Special Reports

Microsoft's Smartphone Strategy Needs a Genius Plan

A decade into it, Microsoft's smartphone strategy lags Apple, Google and RIM. Can it climb back on the strength of its recent efforts?

To be sure Microsoft holds a major share in most important business computing spaces as most enterprises still rely on Windows as a server operating system, Active Directory as a directory framework and Internet Explorer as the go-to Web Browser.

Also many organizations still use Microsoft Exchange as their messaging platform, Windows as a PC desktop operating system, and of course the ubiquitous Microsoft Office for, well, the office, making Redmond (despite Apple's eclipsing its market capitalization recently), the biggest player in the enterprise IT space.

But what about the newer business frontiers such as smartphones?

Not so sure.

Microsoft has since backed away from the projection of 30 million Windows 7 flooding the market by 201, saying that it was intended to represent an "analyst's assessment of the market opportunity." We have not provided any sales forecasts for Windows Phone," Redmond said in a statement at the ReMIX conference in France.

Indeed with Microsoft recently introducing a fundamentally new design user interface Windows Phone 7, the software giant and business technology stalwart is also admitting missteps in the smartphone business and making a commitment to step its game up.

"We were ahead of this game, and now we find ourselves No. 5 in the market," Microsoft CEO Steve Ballmer said during a Q&A panel at the D8 Conference. "We missed a whole cycle. I've been quite public about the fact that I've made some changes in leadership around our Windows Phone software. We had to do a little cleanup."

To that end, Balmer reiterated Microsoft's plans to launching its smartphone operating-system revamp, Windows Phone 7, at some point before the end of the year.

Phil Lieberman of Lieberman Software believes that the recent turnover of the SmartPhone management team at Microsoft was well overdue. 

"Everyone in Microsoft management needs to ask the question: ‘what about Windows Mobile 7 is going to wow me, make this a different platform and a must buy for everyone?' The world does not need another unreliable phone that runs like a Zune and can kind of play some XBox games."

Matt Rosoff, devices and business strategy analyst for Directions on Microsoft opines that the key question will be whether or not corporate purchases, like its server and operating system segments, will ultimately drive Redmond's smartphone strategy. He said that Windows Phone 7 could be a good match as far as connecting to Office Sharpoint and Exchange integration.

The obstacle Redmond faces beyond the obvious perception of the software giant being an also-ran in the smartphone space, is what Rosoff calls the "IT management story."

"How IT administrators would use or respond to a smartphone with integrated Windows architecture is still not clear," Rosoff said. "Also you have to think that Microsoft knows it's in a tough spot in the smartphone world with Apple on top (with the iPhone) and Google (Android) nipping at its heels from not just this phone segment but other segments."

Redmond's Smartphone Redux
The irony of Microsoft's current position in the smartphone market is that it was once way ahead of the game at the beginning of the decade, when Palm Pilots were all the rage from 2000-2002. During that period Microsoft introduced its Windows CE Pocket PC OS, saying it would be the foundation of a Windows-powered Smartphone in 2002.

Microsoft had so much clout around that time that Palm responded by introducing a few Windows Mobile smartphones to complement its own Palm OS smartphones.

But then Apple and Research in Motion hit the scene and now Palm has abandoned both platforms in favor of its new Palm webOS, in the wake of a respectable albeit tepid reception to the Palm Pre smartphone released in 2009.

Now the race is on and Microsoft has to keep pace as well as make up ground. Smartphone market share as of the end of the first quarter of 2010, according to Gartner Research, has RIM with 19 percent of the pie, Symbian with 44 percent, Apple at 15 percent, Google Android at 10 percent. Microsoft's Windows Mobile smart phone share is in single digits at 7 percent.

Even worse is that smartphone sales have risen in Q2. But for all its current efforts, Redmond continues to lag behind its major competitors and is slightly ahead of smaller players, with Linux OS phones at 4 percent and the "others" category with 1 percent.

David Matthiesen, director of sales DeviceLock Inc., a network management solutions company, said there's no reason that Microsoft or any other player in the smartphone business should be throwing in the towel or raising its hands in a victory lap just yet.

Especially, since the business market for smartphones is still in its nascent stages.

"Due to the form factors of smartphone screens and their real or virtual keyboards, the predominate applications and uses will still for a while be for cellular phone service, e-mail, social media updates, and Web browsing/search," Matthiesen said.  "Use of robust business-productivity apps, high-end Web services, or document creation/editing software on the devices will still be rare unless the user is forced by location, timing or other unique circumstances."

Matthiesen and others such as Rosoff from Directions on Microsoft agree that many of the business tasks among IT pros and business specialists that involve app development workflow and typing and formatting are still better handled with a laptop, netbook or workstation with bigger screens and keyboards.

"We've seen that a new "cool phone" will always grab some market share, but more importantly the "cloud" and the supporting technologies like SaaS are really still in their infancy in many ways," Matthiesen said. "Plus, what "can be done" from a smartphone versus what can productively be done is a huge chasm. Vendors can still innovate here with interfaces and with smarter apps, services, and websites serving them."

About the Author

Jabulani Leffall is an award-winning journalist whose work has appeared in the Financial Times of London, Investor's Business Daily, The Economist and CFO Magazine, among others.