With Mobile World Congress coming to a close in Barcelona, we now have a clearer picture of how Microsoft intends to deliver the mobile half of its “mobile first, cloud first” strategy in 2015. And while many had hoped for a more swaggering vision, the firm’s commitment to high-volume, low-margin hardware while delivering its most important productivity offerings across rival platforms is a solid if uninspiring tactic.
A little over a year ago, Microsoft CEO Satya Nadella made his first major public appearance, introducing Office for iPad to a somewhat stunned customer base. That event in many ways set the stage for the rest of 2014 and neatly defined his first year leading the software giant: no longer pushing Windows at the expense of its other product lines, Microsoft was free to deliver a stunning range of mobile apps on Android and iOS. And on the hardware side, Microsoft pushed forward in areas where Windows was then weakest: high-end PC hardware with Surface Pro 3 and low-end phones with Lumia.
There were no Surface announcements at MWC, but perhaps we can forgive Microsoft for stretching out one of its few hardware success stories a while longer. As its newest billion-dollar business, Surface saw its best-ever sales in 2014 thanks to the Surface Pro 3, a design that has resonated with businesses and individuals alike. And while many are looking ahead to a presumed Surface Pro 4—and perhaps a Core M-powered non-Pro Surface of some kind—I could imagine Microsoft waiting on Windows 10 before delivering these devices to a suddenly eager audience.
What Microsoft did announce at MWC, of course, were two more mid-level Windows Phone handsets, the Lumia 640 and the Lumia 640 XL, the latter of which sports a slightly better camera and, more important, a phablet-sized screen. For those pining for a new Lumia flagship, the Lumia 640 and 640 XL were unwelcome news. And coming on the heels of an endless string of low-end and mid-level smart phones throughout the latter half of 2014—the Lumia 435, 530, 532, 535, 730/735 and 830 among them, whew—one might logically start questioning the need for more of these impossible to differentiate non-iPhones. But here, too, there is strategy.
Microsoft understands that it is never going to displace the iPhone, which is both the most popular smart phone model on earth and among the most expensive (and profitable). Oddly, however, that was the original game plan for Windows Phone, as I recently recounted in Five Years Later, a Full-On Retreat from What Made Windows Phone Special. But with ever-dwindling market share, Microsoft was forced first to reduce prices—Windows Phone OS licensing is now free to hardware makers—and to return to its roots. That is, Windows Phone, finally, is starting to focus on the productivity tasks and management needs of business customers.
These things combined are a fairly powerful solution: Microsoft can offer ever-cash-strapped businesses three or even four capable Lumia devices for the same price as one iPhone, and those devices will integrate better with the Microsoft infrastructure they’re already using. So while the company does plan to offer more flagship-class devices when Windows 10 ships, its focus on the low-end is quite deliberate.
“We want to have a business phone properly connected with what is typically Microsoft infrastructure,” Microsoft devices head honcho Stephen Elop told the New York Times this week. “Microsoft is very strong in security and data centers, and businesses have built custom applications around them, and all of a sudden they say there’s no way we’re going to spend this amount of money for an iPhone 6 or Samsung.”
Another key part of this strategy, of course, is the new universal apps platform, which will let developers more easily create apps that run across embedded (“Internet of Things”) devices, phones, tablets, PCs and hybrids, and Xbox One, and even coming devices like the HoloLens augmented reality solution. And you can see the benefit of this approach in a coming version of the Microsoft Office suite, with which the same apps will work on phones, phablets, tablets and even PCs. In this coming generation of solutions, Windows Phone disappears and essentially becomes Windows—Windows 10, that is—running in a phone form factor, opening up new hardware and software compatibility benefits.
By the close of 2015, then, Microsoft’s place in mobility will look quite a bit different than it did on January first. Windows Phone—and Windows RT, for that matter—will be gone, replaced by Windows 10 for Mobile. The reviled Windows 8 will be gone, replaced by Windows 10 for PCs. The growing family of low-end Lumias will finally be accompanied by more aspirational flagship-class devices. And the Surface family will grow to include new members.
Beyond these first party solutions, Microsoft will of course complete its transition to a true “mobile first, cloud first” company by releasing and then maturing a suite of mobile apps across both Android and iOS, and by further integrating its consumer and business-class cloud services—OneDrive, Outlook.com, Office 365, Azure, and so on—into all of its other offerings. It’s one big happy family.
That’s the theory, anyway. The biggest challenge that Mr. Nadella must solve is how to turn all this … stuff … into profitable, sustainable businesses that can rival the steady money making capabilities of Windows, Office and Server from Microsoft’s heyday.