Do devices matter when buying enterprise wireless services?

The following is a guest post by TC2 Asia-Pacific managing director Joe Schmidt, who is based in Singapore.

If you're a buyer of wireless services, which has a higher priority in your decision process, the carrier or the device?

For buyers who negotiate enterprise deals, the answer has always been the carrier. But lately, due the runaway success of Apple's iPhone, as well as Apple's exclusive iPhone relationship with AT&T and company executives demanding "I want an iPhone," enterprise buyers are wondering whether to reconsider their approach to buying wireless services.

Wireless services and the use of smartphones, such as the BlackBerry and now the enterprise-ready iPhone, continue to gain strategic importance in the enterprise. By reading the recent earnings announcements from AT&T and Verizon, it's also clear that wireless services are a significant growth area for the carriers.

Both carriers added net new subscribers last quarter -- AT&T added 2 million and Verizon added slightly less at 1.2 million. What's more, both indicated they expect wireless revenue to continue to grab a significantly greater share of their corporate revenue. And that's particularly due to the demand for smartphones and the use of wireless data services, which are markedly more profitable for the carriers once they get past the initial marketing expenses.

But dig deeper into these earnings announcements and you begin to see how dominant the iPhone has become and why enterprise buyers are likely feeling some pressure to alter their procurement approach. Of the 4.3 million smartphones added to AT&T's network in the third quarter, nearly 75% were Apple iPhones. And, according to AT&T, nearly 40% of those iPhone activations were from customers new to AT&T.

How many of those new subscribers do you think said, "I want an iPhone, so I'll subscribe with AT&T" rather than "I'd like to subscribe with AT&T and I'll take an iPhone please"? My guess is that it's probably a lot more of the former than it is of the latter.

So, we know devices do matter, but can enterprises take this same approach -- select a device first and sign up with whatever carrier supports it? Not so fast -- not if you expect to negotiate a competitive agreement with your wireless carrier.

The moment you put the device before the carrier is the moment you lose your leverage, your ability to negotiate market-leading pricing and commercial arrangements, and your ability to influence operational support. You eliminate the healthy tension caused by having multiple suppliers trying to win your enterprise business. You end up having only one default carrier choice -- the carrier that has the exclusive device relationship.

Think of it this way: Making your enterprise wireless buying decision based on the availability of the iPhone, or any other carrier-exclusive device, is akin to jumping off a building, being told you're in trouble, and then responding that, no, so far you're doing alright. Trust me, at some point your decision is going to hurt.

What you do want to do is make sure you have a real-time handle on the behavior of your user base as you go into the buying process. This suggests monitoring not just the device market per se but also the burgeoning wireless applications market. When you consider that Verizon Wireless is bringing out mobile devices on Google's Android operating system and mobile application platform, and that Apple is now broadening its iPhone availability in the U.K. from one exclusive carrier (O2) to two more (Vodafone and Orange), you can see what's coming down the pike.

It's absolutely fair to demand that carriers support the specific mobile capabilities your base expects without premium pricing, given that a wireless-device rollout under the guise of a corporate-liable deal is itself a marketing function on your part. But as the major carriers sort out their mix of 3G/4G coverage and hardware/software offerings, you should be able to play them off against one another in procurements if you don't get laser-focused on only one device.

Our advice to buyers of enterprise wireless services right now is to continue to evaluate and select your wireless carrier based on the merits of the carrier, its network, its pricing -- and then also its ability to support your enterprise mobility program. Look for carriers that offer a broad array of devices, since smartphones and the applications that run on them are clearly important to the enterprise.

And remember, nothing lasts forever, so when AT&T loses its exclusive iPhone advantage in the U.S., which it likely will in the coming months, you'll be glad you didn't blindly jump while the market was rapidly evolving. We'll be following these developments closely.