Lazy journalism?

A recent BBC piece makes some factually incorrect and outlandish claims about the history of the smartphone. It boggles the mind that an otherwise excellent news organization gets this so wrong. It’s the sort of thing you get when a lazy (or stupid?) journalist appears to us a bad Motorola commercial as their source.

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Farewell To Nokia

Well, Nokia as we knew it is no longer. After selling off the feature phone part of the business, Microsoft is shutting what remains down. It is a sad demise after having once been the biggest mobile phone provider in the world, and one of the first to sell what we would recognize as a “smartphone”. But it shouldn’t come as a surprise, given the missteps along the way.

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Will Other Mobile Operating Systems Matter?

One this has become clear: for about a year now, Android and iOS have commanded the vast majority of the mobile operating system space, at least in smartphones. Together they have made up 85% or more of the mobile space. While their overall gains on the market have slowed, they continue to pile up the installed base and more and more people have chosen them over the “also-rans” of Windows Phone, Blackberry and Bada, and the orphans Symbian, WebOS and Windows Mobile. There are many that are saying “wait, the game is still young” and that other systems will show up to give the top two competition. While obviously you should never say never, I will say that the odds of displacing either iOS, Android or both from the top of the mobile heap are so incredibly long they might as well be zero. As I pointed out in a previous post, the only way to really disrupt them is to change the game. Okay, so why don’t I believe that Blackberry 10, the upgraded Windows Phone, Tizen or the forthcoming Firefox OS will displace the incumbents?

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Microsoft, Nokia and RIM

Apparently, Microsoft and Nokia had spoken about buying RIM. So far, it is just talk, but it got me thinking about what a deal could look like, and what it would mean for the various players.

First, I don’t see the point of Nokia participating, because I don’t think MS buying RIM would be about the RIM handset or operating system business. This would be a deal to benefit Microsoft. The main goal: incorporate RIM’s enterprise technologies into the Microsoft portfolio of products and services. RIM has 3 pieces that I think Microsoft could use to their advantage. But, this presumes Microsoft is prepared to wake up, smell the coffee and capitulate to the inevitable: they aren’t going to be a major player as a mobile operating system. What I see is a future for Microsoft to continue to have a useful influence in the technology world, and a way for some parts of RIM to carry on. What this plays to is Microsoft’s current strongholds, specifically office suites and enterprise technology. I see this as a two-part strategy involving Office and Exchange.

A (Slightly Altered) Strategy for Office

Office is still the dominant technology for word processing and spreadsheets, but it is under attack by Google Docs, and losing some ground as a result. Microsoft’s biggest challenges here are that Google Docs has been proven to be “good enough” for enterprise users, and it is free to most people. That doesn’t mean people, or more importantly enterprise users, wouldn’t be willing to pay for it. But small businesses and individual users find it attractive because it helps keep costs under control.

So how does Microsoft counter this? I see a 3-part strategy for Office, involving the traditional desktop/laptop space, mobile and cloud. First, the desktop and laptop space: Microsoft needs to offer a “lite” version of Word, Excel and Powerpoint for students, casual users and small businesses. This version needs to be cheap, more along the lines of Apple’s pricing for the iWork components (Pages, Numbers and Keynote) at around $20.00 each. Microsoft could charge a higher price (maybe closer to $50), but not much more. I don’t see the need for a free offering for the desktop/laptop version, because people in this market space are willing to pay for something. But what would a “lite” version look like? Well, that would depend on what people use. If they haven’t already, Microsoft needs to instrument their current versions and understand, in detail, what people use and don’t use, and focus on the features that the 90th percentile use. Strip out anything else, and make that as a downloadable (for purchase) extra.

The second part is mobile: Microsoft needs to get versions of Word, Excel and PowerPoint (and maybe Outlook) on Android and iOS. Windows Phone is, for all intents and purposes, dead. It has been mired at 2% of the market for the past year, and hasn’t budged from that point. The first Nokia handsets have been out for a couple of months now, the current buzz is that they haven’t moved the needle for Windows Phone. So, rather than continuing to flog a dead horse, and be left out of the computing revolution that is currently under way, Microsoft needs to ride the wave or risk being left behind. That means versions of Office on iPhone, iPad and Android. Yes, we all know that Windows 8 is coming, and as per usual, there is a ton of hype from the Microsoft camp how it is going to take over the tablet and Ultrabook space. Ultrabooks I’ll give them. Netbooks didn’t have their day in the sun until the Windows versions of them started to hit the streets. Windows will also be a significant part of Ultrabooks, given that the only non-Windows “ultrabook” with any serious volume is the MacBook Air. I expect Ultrabooks will become the defacto standard for laptop/notebook computing, because there are times when you need a real keyboard, and you need it attached to the screen to be useful but still portable.

But in tablets, I just don’t see it for Windows. Despite claims about the “massive Windows software library” being available, the reality is only a tiny, tiny fraction will be touch-enabled. Mouse-and-keyboard applications just don’t work well in a touch world. They depend too much on the keyboard being available 100% of the time and depend on mouse activities (like hovering) which don’t exist in tablets.  The targets on toolbars are too small, again assuming a highly accurate pointing device (a cursor controlled by a mouse) rather than a less accurate fingertip. Simply running an existing Windows application on a tablet is a less than satisfying experience. People will figure this out, and will stick with the two platforms (iPad and Kindle Fire) that have solutions built for the device.

The last part for Office is the cloud, and this involves Office365, but with a twist. Microsoft needs to offer a free version of Office365. Like the “lite” version I discussed for the desktop/laptop version of Office, this would have a subset of features. It would offer some limit in terms of storage (by space, not by the number of documents). It may not have access to enhanced enterprise features. A free version would help keep previous users of Office in the fold that are striking out on their own (either as self-employed contractors or in smaller startups). It would be attractive to students and people who want something for home use, but don’t want to spend money to get it. GoogleDocs is capturing some of that right now. It’s free. It comes with Google’s array of products (gmail, reader, finance, docs) to form a reasonably complete productivity and news/information processing platform. A free version of Office365 would be a useful answer to that. The key points in Office365’s favour? It’s “real Office”. You aren’t working with something “compatible” with Word, you are working with Word. You aren’t using something that is “similar” to Excel, you are using Excel. These are brand names that carry weight. They are easy to adopt because everyone else is using them too.

Reinforcing the Enterprise

On the enterprise side, Microsoft could use RIM technologies to help bolster their offerings. The specific components are Blackberry Enterprise Server (BES), Blackberry Internet Service (BIS) and Blackberry Messenger (BBM). Microsoft is currently the most prevalent operating system in the server room. Technologies like Exchange and Sharepoint are the dominant components in their class. Microsoft still has minimal presence in the web server space, and Linux is still the king when it comes to the Internet-facing part of most companies. But behind the firewall, Microsoft is the leader.

But, there are some weaknesses, and RIM technologies and infrastructure could help plug those holes. The first, and key in my mind, is BES. If Microsoft should take it, incorporate it as standard in MS Exchange, and expand it to support iOS and Android. This solidifies Microsoft’s position in the server room. It means they can offer their customers secure and efficient ways for mobile devices to interact with corporate resources.  Right now, the only option is ActiveSync, which is okay, but isn’t nearly as secure as BES. It also isn’t quite as efficient, because it isn’t really “push” notification. Microsoft could change that, offering a way to integrate mobile devices into the corporate network in a way that is secure and simple.

BIS, offered as a free service, would give small businesses and individuals a way to get some of the advantages of BES, but without the cost. Again, offer a service with some limit in terms of the amount of storage or bandwidth used, and offer upgraded services (for a price) to those that want it, but don’t have the money or resources to set up their own infrastructure. In essence, make BIS a cloud-based version of MS Exchange, working with mobile devices as well as desktop clients like Outlook or Thunderbird. Again, small businesses want enterprise-grade services, but some don’t have the budget or people to set up and maintain their own instances of these things. By offering services for free, and for reasonable prices to gain extra space or features, Microsoft continues to play a meaningful part of the enterprise business for a long while. Give small companies a growth path (free BIS, paid BIS, hosted Exchange, in-house Exchange) that allows them a way to upgrade the back-end without having to change the front.

A New Focus For Microsoft

Needless to say, these suggestions would mean a slightly new direction, but most certainly a new focus for Microsoft. For nearly 3 decades, Microsoft has been the provider of The Platform. They owned and sold the operating system that ran the personal computing revolution, and that is the underpinning of a very large part of the corporate and personal computing world. Microsoft was at the centre of a shift in the technology landscape that saw the rise of the desktop and laptop. It changed the dynamic of computing, from people interacting with large machines in remote locations, to having local computing available for their own use. The big machines in the back are still there. They still have an important job, and Microsoft has also become a big part of what happens behind the scenes, behind the web site and IMAP connection. But a lot of computing shifted from the server room to our desktops and to our lap.

But we are in the midst of another shift in computing, one that started over a decade ago, but that has only started to gain real momentum in the past 3 or 4 years. Computing is moving again, from our desks to our pockets and purses. The Nokia N9, the Treo, Windows CE and Blackberry were the pebbles that signalled an impending avalanche. They were like the Osbourne, the Sinclair and the TRS-80 from the 1970’s, the first indicators of what was possible and what could come. Right now, Microsoft isn’t part of this mobile computing revolution, and their hold on their traditional desktop/laptop market is under some pressure. Windows once commanded nearly 95% of personal computing. Now, they are at 85% and falling as the Mac gains ground. But the desktop and laptop space is becoming less important as more and more people rely on smartphones and tablets for their personal computing needs. This has given rise to two things. The first is increased use of the cloud, to share data between these devices as well as to provide some computing resources. The second is a new generation of end-user software geared towards smaller screens and touch interfaces. Companies like Adobe and Autodesk have realized this, and have been moving their own products to this new space, forestalling new potential competitors. But new players are emerging, and a new crop of 3rd party software developers has been given a chance to flourish because of iOS and Android.

Microsoft, though, is largely absent, seemingly determined to continue down a path which is leading them away from the main body of the market. Windows Phone isn’t going to reassert Microsoft’s dominance of the smartphone space. A lack of touch-enabled apps won’t give Windows 8 much of a presence in the tablet space. People aren’t waiting for Windows 8. They are buying iPads and Kindle Fires now. They aren’t seriously considering Windows Phone, they are buying Androids and iPhones now. If Microsoft wants to be an important and meaningful part of the mobile computing space, they need to take the technologies they have that people do want (Office for the end user, Exchange and others on servers) and make them accessible to a bigger market.

Microsoft Buys Skype

It’s official: Microsoft is buying Skype for US$8.5 billion. Ben Horowitz, one of the founders of Andreesen Horowitz (which participated in the purchase of Skype from eBay 2 years ago) has some interesting insight into why they bought them in the first place, and what he sees for Microsoft. Andrea Spiegel at Forbes has some thoughts on how Microsoft can avoid screwing it up.

This is definitely an interesting development, but in some ways not a surprising one. Microsoft has a history of buying most of their more promising technologies, and then building on the acquisition. Given the apparent in-roads that Google and Apple have been making with their own telephony products (Google Voice and FaceTime, respectively), it shouldn’t be a surprise that Microsoft decided to get into that game as well. What this will mean for the Skype client on non-Microsoft platforms remains to be seen, but if Microsoft is smart, they will continue to maintain the Skype client on iOS and Android, as well as add full support for other platforms with meaningful installed bases. Much as I know it galls the powers that be in Redmond, the mobile space is not shaping up like the PC market, with one over-arching platform dominating the space and leaving crumbs for marginal players. If you want your product to succeed in the mobile space, you have to be prepared to target multiple smartphone and tablet platforms.

What this deal does, though, is leave HP and WebOS out of the mix with a built-in web-based telephony platform. Playing Captain Obvious, their options are to hope Skype and Google Voice make their way onto the WebOS platform, hope someone else builds a viable competitor to Skype, or build their own system. Unless something changes radically, WebOS could find itself dwindling to nothing as the other mobile platforms gain users and infrastructure.

Adding Skype to Windows Phone 7 could be another shot in the arm that, along with Nokia’s partnership, might make the platform a potentially viable one. So far, Windows Phone 7 hasn’t set the sales charts on fire, and they were the only smartphone platform to not only lose market share in Q4 of 2010, but sell fewer units that the previous quarter (and this during one of the busiest seasons for consumer spending in the year). How much the combination of Nokia and Skype helps Windows Phone 7 remains to be seen.

Will Microsoft somehow screw up Skype? It’s always possible, not just because it is Microsoft, but because becoming part of any really big company has both peril and promise. Just ask anyone who was bought by HP, IBM or Oracle. However, Microsoft seems to be changing, given that they don’t dominate the technology space (or at least the mindshare) they way they used to. With companies like Apple and Google doing more to lead the way, Microsoft has had to work harder to get themselves viewed by the general public. Bing has turned out better than Microsoft’s previous attempts at search, and they’ve had to work harder (and do a better job) on things like their cloud-based services. The company still has a long way to go, but there seems to be more steps forward than backward when it comes to useful features and quality.

In the end, the Skype purchase is probably a good one for Microsoft. The team at Skype will have some adjustments to make, not all of them pleasant, and it will take time to see how this shakes out for both organizations. Microsoft needs to tread carefully, though, to avoid messing this up.

Does Microsoft Look Outside Their Walls?

I read a summary of Joe Belfiore’s appearance at D: Dive Into Mobile, and it was truly amusing to read what he said. The biggest take-away I got from this is that Microsoft designed Windows Phone 7 (WP7) inside a locked room with no windows, no Internet access and no TV. His claim of WP7 having “unique features” that have been available on existing smartphones (in some cases, for several years) makes me wonder how much Microsoft actually knows about the current smartphone market. I’ve worked briefly at Microsoft as a contractor, and I do know they can be very inward-looking. His responses seem to reinforce this isolated approach when building WP7, and sadly, what a lot of WP7 looks like is something developed partly from listening to traditional market research focus groups and their own engineers. Here is a platform that, while years in the making, is a subset of what is already out there. Basically, this thing is already years behind everyone else. Unlike their competitors, Microsoft won’t discuss sales numbers for WP7. Anecdotal evidence seems to suggest that sales started well in the first couple of days, but have trailed off significantly since. Some of the information I have found (here at WMPoweruser.com and neowin.net) seem to bear out that WP7 is almost like the Zune all over again: lots of hype and noise, but no substance behind it.

The other issue I saw was their current approach to tablets, which is to continue to use Windows 7 as the platform. Windows 7 is not a mobile operating system, but tablets are a mobile device. A full-on desktop/laptop operating system is simply too much if you are looking for low memory and storage requirements, modest processing requirements, and long battery life. The platform still has too many security issues, and installing software is far more complicated and onerous when compared to iOS or Android. For a small number of users, mainly enterprise users, having Windows 7 on a tablet is useful. For your average retail consumer, it just isn’t that attractive an option. Again, I don’t think Microsoft has fully explored the tablet market, even though it is still fairly new, and they haven’t tried to understand what consumers of these devices are expecting right now.

Unfortunately for Microsoft, mobile devices are not shaping up to be the same environment that PC’s became. Part of that is because PC’s were, despite their name containing the word “personal”, largely driven by corporations first, and retail consumers second. PC’s started out as a retail/hobbyist product, but they didn’t take off until corporations started to include them in their business operations. Smartphones started largely as enterprise devices, but the biggest growth has been on the retail side. Tablets, in their current form, started as a consumer device. Unlike corporations, people seem to be more willing to take a risk on technologies. They are willing to experiment and try things out. Microsoft, like IBM in the past, succeeded because it was an easy decision: it was the defacto standard, so why pick something that few other companies use. Retail customers, however, are willing to try things out, and their purchase decisions can be driven by intangibles (like something being “cool”). Microsoft had several years to look at the market, understand it, and look for gaps where they could innovate. What they didn’t seem to do is understand what the minimum requirements to play were going to be. Instead, they built what they wanted, ignored the market, and appear to assume that because “they are Microsoft” they get to set the direction. They don’t carry that kind of clout in the mobile space.

At this point, I’m not sure what Microsoft should do. They could try to sell off their mobile technology (such as it is), but I’m not sure who would want to buy it. They could try again, and see if the market will let them have a do-over. Unfortunately, they are so far behind everyone else, their next attempt would have to be (to borrow Steve Job’s phrase) “amazing” beyond what all other current device to today. It would have to be beyond “amazing”, past “magical” and into some other realm where adjectives escape me. But given their size and their culture of safe and conservative, I just don’t see that happening. What I see is them staggering along, continuing to act as if they are relevant, but not really doing much to change the conversation.

Is There Really Room For Another Mobile OS?

I read an article this morning on Ars Technica that said that Lenovo was the last apparent suitor to buy Palm. What go me thinking was an assertion the author made toward the end of the piece that said “At some point, though, the me-too Android handset makers are going to want to differentiate themselves, and they’re going to wish they had a mobile OS that would let them do that.” The writer goes on to say that, if these handset makers don’t get Palm, they would have to “launch a brand new smartphone OS in the face of stiff competition from powerful incumbents.”

Does the author really think we need yet another mobile operating system? Is the operating system the only way to differentiate their products? PC makers seem to do just fine, being able to differentiate themselves in various ways while still selling machines that primarily run Windows. Car companies have been able to carve out different parts of the market, all of them using the same basic technology to move the machine. Electronics manufacturers have been able to differentiate with TVs, DVD players, etc. without requiring unique TV broadcast protocols or media formats just for their products.

Trying to build a new market for a new smart phone OS is an enormous undertaking. It isn’t the technical challenges of writing the software. Its the bigger challenge of attracting developers to build the apps, and obtaining the licences to provide content. The reality is that smart phones are about content (music, video) and applications. Its the same basic reason that Windows is so far out in front in terms of PC operating system marketshare. The operating system, by itself, doesn’t mean much without tools to make it useful. But, if the installed base for an operating system is too small, or the operating system itself doesn’t appear likely to survive, then attracting developers to build for your operating system becomes a difficult undertaking. Its the same reason why many developers stay away from the Mac: the market isn’t big enough yet for them to incur the cost and risk to build their applications for the system. As the Mac market continues to grow, it attracts existing Windows developers to include it in their plans. It has taken a long time and a lot of money from Apple to make this possible.

As a lesson in this, look at the iPhone. You’ll notice that Apple didn’t release an SDK for 3rd party apps at launch. Part of this may have been technical. However, it appears to me that Apple wanted to wait until the iPhone installed base was “big enough” to attract developers, particularly significant names like EA. The SDK didn’t come out until there were several million iPhones and iPod Touches out in the market. It also helped because it also meant a community of buyers who were clamouring for apps beyond the basic ones that came with the phone. It built demand and a market that justified the cost and risk associated with building apps. Apple also did this at a time when they only really had Symbian and Blackberry as competitors (Android wasn’t out yet, and both Palm and Windows Mobile were diminishing rapidly).

To try to repeat that now would be a very, very difficult undertaking, and one that requires far deeper pockets that most of the so-called “me-too” handset makers would have. Samsung could possible pull it off, given their available resources and their presence in the Asian market. I doubt that HTC could pull off something on its own, simply because it doesn’t have the financial resources to do it. I would even have my doubts about Lenovo making a go of it, even using Palm as the starting point.

The demise of Palm I think is inevitable, and I don’t see a new mobile OS coming up to be a major player in the market. People are starting to pick their sides. As they become more dependent on content that is locked to their device, and as they come to reply on the apps they have, it will be harder to get customers to switch from one handset family to another. The inconvenience, for most, will outweigh any benefits (real or perceived).

This isn’t to say people won’t switch at all. However, the drive to switch will have to be based on something very compelling. For example, people have abandoned VHS for movies, and moved to DVD, because the image quality was so much better, the form-factor of the media more convenient and you don’t have to worry about rewinding, tape jams or cleaning the drive heads. The jump from DVD to Bluray, however, is going much slower, simply because for most people, the difference isn’t enough to justify the higher price or replacing their video library again. The same goes for businesses running Windows: even if the software they need is available for the Macintosh or Linux, the cost of switching (software, hardware, IT training) and the risk is enough to deter them from doing it.

While we aren’t there yet, I can see a day soon where people won’t want to switch from one mobile OS to another, simply because it means re-purchasing all of their apps, and they may have to live without some apps, because they aren’t available on all operating systems. Right now, the barrier to trying to bring a new OS into the mobile space just seems to be too high, and is getting higher every day. To even consider or suggest it seems folly to me.