Microsoft has a relatively long history with mobile operating systems, stretching back to the mid-1990s and Windows CE. Developed originally for "embedded systems," Windows CE quickly found its way into PDAs and eventually phones, and while consumers never warmed to the platform, it did achieve a level of success in the enterprise.
Microsoft doesn't tend to invest time and capital into market segments it can't dominate, which makes one wonder how it is still a distant fifth in the worldwide smartphone market. According to IDC, Windows Phone 7/Windows Mobile will capture roughly 4% of the worldwide smartphone market by the end of 2011.
However, IDC predicts that once the next version of Windows Phone 7 arrives in products later this year, Microsoft will be on firmer footing. In fact, IDC is so bullish on the future of Windows smartphones that it predicts Microsoft will capture more than 20% of the market by 2015, moving ahead of iOS and behind only Android.
Here are four reasons why Microsoft will be a major smartphone player in a few years, and three reasons it won't.
1. Strong partners and deep pockets
Ever since Microsoft announced its partnership with Nokia, tech pundits have been buzzing about a possible acquisition. A bad earnings forecast for the second quarter of 2011 released by Nokia in early June added fuel to the fire. Thus far, none of the rumours have amounted to anything more than talk. What shouldn't be overlooked, however, is that this partnership alone is a big deal.
"The partnership with Nokia is a stroke of genius," says Brian Reed, vice president of products for BoxTone, a provider of mobile device management services. "Nokia is fighting for its life. The company needs Microsoft, and Microsoft needs a strong mobile partner who can deliver compelling hardware."
Don't forget that, despite Nokia's recent troubles, it still has the largest installed phone base and an overall strong brand. "One major advantage Microsoft has is that by being largest software vendor in world, they can bring together more pieces of both corporate and consumer value chains than anyone else," Winthrop says.
Compared to Google, Microsoft has a much longer legacy of selling to consumers and enterprises. They have stronger relationships. They have a stronger sales channel, and even though they lag behind Apple, Android and even BlackBerry as far as apps are concerned, there are still plenty of Windows and Windows mobile developers out there. The gap could close quickly.
2. Cloud computing and the advantage of openness
When Apple announced its iCloud cloud service, they drummed up a ton of coverage for something that would make any Windows or Google Apps user say, "So what?"
Google and Microsoft were both more aggressive than Apple about rolling out cloud services, but even if iCloud is Apple playing catch up, services like iTunes Match and Book synching will make the iPhone even stickier. Looking at smartphones through the consumer prism, why would an iPhone user abandon the platform for Windows Phone, or Android for that matter?
However, if you look beyond a single device to a larger device ecosystem, the decision to stick by a single vendor becomes more complex. If you're an Apple fanboy, you'll be fine being stuck with iPhone, iPad, MacBook and on and on.
But what about devices Apple doesn't offer? What if in-vehicle GPS units are able to interoperate easily with phones on other platforms? What if you prefer a different tablet than Apple's?
Today's cloud services follow two distinct and nearly opposite strategies. Apple's iCloud will be as closed as most of Apple's other offerings, while Google Apps is wide open. If Microsoft can navigate some sort of third ways, where enough proprietary addons are available to create stickiness, but the cloud services are open enough to provide a platform for strong, unexpected third party innovation, Microsoft and Windows Phone could benefit.
"Many companies are moving to Office 365 or are planning to. By moving application logic and data into cloud, it's now much easier to move data across devices," Reed of BoxTone says. The Windows cloud could easily allow greater device-to-device sharing, even across devices from competing vendors. Moreover, since Microsoft owns the desktop, Microsoft's cloud could be far more compelling than Apple's or Google's as a hub for photos, contacts, music, calendars and more, a hub that you simply log into with any device from anywhere to access whatever digital assets you want.
Productivity, communications and collaborative apps, all with added functionality and cross-platform availability via the cloud, could set Windows Phone apart from other smartphones. Of course, this means that the smartphone provider that should really fear Windows Phone's rise in the short term is RIM's BlackBerry.