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Will Android Erode the Software Development Tool Market?

ARM recently announced a free toolkit (ARM Development Studio 5 Community Edition) for the Android application developer community. At a high level, you might be thinking, “so what, aren’t there already a number of free Android app tool kits available?” And, to a certain extent, you wouldn’t be wrong…until you start to consider the “so what” part.

For one, make no mistake about it – This is not your run-of-the-mill open source toolkit; ARM is in the business of delivering premium tools. In fact, they have an entire division with P&L responsibilities focused on it. This new toolkit supposedly can improve application performance up to 40% as compared to Android applications written solely in Java.

So then why on earth would a premium tool vendor release a high end tool for free?

First off, consider how the evolution of mobile phone space has impacted the demographics of the software development community. Application creation is no longer limited to engineers. Instead, we have seen a widening range of application functionality and sophistication translate to commercial viability, thus opening the doors to a broader set of developers (professionals, students, and hobbyists) with varying skill sets. Obviously, this demographic pool is somewhat at odds with the makeup of ARM’s traditional tool client base (engineers at OEMs).

Secondly, over the last decade,ARM has become synonymous with mobile and has monopolized the domain’s processor market. While it doesn’t look like their share is in jeopardy in the near term, competitors are proving relentless in their pursuit of the high volume market. Whereas their tool business might generate a sizable amount of revenue for ARM, we also all need to keep in mind that it is only a small portion of ARM's overall business. The real value of their tools has always come through the enablement of the success of their licensees’ clients – which, in turn, can lead to higher IP royalties as well as the perpetuation of their overall ecosystem’s strength.

In order to ensure this dynamic continues, ARM is making its best effort to entrench itself within the fast growing third-party software development organization demographic. Whereas the markets for third party mobile applications may have originally been populated with content created by the aforementioned hobbyists, these apps now represent huge revenue opportunities and formalized business entities are now forming to capitalize on them. Since ARM’s “free” toolkit is actually only free when your organization has fewer than 10 engineers and/or less than $100,000 in revenue, the company has the opportunity to gain mindshare and establish itself within potentially fast-growing development organizations that could one day even convert to commercial sale opportunities.

But given that ARM has a slightly different motivation than most tool vendors (they want to maximize processor design wins and unit shipments), what impact will ARM’s approach to the Android developer market play on the long term prospects of a commercial software development tool market?

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