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| Innovating The Next Big Thing | September 9, 2010 |  |
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Technology Pundits: The Near Zero Chance of the Microsoft Phone
Feb 18, 2009 – By Rob Enderle Microsoft is in several hardware businesses but they have constantly been reminded that this is not their strength. What is interesting is that there have been two Microsoft Phones taken to market. The first was done in Europe as a gag and was just a regular phone with a Microsoft logo. The second was a serious effort and consisted of a wireless phone with advanced features that depended on a Windows 9x level PC running 24x7 to work properly. Windows 9x PCs didn't run 24x7 and the result was, and I was once a competitive analyst on phones, the worst phone product I have ever seen in my lifetime (and I've seen some real turkeys). Microsoft Doesn't Do Hardware Well Currently they have two hardware platform products the Xbox which actually does better driving software revenue than any of the other current generation game systems, but likely does a significant amount of damage to Windows sales, and the Zune which has failed to meet market expectations. Microsoft's strength is on building platforms and ecosystems, it isn't on building vertically integrated solutions and, when they forget that, they tend to fail either economically (relatively low or negative contribution margins) or completely. For the Xbox the divisional separation puts the benefits in one organization but much of the real economic cost into the Windows group. By separating the Microsoft gaming efforts Vista suffered significantly suggesting the economic cost of the Xbox likely exceeds by several magnitudes the economic benefit to Microsoft. Something that is likely concealed, or at least not fully understood, within Microsoft. Zune Zune was the big wakeup call. At the time it was created the platform that Microsoft was unsuccessfully driving was "Plays for Sure". The running joke, based on a rocky launch, was that "Plays for Sure" didn't, but, by the time Zune launched "Plays for Sure" generally did work. It generally takes years for an effort like "Plays for Sure" to be successful and it was clear that much of the hardware being developed to use the platform wasn't in the same league with Apple's. In addition, marketing, when compared to Apple's spend and execution was anemic with the hardware vendors expecting Microsoft to do it and Microsoft expecting the hardware vendors to do it and neither being funded to a level that would get it done. In a way it was a repeat of the early battle with Palm in the PDA market except Apple actually was better than Palm at building demand and maintaining loyalty. The problem was demand generation and had that been fixed properly by focusing and enabling partners to build and market like Apple did, the success of the platform effort would have been vastly improved. Instead they brought out a product that was often referred to as the "brown turd". What is interesting is that it actually had a number of advantages over the iPod but Microsoft's inability to effectively articulate those advantages resulted in failure. This is despite the fact that some of the efforts surrounding the product like shelving, accessories, and prelaunch marketing were actually very good. Had the Zune been successful, then a Microsoft phone would be likely. That wasn't the case and that makes the phone unlikely. Wrapping Up: Microsoft is not Apple and Apple is Not Microsoft When Apple tried to license out their operating system or operating in an environment like servers that isn't user centric Microsoft has thrashed them badly. Where Apple thrashes Microsoft is where high integration and user focus can be turned into key advantages and, most recently, where the power of the Apple stores can be brought to bear. The strongest PC company at the moment is HP which has the most ex-Apple people of any of Microsoft's partners and where the strongest effort exists with products like the TouchSmart to create an Apple like experience with Microsoft technology. Apple's strongest offering is the iPod where their control is near absolute and they have a near monopoly. Microsoft's strongest offerings currently come out of their Server and Tools unit where Microsoft has reduced control and vastly increasing licensing. Or, in short, for Apple the more control the better, for Microsoft, the more collaboration and less control the better. It is interesting to note that, competitively, Apple would likely do best aggressively licensing from Microsoft and Microsoft from standing back and letting them become an even stronger example for the others by encouraging that behavior. Google, who is trying to become a better Microsoft than Microsoft, is already showcasing with Android that Microsoft's model continues to work very well when executed properly. In the end, building a Microsoft Phone would be a disaster for Microsoft and seem to know that. We'll hope they don’t forget it this time. Courtesy Technology Pundits. » Send this article to a friend... » Comments? Tell us what you think... » More Analyst Insights articles... 
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