iPhone 3G S: If You Can’t Beat Apple, Join ‘Em

When Apple flexes its iPhone muscle, everyone flinches. 

The iPhone has been called a game changer in the smartphone market, but its impact is felt across the technology board. With iPhone 3G S’s big debut—more than a million units sold in the first weekend—the stakes are high for everyone.

Consider these recent reactions:

The iPhone 3G S comes out with a compass and turn-by-turn navigation capabilities, prompting personal navigation device maker TomTom to embrace its new competitor. TomTom showcased an iPhone app and car kit at Apple’s World Wide Developers conference.

The iPhone 3G S includes a free voice recorder app, and now software developer Retronyms is reportedly working on adding functionality to its popular Recorder iPhone app to position Recorder as a premium offering.

Apple drops the price of the iPhone 3G to a mere $99, attacking smartphone makers at the low-end market. It’s a major move: consumers who don’t have smartphones are the largest untapped market segment, and are primed for the low-end market. Apple’s price is comparable with offerings from leading smartphone makers like BlackBerry-maker Research In Motion.

But this is only the beginning. Here are three of the biggest impacts the iPhone will likely have on markets and technology.

1. High-end smartphone makers will now see new iPhone 3G S features such as the compass and video editing software as mandatory features, says Forrester analyst Charles Golvin. “Performance will become more of a feature for differentiation, akin to the PC days of yore,” Golvin says.

2. Wireless carriers will no longer be in the driver’s seat. Apple fired a shot across the bow of its exclusive carrier, AT&T, by coming out with tethering and MMS capabilities in the iPhone 3G S that are unsupported by AT&T. Never mind that 22 countries and 44 other carriers already support these features. “AT&T will have greater impetus to put 7.2 upgrades in its network to improve the experience for iPhone 3G S owners,” Golvin says.

3. Industries will build vertical iPhone apps to take advantage of the growing mobile platform. Some schools are already using the iPod Touch to take enrollment and put real-time information at the fingertips of teachers, administrators and parents. At the Worldwide Developers Conference, AirStip demonstrated how doctors can receive real-time EKG data via iPhone 3.0’s push notification feature (although the app failed during the demonstration).

Simply put, the shakeup and opportunities are large: Attachments to the iPhone can turn the storied device into, say, remote controls for the garage door or blood sugar monitors for diabetics. Vendors in these markets – not to mention low-end video device makers – suddenly face an incredible competitor in the iPhone.

Many companies, though, are opting to embrace the iPhone just like Retronyms and TomTom have. Even Amazon released an iPhone app for its Kindle earlier this year. “I think the real game changer will be how other companies will interface with the device,” says Desmond Fuller, CIO of DSF Consulting, a software services provider.

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