Patience, Nokia, patience - cloud services take time to succeed / Posted by Ari 23.05.2009 05:21

Just like most corporations, Nokia is tackling the economic downturn primarily by cutting costs. The company is applying three methods; layoff of employees, reducing purchases from contractors, and offering voluntary retirement packages. This is the first time Nokia has offered attractive retirement packages for managers and other knowledge-workers in larger scale.

The first round of packages that was available to 1000 senior-level employees in Finland was so badly wanted that many who hesitated too long, didn't get it. Those who used the opportunity to cash out, received an equivalent of 6 to 15 months salary, depending on the length of their Nokia careers. In May 2009, Nokia employees at the Salo factory were keen to get the packages as well and pushed the top management to offer the scheme to factory workers. It was an instant success, too.

The strategy to let employees decide if they want to go or stay can be regarded a success. Naturally, Nokia will lose talent it didn't want to lose, but that's a small price to pay for the good will and positive brand image created during tough times. Besides, Nokia is still one of the most wanted employees in the world and young talent is continuously queuing up outside the company's door to get a foot inside the door.



In its quest to cut costs, however, Nokia maybe making a big mistake at another front. First, the company told it will close down its small Seattle office which became part of Nokia with Twango acquisition. Twango was developed into Ovi Share service, the best photo and video sharing service we could find for mobile phones and PCs in 2008. The sad news is that Nokia told Reuters it will stop developing the media sharing service.

I can understand how difficult it is to compete against established services like Flickr and YouTube. Even if you had a better product, it would take a long time, maybe years, to get the same level of attention as the major services are getting.

This is the major risk for the overall success of Nokia's Ovi Internet strategy. Patience. Consumer electronics hardware companies are used product lifecycles between 3 to 18 months. Software companies are used to product lifecycles between 3 to 6 years, or longer for a successful product. A common product lifecycle for companies that offer online services for consumers is somewhere between hardware and software product lifecycles.

It seems that Nokia still doesn't realize how different software and service businesses are from hardware business. Ovi is a promising concept. It has huge potential to become the online destination for millions of mobile phone users. But it will take patience to build the presence. And it will take years, not months.