Why Would Windows Phone 8 Change Anything?

After the (potential) goodness of the Surface announcement, our next bit of news out of Redmond is the upcoming Windows Phone 8. As always, there are some pundits and analysts out there predicting that this will give Windows Phone, and in particular Nokia, the shot in the arm it needs to get back into the smartphone game. Others are prepared to give it credit for killing of Blackberry because of the improved enterprise integration. But seriously, this new software really doesn’t represent any fundamental changes. So why would this make any difference in Windows Phone’s struggle in the market?

Putting Microsoft Back In The Game?

We’ve heard this song before. When Windows Phone 7 was first announced,  it would elevate Microsoft to the upper echelons of the smartphone world. It would be better. The user experience was superior. It was easier to use than the iPhone and Android. It would “change everything”.

It finally saw the light of day in October 2010, had a brief shining moment as Windows Mobile users upgraded to new devices running Windows Phone, and then fell flat. It hit a peak in marketshare in late 2010 around 6% of global sales, and then started a slow decline. It started in the holiday shopping season a mere month or so after it shipped: unit sales in December 2010 were down from November, the only platform to see a decline in both units sold and marketshare. And it did this during one of the busiest seasons for smartphone sales.

Nokia As Saviour?

With early sales looking rather grim, the next great hope for Windows Phone was Nokia. When the partnership was announced in February 2011, there was a lot of faith put on the back of the folks from Espoo and their brand. Up to that point, Nokia was the largest manufacturer of mobile phones of any kind. Their Symbian system, although plummeting in sales marketshare, was still in wide use, and was still in the top-4 of mobile operating systems, outselling Windows Phone. Many in the Microsoft camp were convinced that this partnership is what would vault Windows Phone into the the mix, and make Windows Phone competitive.

Instead, Nokia disappeared for 10 months while they prepared their new product. Symbian’s share continued to nosedive, and Windows Phone staggered along at the bottom of the charts awaiting it’s saviour. When the first Lumia devices arrived in late 2011, all that happened was… nothing. It didn’t gain Windows Phone any marketshare. It didn’t slow down iOS or Android sales one iota. The second wave of Lumias that arrived in early 2012 didn’t make a difference either. Yes, these phones were beautiful devices. They represented some pretty good industrial design. They fared well in reviews. But it didn’t matter.

So Why Would An OS Upgrade Matter?

Given that nothing that has happened so far has improved the lot for Windows Phone, why would an upgrade make any difference? Why are people going to suddenly rush out and buy a Windows Phone now, particularly since a unit purchased today can’t run the new operating system?

Nothing has fundamentally changed. Many developers are still going to give Windows Phone a pass, in favour of iOS and Android. Consumers certainly don’t care about it, otherwise they wouldn’t be buying more iPhones in a month than Windows Phone sells all year, or more Androids in any 2-week period than Windows Phone sells in a year.

Given that consumers are already ignoring Windows Phone in droves, how does this upgrade help Nokia? Because it now comes with Nokia’s Map application? How does that fundamentally improve the chances for Windows Phone? It doesn’t, any more than Apple switching from Google Maps to their own technology boosts iOS’s fortunes. People aren’t going to suddenly be more interested in an iPhone just because something mundane like the Maps app has changed, any more than they would on a Windows Phone. It’s a map application. It shows maps. Consumers truly don’t care what technology is underneath. All they care about is that the maps are maps, they data is accurate and the thing is reasonably easy to use.

The other features (VOIP and video chat support, a bunch of minor (yes minor) UI tweaks, a Wallet, NFC support) are interesting, but absolutely none of them are game-changers. NFC is no surprise. We know it’s coming. Being first won’t really make a big difference, and people aren’t going to abandon their iPhones and Androids because of it.

Microsoft Is Stuck

The problem Microsoft is facing is the same one they created for companies like Apple in the PC realm in the late 1980’s and early 1990’s. There are two giants who are now dominating the smartphone industry: Apple and Google. Apple has a lock on a certain market segment, and the hundreds or thousands of dollars people invest in apps and content is part of what keeps them locked into the platform. Google, through the various handset vendors, can offer a range of phones in terms of features and price. There is, quite frankly, very little room to maneuver for anyone else. This is the same as the PC market in the mid-1990’s: sure, the Macintosh could play at the edges, but it could never take over the larger middle-ground of the PC world at the time. Microsoft owned that, and developers made sure it had a massive catalog of software to keep it dominant.

But what about the improvements in enterprise integration? Yes, those help, but guess what: IT groups still have to integrate iPhones and Androids with the rise in Bring Your Own Device (BYOD) and the consumerization of IT. While the IT guys will be thankful for the improvements in the few devices they encounter, they still have to deal with all of the other ones out there.

And these improvements don’t offset the smaller software catalog that Windows Phone still has. In finance we have a saying: volume begets volume. More trading on a platform generally leads to more trading. The same sort of effect occurs in applications: as a platform gains more software, people buy more of that platform, which attracts more developers. Right now, iOS and Android have the largest developer communities, substantially larger than any other mobile platform. That software attracts users to the platforms, which makes a bigger target for developers, current and new.

But, Tablets?!?!?! Enterprise??!?!?

Hold on, didn’t I say that the Surface could give Microsoft a presence in the tablet market by establishing an enterprise footprint? Yes, I did. But remember that the tablet market is less than 3 years old. The first tablet (in its modern form, not those goofy Windows Tablet monstrosities that have been ignored for the past decade) didn’t arrive until January 2010, two and half years ago, with the iPad. Companies haven’t really figured out what to do with them. Individuals are still exploring how to use these things. It is a very new market.

But smartphones, as a device, have been around since 2000. The smartphone market is over a decade old, although it only hit its stride in the past 5 years. Smartphones were driven largely by enterprise sales until the arrival of the iPhone. That event shifted the focus from enterprise to consumers. The enterprise isn’t really a viable launch pad to get back into the smartphone business anymore. The consumer market is far larger, for one, and the enterprise is no longer driving the conversation on smartphones, they are just along for the ride. More and more are taking advantage of BYOD and consumerization by avoiding the cost of buying the device. The admin and maintenance costs are there, no matter who owns the thing. But they save on their bottom line by avoiding the expense of buying the device itself.

To Disrupt iOS and Android, You Need To Disrupt Smartphones

So yes, there is still room to grow tablets by targeting the enterprise first, because that market is so new. The smartphone market is not. There is still a battle between Android and iPhone to see where the dividing line will be, and it will move back and forth for some time. But unless someone comes up with something completely and totally different for mobile communications, productivity and entertainment, we are in the market we are going to have for a while. Cosmetic differences won’t matter. Sure, the Metro interface is different, but the basics are largely unchanged: you have a bunch of apps you run locally to do stuff. Whatever supplants the iPhone and Android won’t be a smartphone in the form that we understand it today.

Windows Phone 8 is just another smartphone operating system. It is a platform consumers generally aren’t interested in now, and as a result, it is stuck at the bottom of the sales charts. An upgrade is unlikely to change consumer’s minds, because nothing fundamental to the consumer has changed.