Introduction and Continuum advantage
Microsoft has never had much success with its mobile phone business, and buying Nokia for $ 7.2 billion (around £5.5 billion, AU$ 9.7 billion) back in 2013 didn’t help Redmond claw its way to relevancy, either.
Revenues from its phone business, which includes Lumia-branded handsets, dropped over 70% in the three months leading up to July, on top of a 50% decline in the quarter before that, and a similar drop in the previous quarter.
Research firms, such as Gartner and IDC, peg the market share of Windows 10 Mobile at somewhere between zero and 1%, a figure that could also be described as a rounding error equivalent to BlackBerry’s share of the market.
The company hasn’t been releasing many new handsets of late and recently revised its stated goal of getting Windows 10 onto one billion devices by 2018 because of "the focusing of our phone hardware business."
The "focusing" in question is, by and large, a mystery. Microsoft declined to show off any new Windows 10 Mobile details earlier this year at its Build conference, and after this was picked up on by the media, Redmond was subsequently forced to release a statement clarifying its commitment.
The platform the company built with Windows 10 has been growing and now has 350 million active users across a range of devices, including Xbox, PCs, tablets, and (some) smartphones. But the downward revision of the big billion goal – and its reasoning – is embarrassing for Microsoft and signals just how far its mobile ambitions have fallen.
There is, however, a way to turn this around.
Deep and meaningful relationships
Microsoft has always had the best, by which we mean the deepest, relationships with big enterprise customers who run Windows, use Office, and most likely have some kind of Azure setup humming in the background.
While Amazon has snapped up growing startups with its Amazon Web Services platform, Microsoft has retained many big clients, which are defined as companies with over 100,000 employees, $ 10 billion (around £7.5 billion, AU$ 13.5 billion) in revenue per year, or both.
According to Gartner, Microsoft software and services are used in these kinds of companies the majority of the time, and the dominance only starts to fade as the organisations become smaller than 250 employees or generate less than $ 50 million (around £38 million, AU$ 67 million) in revenue.
As you’d expect, the bigger the company the more money Microsoft generates from it. Office 365, the cloud version of its productivity software, is used by over 23 million people, many of which are employees of big firms.
These relationships – which are likely years old – could be used to sell Windows-based smartphones.
"In the enterprise segment, Microsoft has a chance," said Francisco Jeronimo, a senior researcher at IDC, in an interview earlier this year. "They are looking at selling a bundle of products and services, rather than just the operating system, and when they go to a client and offer a device that comes with Continuum, the docking station, and Windows 10, it can be quite interesting."
The features that Microsoft has developed for its mobile operating system are some of the best-in-class. Continuum, for example, uses a $ 99 (around £75, AU$ 133) dock – called the Display Dock – which attaches to a mouse and keyboard to turn a Lumia smartphone into a fully-fledged computer running Windows 10.
Demos of a smartphone turning – literally – into a computer are really impressive and, more importantly, represent something only Microsoft is doing currently. Apple, which makes the iPhone, chooses to keep its desktop and smartphone operating systems separate, and Google, which develops Android, has chosen never to merge Chrome OS and Android in any meaningful way.
So, either by design or by accident, Microsoft has a huge, marketable advantage that would be uniquely beneficial to enterprise customers.
Avoiding phone pain
The other advantage that Microsoft has is a realisation by big businesses that letting every employee carry their own smartphone is a pain. iPhones are okay because there are a finite number of versions, but Android is open to anyone who wants to make a handset which means there are a host of different screen sizes, features, OS versions, and so on.
"Companies have realised it costs a lot more to manage very different versions of phone OSes, hardware, etc, and it’s easier just to roll out corporate phones on one platform," said Jeronimo. "Many companies are going back and giving employees the phone they want, or allowing them to choose between a set."
This change, which is happening over time and will likely continue in the future, is of huge benefit to Microsoft. The relationships it has so carefully nurtured with companies who will feel the pain of BYOD can be leveraged to sell handsets of a specific type, design, and software version.
Microsoft can go to a company which is frustrated by the process of supporting 30 different types of Android phone, or five types of iPhone, and say: "We have two handset types across the low- and high-ends which run Windows 10."
That, Microsoft should be hoping, is a compelling proposition, especially as company computers will soon be upgraded to Windows 10 and are running Office.
There is, of course, a lack of native apps on Windows 10 Mobile – including ones like Snapchat – but the Universal Windows Platform alleviates many of these problems.
Essentially, Microsoft managed to get Windows 10 fully unified across devices which means that apps developed for a PC, running Windows 10, work on a smartphone, tablet, or Xbox. Basically, any device that runs Windows 10.
This has meant that some big developers, like Uber, have produced a single Windows 10 app that is then available across multiple platforms, and Microsoft hopes others will do the same.
For enterprise, however, the number of popular apps is irrelevant (and fewer is most likely a good thing). What is relevant is that the company’s software team can use one version of its software – and that’s it. From here, it will run on a smartphone, PC, tablet, and so on.
Apple has also been pushing the iPhone into the workplace by partnering with IBM, Box, and others but its solution – beautifully designed enterprise apps – still requires hard work on the part of each individual company to bring its app onto iOS, not to mention that similar versions also have to be made for Android.
It’s unlikely that ‘winning’ enterprise will yield the same kind of profits that selling phones to consumers does – as Apple discovered – but it will be some repayment for the time, money, and energy that Microsoft has consistently dedicated to Windows on smartphones over the years.
Selling the complete package – an operating system, productivity software, hardware (including the Surface), and infrastructure – is a very compelling offering, and Microsoft is uniquely positioned to do just that. The company best take full advantage of this fact.
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