Earlier this morning, Google announced its intention to buy Motorola Mobility for 12.5 billion in cash or $40/share.  There are three broad justifications for the deal:

• Access to the Motorola patent portfolio which it could then license to partners like HTC and Samsung to protect against the long arm of Apple's lawyers. 
• An integrated hardware/software play to compete with Apple.  The problem with this logic is that the deal does not address the fragmentation on the Android platform, which is the bigger issue.
• The set-top business to bolster its lagging Google TV offering.

This said, the deal leaves Google in a very awkward position of being half-pregnant and trying to be a provider of an open source "environment" while at the same time competing with its "customers."  It also means that there are four integrated hardware/software offerings: Apple/iOS, HP/WebOS, RIM/QNX, and now Google/Motorola, and potentially a 5th if this deal emboldens Microsoft to pull the trigger on the long-rumored full takeover of Nokia.  The Apple story of simplicity and focused innovation at the app level has won out over complexity and innovation at all levels. Unfortunately, the deal extends the overall market fragmentation at a platform level well into 2013 to the frustration of developers.

So where does this leave the Asian OEMs HTC, Samsung, and LG? If Microsoft passes on the Nokia acquisition, this deal could throw Windows Mobile a temporary lifeline.  Forrester can hear Steve Ballmer and company pitching the Asian players on how Microsoft is the only hardware agnostic player left and that HTC, Samsung, and LG should increase their support for Windows Mobile as protection against Google favoring its own hardware play.

Today’s deal between Microsoft and Nokia acts as a temporary lifeline for both companies. It gives Microsoft access to the largest handset provider, and it allows Nokia to defray some of its operating system development costs. I have just finished a report, “Mobile App Internet Recasts The Software And Services Landscape,” that will hit the Forrester site on Monday, February 28.

In the report, Forrester states, “The explosion of app innovation that started on the iPhone and then spread to Android devices and tablets will continue to drive tech industry innovation and have far-reaching pricing and go-to-market implications for the industry. Three different vectors of innovation that have been percolating under the surface will combine over the next 3-5 years. Mobile, cloud, and smart computing together will foster a new set of 'intelligence everywhere' apps.”

And based on that research, I believe that deal does not address the biggest issue for both companies – attracting apps and app developers. For Nokia, it now sends the message that Symbian and MeeGo platforms are no longer the long-term app focus. For Microsoft, it creates an eight-to-twelve month void/pause as developers wait to see what the new Nokia hardware looks like.

At the current rate that Apple and Android are recruiting third-party and enterprise app developers, this could mean a gap of 100,000-200,000 applications by the time the first Nokia Windows Phone device ships. This is likely a lead that even the combined resources of Microsoft and Nokia could not bridge.

Last week, as part of the debate on the 600B border security bill, Senator Charles E. Schumer from New York reportedly called the Indian offshore IT firms in general and Infosys in particular “chop shops” — a reference to the locations where criminals dismantle stolen cars for spare parts. As always, the Indian press has immediately reacted. But let’s not take the comment out of context; US Senator Charles Schumer calls Infosys 'chop shop' - India Business - Business - The Times of India. Senator Schumer is showing that in an election year, he is “standing up” for American jobs.

But that said, as we head into the midterm elections with 9.5% unemployment and very little job growth, there will be more comments like this unfortunately, and the Indian firms and NASSCOM need to be prepared with their own PR counterattack and story. Offshore customers would also be advised to take the same advice and have a clear PR plan ready to go at a moment’s notice in case they get raked over the coals as part of the rhetoric.

The recovery of IT spending late in 2009 and early in 2010 has sent the local players in India and multinationals scrambling for find talent. The fact that firms cut back hiring and reduced their bench to maintain margins has degraded suppliers’ ability to respond. As a result, vendors have turned to poaching talent from competitors. At its analyst day, Cognizant was honest that it had increased to 16% up from 12% for the trailing 12 months. One small vendor that Forrester spoke with said that it had peaked at almost 30% over the last quarter. Another said it was in the mid-20s for certain practices; yet another two multinationals said that it had seen a similar overall rise to Cognizant, but in some of the packaged application areas it was in the mid-20s.

The impact of this sudden increase attrition? Forrester believes that this spike coupled with the clients need to deploy more quickly and cost effectively will drive the much broader adoption of solution accelerators and other non-linear IP models. Today best practice is to get 5% to 7% of revenue. We expect that that percentage could easily double over the next 18 months as vendors deal with attrition and clients clamor for faster deployment of solutions.

Late last week, ExlServices acquired PDMA, Inc., maker of the LifePRO Insurance Policy Administration System. In his discussions with Forrester, Yogendra Goyal, VP & Global Head - Insurance Practice, was very clear on how the deal will help theBPO provider. He said the LifePRO platform will enable the company to move to a more sophisticated outcome pricing model as well as enable it to to cut costs and drive higher value and up the process stack. It's another clear example of how the BPO market is moving to have a standard software platform underpin its process work (see my report Platform BPO: Process Outsourcers Take A New Approach To Traditional BPO for more information).