The market for mobile software will exceed $1.6 billion before 2006 according to technology market research firm IDC. But what is really driving customers to open their wallets for smart gadgets? There are three primary factors. First, business customers are racing to outgun each other in giving a mobile workforce access to information and tools, regardless of location. In a heated sale, for example, a salesperson could check inventory and confirm delivery with the press of a button. Next are the games. As more powerful processors, better software, and serious developers get into the mix, users are coming to expect more entertainment to fit in their pocket than their PC could hold just a decade ago. Add to that the increasing number of young people who are getting phones, and you have a powerful formula. Finally, there are services to suit those on the go, such as GPS-equipped maps and tools to get directions. These location-based services look to hook up vendors with insight into users’ locations. Remember “m-commerce,” the bubble-era fad that never materialized? Well, with truly smart devices, it just might work out this time, as the underlying devices have become just that: smarter.

Public companies724The Herring Take: For sports fans, the joy of wireless connectivity is about to get a huge boost. It’s great to know your baseball team just scored a point by seeing the count change on a monochrome display. But imagine having the images beamed to you instantly on your smart phone, and watching the expression on the hitter’s face as the ball clears the outfield. That is exactly what 724’s technology allows wireless operators to do for their subscribers, running a video slideshow of the play. 724 claims that this is exactly the kind of thing that consumers will want to buy. At a time when the average revenue per user (ARPU) is at an all-time low, it could be just the ticket.

VodafoneThe Herring Take:Vodafone, the world’s largest mobile operator by revenues, is serious about using smart phone technology to its advantage. The European giant was one of the first to support new services. In 2002, it launched the Vodafone Live service offering color, sound, and pictures; customers use picture messaging, download different ring tones, play color games, and browse the Web with an icon-driven menu. The service is a hit, and Vodafone has lined up more than 1 million customers. On the more straitlaced side, Vodafone offers Mobile Connect Card, a global business service that launched in 12 countries in 2002. The product is a high-speed data card that lets customers access their usual business applications from out of the office. After the February acquisition of AT&T Wireless fell through to rival Cingular (see Cingular’s Big Gamble”, Vodafone may well turn to its existing global customer base for more revenues. Instead of adding more customers to the clip, Vodafone might draw more revenue from existing subscribers. This could cause the giant to up the ante in the smart phone game, a development no one can ignore.

Private companiesEverypathFounded: 1998Employees: 55Funding (millions): $98 millionNumber of rounds: 4Key investors: Amerindo, ArrowPath Venture Capital, AsiaTech Management, Bay Partners, CIBC Capital Partners, Focus Ventures, Nippon Systems Development, Raza Ventures, Redwood Ventures, Sevin Rosen Fund, Trident Capital, U.S. Venture Partners, Wasserstein Adelson Ventures

Santa Clara, California-based Everypath focuses on mobile task automation. The company aims to give mobile workers access to a slew of applications, including sales force automation, field force automation, and enterprise resource planning, as well as supply chain management, and the ability to generate quotes and check inventory. The company is off to a solid start with a full line-up of high-profile customers. The Department of Defense, Toshiba, Yamaha, and Accenture are onboard, as is ETrade. (ArrowPath Venture Capital, an investor in the company, is also ETrade’s venture arm.) The company’s original game plan was to deliver Internet content to all wireless devices; during the tech boom, venture capitalists rewarded the company for its ambition. After raising its second round in July 2000, the company was valued at $400 million. As boom turned to bust, Everypath had to turn dreams into reality; it seems to be managing that pretty nicely.

Action EngineFounded: 1999Employees: 55Funding (millions): $35Number of rounds: 4Key investors: Baker Capital, Cascadia Capital Partners, Intel, Northwest Venture Associates, OVP Venture Partners, Spangler Ventures

Action Engine has a novel idea about why users would serve the Internet from a smart phone: because they want to. “WAP (wireless access protocol) is crap” became the adage as frustrated users grew tired of the clunky browsers on cell phones. Redmond, Washington-based startup Action Engine believes the inefficient displays are not just a nuisance, they are also at the center of the wireless world’s conundrum. As the cell phone becomes more a commodity than a fashion accessory, users have started to change their priorities. Cheap is the mantra among users. But it is probably the opposite of what mobile operators had to pay to build up their services. Enter the five year-old Action Engine, which got its start during the winter of WAP’s discontent. Action Engine makes smart displays – intuitive and intelligent, the company says – for smart phones. Hip phone maker Orange seems to think so too, and is one of Action Engine’s customers.

UIEvolutionFounded: 2000Employees: 20Funding (millions): $16Number of rounds: 3Key investors: Ignition, Inspire, ITX International, Square Enix U.S.A.

While serious, button-down startups struggle for funding in the market, it’s all fun and games for UIEvolution. The Bellevue, Washington-based fledgling brings high quality video games and other multimedia applications to smart phones and wireless devices. UIEvolution focuses on middleware that lets data-rich programs run on cell phones, handhelds, Pocket PCs and other programmable devices without having to worry about operating system compatability. The company’s expertise is exemplified by its founder, Satoshi Nakajima, a former lead architect at Microsoft and a researcher at NTT Labs. Japanese video game maker Square Enix, which publishes the popular Final Fantasy game series, was so impressed by UIEvolution that it led the company’s latest round. The company counts Disney, ESPN, Moviso, and Interactive Communications among its clients. But it’s no secret that the gaming market is supposed to be big business for smart phones. As more and more big players head to this sandbox, UIEvolution runs the risk of eating dirt.

WebraskaFounded: 1998Employees: 110Funding (millions): $98Number of rounds: 3Key investors: Apax Partners, Argo Global Capital, Asset Management Company, Band of Angels, Bay Partners, Infineon Ventures, Inktomi, Navigation Technologies, Openwave, Philips Corporate Venture Fund, PTI Ventures, SAIC Venture Capital, SignalSoft, Trio Investments

Webraska, based in Maisons-Laffitte, France, provides GPS and voice-enabled wireless applications and location-based services. The company’s technology combines mobility, navigation, and the Internet to provide services and software for the development, integration, and deployment of telematics and location-based services like in-car navigation. The company’s SmartZone product portfolio is made up of applications including GPS navigation and navigation plug-ins for cell phones. Customers of the platform include AT&T, Orange, and Telecom Italia Mobile. The list of customers for its other products are no less impressive, including Shell Mobile, Blu, Vizzavi, O2, E-Plus, and Pacific Access. Still, as GPS-based functions become embedded in everything from cars to key chains, Webraska will have to be able to distinguish itself from the pack through a new wave of innovation.