As the mobile industry growth slows and looks to growth in IoT, companies like Samsung Electronics are looking for ways to initiate change or adapt to the new climate around them. One of the ways mobile companies are going to be profitable in the future is through offering, building and sometimes hosting those services beyond just selling the device to the consumer. Some mobile companies have already done this like Apple (iCloud), Google (Google For Work), Microsoft (Office 365) and in PCs, HP (TouchPoint Manager) and Dell (ProSupport Plus). Offering services after or part of the sale is a way for mobile smartphone manufacturers to be able to continue to earn incremental revenue and profit after they’ve already sold the phone and provide more of a holistic solution. Samsung’s acquisition of Joyent aligns with those trends and the company’s long-term objectives.
No mobility without the cloud
Mobility wouldn’t exist as we know it today without the cloud. You see, behind every fancy mobile app and service is a giant datacenter that hosts the “back end” of the app, or where the heavy lifting happens. This is why the largest capital expenses for Google, Microsoft, Facebook and Amazon are datacenters and the biggest trend in the enterprise iOS the race to the private cloud. At Moor Insights & Strategy, we cover this trend every day, whether the “Super 7″ public cloud giants or the up and coming private and hybrid cloud players like Dell and Hewlett Packard Enterprise.
Samsung already does cloud, but expensively
Samsung has been heavily relying on Amazon.com AWS and Google for their cloud services which many Android OEMs have done in the past. However, with the need to drive profitability and service “stickiness” on a global scale, paring back their external cloud spending could be a potential opportunity for Samsung to both offer new enterprise and consumer services while also reducing their external cloud expenditures.
What Samsung could do with Joyent
Samsung isn’t detailing exactly what it will do with Joyent right now for obvious, competitive reasons, but I will talk about what they could do with it. Joyent brings a lot of things to Samsung that could make sense for the company’s consumer and enterprise businesses including their own cloud infrastructure, end to end container solution as well as many other cloud services. Joyent was one of the few companies left in the cloud space that hadn’t been acquired by a big company like Samsung.
Samsung already has a plethora of different services that they have to support across a broad array of products that the company sells. While this acquisition has been made by Samsung’s mobile division and will allow Joyent to operate as a wholly owned subsidiary, there are still many opportunities for other Samsung divisions to utilize Joyent’s infrastructure.
IoT leadership requires cloud competency
Samsung Electronics, like its competitors, is moving heavily towards IoT and enabling consumer IoT solutions through their acquisitions like SmartThings and there is only going to be an increased demand for cloud services to service those IoT devices. Since IoT includes Smart TVs, that also means that Samsung could potentially host much of their own content delivery platforms and run many of their future planned services on their own infrastructure instead of Amazon or anyone else. Acquiring Joyent would also allow Samsung to be able to increase the size of their Samsung Pay service to more geographies and scale the service globally without incurring too many external cloud costs.
The acquisition of Joyent also means that Samsung could more efficiently offer custom tailored private cloud solutions to their enterprise customers that are utilizing Samsung’s devices for business uses. Samsung has their own Knox enterprise platform which can now operate wholly off Joyent’s infrastructure and enable a secure end to end solution for Samsung’s customers, something that many enterprises are looking for these days. Additionally, it allows Samsung to improve their enterprise offerings to match those of their mobile competitors and not to rely on the offerings of companies like Amazon.com AWS, Google and Microsoft Azure to sell services to customers. The recurring revenue that can be generated from these services is what companies like Samsung Electronics desperately need in a smartphone market that is huge but without growth.
Samsung’s move to acquire Joyent makes sense on the surface for a lot of reasons. Both companies have a lot of benefit from one another, and Samsung is smart to not wholly absorb the company into the Samsung corporate structure and allow it to operate independently. By giving Joyent a bunch of its own business and improving Joyent’s scale, they could also improve Joyent’s market share as well as profitability. Samsung also gives Joyent a great platform to test many of their new services on and to give Samsung the first opportunity to utilize those services and to differentiate Samsung from their competition. Joyent’s infrastructure should be helpful in enabling Samsung’s data-rich future and increased demand for cloud services through new product offerings and associated cloud services, not to mention getting reducing costs by stepping away from Amazon.com AWS.