Surface Changes the Microsoft, OEM Dynamic Forever

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Yesterday, Microsoft announced Surface, a Microsoft-branded line of Windows tablets and convertibles. While details on battery life, pricing and availability were not available, Surface looks very impressive at first glance. The most unique feature is the thin keyboard case that converts the device into an extremely portable notebook. By competing with their own PC customers, Microsoft has changed the customer dynamic forever and will cause ripples all the way down the value chain.

Microsoft has a mixed history of making their own hardware products. On the plus side, we have the XBOX, mice and keyboards. XBOX is the dominant gaming and entertainment living room platform with one of the most innovative input devices, the gamer with Kinect. Microsoft has also had some big failures, too. The Kin phone was on the market a few months and the Zune was just recently discontinued. Both the Kin and Zune were nicely designed hardware, but both had certain fatal flaws, too. Kin consumer pricing blew it out of any reasonable price range for its target market. Zune forced users into a content acquisition model consumers just weren’t ready for and also faced intense competition from Apple’s iPod. While Surface details like pricing and availability were not available, assuming enough high-quality Windows Metro apps are available, the tablet looks very compelling… and that’s a problem for OEMs.

Since the days of DOS, Microsoft has never crossed the line and competed with its own PC customers in PCs, the HPs, Dells, Toshibas, and Lenovos of the world. When Microsoft got into Xbox, their customers did not want to get into that market. The only major friction point was discussion around Microsoft under-investing and deprioritizing PC gaming in lieu of Xbox game investments. When Microsoft launched Zune, PC OEMS did participate in the PMP market, but the Zune took the premium spot and left some differentiation room for its OEMs.

Before Surface, many OEMs I research were planning to launch Windows 8 and RT tablets. Some would be out for the October Windows launch, others would be out in Q1. Some tablets would be focused on the consumer market, others commercial and designs were in final prototype stages. Those designs could be in serious jeopardy now, but key details do not exist on Surface that would give better indication of an OEMs response. These are details like pricing, bundled software and services, target markets and distribution. Given Microsoft did not share details, one must now play out scenarios and do what-if games.

Microsoft could price Surface $100 above their OEMs. This would be a halo product strategy where Surface was the best of the best and aspirational, but wouldn’t sell that many. That is, unless it came pre-bundled with key services up front. This could be dangerous given consumer reaction to Zune’s all you can eat music plan. It would though “prime the pumps” like Ballmer indicated, paving the way for other OEMs to slot in. Microsoft could also narrow the target market, like going consumer only and not adding tools and features that would make it desirable to IT. This is an unlikely scenario given the Windows 8 and RT enterprise feature set and the popularization of BYOD. Surface will be in the enterprise on its own or get dragged in there by CIOs given the Microsoft brand and backing.

All the above scenarios are muddy and net-net only enable OEMs to participate in a low price leader position. This is similar to what the Android tablet manufacturers are experiencing today, which is ugly at best. A few companies are rising to the surface like Asus and Samsung, but still no one I talk to likes this market as no one is making any money in it and return rates and low levels of satisfaction run rampant. This is why OEMs were so excited by Windows 8. They saw how Android and in HPs case webOS turned out for them and came back to Microsoft.

With Surface, the dynamic between Microsoft and its customers changes…. forever. The announcement yesterday may be known as the day Microsoft delivered the iPad’s first real competition, but may also be known as the day Microsoft crossed the line with OEMs. Microsoft now is competing directly with its customers. Some OEMs will contemplate exiting the PC business entirely or exit the consumer market. Others will re-engage with Android. Some will run after Tizen, webOS or even plan to double down on their own OS like Samsung’s bada. Regardless, the PC market as we know it will be different from here on out. In some ways, that is a good thing, but long term could be a very dangerous game for Microsoft if the conclusion is that they have less customers for Windows.

Microsoft Should License Surface Technology and Brand to Partners

Microsoft’s Surface PCs are yet to hit the market so it may sound odd for me to propose what I am about to propose. However, the potential impact of a Microsoft branded tablet for their partners is significant if Microsoft is actually choosing to compete with them. I tend to believe Microsoft may be challenging them and in the process creating some useful and innovative solutions designed to help their partners not compete with them.

Surface PC is being positioned as a new family of computers. There is some truth to that and there isn’t at the same time. This is a class of computer some call convertibles but we refer to them as Hybrids. We have written many articles about this form factor and why we think it is interesting. The key takeaway is that to truly engage in productivity tasks a keyboard is a necessary accessory and we already see demand in professionals and many consumers to use a keyboard with their iPad.

The demand is there and Microsoft believes Windows 8 is uniquely positioned to meet the needs of the customer who wants true tablet and true notebook functionality in the same device–and they may be right. I say that because if there is a sweet spot in the market for a product like Surface, Microsoft is the only one merging touch and mouse / keyboard computing to a single OS. Microsoft may not have been the first to create a product like this but they may be the first ones who make it work.

With all of this context I believe the smartest thing Microsoft can do is license the Surface Brand and many of their hardware innovations like the Touch Cover, Type Cover, Vapor MG, Digital Ink, etc., to any hardware partners who wants to make a Windows 8 Tablet. 


In this scenario Surface could be to Microsoft what UltraBooks are to Intel. Microsoft can influence the specifics of the hardware and provide them with the tools to create Surface PCs. Microsoft could still sell keyboard accessories or perhaps others they come up as well, which is a model they are already successful with.

This path would also allow Microsoft to build the Surface brand and keep all Windows 8 tablets under the same brand. This is a good positioning strategy so consumers are not confused when they see an OEM tablet which is not a surface computer but is similar. Given the youthfulness of the tablet category, and the challenge of a horizontal platform while a market is maturing, the less confusion in the market the better. Given what I have seen so far the best path forward is for every Windows 8 tablet to be a Surface PC whether it has the Microsoft brand on it or not. 

Lastly, this move would not put Microsoft in a position to compete with their partners but rather spur interest in a category that is beneficial to the Windows ecosystem. They can then let their hardware partners take it from there and come up with differentiators that fit the surface computing paradigm.

This direction would require Microsoft to work much closer with their hardware partners going forward. Something I believe Microsoft should have been doing all along and yet they have not. This has led to quite a bit of frustration with some partners to which I have first hand knowledge of.

From what I have seen so far there are enough interesting features to generate interest in Surface PCs. The bottom line is many professionals and some consumers are looking to unite a keyboard with a tablet. For those a Surface PC may be a viable option. However, we believe that even though the hardware is compelling, it will not change the fact that for Microsoft to be successful customers have to want more than the hardware, they have to want Windows 8.

The challenge staring Microsoft in the face is convincing customers Windows 8 is a software platform worth their time, energy, and overall commitment.

The bottom line is I am excited by what I saw. More importantly I am impressed that Microsoft did something bold and took a risk. Whether it works or not, this is the kind of thing they needed to do to stay relevant in the new era of personal computing.

The Terrible Tablet Tsunami and the Future of Computing

IDC just issued a press release updating their expectations for tablet shipments. Here are their numbers, year by year:

2010: 19.5 million tablet shipments.
2011: 69.6 million tablet shipments.
2012: 107.4 million estimated tablet shipments.
2016: 222.1 million estimated tablet shipments.

When looking at the above numbers, you need to keep two things in mind:

1) These numbers DO NOT include the anticipated shipments of Windows RT and Windows 8 tablets. If Microsoft has its way, that’s a lot of missing tablets. Further, IDC expects the coming Windows tablet shipments to be ADDITIVE to their existing tablet estimates.

2) IDC has consistently UNDERESTIMATED the number of tablet shipments in each of its previous forecasts. By a lot.

For example, in March 2012 – just three months ago – IDC increased their estimates of tablet shipments in 2012 by 21% from 87.7 million units to the 106.1 million units. That still wasn’t enough of an upward adjustment and three months later IDC had to tweak their totals from 106.1 million to 107.4 million.

Further, if you look at the current growth in tablet shipments and compare it with IDC’s predicted 222.1 tablet shipments in 2016, you can see that their estimated growth rates are far below current levels and conservative in the extreme.

What does this all mean? It means that if desktop shipments continue to stay flat or modestly decline as they have for the past several years, then tablet shipments will be on a par with desktop shipments within the next 4 years.

The implications are industry shattering.

First, he who makes the most tablets makes the most growth.

Second, only platforms that are able to sustain significant market share in tablets will remain viable in personal computing in the long run. The first implication is self-explanatory. The second may require some justification.

Three Categories of Computing. Today, there are three distinct categories of computing: smart phones, tablets and desktops (including notebooks). Some consumers own devices in only one category, some own devices in two categories and some consumers own devices in all three. The trend is definitely toward multi-category computing ownership.

If you’re going to buy devices that span multiple categories, it only makes sense to buy devices that run on the same or a compatible platform. In other words, if your platform doesn’t support phones, tablets and desktops, then your platform is going to become marginalized.

I don’t hear analysts, pundits or commentators talking about this much and I don’t know why. Platforms are “sticky” – they have high retention rates. Multiple device platforms are like glue. Once you own two or more devices on one platform you’re very unlikely to every leave that platform. The company or companies that work well across all three computing categories will dominate personal computing for the next five to ten years.

APPLE: Right now, only Apple has a multi-category solution in place. Apple’s mobile operating system (iOS) runs on both its phones and its tablets and Apple is working hard to make the transition between their mobile OS and their desktop OS (OS X) as familiar and as comfortable as is possible.

Apple not only has a lead in creating solutions for all three computing categories but they are working hard to extend that lead as well. Last Fall, Apple announced that they would synchronize their mobile and their desktop operating system updates and put them on an annual schedule. This commitment to parallel development makes it much easier for Apple to move their two operating systems in lock step.

With iCloud binding their phones, tablets and desktops together in a seamless whole, Apple is well positioned for the multi-category computing market that lies ahead.

MICROSOFT: Currently, Microsoft has a big problem and an even bigger proposed solution. Right now, Microsoft dominates the desktop, has minuscule share in phones and no share at all in tablets. That’s a big problem.

Their big solution? This Fall Microsoft intends to introduce Windows RT tablets, Windows 8 tablets and, perhaps, even an ebook reader. Microsoft is currently well behind Apple but they intend to provide a solution that spans and ties together all three computing categories. And they plan to do it in a hurry.

Can they make it happen? Unknown. We’ll have to wait and see. If they don’t, they are in deep, deep trouble, at least so far as personal computing goes. If Microsoft’s tablet solutions are only as popular as their phone solutions have been thus far, then those who seek a multi-category computing solution will soon learn to look elsewhere.

Microsoft has its work cut out for it but if they can gain acceptable market share numbers in the tablet sector (which will presumably translate over to the phone sector, as well) then they are well positioned to create the type of ecosystem that makes multi-category computing such a joy. Microsoft has flaws like any company, but ecosystem is not one of them. If Microsoft can just get back in the game, they can play the multi-category computing game as well, or better, than anyone.

ANDROID: So wither Android? Right now Android dominates overall smart phone sales. But just as Microsoft is currently stranded on the desktop, Android is currently stranded on phones. Their struggles with tablets have been well documented and they’re not even trying to provide an Android solution on Desktops (Chrome, yes. Android, no.) If you want a single platform to support your multiple category devices, Android is currently the last place you’re likely to turn.

Can Android turn things around? Of course they can. Google has committed to putting more resources into Google Play (I still don’t understand why they re-branded Google Marketplace as Google play – Google Play is an awful name) and they’ve promised us a tablet “of the highest quality” this summer. But promises are only promises, nothing more. Just as Microsoft has to prove that they can field a successful tablet product, Google has to do the same. And while Microsoft has a proven track record in building strong and vibrant ecosystems, Google seems to struggle in this oh-so-crucial facet of the multi-category computing game.

Conclusion: Right now, Windows dominates desktops, Android dominates smart phone sales and Apple dominates the cross-category solutions. But rapidly growing tablet sales may not only be the key to computing growth, it may also be the key to the future of all three categories of personal computing.

As tablet sales grow, not only will Apple’s share of the computing market grow but the current positions of the big three operating systems will necessarily shift as well. Like a monstrous game of Jenga, as the pieces move in and out of place, there will be a titanic shift in power as someone, or several someones, find themselves unable to satisfy the desires of a demanding consumer base.

Apple’s place in the new world order seems assured. But as Google and Microsoft fight to gain tablet share, the one who fails to become relevant where they are weakest, will also risk becoming irrelevant where they are currently strongest, as well.

The future is uncertain, but one thing is for certain. If you like tech, the next 18 months are going to fascinating to watch.

The One Thing I Want to See from Microsoft

I have been following the news coming out of Microsoft’s TechEd conference closely. I was scheduled to attend the event but family circumstances altered my plan. There are a host of things that are of interest to me regarding Windows 8. Not everything I am interested in will be addressed until much closer to launch but it has been interesting to see the major messages around their next major software release at their TechEd conference.

The more I study the trends in the industry the more I am convinced that Microsoft’s future depends on them becoming a hardware agnostic software company. Throughout most of Microsoft’s history, all their major innovations and value have been strictly limited to companies who license their software platform Windows. This worked in a Windows dominated world but with the role of smartphones, tablets, and even shifting tides in notebooks / desktops, it is clearly no longer a Windows dominated world. I don’t personally believe we will see a Windows dominated world again the way we did as the computing industry was maturing.

Related: Why History Won’t Repeat Itself

If this is true then the market will support a multitude of software platforms. Which means for a company like Microsoft the key strategy should be to innovate through software for all hardware platforms.

The first obvious move could mean to bring Office to platforms like iOS, Android, and perhaps RIM IF they make a comeback. Reports have come out about Office for iPad and I hope they are true. Microsoft is committed to Office and it would be wise for them to re-envision office for every software platform. When Microsoft began taking the Mac and OS X seriously they brought office to the Mac in a relevant way and did not just port the Windows version. I believe they should do the same thing for iOS, Android, and perhaps Blackberry 10 if it gains traction.

But the thing I would really like to see from Microsoft is something new. Something not Windows and something not Office for personal computing. Microsoft’s innovations have revolved around Windows and Office but I wonder what is beyond. I’d like to see new software, for the new personal computing era, created by Microsoft.

Take for example Apple’s iLife suite of software. It blows my mind that Microsoft has not felt compelled to solve the problem of ease of use for digital media creation and management. I know Microsoft has relied on partners in this area like Adobe, ArcSoft, Pinnacle, etc., but given how key this experience is to consumers I would have thought it was important enough for Microsoft to control the way Apple does.

Even if the area of creativity is not of huge interest to Microsoft I would like to see them create new software or apps that is unique and fresh for their ecosystem and beyond. Windows and Office have been pillars for Microsoft but I am not convinced they are the only legs they have to stand on going forward. I appreciate their efforts to re-think user interfaces for the next era but I still want to see more. I also wonder if just re-imaging a user interface is enough in todays world.

We are entering a new era of computing where we will face new problems which will present new opportunities to solve through software. Which brings me to the one thing I am desperately interested to see from Microsoft. Vision.

Touch Computing and The Re-Birth of the Software Industry

It seems like you can’t go anywhere in Silicon Valley without hearing about someone who’s making an app. Apps are all the rage these days and software engineering is one of the hottest jobs all over the world. But in the not too distant past, there wasn’t this much excitement around software.

In fact, I have heard from many executives who have been around a while that the excitement around software and apps today reminds them of the same excitement around software when personal computers were first gaining steam.

Although there are some similarities between the industry today and the PC software industry when it was first getting started, the excitement around software today is taking place on an entirely different kind of computer. The excitement around software today is entirely focused on touch computers like smartphones and tablets.

Smartphones are contributing and are the device that began this new app economy but tablets are where the next real software innovations will be focused on in my opinion. I say this because I am a big believer in the tablets ability to take significant time away from the traditional PC. Our research indicates that consumers are comfortable doing the vast majority of tasks they used traditional PCs for in the past on their tablet. Because of that point we feel the tablet represents one of the most exciting platforms which will lead a new software revolution.

Starting Over

I think a strong case could be made that much of the focus of the software industry over the past few decades has been on professionals and the workplace. In my opinion, only in the last five years have we had what I would consider a pure, mature consumer market. The maturity of the consumer market for personal computers is the foundation that has led to the rebirth of the software industry. If the first phase of the software industry was focused largely on businesses, then the next phase will be largely based on consumers.

Although we can articulate what is happening by proclaiming that the software industry is being reborn, in all actuality it’s starting over. The first software phase was all about creating software for desktops and then eventually laptop computers. Both were driven primarily by mouse and keyboard input mechanisms. The software generating all the excitement today is fully around touch as an input mechanism. Given the drastic differences between touch computing and mouse and keyboard computing, software developers are reinventing or at the very least re-imagining their software around touch computing. It is this reinventing and re-imagining of the software industry — brought about by touch computing — that leads me to believe it’s almost like it’s starting over more than it’s being reborn.

New Hardware Is Driving New Software

This rebirth of the software industry is being driven primarily because of new hardware that’s selling like hotcakes to the masses. Although it’s easy to get excited about all the shiny new smartphone and tablet hardware, it’s important to remember that hardware is only as good as the software it runs. I could own the most amazing and elegant piece of hardware, but if it runs poor software, it’s no better than a paperweight.

When I speak with software developers who are driving this new phase of software, they’re largely focused on the iPad and the iPhone. These two platforms are giving software developers valuable experience in gaining expertise, making the next generation of touch software much more personal. This is important because new platforms incorporating touch are on the horizon based on Windows 8.

Windows 8 presents a radical departure from the normal desktop/notebook operating system that Microsoft usually churns out. Windows 8 will be the first OS to combine a touch-based operating system (called Metro) with a mouse-and-keyboard operating system and a familiar Windows interface. These two experiences combined together will lead to a new generation of notebooks, desktops, and tablet-notebook hybrids, all with touch interfaces.

Regardless of your opinion about Microsoft’s approach with Windows 8, the reality is that over the next few years, touch computing is coming to a wide range of laptops and desktops.

What’s Next?

That’s a great question, and my answer may surprise you. I believe the next big software craze will be around television. I know it may seem crazy to think about running apps on your TV, but that’s what I think is next. Google is already going down this path with Google TV, letting software developers make apps for the big screen; Samsung is also doing this with its line of Smart TVs. And there’s speculation that Apple has big plans for the TV industry — if that’s true, I believe apps will be a part of the strategy.

Even though there are products on the market that let you run apps on your TV, those developers have yet to re-imagine their apps on the big screen. Just as software developers are having to re-imagine their software for touch computing, they will have to do the same thing for the TV.

We live in extremely exciting times and things will get even more exciting. I firmly believe we will see more fascinating innovations centered around personal computing hardware and software over the next 10 years than we ever saw in the past 30 years of the PC of the industry, and I’m glad that we’ll get a chance to observe them firsthand.

The Curious Case of Microsoft Marketing

Is it just me or am I missing or not seeing much marketing effort by Microsoft these days? Generally I am very observant to marketing campaigns within our industry due to my conviction of its importance. Because of that I try to pay close attention to tech companies consumer marketing efforts on every medium. This is why it is surprising to me to not see the kind of marketing I would expect for a company with an critical strategic asset in the market with Windows Phone and one that is coming up on the most important Windows launch in over a decade.

When it comes to Windows Phone, most of the marketing efforts I am seeing is either driven by the carriers or by Nokia at this point. Perhaps Microsoft is playing a role in those as well but to be honest even what I am seeing marketing wise around Windows Phone is not enough in my opinion. Windows Phone is incredibly strategic to Microsoft from a Windows brand and platform standpoint. Because of its importance I would have expected Microsoft to saturate the market with branding, messaging, and positioning.

Marketing Like a Record Label

Perhaps Microsoft is taking the approach record labels do when one of their artists is launching a new album. The music industry is so incredibly saturated with artists all competing for consumer mind share. It is nearly impossible, although becoming more possible with Twitter, to keep artists top of mind share all year. Because of this, labels store up marketing budget until the months prior to an artist’s album release in order to raise the artist back into the publics mind. As much as I disagree with this approach in the tech industry perhaps this is the approach Microsoft is taking.

Whatever approach Microsoft is taking they need to take immediate action to elevate their brand and Windows / Windows Phone mind share. This would prime the pump for when Windows 8 finally launches and hopefully make their partners lives easier driving mind share of new Windows products for this fall. I hope Microsoft has a massive marketing campaign planned because I believe it is one of many things critical to the success of Windows 8.

Interestingly, Apple has cracked the code when it comes to branding. I would argue that Apple, more so than any company in this industry, maintains a consistently elevated mindshare. This is due to the tech media’s fascination with all things Apple, their marketing strategy, their event and product release strategy, their retail stores, and host of other well-executed strategies. Due to those strategies employed by Apple it is not surprising that the results of a Nikkei Brand Asia 2012 results show Apple as the number 1 consumer brand in China, Japan, and Taiwan and No. 2 in South Korea ahead of Samsung.

Marketing is best done strategically spread out over time rather than in bulk bursts. The goal should be to maintain share of consumer mind not spike the interest then let them get interested in the next shiny thing to catch their attention.

Why Google Will Use Motorola To Become Vertically Integrated

If you look closely at the most successful company in tech today, it is Apple. And they are in this position for a major reason. They are completely vertically integrated. They own the OS, the hardware and the ecosystem. And although they don’t manufacture their own chips, the IP in their chips are homegrown and designed to meet the needs of their advancements in OS and hardware designs. The result of this vertical integration is that they have complete control of their future.

Another company that is pretty much vertically integrated is Samsung. They do their own design, their own chips, and in their case they even do their own screens and manufacture their own products. Their only weak link is with the OS since they are licensing Android for their smartphones and tablets. However, they are about to launch their own cloud services and take even more control of their destiny by tying all of their products together to cloud based applications and servers. And as you know, they have gained great ground in smartphones and while still struggling against Apple in tablets, they have become more aggressive in looking at alternative operating systems to Android and could soon deemphasize their use of Android in favor of their own OS solution to guarantee even tighter vertical integration in the future.

But there are two companies today that at the moment have very little control of their future because of their lack of vertical integration and that is Google and Microsoft. And without out being vertically integrated, their prospects of wide spread success in the future in my viewpoint is highly questionable.

The Vertical-ization Trend

Ironically, at the moment, Google is actually in a better place than Microsoft to develop a vertically integrated strategy but Google is in denial about how important this is to their future at the moment. In their case, they own the software OS and a lot of the services layer but have little control of the hardware and the marketing needed to guarantee that Android will be successful in the future. In fact, if you read a lot of the recent posts about Android, you see numerous reports that suggest that Android is in trouble and losing ground, especially in tablets.

Today, Google has to completely rely on their Android hardware partners to drive Androids success. While this has been OK with smartphones, their partner’s performance in advancing Android in tablets has been dismal. Now to be fair, a lot of this is Google’s fault in the way they have handled the various versions of Android and the uneven, if not disastrous way they handle upgrades and OEM relationships.

But Google is about to have an even bigger problem on their hand when it comes to partners. To date, Android has been the only game in town when it comes to alternative operating systems for smartphones and tablets. But that is about to change. With Microsoft now entering the market with Windows based operating systems for smartphones and tablets, these vendors now have a solid alternative to Android. And pretty much every one of them will be doing a Windows Tablet. And with doing a Windows Tablet comes major marketing dollars from Microsoft as well as huge industry interest for this tablet platform since it includes backward compatibility with existing Windows Apps.

This means that Google has even less control of their partners push for any Android tablets and this probably translates into Android tablets in general losing steam. Sure, Amazon will continue to use Android and in a sense advance Android in tablets. But their version of Android is their own amalgamation of the Android OS and their own special tweaks and in no way really advances Android itself in the market.

Now, when Google is asked about their Motorola purchase, they say it was for the patents and they plan to treat Motorola just as if it is another Android vendor and not give them any preferential treatment. Well, if you buy that, then I have bridge in NYC that I want to sell you very cheap! I believe Google knew full well that at some point Android could become really challenged and that their vendors could desert them. So the Motorola purchase was insurance. At first they could just gleam value from the patents and hope that this alone was worth the price. However, having Motorola in their backpocket that would let them become vertically integrated at the turn of a switch was the real goal of this acquisition.

Now, in my opinion, it is not a question of “if” they make Motorola their hardware arm. It is a matter of when and I believe that this will happen this summer. Put yourself in their position. By the fall, all of their key Android vendors will also be backing Windows 8 and you can be sure that this will be the beginning of these vendors de-emphasizing their Android products. Google better be ready to pick up the ball with Motorola by then or their ability to control their own destiny will take a real hit given the momentum that will come in Windows 8 tablets this fall.

More Acquisitions Will Happen to Go Vertical

A week before Google bought Motorola, my son Ben wrote an article in Tech.pinions arguing that Google should buy Motorola if they wanted to control their destiny. Although Google continues to deny that it will make Motorola its hardware ARM, both us believe that Google has no choice if they want to see Android succeed for their own purposes.

Related Column: Why Google Should Buy Motorola

So what about Microsoft and this issue of vertical integration? Aren’t they also completely beholden to their OEM partner’s to carry out their OS dreams and must trust them to be successful in hardware if Windows 8 on tablets and Windows Phone are to be big winners? Absolutely. Their model of using vendors for Windows 8 on desktop and laptops is intact and will succeed on its own. And perhaps even with tablets this will be the case since Windows 8 backward compatibility will be a big driver for these products and all PC OEMs will use this to extend their reach in tablets. But where Microsoft is very vulnerable is in smartphones since they pretty much are relying on Nokia to make Windows Phone–and beyond–succeed in these devices. Early this year, I wrote an article in Tech.pinions saying that Microsoft “will” buy Nokia and reasoned that in the end, when it comes to smartphones, Microsoft is so late in the game that ultimately they need to control its hardware destiny.

Related Column: Why Microsoft Will Buy Nokia

With the news last week that Nokia lost $1.9 billion last quarter and rumors of bankruptcy swirling around them, I am more convinced then ever that Microsoft will buy at least Nokia’s handset business. Although Nokia officials have denounced reports of bankruptcy, if they have another bad quarter their long-term position in the market could be even more questionable. In the end, Microsoft will have to be at least vertically integrated when it comes to smartphones if they want to guarantee the ultimate success of Windows phones.

Take a close look at why Apple is successful and you will see that their vertical integration allows them control their entire ecosystem and as a result, be master of their destiny. I don’t see any way for Google or Microsoft to ultimately control the success of Android in tablets and Windows Phone/8/9 on smartphones and tablets without becoming vertically integrated in these areas. If they do not do this, Apple will continue to eat their lunch and leave them in the dust.

The Fallacies of How To Compete with the iPad

I take articles like this claiming the iPad will drop below 50% market share by as early as next year with a grain of salt. I don’t want this article to be about all the reasons why we believe the iPad will maintain significant market share, we have written quite extensively about those reasons. I’d rather examine a few flaws in competitors thinking about how to compete with the iPad and to do that I’d like to start off by making a point. I genuinely believe that it is possible to compete with the iPad. I don’t think it’s easy. I don’t think many companies can; but I don’t think it is impossible.

There is always room to innovate. The problem is simply that the companies attempting to create competing touch computers don’t understand touch computing or the market dynamics for tablets. It seems as though many vendors and software platform providers believe that by simply slapping a touch screen on a piece of hardware, regardless of what that hardware looks like, that it will hit the market and instantly be competitive. This is the fallacy number one.

Touch computing requires a touch based ecosystem. This is everything from carefully designed hardware, software, and to a degree services, all around touch (not mouse and keyboard) as a computing paradigm. This is no trivial task. Android is a weak touch computing ecosystem in my opinion. Mostly due to Android being an advertising strategy not a software strategy to Google. Time will tell with Windows 8 what kind of touch computing platform it truly becomes. Windows 8’s success rests largely on the hardware manufacturers and software developers ability to understand touch computing and develop a truly competitive ecosystem.

Fallacy number two is that the number of designs in the market on a particular platform is a competitive advantage. When I ask why a particular platform release may be competitive, often number of designs is the answer. “There will be over xx designs in the market,” is a phrase I hear often. I don’t believe that number of designs alone makes a particular platform competitive. In fact, it is perhaps quite the opposite. There is a book I like to reference called The Paradox of Choice by Barry Schwartz. The overall premise of this great book is that too much choice or too much variation in choice can overwhelm the purchaser to the point of frustration and lead to the inability to make a decision. My concern with too many products on a particular platform is that consumers may find the decision making process painful and confusing. This is why I believe there is a lot of merit to the argument for very limited product offerings per vendor and per platform to a degree.

Fallacy number three is that low cost always wins. I don’t believe that today’s consumers in mature markets want things that are cheap. I believe they want things that are valuable to them at a personal level. A key point to understand is that in mature markets what is valuable varies quite a bit. This is because in mature markets consumers make specific purchases for specific reasons. Often in mature markets consumers know roughly what they want, why they want it, and they are shopping with a pre-set of conditions. What one segment finds valuable may not be the same as another group. This is why product segmentation is important. The key is to create products in a segment–hopefully a large one– that consumers in said segment find valuable. In the automotive industry, for example, minivans target a segment, trucks target a segment, motorcycles target a segment, economy cars target a segment, and so on and so forth. In this case, the automotive manufacturer understands the segment a product is being created for and then innovates and delivers solutions to meet that segments needs on an annual basis. This understanding of the market dynamics for tablets is what I think is largely being missed by those desiring to create competitive tablets.

The question anyone who desires to create a tablet to compete with the iPad needs to answer is “What will my tablet do better than the iPad.” And what can they do with it that they can’t do with an iPad?

If there is not a well reasoned answer to this question then get back to the drawing board and innovate. The answer may not be obvious or easy to figure out but just trying to be me too is a recipe for disaster. Perhaps if these new Windows tablet vendors can create a product that is unique, does specific things the iPad doesn’t, and meets additional needs that the iPad can’t (or Apple isn’t interested in), then they might have a chance to truly deliver a competitive product that gains market traction.

Why My Next Tablet Will Run Windows 8


I’ve been using Windows-based tablet computers for almost a decade. I was hooked the moment Bill Gates trotted out Microsoft’s first prototype tablets at a developer event in mid-2001. I got my first tablet, a Fujitsu Stylistic, in 2003 and I’ve carried it or its successors to meetings ever since, migrating along the way from Windows XP Tablet Edition to Vista to Windows 7. Nothing beats a Tablet PC for capturing notes during meetings and presentations, especially if the material contains diagrams, graphs or mathematical equations. When I’m not using my tablet to take notes, I use it to get my mail via Outlook, or to work on documents and spreadsheets with Word and Excel. It’s usually the only mobile system, other than my phone, that accompanies me when I travel.

Some suggest that the structure of the tablet market has already been settled. Apple rules, Android-based suppliers challenge; no other platforms need apply. The failures of HP’s Touchpad and RIM’s Playbook prove there’s no room for another software platform. I beg to differ. Android and iOS tablets do a yeoman’s job when it comes to consuming content, but lack the software tools and hardware features needed to create content. Windows-based tablets, which have been around since 2002, have always included the features needed for content creation, but lacked the easy to use interfaces needed for content consumption. The Metro User Interface in Windows 8 supplies these missing elements, and thus positions Win 8-based tablets as the only ones suitable for those who want to both create and consume content on a single device.

“Content Creation” as I use the term applies to a broad range of activities that includes tasks as varied as a student taking notes, a worker recording and distributing meeting notes, a club secretary assembling and distributing newsletters, a teenager spiffing up the audio from a band performance, a webmaster updating a website, and a mother preparing her annual Christmas letter. Contemporary PCs and MacBooks handle such work effortlessly. But, have you tried to accomplish tasks like these on an iPad or Android tablet? The process is at best arcane, and often impossible. Printing from a tablet? Most of the people I know e-mail the files they want to print to their PCs, and print from there. Manage a mail list? Forget about it. iPads and Android tablets work best as “companion devices,” and assume you have access to a PC or MacBook to handle everyday computing tasks. In fact, when I took my new iPad2 out of its box, it insisted that I connect it to iTunes running on a PC or Mac before it would let me do anything. Fortunately, there’s no shortage of those systems around my office, but what if I purchased it in the airport store, and tried to use it for the first time on a flight to China?

Windows 8 provides a more complete environment. Unless you’ve spent the last six months on the International Space Station, you’ve probably seen its vaunted Start screen, which replaces the Start menu used in earlier versions of Windows. The various colored blocks, referred to as “tiles,” contain live content updated by applications running in the background. Touch a tile and its associated program fills the screen. Switch from one app to the next by dragging your finger from left to right. Drag your finger up from the bottom of the screen to call up menus for the app. Drag your finger from the right edge of the screen to call up system menus, or to get back to the Start screen. Multi-finger gestures for pinching and zooming work intuitively, just as you’d expect. All-in-all, a well architected, contemporary user interface, great for leaning back and reading web content, watching videos, or whatever. But Windows 8 also supports more serious endeavors. Tap on the Desktop tile, and you are instantly transported to the familiar Windows 7 desktop. The applications you invested years learning to use are there in all their glory; not striped down versions that some guy in a marketing department thought were “good enough” for tablet users. Although the touchscreen interface works with these packages, odds are you will want to use a traditional keyboard and pointing device (mouse or track pad) arrangement, whether built into a dock or case, or freestanding. They may be old fashioned, but after 30 years of development, the industry has refined these input devices to the point where they’re hard to beat for content creation.

Digital Ink: Microsoft’s Unsung Advantage

Microsoft’s Tablet PC software includes a feature it calls “digital ink” that allows users to write on the surface of the display the same way one writes on a sheet of paper. The system makes no attempt to convert pen strokes entered this way into machine-readable text in real time, a la Apple’s failed Newton (although the option remains to convert information entered this way into a more conventional format if needed). Digital ink documents can be filed and searched in the same manner as conventional text documents. My tablet contains inked notes I’ve entered over the last eight years; I back them up, transfer them from one machine to another, and read them on my desktop when needed. Almost nobody knows this feature exists. Often, when I’m scribbling notes on my tablet at a conference, people sitting nearby will ask me what magical device I’m using. They’re amazed when I tell them it’s a five-year old tablet PC that runs Windows 7 and Office. I view Micro0soft’s failure to capitalize on this feature to be one of its biggest marketing disasters ever, almost as bad as Vista or Bob.

I don’t doubt the claims of a few of my colleagues that they can type faster than they can write. But can they capture graphic information as well? Here’s a snippet from the notes I took at a recent event where Intel’s Mark Bohr discussed the company’s new 22 nanometer technology. I captured the charts Bohr flashed on the screen on my tablet as he touted the advantages of Intel’s approach. I doubt any of my colleagues could key this in on their PCs.

Digital ink has always struck me as one of the most natural ways (other than pen on paper) for students to take notes in class or attendees to take notes in meetings. Yet Windows Tablets with this feature never gained much market share. Some of this resistance can be attributed to the premium (typically $300 or more) that suppliers charged for Windows Tablets, compared with conventional laptops. Some of this premium stems from the specialized hardware needed to implement digital ink (see below), which adds to the cost of Windows-based tablets. Suppliers like MSI omit such hardware in the interest of lowering the system’s cost. I’m confident the cost premium will shrink over time. I’m less confident that Microsoft will figure out how to market this capability successfully.

Since there will likely be a range of Windows 8 Tablets on the market, some with and some without the hardware needed to handle digital ink correctly, buyers who care about this feature should evaluate the specs of the devices they are considering with regard to the digitizer technology they use.

All told, Windows 8 melds a modern multi-touch user interface that’s great for consuming content with Microsoft’s successful Windows 7 environment that excels at creating content. No other tablet OS can deliver this one-two punch.

Two Sides of the Consumer Coin to Windows RT

Yesterday, Microsoft unveiled via a blog the different Windows 8 editions and comparing the different features and functionalities.  There are three versions, Windows 8, Windows 8 Pro, and Windows RT.  One of the biggest changes in Windows 8 versus previous editions is the support for the ARM architecture with NVIDIA, Qualcomm, and Texas Instruments, and the new naming reflects it.  The Windows 8 on ARM, or WOA for short, gets its own name, called “Windows RT”.  I believe that this naming cuts both ways, some positive and some challenging for the ARM camp, but can be mitigated with marketing spend and education.

Windows RT (ARM) versus Windows 8 (X86)

Windows RT and Windows 8 are very similar but in other ways very different, and in some ways reflect Windows RT’s shedding of legacy…. but not completely.  The Microsoft blog had a lengthy line listing of differences, but here are the ones I feel are the most significant to the general, non-geeky consumer.

The following reflects relevant typical features Windows 8 provides over Windows RT:

  • Installation of X86 desktop software
  • Windows Media Player

The following reflects relevant typical consumer features Windows RT provides over Windows 8:

  • Pre-installed Word, Excel, PowerPoint, OneNote
  • Device encryption

Again, this isn’t the complete list and I urge you to check out the long listing, but these are the features most relevant to the non-geeky consumer.

What isn’t Addressed

What I would have like to seen discussed at length and in detail was support for hardware peripherals.   I will use a personal example to illustrate this.   Last week, I bought for $149 a new HP Photosmart 7510 printer, scanner and fax machine.  Will I am confident I will be able to do a basic print with a Windows RT machine, will I be able to use the advanced printer features and be able to scan and fax?  We won’t know these details until closer to launch, but this needs to be addressed sooner rather than later.

Next, I would have also liked to see some specifics on battery life and any specific height restrictions for Windows RT tablets.  If these devices are intended to be better than an iPad, they will need some experiential consistency to provide consumers with confidence, unlike Android.  As I address below, this wasn’t overt, but a little covert.

The Plusses with what Microsoft Disclosed with Windows RT

There are some positive items for the ARM camp that came from Microsoft’s blog post that covered Windows RT.  Windows RT does support the primary secondary tablet-based needs a general consumer would desire.  In the detailed blog posts, Windows RT supports many features.   This comes to light specifically when you put yourself in the shoes of the general consumer, who doesn’t need features like Group Policy, Domain Join, and Remote Desktop Host.  Also,  I don’t see the absence of Storage Spaces or Windows Media Player as major issues for different reasons.  Storage Spaces is very geeky and I do not believe the typical consumer would do much with it.  I believe Windows RT will have many, many methods of playing video as we see on the iPad and Android tablets, so the absence of Windows media Player isn’t a killer, specifically for tablets.

Windows RT also contains Office, specifically Word, Excel, PowerPoint and OneNote which sells for $99 today. Finally, while details are sketchy, Windows RT supports complete device encryption.  I can only speculate that all data, storage and memory operations are encrypted.  This can potentially leveraged with the consumer, but it’s not something that has kept the iPad from selling.

A final,  important note, is the consistent experience I expect Windows RT to deliver.  By definition, all Windows RT systems will be lightweight with impressive battery life. While this doesn’t come out as clearly in the blog post, I do read between the lines and see where this is headed.  I believe Microsoft wants to deliver the most consistency with Windows RT and leave the experience variability to Windows 8.

There will be challenges, though.

The Risks with what Microsoft Disclosed with Windows RT

While there are positives in what Microsoft disclosed on Windows RT, there are risks and potential downsides, too.  First of all and primarily is the absence of the “8”.  Regardless of how much Microsoft may attempt to downplay the “8”, consumers fixate on generational modifiers to add value to something.  Consumers do this because it makes it easy for them.  When a consumer walks into a store and sees Windows 8 and Windows RT, I expect them to ask about the difference.  What will the answer be from the Best Buy “blue shirt”?  Without a tremendous amount of training on “RT” I would expect them to say, “RT has MS Office, but won’t run older programs.  8 runs all your old programs but doesn’t come with Office.” With that said, the street price adder for Office isn’t public knowledge, but I know that it does add at least $50 to the street price.  This is a discount to $99, but then again, I don’t miss not having Office on my iPad.

As I discussed above, Microsoft needs to disclose more on backward hardware compatibility.  Every day that ensues without a more definitive statement, Microsoft draws in the skeptics.  What wasn’t discussed in the industry 6 months ago is being discussed now.  Finally, how can the lack of X86 desktop software be turned into a positive?  The basic consumer, if offered something more in their minds for the same price, will always choose more, unless they see a corresponding behavior to give up something.  Apple has done a fine job with this on the iPad.  When the iPad first launched, many focused on what it didn’t have, namely USB ports, SD cards, or the ability to print.  The iPad can print in limited fashion, still has no USB or SD card slot and is still selling great.  Windows RT needs a distinct value proposition related to Windows 8 but different too.

What Needs to Be Done Next

If I were in the ARM camp, I would plead with Microsoft to reconsider the naming.  Even adding an “8” to the naming to render “Windows 8 RT” would at least recognize it’s in the same family.  Without it, Windows RT looks like part of the Windows family, but not “new Windows” table. This can be overcome by spend on a unique value proposition.  This distinct value proposition may be that all RT units are thin and light weight and provide a consistent experience, something that Windows 8 cannot guarantee.  The ecosystem then would need to fill “RT” with value and meaning which will be expensive. Finally, the Windows RT ecosystem needs to start better communicating about peripheral compatibility, as every day passes, the broader ecosystem gets more nervous.  With six months to go, there’s a whole lot of work to do, and a lot more in the Windows RT camp than the Windows 8 camp.

 

We Have Personal Clouds, Now We Need Family Clouds

Prior to the launch of iCloud last year I wrote a column looking at ways that iCloud might work well for families not just individuals. I have a houseful of Macs and other iOS devices and I like to keep them in sync. The problem is they aren’t all mine. Some are my kids and some are my wife’s. There are digital assets that we own that are communal and shared and there are ones that are personal. I had hoped that iCloud would address these issues more fully than it currently does but unfortunately iCloud is designed to be more a personal cloud than a communal one. It is the communal or family cloud that I think needs to be addressed.

Synchronization is at the foundation of any good personal cloud. If I have a multitude of connected devices which I use regularly I want them all to stay in sync. The power of this lies in software that contains what we call a change and detect engine. That means that when a change is made on one device, it makes a change across all devices. Take a photo on one device, it is already on the others. Buy a song on one device, it is already on the others. Edit a document on one device it is already on the others, etc. This solution has manifested itself in the marketplace for quite some time but only recently has it been any good. Personal clouds are evolving nicely but we need hardware and software makers to start thinking more communally as well.

Communal Clouds

One of the things that needs to be pointed out about personal clouds is that they only matter when you have more than one connected device which you use on a regular basis. If I only used one personal computing product, I wouldn’t really have a need to keep it in sync with other devices. But once you get a desktop/ notebook, smart phone and or tablet then the cloud data synchronization becomes important. This is also true with communal clouds.

When only one member of the family has multiple computing products then the notion of the person cloud works. But once several members of a family start getting connected devices then the problem grows. Link that up with the reality that not all family members share a same roof and you can see how a communal cloud could be of value.

There is certain data that is communal and of value to a larger group and there is certain data that is valuable to just the person. A solution in the market needs to exist that makes communal data sync as easy as personal data sync.

For Apple, they have built iCloud with mostly the personal cloud in mind. There are of course ways to sync libraries of photos or other digital data but they are mostly manual processes. iTunes library sync is great and to some degree. Home Sharing is a good start but what about photos for example? Perhaps some of the most communal content in any family ecosystem is photos and currently keeping photo libraries in sync across a number of devices and iCloud accounts in the family is a pain. My wife constantly complains that none of our photos are ever on her computer because I download them all to mine. My iCloud account helps me to a degree but she has her own iCloud account and both act and sync independently of each other.

Other areas of shared sync that could be of use are things like family calendar, chores or to do lists, family documents or spread sheets which can be worked on collaboratively– just to name a few.

Interestingly this is a concept Microsoft has actually marketed to a small degree. There was a line in commercial I saw earlier in the year during a commercial for Windows which said “It’s good to be a family again.” In the commercial the father was using a Word document on his Windows Phone as a shopping list. As he was shopping, new items kept appearing on the list for things like candy and other junk food items. He quickly realized what was going on and the commercial ended showing his kids adding to his shopping list from their Windows PC at home. Changes they made to a document were instantly there in real time on his phone. This idea of how a family uses the cloud in a more holistic way is one that I think needs further development in this new era of commuting.

This extends outside the home as well. It would be great if new photos I took were not just synced across mine and my wife’s iCloud account but also with my parents and her parents and her grandparents. I am constantly putting photos on thumb drives and moving them or uploading chunks the cloud or to DropBox to get them from one place to another. There are solutions in the market but I want the manual processes removed and key communal data to simply stay in sync with those for whom it is relevant.

The bottom line is personal clouds are great but if they only work for me personally than they are useless at a communal level. People don’t use technology in a vacuum and we need hardware and software manufactures to not only solve problems for the personal computing ecosystem but for the family computing ecosystem as well.

How Apple is Cornering the Market in Mobile Devices

I have been speaking with various vendors of tablets lately and more than once, the topic of Apple “iPodding” them has come up. iPodding basically refers to the fact that although Apple has had the iPod on the market for over 10 years now, they still have over 70% of the MP3 portable digital music player market. This fact is giving many of the tablet vendors nightmares. Although they see this tablet market as a very large one and believe there is room for multiple tablet vendors given the potential market size and potential world wide demand, they know very well that Apple has done a great job in cornering the MP3 player market with iPods and are afraid that Apple could do the same with tablets.

And even though Apple has not cornered the market in smartphones, all are amazed that Apple had record iPhone sales last quarter and realize that Apple has just started selling iPhones in the Chinese market and could be expanding to other BRIC (Brazil, Russia, India, China) countries too. And many of the smartphone vendors are certain that Apple will bring out a lower cost iPhone at some point and get very aggressive in emerging markets within the next two years. An even harder fact for them to swallow is that when it comes to smartphone profits, Apple takes about 75% of all profits made in cell phones.

While all of them think that they can compete with Apple when it comes to hardware, and maybe even software, what they all pretty much know is that the secret to Apple success is that they have built their hardware and software around an integrated ecosystem based on a very powerful platform. And it is here where their confidence level lags and the “iPodding” fears raise its head. And to be honest, this should really concern them.

Apple is in a most unique position in which they own the hardware, software and services and have built all of these around their eco-system platform. That means that when Apple engineers start designing a product, the center of its design is the platform. For most of Apple competitors, it is the reverse; the center of their design is the device itself, and then they look for apps and services that work with their device in hopes that this combination will attract new customers. In the end, this is Apple major advantage over their competitors and they can ride this platform in all kinds of directions.

For example, when they were working on the iPad, they already had in place the iTunes content store and since all were based on the iOS platform, it was pretty straight forward for them to now build the iOS iPad Apps environment that easily sat on top of this already existing software platform. Of course, the iOS app platform already existed for the iPhone so all they had to do is to create an apps toolkit to take advantage of the new screen size they now had with the iPad.

We will see this same concept repeated when they eventually release anything for the TV. The current Apple TV product is a good first step and is also based on this iOS platform and eco system. But let’s say they design an actual TV; the platform is already in place for them to tap into it and indeed, the center of design for any future TV is the platform itself.

For a lot of vendors, they had hoped that Google’s Android would deliver to them a similar platform to build on, but to date that has not been the case. The various versions of Android only complicate things for the vendors and the software community and in essence they really don’t have a solid unified platform to build anything as powerful as Apple’s iOS architecture. As a result there is a lot of fragmentation in the Android marketplace. This is more than problematic and has been at the heart of Android failures in tablets thus far.

And I am not sure Microsoft’s new Windows 8 platform will deliver what they need either. The key reason is that Windows 8 is still based on a PC Centric OS and this is being extended downward to tablets. At the same time, they have a Windows OS for their smartphones that share no code and no app base. In the end, it delivers at best splintered apps and a non-unified ecosystem even if all the devices have the same Metro UI. I believe this OS has more of a chance to challenge Apple then Google’s Android will, especially in tablets. But the lack of a powerful unified platform that the vendors can really design around and support, along with vendors own quests to differentiate, could cause this approach to have a hard time competing with Apple too.

The bottom line is that when it comes to competing with Apple, it really is all about the platform. And at the moment, I don’t see anybody creating a unified and powerful enough platform that comes close to or is equal to what Apple already has in the market. That is why Apple is cornering the market in mobile devices today and why it could continue to grow its user base WW at the expense of their competitors. Based on marketing material on Apple’s own website, I would say they understand this as well.

Software Updates: Another Reason iPhone Keeps Winning

When Apple introduced the iPhone in 2007 with AT&T as its exclusive partner, it made two revolutionary changes in how mobile phones were sold and managed. First, it was to be sold without a carrier subsidy. Second Apple would control both the initial software load and all updates.

Windows Phone Tango logo
Tango is the newest version of Windows Phone software

The first change didn’t last long. Faced with customer resistance, the price was cut from $600 to $400 two months after introduction. And when the iPhone 3G came out a year later, it was priced at $200 with a traditional carrier subsidy.

But Apple held firm on software and insisted on similar terms with all other carriers offering the iPhone. The result has been a tremendous advantage for Apple. When it pushes out an update, it is immediately available to every iOS device that can run it. Typically, a large percentage of users upgrade within days, especially now that the updates are distributed over the air. This means that the great mass of iPhone users are all running the same software at any given time. The users always have the latest and greatest and developers have a single OS version to target.

When it was introducing Windows Phone 7, Microsoft perceived the Apple advantage and was determined to follow the same part. Microsoft officials declared that it, not carriers or handset makers, would determine when upgrades went out. Unfortunately, however, they apparently failed to get that in writing. Trouble started with the very first “NoDo” update, and every software change since has staggered out on the carriers’ own schedule.

On a recent post on his Supersite for Windows, Paul Thurrott accused AT&T of hurting Windows Phone users and Windows Phone itself by holding off on distribution of an important bug fix that Microsoft made available in early January. Thurrott writes:

AT&T, I’d like my on-screen keyboard to stop disappearing when I’m typing. Microsoft fixed this bug in January, after putting that update through a wringer of tests that, get this, were partially designed by AT&T. There is no good reason for me and other Windows Phone users not to have this update already. No good reason at all.

The best that can be said about the Windows Phone situation is that it isn’t as bad as the  horrific version fragmentation in the Android world, where handset makers are shipping new phones running the 2010 Gingerbread version of the operating system rather than the Ice Cream Sandwich version released last fall.

Apple has enjoyed phenomenal success with iPhone because the product is very good. But it has also been blessed by the monumental incompetence of the competition. Apple was able to force a major, pro-consumer change on carriers at a time when it had 0% of the market. And its sorry competition is still unable to match it.

 

Microsoft Needs to Get its Apps Together

Last week in my Friday column I outlined a few of the challenges that I think Microsoft has in front of them with Windows 8. I cited lack of Windows momentum in the market along with changing software and app economics that are going to challenge Microsoft in ways they have never had to deal with. That being said I am rooting for Microsoft on this one as I have followed every major release since Windows 95. Although, I am not sure I have ever analyzed a release where I personally have had so much uncertainty about its chance of success.

Why I am Excited About Windows 8

Before I hit the larger direction behind this column, I want to make a few points about why I am excited and optimistic. What has me excited about Windows 8 is the kind of hardware innovation we are going to see because of it. Intel is helping this hardware innovation around Windows 8 with their UltraBook initiative and many of the products that will hit the market later this year and next are very interesting. Tim wrote earlier in the week about a category we are looking at heavily called “hybrids” which are tablet first hardware designs paired with a keyboard for when a consumer may need or want it. This is just one of many hardware designs that I think are very interesting and I am anxious to see how the market responds to them.

We write frequently about how the technology industry moves in cycles where a clear and obvious value shift moves from hardware, software and then to services. This example is clear in Apple’s ecosystem where hardware remains relatively constant and the major value has moved to software and now creeping into services.

Windows 8 because it is new and blends two unique experiences together will ignite a short term value trend where we will see new and innovative hardware built around the operating system. Inevitably, however, many of the designs we will see in hardware may not stick and the market will dictate which Windows 8 form factors are the winner. Because of the speed of this market and how mature the Apple and to a degree Android ecosystems are Microsoft–and partners– can not simply rely on the hardware and Windows brand alone to give them momentum in this market. Rather, for Microsoft to have a shot when they launch they need to get their apps together.

More than Hardware

To my point above of how the value chain evolves, it is as if, for Microsoft with this release, they need to come to market with as mature an ecosystem as Apple and Google in terms of apps and a software developer community. This, in my mind, is one of the most important factors necessary to truly evaluate and form an opinion of how successful the Windows 8 launch may be.

Microsoft needs to learn from Google on this one as the utter failure of Android tablets to gain any real traction is due to the lackluster apps built for tablets. Microsoft is in a similar position with Windows 8 Metro Apps. Of course Microsoft has legacy apps to fall back on but I still question how valid that really is in pure consumer markets.

My Techpinions colleagues Steve Wildstrom and Patrick Moorhead have already covered some of the potential legacy hardware issues with Windows 8 and perhaps some of the challenges Windows 8 faces on non-touch notebooks or desktops–which will still be a healthy portion of the market. I agree with and share their concerns in those areas but I am mostly concerned about what new and exciting software that will be waiting for consumers when they purchase these new Windows 8 devices.

Related Columns:
Windows 8 CP Tablet Experience: Distinctive yet Risky for Holiday 2012
Windows 8 and Mountain Lion: Same Problem, Different Answers

To use a video gaming industry analogy, Microsoft needs a title franchise to drive the hardware. They had this with XBOX and Halo where many consumers bought the XBOX simply for this title– it was that valuable. There has to be something that grabs consumers attention and appeals to them in a way that no other platform can.

This is clearly one of the strengths of Apple as they continually put products on the market both in hardware and software that drive demand. Microsoft and others lag in this category and it needs to change fast or they will face and even tougher uphill challenge than they already do.

As I stated earlier, we are rooting for Microsoft. We need healthy competition in this industry. However, our expertise in being industry and market analysts gives us insights into the challenging road ahead. To be fair, this is one of the riskiest things Microsoft has done in a while. Taking risks can bring great reward or fail miserably. Let’s just hope Windows 8 is more like the Windows 95 launch in terms of success and less like Vista, or even worse, Bob.

Windows 8, Metro, and Desktop: The ISV App Challenge

Windows 8, at least in its current Consumer Preview form, presents a confusing picture to folks trying it out on a conventional, non-touch PC. It’s one operating system with two user interfaces–the traditional Desktop and the new tabletized Metro–and you find yourself jumping back and forth between them a lot.

Windows 8 screen shotBut users aren’t the only ones who will be jumping. The split personality of  Windows 8 creates some big challenges for the independent software vendors whose efforts will play a big role in the new operating system’s success. And these choices will not be easy.

Sticking with Desktop requires minimal changes. Existing programs will run fine, but ISVs looking to update will probably want to include a “touch mode,” similar to that used in the forthcoming Office 15, enlarges icons and other UI elements to make their use easier on tablets or touchscreen PCs. But it remains to be seen how usable these touch mode Desktop applications will be on mouseless, keyboardless tablets. Perhaps more significantly, sticking with Desktop closes an ISV out of the Windows on ARM tablet market because ARM tablets will support only Metro apps.

Apps rewritten (or, to really work well, reconceptualized) for Metro will run on all platforms. But  just as Desktop apps are awkward to use on tablets, Metro apps are not very comfortable on traditional PCs. The requirement that they run full screen, or at best, as a second app in a sidebar, won’t make many computer users happy. (As I write this, I have 10 windows open in 10 different applications on my 27″ iMac.  And by my standards, that’s an empty desktop.)

Microsoft itself is splitting the difference with Office 15. Based on information that has leaked out from test of a technical preview edition, Microsoft is splitting the difference, creating Desktop applications with a Metro look and feel. But Microsoft has a unique advantage: Office applications and the Windows Explorer file manager will be the only Desktop apps allowed to run on ARM tablets.

Most heavyweight Windows productivity applications are likely to stay with Desktop. Filemaker Pro, for example, has no plans for a Metro version of its flagship product, though I wouldn’t be surprised to see a  Metro edition of something like the iOS Filemaker Go for database field entry and lookup on windows tablets. (Filemaker is owned by Apple, but over half of its installed base is Windows.)

Related post: Windows 8 and Mountain Lion: Same Problem, Different Answers

Adobe has invested a great deal over the years in creating an Adobe UI that achieved a high level of consistency between the Windows and Mac versions of its Creative Suite products and I can;t see them giving it up for Metro.  But Adobe has a real opportunity in creating lightweight, distinct versions for Metro. Windows tablets, for example, will desperately need an app to compete with the new iPhoto for iPad, an app that rips the heart out of Adobe’s consumer-oriented Photoshop Elements.

In a world of unconstrained resources, ISVs would develop touch mode Desktop apps that retain the full capability of current versions as well as lighter weight Metro editions. But in the real world, the constraints are tight and getting tighter as the reluctance of consumers to pay as much as $10 for tablet apps puts relentless downward pressure on software prices and margins.

I suspect the overwhelming majority of ISVs will stick with Desktop. That’s where the installed base is and where pricing still gives them a chance to make some money. And that could be bad news for Metro and for Windows tablets, because if the iPad vs. Android has proved anything, it’s that apps are the key to tablet success.

 

 

Why Microsoft Has Big Challenges Ahead

I genuinely desire for Microsoft to succeed with Windows 8 and beyond. I believe it is healthy to have competition in the market of personal computing and I like the way I see Apple, Microsoft, and Google with Android, pushing each other. Of course everyone has their opinions on who is doing more but I don’t intend to cover that here. Rather, I want to focus on what some of the challenges ahead are for Microsoft to succeed with this next round of software.

Do Consumers Care About Windows?

At the core of this challenge for Microsoft is going to be creating demand and consumer interest around Windows 8. There is a lot of momentum for Apple’s ecosystem and their hardware and software. As I survey and observe the market I don’t see that kind of interest around Windows in general but specifically Windows 8. Granted, Windows 8 is not in the market yet but in a general sense we can confidently say that Windows itself is not the reason notebooks and desktops are selling.

What I think has to be noted is that Microsoft and partners can not simply expect to slap a piece of hardware on a shelf at retail and simply assume that Windows 8 alone will be a driver of interest and generator of consumer demand.

I feel the same way about what is happening with UltraBooks. Just because these new form factors are thinner, lighter, have decent specs, and run Windows 8 does not ensure success in any way shape or form.

My biggest concern for Windows 8 can not be answered yet but it lies with the question of when these products hit the market, will consumers even care?

The Software Challenge


When it comes to software or the selling of software, things like the OS as well as individual software suites, etc, the market has changed drastically for Microsoft. Microsoft has traditionally been in the business of selling suites like their Office solution as well as their Operating System for well over $100. Yet we are now in an “app economy” where consumers are now used to paying quite a bit less for software. Even in Apple’s ecosystem around OS X many of the highest selling software titles rarely go above $29.99. Even Apple’s own operating system, productivity apps, etc, are all well below what Microsoft is used to selling software for and unfortunately for Microsoft I think these software economics are here to stay.

Given Microsoft’s prior business models, which got them to where they are today, I don’t see how the new app economy and software economics are going to work in their favor.

Microsoft has done some good work around re-inventing their operating system. But I still think there is some work that needs to be done for Microsoft to also re-invent their business model around software.

If Microsoft were to have to sell both their new OS as well as stand alone elements of the Office Suite, like Word for example, in the same price range that Apple does, it could have a significant impact on their business. Ultimately I feel that consumers have come to expect this new software pricing ecosystem so I don’t see how Microsoft sells their software for the prices they used too.

The manufacturers who make desktops, notebooks, tablets, and more, are relying on Microsoft to get this right the first time. They simply have no other choice and neither does Microsoft to get it right the first time.

In the end, consumer demand / interest in Windows 8 and the new software economy are all things that I believe present real challenges for Microsoft. All one needs to do is look at the foot traffic in an Apple store vs. the foot traffic in a Microsoft store to see the glaring difference in consumer interest in each companies products.

The world has changed drastically since Microsoft’s last operating system hit the market. It is going to be interesting to watch how they adapt to a fundamentally different landscape than the last time they released on OS.

We Are Entering the True Era of Personal Computing

Remember that old HP campaign “The computer is personal again?”  I remember seeing that campaign and thinking to myself, when did the computer become un-personal? I’ve been cogitating on this term “personal computer” and in light of the recent debate of whether the iPad is a PC, I have come to some personal conclusions on this topic.

I would also like to preface this by saying that I agree with how Tim Cook illustrated what Post PC meant. He explained how Post PC means the PC is no longer the center. That is true. However, we are using this term “post pc” only because a desktop or notebook form factor is what has been associated with “PC.” We should not forget that the term PC literally means personal computer. So my overarching point is that we are actually in what is truly the PC (personal computing) era. My logic is as follows.

First lets look at some computing history.   To do that I am going to look at the evolution of personal computing by calling out specific “eras” of computing.   The first era was the birth of computing. During this era computing was in its infancy. Things like the transistor, then the microprocessor were invented which paved the way for computing.   During the first stage of computing, computers were quite large and normally filled a room mostly and in the form of mainframes then eventually minis.   Many visionaries dreamed of making these devices smaller so people could bring them into their homes and own their own computer.   This vision paved the way for desktop computing. 

Desktop Computing

This is the second era of computing.  What most during this time would consider the personal computer I will call a desktop computer.   The term personal came from the idea that each “person” would have one.  When computers were largely mainframes or minis they were too big for each person to own.   Bill Gates famously said “some day there will be computer on every desk.”   This was the result of the next evolution of computing as computers become smaller and were able to now fit on desks as well as become more affordable.  Of course these devices could become personal in the sense that a person owned them and could personalize them to a degree.  But more personal computers were still ahead. 

Portable Computing

The next era was the era of portable computing.   This was the era of notebooks.   Some call this mobile computing but my argument is that notebooks were really more portable computers than they were mobile.   Meaning you could move them more easily than a desktop but you still sat down and were stationary using the device at arms length (generally) to type.  My point is you weren’t actually doing computing while being mobile–you were still stationary.    

Notebooks certainly took us one step closer to personal computing because they added an element of portability. They tended to travel with a select person who largely customized the notebook thus making it more personal to that individual.   I would argue that the notebook is actually the first truly personal computer and birthed personal computing.   

Now enter smart phones and tablets.   The Merriam-Webster definition of a computer is:

“a programmable usually electronic device that can store, retrieve, and process data.”

Another definition I found in the dictionary says:

“An electronic device for storing and processing data, typically in binary form, according to instructions given to it in a variable program.” 

So my first question is how is a tablet and smart phone not considered a computer?  I also highly customize my smart phone and tablet for my own tastes and likings via software, personal data storage, access to media, and take them with me everywhere I go.   So how exactly how are they not also personal?  Thus one would have to logically conclude that smart phones and tablets are in fact personal computers on which computing tasks take place.  

What we need to realize in this evolution of personal computing is that devices like smart phones and tablets represent a form factor evolution of computing similarly to the way the desktop form factor evolved to the notebook form factor.   This evolution led to portable personal computing and it made computing possible in places that were before impossible with a desktop–like at Starbucks.  The evolution of the personal computer form factor from notebook to tablet and smart phone represents the evolution to truly mobile personal computing.   Again bringing computing to places not before possible or were before inconvenient–like the couch, bed, walking down the street, etc.  

The Era of Mobile Personal Computers

My point earlier was that notebooks were more portable than they were mobile due to the form factor of a notebook still requiring its user to be stationary, with the device resting on a surface being used at arms length.   Devices like tablets and smart phones change this computing paradigm.  We can hold these devices in our hands and use them, we can move around while using them, we can use them in a range of places and situations where a desktop or notebook could never be used.   Places like point of sale retail, by waiters, or car salesman, while running through the woods, while hunting, while boating, at the park, at the beach, etc.   

The tablet and smart phone form factor represent what I believe are the best form factors for truly mobile personal computing.   Thus they are simply form factor evolutions in personal computing not something other than a personal computer.  

Can they replace other form factors?

 
The answer is no; tablets in particular are not replacing PCs, at least not in the foreseeable future.   Rather what is happening is tasks or jobs are being replaced.  Things that once were done primarily on the notebook or desktop form factor are now being done largely on devices like tablets and other form factors. In essence the best way to think about this is that time is shifting from notebooks or desktops to tablets and smart phones

Prior to tablets, for example, the notebook owned the bulk of a consumers time when it came to computing tasks like searching the web, consuming media, checking email, etc.  Now with tablets, time has been shifted to the tablet or smart phone where the form factor is more convenient for tasks like browsing the web, checking email, etc, in many situations.   

Each form factor has a role to play.  Based on the list of computing tasks consumers perform, the form factors play a role in making those jobs easier to accomplish.    In this environment what happens is that consumers spread their time across a number of form factors to accomplish computing holistically.  

Before one “personal computer” monopolized consumers time.  Now time is shared between computing devices in the ecosystem in order to accomplish a wider range of computing tasks.  Things that were not possible, or were harder to accomplish with previous form factors become possible with new computing form factor evolutions that stick in the market.

Rather than look at tablets and smart phones as separate from PCs it would be more helpful to look at them within the larger personal computing ecosystem.  If we did this then we would not be arguing about whether the “death of the PC” is imminent or the degree at which PC sales are slowing.   Instead we would be talking about the growth of the PC industry as well as the expansion of personal computing into new form factors, use cases, tasks, etc.

What we need to let go of is not the idea that these devices are not personal computers. What we need to let go of is an archaic and out of date definition, assumption, and stereotype of the term PC.
  
We are not really in the post PC era.  We are in the post notebook form factor era. We are in the post traditional definition of a PC era.    We are actually just entering the era of truly personal computing.    If Bill Gates vision of long ago was that every desk would have a computer then I offer up this: in this new era, every pocket will have a personal computer.

Windows 8 CP Tablet Experience: Distinctive yet Risky for Holiday 2012

A little less than a week ago, Microsoft launched to the public the Windows 8 Consumer Preview (CP). This is a follow-on to the Developer Preview (DP) that I’ve been using on a tablet and all-in-one desktop since it was introduced last September at the Microsoft BUILD partner conference. After 6 months and reportedly 100,000 code changes, is Windows 8 ready for prime time? Based on over 20 years of working with Windows development code and launching real products, I believe that Windows 8 is very distinctive but is risky for a Holiday 2012 release.

If you haven’t actually used Windows 8, I urge you to download it here. Truly using beta software is the only way to truly get the “feeling” of preview software and devices. What I will do is take you through the areas where I believe Windows 8 shines, needs work, and finally, areas where there’s not enough data to make a recommendation one way or another. I want to stress that my assessment is based on “preview” or “beta” code, not the finished product. Finished code is called RTM, or “Release To Manufacturing”. One very important hurdle for preview or beta is that it must be feature complete, which in some areas Windows 8 is and others, not.

Tablet Experiential Plusses

  • Fast response: My tablet booted very quickly and most times, woke up very quickly from “sleep.” Like DP, Metro was very fluid and fast as well, a first for a PC platform. Even installing apps was fast.
  • Content mashups:  Unlike Apple iOS or OSX, Microsoft has attempted to deliver what people really want who have multiple on-line services; a focus on the content and interaction, not the service. For example, those who have LinkedIn, Facebook, Twitter, multiple address books, etc., Win8 makes it simple. Instead of having to go to multiple services or apps, consumers go to apps like “People” (Facebook, Twitter, LinkedIn, Google), “Pictures” (Local, SkyDrive, Facebook, Flickr), and “Messenger” (Facebook, Microsoft, etc.) All of this saves time and places focus on the content.
  • Metro apps visually stunning: Microsoft pulled the “essence” of the app experience from Windows Phone, Zune and theXBOX 360. This results in beautiful looking apps like Music, USA Today, Weather, Bewise Cookbook, and iCookbook. When playing music, cover art and band photos are “silhouetted” on the display giving the feeling of a premium experience. Photos are huge and there is always a lot of white space. App beauty matters; just ask Apple.
  • Live tiles: Microsoft took what Android started in mobility, perfected the notification system with Windows Phone and extended it to the tablet. Without even opening up an app or swiping, consumers can see latest emails, next calendar item, most important stock prices, weather, and social media updates.
  • Dual use experience: I have been a proponent of modularity for years as it ultimately where the future of computing is going. With Win8 mid-term, Microsoft has the unique ability to capitalize on this with tablets, unlike Apple or Google. It’s simple; when users want to use the tablet on the couch or in bed, they use Metro. When I want the full desktop,they dock it with a full sized mouse, keyboard, 32” display and am doing real work. Microsoft ultimately needs to enable a way for a Metro and Desktop app to share the same local data files, but cloud-sync is an acceptable start particularly for the tech-aware audience.
  • XBOX integration: Like Windows Phone, Windows 8 CP integrates XBOX functionality quite well but is just a start. Using the XBOX Companion app on my tablet, I could find movies, TV shows, and music and even launch games to be watched or played on the XBOX. It is like an XBOX remote on steroids. I am still waiting for the enhanced “play to” functionality to share local content like photos and web pages to the TV via the XBOX. This functionality was discussed in-depth at the BUILD conference.
  • Search: Unlike the iPad, users can do full document and app content search. This what consumers expect and this is what Windows 8 CP delivers.

Too Early to Tell

  • ARM experience: Microsoft and its partners have been very selective on showing the Windows on ARM experience. It has been shown on stage and behind closed doors, but unlike the X86 versions, the public cannot touch the devices. Even at January’s CES show, the public was not allowed to touch the devices. If it were working great, there wouldn’t be a restriction and as I pointed out here, there are many challenges with Windows on ARM.
  • Updates: Every operating system and apps have updates and for good reasons, namely security and bug fixes. What is unknown with Windows 8 is the size and frequency of updates. We all know that the current pace and method of Microsoft updates is unacceptable in the modern world, and if it continues at its current pace, will detract from the tablet experience. The first day after I installed Windows 8 CP and got my system ready for desktop use, I received 34 updates; 4 for Windows 8 and 32 for Office. It took over an hour and that’s unacceptable in a modern, tablet world.
  • Tablet Games: I was very impressed with Pinball FX, but one game make not a trend. Given games are the most popular iOS and Android app category, I would have expected more by now.
  • Metro SkyDrive: I have used SkyDrive and Live Mesh for many years but primarily use Dropbox and SugarSync. There are two main issues I have found. First, I can see no more than 14 icons on an 11″ tablet display and there isn’t search capability. Sorry, consumers don’t like to create file folders nor do they manage them tightly. I am expecting Microsoft to change this or it renders SkyDrive useless.
  • Number of relevant apps: Certainly this will grow given Microsoft’s big bet and investment into developers but I was expecting more apps 6 months after Visual Studio was shown at the BUILD conference. 15 games and 3 social media apps 6 months after the developer preview isn’t the progress I expected.
  • Tablet OS footprint: The size of the final tablet installation is unknown, but if it’s more than a few GB, this will be a cost issue for tablets. Hard drives are “free” on desktops, but on SSD-based tablets, it’s a premium. The current download size for Win8 CP is between 2.5GB and 3.3GB, but those then get “unpacked” and increase in size. Microsoft is recommending 16GB free space for 32-bit and 20GB for 64-bit so the reality is the build will be between the download and the recommendations. Keep your eye on this one….
  • Tablet battery life: Microsoft and its partners have made a tremendous effort to improve battery life. Early indications show that by re-architecting the ways drivers work and BIOS work, using Metro as the front-end user experience, and by leveraging the lowest power ARM and X86, battery life will be competitive. I expect battery life to be competitive, but less than iOS or Android devices; but then again, it does more and I believe that it won’t become a consumer issue.

Experiential Improvements Needed

  • Too many bugs: Yes this is preview, but I was surprised to see this far into the development process the amount of application “hangs” with Metro apps like Mail, SkyDrive, and Photos. I experienced many situations where the screen just sat there in one color as if it were waiting for something. I used Microsoft’s recommended hardware tablet platform so that cannot be the issue.
  • Universal email inbox: The Metro Mail application doesn’t support a universal inbox. This is just basic and is surprising a feature complete preview launched without one.
  • MS Office file format viewers: Unlike iOS, OSX, and Android, the Win8 CP doesn’t include local viewers for MS Office documents. But it does support viewing PDF files.. huh? Click on a Word doc and you get sent to online SkyDrive where you can view and even edit a document. I see why Microsoft would want this as it “motivates” you to buy Office, but with all of the competition providing this, it really messes up the experience. The Windows 8 on ARM systems do contain Office but it isn’t clear what will ship on X86 systems. For the user’s sake, we can only hope that OEMs install at least viewers or Office Student Edition.
  • Metro Windows Explorer: Sorry, the newly designed Explorer doesn’t cut it in a touch environment. Even on an 11” display, it’s just too easy to click on the wrong icon or accidentally delete or move a file.
  • Metro Internet Explorer bookmark folders: Even Apple fought against but finally learned on iOS that for a browser to be usable, it needs an easy way to file bookmarks. And that means folders. 50 bookmarks strewn all over the place is just a mess and will repel users.

Conclusions

Windows 8 Consumer Preview builds upon the Developer Preview by adding application previews and cloud connectivity.  Windows 8 for consumer tablets is very distinctive in that it can effectively be used as a tablet device for “lean-back” usage models and for “lean-forward” usages when docked in desktop mode. Like Android, Windows 8 takes a content-first approach, albeit with much more beauty and style, and simplifies user’s interactions between different local and cloud-based services.

Unlike iOS, Windows 8 is “alive” and vibrant with its live tiles, white space, and over-sized imagery. When launched it will pose a serious threat to high-end Android tablets and will help thwart competitive threats on the desktop by Android, iOS (in convertible form), and even OSX. The biggest challenge I see is Microsoft’s and its partner’s ability to hit the 2012 holiday selling season with a stable operating system for tablets to compete with the iPad. That risk is being mitigated with special image loads for specific devices, but given the state of the Windows 8 CP experience, hitting holiday 2012 with the experience Microsoft envisions and must deliver will be a tremendous challenge.  I believe it is a bridge too far and the experience will suffer at the need to hit the holiday selling season.

Why Microsoft Should Make an XBOX Mobile Gaming Console

Yesterday I shared a column on why casual gaming, or even more immersive gaming on smart phones is not going to threaten dedicated mobile gaming consoles any time soon. To come to this conclusion I had been using the Sony PS Vita for a few weeks. Using that device also led me to the conclusion that Microsoft needs a device like the PS Vita for their gaming ecosystem. There are a number of good reasons for this.

Strategy for Windows and Windows Phone
Microsoft includes on their Windows Phone platform an XBOX Live hub. This is simply an application that lets you interact with your XBOX Live friends and view your own profile information and achievments. Given the success of the XBOX 360 it makes sense for Microsoft to branch the service out to mobile devices. They even have an iOS app for XBOX Live as well.

What would be interesting for Microsoft strategically would be if they built this device and had some of the main dashboard UI be much closer to the Metro UI they are orienting around. The new XBOX Live dashboard is getting closer but is not the fully Metro UI yet.

I would expect a device like this from Microsft to be quite successful given the passion of the XBOX 360 audience and the number of live users gaming online. If that were true then a large number of consumers who purchased the XBOX mobile device would get immersed in the Metro UI and become familiar with it. Thus making them partial, perhaps, to Windows 8 and Windows Phone products in the future. One could make a strong case a dedicated XBOX Live mobile gaming console could be more successful than Windows Phone in the short term.

Gaming as a Service
Another key element of strategic interest in this thinking is the role of the XBOX Live service as a part of such a device. I can imagine that if Microsoft demonstrated with such a device how groups could play Modern Warfare with their friends online from both the XBOX 360 and the mobile console, that it would generate quite a bit of excitement. The PS Vita and new software that will be rolling out will support this feature as well. However, XBOX Live is such a good gaming service for hard core gamers that a mobile device tied to XBOX Live gaming could be a big hit.

This would further the revenue model for XBOX and perhaps even generate more XBOX Live Gold customres. Gold is the package where you pay $50 a year for special online features. Perhaps using XBOX Live on the mobile platform could even cost slightly more as a package. Either way it makes for an interesting extension of a core servce Microsoft is invested in.

Game Software Developers
Lastly a move like this would attract game developers for the Windows Platform much more rapidly than I believe is currently happening. Games are a rapidly growing category on mobile devices and even casual games on notebook and desktop PCs are gaining steam.

Microsoft could include in many of the same development toolkits the ability to easily also make games for the mobile XBOX console on top of their other Windows products. The byproduct would be more key apps, and in this case games, for the Windows ecosystem. Something they desparately need.

Microsoft could make it easy to buy these games for the mobile device through their own digital store, similar on Windows phone and Windows 8, which in turn would bring more consumers to their stores doorstep.

There is actually quite a bit strategically I like about this idea for Microsoft. I know the push back on this concept is around how big the market would be for a device like this. Especially since a piece of hardware like this has a longer product cycle life of more than 2 years conservatively. But I will again default to this market being similar to the console market at large. A market where the value has never been in hardware but is always in software and services. Although the hardware may have a long life the annual revenue opportunities come from soft are and services.

The thought of being able to play a game like Modern Warfare, Battlefield, or Gears of War from a mobile console while I travel and my friends are playing as well from their consoles is just exciting.

The key in all of this thinking is the hardware touch points that Microsoft can use to get consumers into their ecosystem. XBOX has been one of those key peices of hardware. So naturally with the world going mobile and Microsoft wanting a peice of that pie, my opinion is that a dedicted XBOX mobile gaming console is a good business strategy for Microsoft. It is also a product I think they would sell very well.

The New Microsoft and Apple OS Wars–Game On

After years of lagging behind Apple in terms of innovating around their user interfaces on both their smartphones and Windows, Microsoft finally took a big step towards competing with Apple head on last year with the introduction of their new Metro UI. Introduced first on Windows Phone 7, this new Touch UI, which uses a tiling metaphor to deliver a more graphical way of dealing with data, is also coming to Windows 8 this fall and in essence, will finally unify the way people interact with Windows based software across smartphones, tablets, laptops and desktops in the future. And while touch is critical to smartphone navigation, Windows 8 is also built around a touch UI that, especially on tablets, will be key to navigation and input on all Windows based devices soon.

Of course, this move is basically copying what Apple has been doing for over five years with their iOS strategy in which they use the same OS, UI and touch architecture on iPods, iPhone and iPads. And while direct screen touch is not built into OS X, Apple has gone to great pains to create a touchpad experience that very much emulates these same touch movements on all MacBooks and with an external touch pad for iMacs. And with the recent introduction of OS X Mountain Lion, they now add much of the great features only available on iOS devices to the Mac as well.

What’s interesting about these developments is that in some ways, history is repeating itself. In 1984, Apple brought to market the Mac and introduced the world to graphical user interfaces and the mouse. It took Microsoft a couple of years and some real false starts until they finally got their own GUI right on Windows 95 and continued to ride this new OS and GUI into further PC domination. And during this period Apple had major changes in management and inconsistent strategies that played perfectly into Microsoft’s hands and Microsoft grew exponentially without any real competition.

But when Steve Jobs came back to Apple in 1997 and began crafting a strategy in which Apple would begin to drive the market beyond the PC and launch the post PC era, Apple soon emerged as the real powerhouse in the world of technology. Starting with the iPod and then with the iPhone, Apple saw their fortunes change from an also ran to the lead horse that is mining most of the industry profit today and is now the most valuable company on the planet. Now Microsoft and other competitors are playing catch up again.

From Microsoft and their partners point of view, they are really hoping that history literally repeats itself. Just as Windows was used to bypass Apple in the past, they are “praying” that Windows 8, with its ability to deliver a similar OS and touch UI experience across multiple devices can revive their fortunes and make them relevant again.

Related Column: Dear Industry History Will Not Repeat Itself

But this is a very tall order this time around. Apple’s lead with iOS and OS X, along with their stellar offering of products that use these operating systems is very large. And while Microsoft’s OS seems to be a solid offering, unlike Apple who owns the hardware, software and services aspect of their eco-system, Microsoft has to hope that their software developers, hardware partners and potential service providers can gel and execute in a way that allows them to actually gain ground on Apple. And, they can’t afford to have any missteps. While Windows on Intel X86 chips seems solid, their move to put Windows on ARM is only in its early stages and its success on this new processor platforms, which includes the need to have software written specifically for these chips, is not assured.

Also keep in mind that, while Microsoft and partners are scrambling to play catch up, they have no idea what else Apple has up their sleeves in the way of new hardware, software enhancements and services. If Apple continues to innovate and stay at least two years ahead of the competition, Microsoft and friends may always be playing catch up for the foreseeable future. And this time around, Microsoft will also have to compete with Google and the Android crowd and Google’s Chrome OS that is destined for the desktop. And with HTML 5 emerging as the future of software development and Web Apps becoming the means of delivering applications, Microsoft this time around has their hands full keeping up with a market that is moving much faster then it did in the past.

But now that the Windows crowd finally has an OS, UI and a strategy that is actually designed to compete with Apple, Microsoft and their partners can now look towards what they hope is a promising future and like in the past, are telling Apple that the game is back on.

Windows 8 on ARM: The Big Questions

Microsoft released a lengthy blog post yesterday on their website specifically around Windows 8 on ARM. Although the post shed some insight into a number of the looming questions we all have about Windows on ARM, there are still a few things I am concerned about.

Windows 8 on ARM has the potential to be either wildly successful and disruptive but it also has the potential to fail in the short-term.

How Will Microsoft and Retail Position the X86 vs the ARM hardware Versions?
When I put myself in the consumer buying mindset for a new Windows-based PC, I see some potential confusion when it comes to product positioning. Microsoft has a challenge on their hand that I am fascinated to see how they figure it out.

What Microsoft, their hardware partners, and their retail partners can not do is position ARM notebooks or other form factors as limited devices. So they can’t use terms like “full Windows experience” or “the Windows you know and love” types of terminology for non-X86 devices. Taking this direction would cause consumers to ask of their ARM counterparts: “I don’t get the full Windows experience I know and love on these products”? Which would essentially deem Windows on ARM devices to fail because they would be positioned as truncated.

This is actually an area where I am intrigued to see if the Intel inside branding efforts of years past have any relative spill over. It actually could if consumers are on the fence. Consumers may consider going with a product with Intel, or AMD for that matter, the “safe bet” if there is any confusion what-so-ever.

Unfortunately, or fortunately depending on who you are, I don’t think any of the ARM companies benefit by touting their brand name in a Windows 8 on ARM device. For example saying “Runs Nvidia Tegra 3” or “Qualcomm Snapdragon”. In fact that may add to the confusion rather than help clear it up.

It is of course possible that Microsoft and retail partners ignore trying to position Windows on X86 and Windows 8 on ARM differently at all. However, unless the device experiences have no difference at all this would be a mistake.

Will All Drivers Be Supported?
To quote the blog post directly:

“Our device strategy uses standardized protocols and class drivers extensively”

“Of course Windows has many class drivers inside, which you experience when you plug-in a wide variety of USB devices, such as storage, mice, or keyboards.“

“The majority of printers selling today are supported using the class driver, which means you’ll be able to “plug and print” on WOA without additional drivers”

This must be true and must be delivered upon. I want to be optimistic about this and take Microsoft at their word that drivers won’t be an issue, as they appear to insinuate. However, I will feel better once I see Windows 8 on ARM working with a wide variety of peripherals.

Are Consumers Willing to Invest in New Software?
This may be perhaps the biggest point to wrestle with. As I have stated before, I believe Microsoft, with Windows 8 in general, has come as close to fundamentally starting over with Windows as they possibly could without completely starting over. Windows 8 is a step in the right direction to optimize Windows for the future of computing.

Consumers being willing to start fresh with software is the wild card for me. Unfortunately I have no hard data (yet) on this but I will offer some observational logic as to why this may be the case.

Firstly, consumers switching to the Mac platform at incredible rates is an indicator. Apple continually mentions their stats on each quarterly call that 50% of Mac sales are to first time Mac buyers. This would mean that many of those customers have made investments in Windows software and are willing to start over. Perhaps this same buying psychology could translate to Windows 8 on ARM with a reality that legacy Windows software isn’t as important as many would think.

Secondly, reports came out in late December from Flurry that on Christmas day there was a 125% increase in app downloads mostly coming from the 353% increase in device activations on the same day. This leads us to believe that as consumers get a new device they go app shopping.

Lastly, the economics support this trend. The reality is that the new app economy has driven the cost of software down. This is not only true of mobile devices but of desktop / notebook as well. The days of selling software and software bundles in the hundreds of dollars are over. If you look at the top-selling apps in the Mac OSX App store there isn’t a single one over $29.99 and most are well south of that figure. With lower overall app pricing becoming the norm it makes it feasible for consumers to actually start over with software.

Could it be Netbooks all Over Again?
In all of these scenarios I am generally concerned that Windows 8 on ARM devices may be headed down the path of Netbooks in their early days if we are not careful. Netbook return rates were north of 30% in their early years mainly because consumers bought them expecting a “full PC” experience and early Netbooks didn’t deliver. This was primarily because early devices were Linux-based. However, even once the devices ran Windows, they were still positioned as “not full PCs” mainly because they were underpowered. It was a positioning mess in my opinion.

I am not as concerned of these devices being underpowered as much as I am them fully delivering on the full PC experience. This will have to include a robust list of software, which Microsoft and partners are working on. There are a number of form factors outside of the clamshell PC design that I think will be more successful for Windows 8 on ARM vendors and Hybrids being the most interesting potential.

Even with all the questions still looming, ultimately the positioning of these products is what will make or break Windows on ARM devices.

Do Apple Competitors Make Bad Products?

I often engage in discussions with the financial community on matters related to tech for their portfolio management. One of the things I was asked in a recent conversation intrigued me. The question was around why Apple seems to be dominating their competition with such a limited product portfolio mix.

Tim Cook continues to emphasize with each investor, earnings, and public event that Apple’s laser focus is to continue striving to make the best products on the planet. Given that Apple seems nearly unstoppable, it appears their strategy is working. And it does make you wonder what Tim Cook’s statements about Apple continuing to focus on making the best products and Apple’s dominant position (especially with iPhone and iPad) says about other products on the market.

So the question thrown at me was “Do Apple Competitors Make Bad Products?” In light of Apple’s continual progress forward and other companies’ struggle to keep up, this is an interesting question. The answer is simply that many Apple competitors make very good products. I happen to like quite a few of them. The problem—for competitors—is that Apple makes exceptional products and perhaps more importantly, extraordinary experiences with those products.

To dive into this deeper, three fundamental points need to be established…

Apple Has More Competition Than Anyone—Yet No True Competitors

When you think about Apple’s vertically integrated business strategy of having a dedicated hardware business, software business, and services business, you realize that Apple competes toe-to-toe with almost the entire tech industry. Yet no company competes toe-to-toe with Apple.

What I mean by that is Apple competes directly with hardware companies, meaning people who make notebooks, desktops, all-in-ones, smartphones, tablets, and set-top boxes to a degree.

They also compete with those who make software, particularly in operating systems, but also in core apps. They compete with Microsoft at an OS level and at an Office level with Pages, Keynote, Numbers, etc. They compete with companies who make media management and creation software like Adobe, or ArcSoft etc, with iMovie, iPhoto, etc. They compete with Google with Android. The list could go on.

They also compete with services companies. iTunes and iCloud as a service competes with a host of online services providers from email, to calendar, to movies, music, storage and backup etc. Google and Microsoft again are competitors here along with a long list of others.

They compete to a degree with retailers. Apple retail competes with Best Buy, Wal-Mart, Target, Staples, etc. Note that Apple doesn’t compete on all levels with these retailers, but we have to acknowledge there are some crossovers.

When you look at the sum of their businesses, because of their vertically integrated strategy, it is not quite obvious the large list of competitors Apple has all over the industry. Yet the reality is that no other company has such a tightly integrated vertical strategy as Apple. So my first point is that at a fundamental level, Apple doesn’t actually have any true competitors who compete with them on every level they way they do with the rest of the Industry. This, at its core, is what sets them apart.

Granted we could debate that with Google’s acquisition of Motorola, they have all the parts on paper to compete with Apple toe-to-toe, but for the time being I still consider that a stretch.

Apple’s “Works Better Together” Philosophy

What is truly unique about Apple is the relationship that all their products have with each other. It is as if each product was made for the other, yet alone each one is still a solid standalone product. We call this the “Works Better Together” approach. It means that your products or “consumer end-points” can work fine as standalone products, but work even better as a comprehensive whole. In concept this sounds like a no-brainer, but the reality is that Apple’s vertically integrated approach is essential in executing this strategy.

Too many companies who make consumer products organize their business units to compete for PNL. Sometimes even worse than competing for PNL, they work as a silos and never have a clue what the other business groups are working on. This makes it extremely difficult for a company to create a “works better together” portfolio even if they have all the parts to make it work.

By developing this strategy as a part of the “iDevice” ecosystem, Apple benefits by creating a user experience that is not related to simply one device, but to the entire Apple ecosystem. This and more is what we mean when we talk about the Apple ecosystem being sticky and creating consumer loyalty.

Technology as Art

Lastly, Apple has a culture that is completely unique, which is another part of the reason for its success. Steve Jobs in his many keynotes has pointed out that Apple’s approach to products is that they are at the union of liberal arts and technology. And nobody in the industry so far has been able to match Apple’s eye for design.

What this means is that there is an added dimension of design and technology as art that influences the thinking of those who work at Apple. This group is like a passionate team of artists who happen to turn their art into technology.

This is the major reason that Apple emphasizes simplicity. Steve Jobs has in many keynotes and demos said that Apple’s various products “just work.” What we must not forget is that creating technology products that are simple is no trivial task. Simple solutions require sophisticated technologies. Apple knows this better than anyone and it has oriented itself to succeed at just that.

So it is not that Apple competitors make bad products. Their hardware competitors and OS competitors make good products. It is simply because of their vertically integrated model, paired with a works better together product philosophy, coupled with incredible execution, and a hardware as art design strategy, that Apple simply makes exceptional and extraordinary products.

Which is why one can argue that they truly do not have any real competitors.

Why the PC Industry Cannot Ignore Smartphones

When HP abandoned their smartphone and tablet business and webOS last August, many in the industry were hp-veerdisappointed in the speed of the Palm acquisition and the quick dismantling of it. Some who consider themselves "business-savvy" said it was the wise approach as it wasn’t core to HP’s corporate mission. They said that smartphones were a distraction to competing with IBM and even Dell. We won’t know until 3-5 years from now whether it was a good decision or not.

I believe though, that just as PC companies fought to stay away from the sub-$1,000 PC market in the 90’s, PC makers who don’t embrace smartphones could be out of the client hardware business in 5 years.

Some Context

Over the last 20 years, PC hardware and software have done this little dance where one is ahead of the other. New software came out that required better hardware, then the new hardware outpaced the old software and the cycle continued. With the better hardware and software came new features and usage models like multimedia, desktop publishing, 3D games, DVD video, videoconferencing, digital photography, the visual internet, and video editing. Then Microsoft Vista was launched and it seemed no matter how much hardware users threw at it, issues still existed. Microsoft then spent the next few years fixing Vista and launched Windows 7 instead of developing environments for new rich client usage models. Windows 7 actually took less hardware resources than Vista, the first time a Microsoft OS could say this. Microsoft is even publicly communicating that Windows 8 will take less resources than Windows 7. So what happened? Did the industry run out of usage models to consume rich PC cycles? No, there are many usage models that need to be developed that use rich PC clients.

What happened was netbooks, smartphones and tablets. Netbooks threatened Microsoft and forced them to re-configure Windows XP for the the small, cheap laptops. This was in response to the first netbooks, loaded with Linux, getting shipped into Best Buy and direct on the internet. In retrospect this wasn’t a threat to Microsoft, as those netbooks had a reported 50%+ return rate. After netbooks came MIDs and after MIDs failed came touch smartphones and the iPad. Once the iPhone and iPad showed strong sales it was clear that the center of design was moving to mobility even though needs the rich client PC could solve didn’t just go away.

Windows 8 and Rich PC Clients

Windows 8 was clearly architected to provide a tablet alternative to the iPad and stem the flow from Windows to iOS and Android. Most of the work has been to provide a new user and development environment called Metro, WinRT and to enable ARM SOCs. None of these investments does a single thing to propel the traditional rich PC client forward, maybe with the exception of enabling touch on an all-in-one desktop. Without Microsoft making major investments to propel the rich client forward, it won’t move forward even to the dismay of Intel, AMD and Nvidia. I want to be clear that there are still problems that the rich client PC can solve but the software ecosystem and VC investment is enamored primarily with tablet, smartphones and the cloud. Without Microsoft’s investment in rich PC clients, thinner clients like phones and tablets will evolve at a much faster rate than rich PCs.

The Consequences of Not Investing in the Rich PC Client

With the software ecosystem driving "thin" clients at a much faster rate than "rich" clients, the consequences start to airplaytvemerge. We are seeing them around us every today. Users are spending more time with their tablets and smartphones than they are with their PCs. Savvy users are doing higher-order content creation like photo editing, video editing and even making music with GarageBand. That doesn’t mean that they don’t need their PCs today. They do, because neither smartphones nor tablets can do everything what a PC or Mac can do…. at least today. Display size, input method and lack of software modulraity are the biggest challenges today.

Enter Smartphone Modularity

Today, many users in traditional regions require at least a smartphone and a PC, and a tablet is an adder. Tomorrow, if users can easily attach a keyboard to a tablet via a convertible design, they may not need a PC as we know it today. It’s not a productive discussion if we debate if we call this a PC with a removable display or a tablet with a keyboard. What’s important is that some users won’t need three devices, they’ll just need two.

What about having just one compute device, a smartphone, and the rest of the devices are merely displays or shells? Sounds a bit aggressive but lets peel this back:

  • Apps: If you believe that the smartphone ecosystem and apps moves a lot faster than the rich client ecosystem, then that says that thin clients at some point will be able to run the same rich apps as a PC. Then the question becomes, "when".
  • OS/Dev Environment: iOS, Windows, and Android are all becoming modular, in that their goal is that you write once and deploy everywhere. Specifically, write once for a dev environment and deploy to a watch, phone, tablet, PC and TV or console.
  • Hardware: Fixed function blocks and programmable blocks on tablet and smartphone SOCs are taking over many of the laborious tasks general purpose CPUs once worked on. This is why many smartphones can display a beautiful 1080P video on an HDTV. This is true for video decode, video and photo cleanup, and natural user interfaces too. 3D graphics will continue to be an important subsystem in the SOC block.
  • Display: With WiDi, WiFi Direct, and WiFi AC on the mainstream horizon, there’s no reason to think that a user cannot beautifully display their apps from their 4" smartphone display to a 32" high resolution PC display. Today with my iPhone 4s airplay movieI can display 1024×768 via AirPlay mirroring with a little lag but that’s today via a router and WiFi network. I can connect today via hardwire and it looks really good. In the future, the image and fonts will scale resolutions to the display and the lag will disappear, meaning I won’t even need to physically dock my smartphone. It will all be done wirelessly.
  • Peripherals: Already today, depending on the OS, smartphones can accept keyboard, mouse and joystick via Bluetooth, WiFi or USB. The fact that an iPad cannot use a mouse is about marketing and not capability.

Smartphone Modularity a Sure Bet?

As in life, there are no sure things, but the smartphone and cloud ecosystem will be driving toward smartphone modularity to the point where they want you to forget about PCs. Apple, Microsoft, and Google are building scalable operating systems and development environments to support this. Why Microsoft? I believe they see that the future of the client is the smartphone and if they don’t win in smartphones, they could lose the future client. They can’t just abandon PCs today, so they are inching toward that with a scalable Metro-Desktop interface and dev environment. Metro for Windows 8 means for Metro apps not just for the PC, but for the tablet and the Windows smartphone. The big question is, if Microsoft sees the decline of the PC platform in favor of the smartphone, then why aren’t all the Windows PC OEMs seeing this too? One thing I am certain of- the PC industry cannot ignore the smartphone market or they won’t be in the client computing market in the long-term.

Where Have All The Profits Gone? Gone to Apple, Every One

A few years ago, folks in tech used to worry that all the profits in the PC industry were being scarfed up by Microsoft and Intel and that the crumbs left to PC makers would be insufficient to fund any innovation. For companies not named Apple, those were the good old days.

Chart: Apple per share earningsApple’s  blowout December quarter was stunning enough viewed in isolation. But it is even more striking in comparison to the rest of the industry. Apple’s revenues of $46.2 billion blew past Hewlett-Packard’s $32.3 billion to make it the industry leader by sales. But the real story is profits. Apple’s net of $13.1 billion was just a hair less than the earnings of Microsoft, Intel, HP, and Dell combined.

For a little historical perspective, in 2006, Apple earned just under $2 billion on sales of $19 billion for the entire year. Microsoft and Intel combines for sales of $80 billion and profits of $18 billion.  (M.G. Siegler at TechCrunch has a host of other Apple-industry comparisons.)

Apple’s growth and stunning profitability is obviously wonderful news for the company and its shareholders. And there are no signs that its remarkable run is over. The growth rate of the December quarter is unsustainable, but that is a reflection of the strength of one three-month period, not an indication of any weakness.

But the concentration of the tech industry’s profitability in one company is a potential problem for the industry as a whole. Apple is a wonderfully innovative company that has, year after year, come out with the most interesting products in tech. And the iPhone and iPad have spawned a whole ecosystem of successful third-party products.

Innovation, especially in hardware, requires talent, imagination–and money. Apple’s cash hoard–by now over $100 billion–allows it to do things that competitors cannot even think about.

It’s not a healthy situation to have all the innovation coming from one company, no matter how brilliant. But the razor-thin margins of Apple’s competitors make risk taking difficult. Consider the sad case of HP and the TouchPad. Executives of HP’s Personal Systems Group saw webOS and the TouchPad as a way to both challenge Apple and to free the company from the domination of Microsoft.  PSG chief Todd Bradley saw this as a fight of  “years, not months.” But looking at startup costs in the billions and a lack of instant success, HP’s top management got cold feet and killed the project before it had a chance. A lot of this had to do with HP’s tumultuous internal politics,  but the fact that the company earns eight cents on every dollar of revenue  while Apple nets 29 cents  has to have been an important factor in its skittishness. The problem is the vicious cycle, in which a financial squeeze cripples innovation which damages the prospects for growth.

It’s hard to see how this situation changes anytime soon. Perhaps Google, which has margins even better than Apple’s though it is a much smaller company, can use some of its profits to turn stodgy Motorola Mobility into an innovation engine, assuming that it completes its planned purchase. Maybe the partnership of Nokia and Microsoft will produce something wonderful. But for the foreseeable future, expect Apple to expand its dominance.

Do Nokia and Windows Phone Have Any Hope for 2012?

There were a number of priorities for me at this years CES.  One of my top priorities was to better understand Nokia’s strategy for Windows Phone and the US Market.  Secondarily to Nokia’s US strategy was Microsoft in general and whether Windows Phone can grow in market share in the US in 2012.   

As I have written before, Nokia has again entered the conversation at large, but more importantly, they have become relevant in the US smart phone market.  I have expressed my belief that they contain some fundamental strengths, like brand, quality design, and marketing smarts, to at least compete in the US.

For Nokia, this years CES bore two important and timely US events.  The first was that their US presence was solidified when the US sales of their Lumia 710 officially became available at T-Mobile this week.  The second was the announcement at this years CES of the Lumia 900 which will come to market on AT&T.   

Both products are well designed and the Windows Phone experience is impressive.  That being said, Nokia’s and Microsoft’s challenge is primarily convincing consumers that Windows Phone is an OS worth investing in.

I use that terminology because that is exactly what an OS platform is asking consumers to do.  Not only invest but allow this most personal device to become a part of their life.

Currently, only a small fraction of consumers are convinced that they should buy into Windows Phone 7 and it will take quite a bit more convincing for most.  Nokia and Windows Phone face stiff competition with the army of Android devices and the industry leader in Apple. If anything, Nokia and Windows Phone have a small window of opportunity to rise above what is the Android sea of sameness – but it is only a small window. This is because many more of Android’s core and loyal (on the surface) partners will continue to invest resources in Windows Phone over the next few years. If Microsoft and Nokia are successful the result should be that the market will contain not only a sea of Android devices but of Windows Phone devices as well.

This is why the battle will again turn to differentiation across the board on both the Android and Windows Phone platform. I have previously dared the industry to differentiate and this will need to be the focus going forward.

As I look at where we are right now, it appears that Nokia is faced with an unfortunate dilemma.  Nokia now bears the difficult task of not only spending money to develop their brand in the US but to also help Microsoft convince consumers Windows Phone is the right platform for them.

Microsoft is unfortunately not building or investing in the Windows Phone consumer marketing as aggressively as they should on their own.  So rather then be able to simply focus on their brand, Nokia must also invest in marketing Windows Phone. This will inevitably help Nokia but also their competitors in the long term.

All of this, however, presents Microsoft with what is the chance of a lifetime and it all relates to Windows 8.  The importance of Windows 8 to Microsoft seems to be wildly shrugged off by many.  But I believe that if Microsoft does not succeed in creating consumer demand with Windows 8, they will begin to loose OS market share even faster than they are right now.  

Windows Phone’s success in 2012 can pave the way for Windows 8.  If Microsoft can, at the very least, create some level of interest and ultimately generate demand for Windows Phone, it will almost certainly do the same for Windows 8.  This is because once you have gotten used to the user experience of Windows Phone, it creates a seamless transition to the Windows 8 experience.   

If Microsoft can generate some level of success for Windows Phone in 2012, it will build a needed level of momentum for Windows 8. Primarily because the Windows Phone and Windows 8 Metro UI are very similar.  All of these steps are necessary for Microsoft to not only create demand for their OS platforms but to also create demand for their ecosystem.  I have emphasized the importance of the ecosystem in past columns and Microsoft must leverage their assets to create loyal consumers.

So what is my conclusion for 2012?  Simply put, and to use a sports analogy, it is a rebuilding year for Microsoft and Nokia.  Both companies need to view 2012 as a “laying-a-foundation-for-the-future” year.  I do expect Windows Phone and Nokia to grow in market share in the US but I am not sure if we can count on double digit growth. If both companies play their cards right in 2012, then 2013 will present them with the growth opportunities they both desire.

Past Columns Mentioned:
Why Nokia is Interesting
Dear Industry – Dare to Differentiate
Why It’s All About the Ecosystem