radios into our notebooks," said Dell. "We already have agreements with many mobile carriers around Netbook devices, so it wouldn't be unreasonable to expect that we would have smaller mobile Internet devices or smartphones in the future."

I don't think Dell can simply start selling small computers, call them smartphones, and expect to be successful. As a company that missed quite a few trends in the market and one of the last to stop selling Pocket PCs, Dell has to carefully prepare for some of the issues that await it if it does release a smartphone.

The market has changed since the Axim
Dell has been here before. The Dell Axim line was launched in 2002, and had in it some of the most powerful Windows Mobile Pocket PCs on the market. I owned a Dell Axim x51v and loved it. I used it all the time.

But the Axim failed, because smartphones replaced PDAs as the favored mobile devices. Pocket PCs became irrelevant. Eventually, Dell discontinued the Axim and decided to get out of that market, but today, if it's really trying to get back in, it must know that it will be dealing with a more entrenched market with a few major thought leaders--RIM, Apple, and Google--commanding much of the consumer's attention.

While Windows Mobile enjoyed more market share than the iPhone in the fourth quarter of 2008 (mainly because there are so many more Windows Mobile devices than iPhones), it's not as ubiquitous nor as important to the industry as it was when the Axim was still on store shelves. In fact, I'd contend that installing Windows Mobile on the new Dell smartphone could be a major blunder.

Lessons learned from Apple's iPhone
Why would installing Microsoft's mobile OS on a Dell device be a blunder? Simple: Apple, RIM, and Google have taught us in their success that developing a unique OS is now a key success factor in the smartphone market.

If Dell decides to release a smartphone with Windows Mobile installed, I'm willing to bet it will be irrelevant in weeks. Windows Mobile is, based on my experience, largely incapable software when compared to the competition. Worst of all for Dell, its smartphone will get lost in the weeds at carrier stores, sitting next to all the other Windows Mobile phones from companies like Samsung and LG. A Windows Mobile-equipped Dell smartphone would be hobbled by its software and it would struggle to stand out in any way. In the smartphone business, that's a major issue.

To address that issue, Dell needs to create its own OS. Although it's a major investment, it allows Dell to differentiate its smartphone in the market. By running Windows Mobile or any other mobile OS currently found in other phones, Dell effectively diminishes its chances of standing out. After all, what would make a Windows Mobile-equipped Dell smartphone so compelling? Different shells?

Creating a unique OS will be expensive. There's no doubt about it. Luckily for Dell, though, it has over $8 billion in cash on hand and little debt. It can afford a hefty cash outlay to develop a mobile OS. I also realize that as a hardware company, it can be difficult to build software from scratch. But a unique OS is a necessity in this market.

A Dell OS will give the company more control over its phone's destiny. It allows the firm to develop its own app store and ensures that it can give consumers a unique alternative to any other device on the market. Given how crowded the cell phone space is and the ubiquity of derivative devices, that's an important leg up that Dell shouldn't ignore by installing Android or Windows Mobile.

But in the end, the success of Dell's OS will require a solid first run. There's no debating that it will have its share of issues--they all do--but if the company can provide Google Maps integration, GPS functionality, strong enterprise support, a good browser, a strong e-mail program, and intuitive design, it's already a more viable software solution than Windows Mobile. And the best part is, Dell can constantly improve its platform instead of waiting for another company to update the OS it would be running on its phones. That ensures its devices will only become more appealing the longer they're on store shelves.

It's costly, it's time-consuming, and there's no guarantee it will work. But a unique OS is a necessity if Dell wants to establish itself in the cell phone space.

App Store? Yep
Beyond software, Dell should consider releasing an app store as long as it develops its own OS. Apple has proven that if a company can release a desired smartphone, developers will flock to its app store just to have the chance to sell apps for it. Google has been able to do it too with its Android Market.

In an ironic twist, an app store is becoming a necessity in the smartphone market. Microsoft is now touting its own store and RIM has a small marketplace. If Dell really wants to make a splash in the smartphone market, it will need to release an app store and try to find ways to bring developers to it. Doing so would create that end-to-end solution that Apple has proven successful time and again and from a business standpoint, Dell would have the opportunity to share revenue with developers on all app sales.

Design is important
Apple has proven that smartphone design means almost as much as the software that device is running. While the Axim was a relatively well-designed device, it wouldn't cut it in today's smartphone market where customers require iPhone-like style. That might be unattainable for some companies, but one thing is certain: Dell needs to do whatever it can to make its smartphone as sexy as possible. An ugly or generic device just won't cut it.

If Dell does indeed plan to release a smartphone, an Axim with phone capabilities won't cut it. For me to want a Dell smartphone, it needs to have its own OS, a solid design, an app store, and all the bells and whistles Dell can throw into it. I won't be interested in anything less, and I'm willing to bet that I'm not alone.

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