Is Microsoft Giving Up on Smartphones? (Updated)

Source: Microsoft.

Update: Paul Thurrot reported this morning (4/28/2015) that Microsoft “will most likely announce this week that it will enable customers to run Android apps on their Windows 10 phones, tablets and PCs.” That’s pretty strong language, and Thurrot has connections. I doubt that he’d state it so firmly, and write such a strongly-worded post in general, if he didn’t have some inside scoop. His post not only strengthens my prediction here, but essentially expands it to include Windows 10 on tablets and PCs. I wouldn’t necessarily go that far–I think Microsoft needs Windows on other devices in a way they don’t need it on smartphones, and I think Windows remains viable on larger systems due to software complexity that smartphones (and really dedicated tablets) don’t support so well–but he makes some important points.

—–

A number of people have mentioned that Microsoft seems to be stripping Windows 10 of the features that made Windows Phone so special. Things like pivots and hubs are going away, and for long-time Windows Phone users it may seem like Microsoft’s one-OS concept, at least on phones, is much more like iOS and Android than the innovative (and controversial) vision introduced with Windows Phone 7.

At first, I rejected the idea. Windows 10 still has Live Tiles, I told myself, and indeed it does, and apps like Music retain their pivot workflow (for now). But as I spend more time in the latest Windows 10 phone preview, I’m starting to agree. Start Screen aside, Windows 10 really is looking a lot like the competition, with “standard” user interface elements like hamburger menus and an overall workflow that seems to make Windows 10 on phones pretty much the same as all the others. Arguments have been made that these changes are due to poor user response to Windows Phone’s design, and that might be true, but I’m not sure that’s all there is to the story.

Indeed, it makes me wonder: how exactly does Microsoft plan to differentiate Windows 10 from iOS and Android? Will they rely on universal apps? That seems like a risky strategy, given the relative dearth of developer support for the platform so far. Will they rely on hardware? That, too, seems risky, given Apple’s ability to make hardware that people love so much, and Android’s incredibly diverse hardware ecosystem that offers something for everybody. And, Microsoft is losing money on every Windows Phone sold, allows for lower revenues going forward, and looks to cut hardware costs (particularly ominous given that they’re only making low-cost phones at the moment). Will Microsoft rely solely on the similarity of the phone’s OS to desktops, notebooks, tablets, and hybrids? That’s a strength, for sure–for anyone who’s bought into Microsoft’s new vision of how operating systems should work, and assuming it translates well to smartphones. (Update 4/28/2015: This is also important to businesses looking to reduce training and support costs; see below.)

As I’ve pondered the question of how Microsoft might try to make Windows 10 on phones successful, then, one thought has stuck with me. Perhaps Microsoft isn’t making a differentiated smartphone OS because they don’t care if Windows 10 survives on phones. Or, perhaps their definition of “survival” has changed dramatically.

Cross-Platform: The End Game?
First, consider how aggressively Microsoft is going cross-platform with all of their solutions, in many cases providing the best Microsoft experience on iOS. This is well-established, and I’m not alone in writing about it. I’ve thought this might just be a holding pattern while Microsoft makes Windows 10 on phones successful, but now I’m not so sure. Maybe it’s preparation for a time when the smartphone the typical user carries simply doesn’t matter to Microsoft, so long as it’s loaded up with Microsoft productivity apps and services.

Windows Phone’s Obituary Already Written
Second, Microsoft is already killing Windows Phone. Windows 10 is its direct replacement, not just an update. In a very real sense, in fact, Microsoft is pulling out of the smartphone market altogether, at least in terms of developing a smartphone platform. Instead, they’re making an operating system that runs everywhere, almost coincidentally including smaller devices with cellular radios that people use to make phone calls.

Think about that for a second. Once Windows 10 is released, Microsoft will no longer offer a smartphone OS. Google will still have Android, and Apple will still have iOS (both of which almost incidentally run on tablets). But Microsoft will only have Windows 10. Combine this with a distinct impression that Windows 10 development so far seems focused on traditional platforms (e.g., the desktop and notebook, or machines with a keyboard and mouse). Much less development, so far at least, seems to have been spent on making Windows 10 work on mobile devices that rely exclusively or primarily on touch. Even less work has been spent on making Windows 10 optimal on smartphones.

Things have gotten a little better on Windows 10 Build 10061 on PCs, tablets, and hybrids. And I do believe that once the perceived mistakes of Windows 8.X are extracted from the OS, we’ll see renewed efforts at making sure it’s comfortable on touchscreen devices in general. But from what I’ve seen so far, I’m not sure that Windows 10 will ever be a very special experience on smartphones.

Which brings me to my point.

Smartphones = Enterprise?
I wrote in my piece “What is Productivity?” that Microsoft isn’t focusing solely on businesses in its transformation. And I think that’s correct when you think of Microsoft as a cross-platform productivity solutions company and one that continues to sell consumer products like the Xbox. But I can’t help but think that Microsoft is, in fact, giving up on making a competitive general-purpose smartphone platform. I think that, just maybe, Microsoft is conceding the smartphone market to iOS and Android, and will offer Windows 10 on phones principally to meet the needs of the enterprise.

Consider: what does Windows 10 actually accomplish on phones, specifically? We’ve already proposed that when all is said and done, Windows 10 on phones might not end up highly differentiated in its feature set or user interface. It might not, in fact, offer any particular advantages over iOS and Android. Let’s face it: if Windows 10’s only “special” feature is Live Tiles, it won’t offer much to compel people to choose it over the competition.

Instead, it might just end up that Windows 10’s primary smartphone strengths lie in areas that Microsoft can’t control on other platforms. I’m thinking of the guts of the OS, things like security and device management–things, in other words, that appeal primarily to businesses (and governments), and even to typically larger businesses as opposed to smaller businesses. Furthermore, by making Windows 10 on phones work so much like iOS and Android, Microsoft could more easily convince businesses to adopt Windows 10 alongside employees’ personal iPhone and Android devices. In such a scenario, training and support costs would be reduced and employee pushback would be substantially defused.

We’ve also seen rumors of even more aggressive moves that run counter to a broadly successful Microsoft smartphone platform. Perhaps the most significant is the notion that Windows 10 might run Android apps. While I personally don’t give that rumor much credence, if true it would signal that Microsoft doesn’t care at all about whether or not developers make apps for Windows 10 smartphones. Instead, perhaps the “universal apps” concept is related more to easily supporting enterprise applications across multiple devices than to bringing app parity with Android and iOS.

How Important are Smartphones, Anyways?
The bottom line is this: does Microsoft really need a successful smartphone platform? So far, given their recent quarterly financial results, I’d say they don’t. Windows Phone and the Lumia brand contributed negatively to their bottom line and didn’t make a dent in the overall smartphone market. Microsoft’s growth came from the cloud, and from going cross-platform. Future growth looks the same, at least as far as smartphones go. Windows on traditional PCs remains important, and Surface is selling well, but as Microsoft remakes itself I’m no longer so convinced that the company sees playing in every market as important to its future. There’s even speculation that Microsoft could completely write off the Nokia acquisition, which wouldn’t bode well for their smartphone hardware business.

We’ll find out more at this week’s Build 2015 event. If Microsoft continues to turn Windows 10 into a me-too smartphone platform while strengthening their cross-platform and cloud solutions, then I think it’s safe to at least consider that Windows 10 on phones is primarily an enterprise play. Dreams of killer Windows 10 flagship phones might be dashed, except where those phones are attractive to large companies and governments looking for highly secure and manageable devices.

If I’m right, I’ll be disappointed. I liked Windows Phone in much the same way as I liked webOS–they were both very different and innovative smartphone platforms with great workflow and almost zero market penetration. But I’ll survive, because ultimately I want a smartphone that enhances my life and allows me to get things done. My iPhone 6 fits that bill, particularly as it runs the best mobile versions of Microsoft products and services. In the end, it’s not like I’ll be losing some great value if I’m “stuck” with the iPhone. I’ll just, once again, have invested time and energy in another platform that failed to make it in the marketplace in spite of its inherent superiority.