Microsoft's struggle with Mobile

When someone speaks of mobiles and particularly smartphones, Microsoft isn't the first company most people think about. Microsoft's journey in the mobile space has been a rough one even though it was one of the first companies to enter this space with Windows CE in 1996, Pocket PC in 2000 and Windows Mobile in 2003. Windows Mobile was not as successful as Windows. With increased competition from Android and iOS, Windows Mobile got a complete refresh in the form of Windows Phone.

With Windows Phone, Microsoft became aggressive in the smartphone arena. It struck up an exclusive partnership with the then dominant Nokia and spent heavily on marketing.

Although initially Microsoft's attempt with Windows Phone seemed successful, over time the efforts started fading off and by now most analysts believe that  Windows Phone would at some time in future meet the same fate as Symbian and WebOS.

So has Microsoft given up on Mobile ?

The answer is for the most part NO, Microsoft's new CEO Satya Nadella clearly said that going ahead the two priorities for Microsoft are Cloud and Mobile.

In this post I will try to list down the efforts Microsoft has been taking to keep themselves relevant in the mobile era to the end user.

Buying Nokia

Buying up the mobile division of Nokia was the biggest effort Microsoft made towards the mobile arena. As I mentioned earlier, Microsoft struck an exclusive deal with Nokia for Windows Phone. Nokia was the only manufacturer exclusively making Windows Phone devices in the form of their Lumia brand and supported no other OS. All other Windows Phone manufacturers made Android smartphones along with Windows Phone devices. The three major Windows Phone manufacturers were Samsung,HTC and Nokia. Initially Samsung, HTC and Nokia all three devoted resources to Windows Phone.

As time passed by it became increasingly clear as to which OSes were being preferred by developers and subsequently consumers. Those OSes were none other than Android and iOS. Most developers developed apps for Android and iOS alone and left Windows Phone out in the cold. Even if they made an app for Windows Phone it would be less feature-rich or would receive less updates compared to its iOS or Android counterpart.

Samsung and HTC both realized that Android was turning out to be better than Windows Phone in terms of apps, ecosystem, popularity etc. Subsequently both HTC and Samsung concentrated their efforts on Android and stopped churning out Windows Phones in a significant manner.

While Samsung and HTC were diverting their resources towards Android, Nokia was stuck with its exclusivity deal with Microsoft. Consequently Nokia had no other go but to keep pushing its Lumia line of Windows Phone smartphones. As Nokia became the sole global vendor of Windows Phone, over a period of time they ended up achieving more than 80% share of the Windows Phone market.

Despite such a significant market share of Windows Phone, Nokia was never able to convert the same into healthy financials. The company's mobile division had been in loss ever since 2011.

When Nokia's exclusivity with Microsoft for Windows Phone was set to expire it was clear that Nokia would adopt Android. Had Nokia dropped Windows Phone and adopted Android, Windows Phone would be all but dead since as I mentioned above Nokia was the only manufacturer taking Windows Phone seriously which was evident by their 80% market share.

To prevent this Microsoft on September 2013 announced that it would buy Nokia's mobile division for an estimated $7.2 billion. With the closure of the acquisition Microsoft was able to protect the majority of meager 3-5% share Windows Phone has in the global smartphone market.

Efforts in emerging countries:

The chart above makes it clear that low end models such as Nokia Lumia 520 and Nokia Lumia 620 were the most dominating Windows Phone devices. Microsoft had understood that almost all of Lumia's growth was coming from emerging countries such as India. A vast majority of the smartphone market in emerging countries is controlled by local smartphone vendors.

1. In order to entice these vendors of emerging countries, it was necessary for Microsoft to make the cost of producing Windows Phone devices as minimal as possible since these vendors work at razor thin margins,

2. Cancelling license fees - The first step towards reducing the cost of producing Windows Phone devices was obviously to cut down on licensing fees
Microsoft has made most of its money through licensing various kinds of software. Initially with Windows Phone Microsoft planned on following the same model. Later on Microsoft realized that it was competing in a market where Android commanded more than 75% market share and Windows Phone had less than 5%.
Clearly in such a market Microsoft could not ask vendors to pay for its software especially when the AOSP version of Android was completely free.
Microsoft as a result removed licensing fee on all devices that ran Windows and were less than 8 inches in size.

2b. On screen buttons with Windows Phone 8.1 -

The second step Microsoft took towards enticing manufacturers of developing countries was to bring support for on screen controls. This in turn helped manufacturers reuse a particular smartphone design for both Android as well as Windows Phone.

2c. Support for Dual SIM -

The third step Microsoft took was to bring dual SIM support which was long wanted in Lumia devices and often a make-or-break it factor for end consumers buying smartphones. Most emerging nations work on a contract-free model. Users pay the price of smartphones upfront and subscribe to carrier services separately. Often in these countries carriers keep coming up with special offers. Most users prefer to have one SIM slot for their main number which they use for communication. The other SIM slot often consists the SIM of the carrier which provides good offers, as soon as the carrier stops the offer, users buy a new SIM from another carrier whose offers are better.

These efforts brought some results when a number of local manufacturers released devices based on Windows Phone 8.Miia, Micromax,Prestigio, Yezz, BLU, K-Touch and InFocus were subsequently named as hardware partners later on in the year. All these are country specific manufacturers with a special focus on low end hardware.


3. Solving the app problem -

Any tech enthusiast will tell you that one of the main reasons why Microsoft's Windows Phone continues to lag behind iOS and Android are because of lesser apps. Both iOS and Android have more than a million quality apps to choose from whereas Windows Phone doesn't even reach half a million. This app problem has had serious effects in the growth of Windows Phone and Microsoft has taken steps to tackle the same.

3.a Universal apps with Windows Phone 8.1 -

With Windows Phone 8.1 Microsoft had already advanced towards a universal app platform to some extent. The idea behind this was to make use of the developer platform for Windows and use them for Windows Phone since a single code would be able to run on both Windows as well as Windows Phone

3.b Project Islandwood and Astoria

With the launch of Windows 10 the biggest step Microsoft took for Windows Phone were projects Islandwood and Astoria. With Project Islandwood, iOS developers will be able to take their ios apps and build them for Windows. Microsoft has developed an Objective C toolchain and middleware layer that provide the operating system APIs that iOS apps expect. A select group of third parties have been using the Islandwood tools already, with King's Candy Crush Saga for Windows Phone being one of the first apps built this way. King's developers had to change only a "few percent" of the code in order to fully port it to Windows Phone.

For Android, there is Project Astoria. Rumors of Android apps on Windows have been floating around for some time, and in Windows 10 Microsoft is delivering on those rumors. Astoria will allow Android apps to run in Windows. Specifically, Windows Mobile (and yes, that's now officially the name for Windows on phones and sub-8 inch tablets) will include an Android runtime layer that'll let them run existing Android apps (both Java and C++) unmodified. Unlike Islandwood, which will require developers themselves to recompile their software to bring it to Windows, Astoria will in principle work with any old APK, without requiring the developer to do anything but publish the app in the store—as long as the APK sticks to the APIs that Astoria will provide.

3.c Carrier billing -

Microsoft recognizing that the growth of Windows Phone is coming from emerging countries has actively partnered with operators to enable carrier billing for apps. In most emerging countries credit card pentration is very low and often carriers are the main gateway for financial transactions, the sucess of initiatives like M-Pesa by Vodafone in Africa is enough proof of the role carriers play to enable transactions. As of today Microsoft boasts to have partnered with around 90 operators around the world to enable carrier billing.

The app gap has always been a real problem for Windows Phone. With projects such as universal apps, Astoria and Islandwood Microsoft plans to make developing apps as easy as possible for the end developer. With carrier billing Microsoft is trying to make paying for apps as easy as possible.

4a. Going cross -platform

Points 1, 2 and 3 have detailed the methods Microsoft has taken to protect and grow Windows Phone. But Microsoft itself understands that Windows Phone alone won't be able to provide for a firm standing in the smartphone market. Since its inception, Windows Phone has never been able to grab a double digit market share of the smartphone market. Despite all the efforts Microsoft is making towards Windows Phone it is highly improbable that Windows Phone alone will ever match the market share of Android. 

There is a saying "If you can't beat them, join them" - Microsoft following the same is now actively trying to develop its apps and services for Android as well as iOS.

4b. Developments of apps for other platforms -

Under Satya Nadella, Microsoft  realized its insignificant share in the mobile space. It thus launched

MS Office on Apple’s iOS that was earlier available only on Windows, Windows RT, and Windows Phone. Microsoft launched Office on iOS for free. The company later launched Office for Google’s Android too. According to Microsoft, within one week of its launch on iOS, there were 12 million downloads of Word, Excel, PowerPoint, and OneNote for iPad.

Google and Apple have not shown much interest in making their apps and services available for Windows Phone users.

According to Quartz, Microsoft has launched about 100 apps on both Android and iOS. Microsoft is more concerned with other platforms than its own Windows Phone. There are only a few apps, such as Snipp3t for iOS, that are only available on other platforms. Skype for both iOS and Android has received a number of app updates. Plus, the general consensus is that Office for iPad displays documents better than Windows tablets do.

Microsoft has also been aggressively pushing Outlook on Android and iOS devices through acquisitions of Accompli and Sunrise. As of recently Microsoft is also allowing Dorpbox users to edit Office files directly from Dropbox itself.

4.b Pre-installing apps on other Android devices -

Lately Microsoft has also been persuading manufacturers such as Samsung and others to pre-install Microsoft apps on their devices.

Microsoft caught a big fish when its convinced Samsung to pre-install a range of Microsoft apps on Smasung's Galaxy S6 and Galaxy S6 Edge. According to Samsung's own estimates the Galaxy S6 and Galaxy S6 Edge are estimated to sell around 70 million. If even 10% of these Galaxy users start using Microsoft apps/services Microsoft will get a whopping 7 million users.

Apart from this, Microsoft has also made a strategic agreement with Cyanogen whereby devices running Cyanogen OS will be loaded with Microsoft's apps and services, once again giving Microsoft a significant opportunity in the Android market place.

Conclusion

While Microsoft's presence and influence in the smartphone market is limited because of Windows Phone's market share, the company by going cross-platform and by striking various partnerships has a real chance in the smartphone market down the line.

Note -
I have tried to list down as much as possible however if you feel that I have missed something please let me know and I will update the post accordingly.