Hardware Manufacturers have a Problem with Windows Phone

Windows Phone: Nokia's all in, HTC's half. The rest are quiet.

Windows Phone: Nokia’s all in, HTC’s half. The rest are quiet.

Windows Phone has been constantly reviewed as a great operating system by tech writers and journalists. However, adoption rates have been low and Microsoft is currently battling Blackberry (formerly known as RIM) for a distant third spot. Many are quick to point out that the lack of apps is the main reason for its low adoption rates. Others point to the late arrival of Windows Phone to what has already turned into a clear two horse race.

I think the answers are not that simple. The smartphone market is far from saturation. There are many more consumers to reach to and international demand is very strong. I think Windows Phone has a problem with hardware manufacturers and that is why you see little promotion of the platform from big players like Samsung and LG. Nokia has done most of the marketing with HTC throwing in a yearly event. Sony didn’t even bother.

Before you dismiss this possibility, just look at all the ads for Windows Phone. Do you see any hardware manufacturer spending marketing resources on them? None besides Nokia. Instead, you see Microsoft marketing the hardware of these manufacturers on their behalf. It is very clear that hardware manufacturers are not pushing Windows Phone even though they know they have to diversify reliance on Android by building demand for a competing platform. Here is why they are so reluctant.

 

 

 

An Uneasy History

IBM: The monopoly that made Microsoft great.

IBM: The monopoly that made Microsoft great.

To put my points in perspectives, let us take a quick revisit of how Microsoft’s Windows became the de facto operating system on desktops and laptops with a giant 90% share of the microcomputer market. Microsoft Disk Operating System (MS DOS) was the forerunner to Windows and laid the carpet out for the latter’s domination. MS DOS entered a market that was led by CP/M. The romantic story on how CP/M lost out to Microsoft because they couldn’t agree on a non disclosure agreement with IBM is well known but the fact remains that MS DOS became a standard because a preceding monopoly helped it to.

 

Windows simply walked on top of a ready made monopolistic hold that was created by the IBM brand.

 

 

IBM was very late to the microcomputer market and faced a fast moving market with dozens of differentiated small competitors. It needed to be as nimble while being able to drive its enterprise orientated model forward. Unlike mainframes, IBM could not do everything in house – that would be too slow. And so, the Wintel alliance was born. IBM outsourced the design and production of processors to Intel while licensing Microsoft’s ready made operating system. Because IBM was by far the most recognized brand, IBM PCs caught on like wildfire. That was how MS DOS took over the world before Microsoft introduced Windows. Windows simply walked on top of a ready made monopolistic hold that was created by the IBM brand.

It must be clear that MS DOS did not ‘win’ because it was first to market. Neither did it ‘win’ because it was the best out there. It won because of a very smart business decision by Bill Gates who was at the right time and place. The Wintel alliance is not the coziest of relationships between firms. In fact, many research papers suggest that the alliance is more akin to that of a broken down marriage. Intel and Microsoft were constantly vying for control. It became pretty clear that Microsoft’s front facing reach to both individuals and enterprise consumers gave it the advantage. Software almost always holds the advantage because of the simple fact that people identify with a user interface and not a chip in their PCs. When Intel pushed out its first 64 bit processor, Microsoft waited a decade before producing a 64 bit OS. Guess what? They partnered AMD at the launch. Intel was left in the cold.

 

Manufacturers like Hewlett Packard, Dell, Compaq, Acer, etc were reduced to being ‘dumb’ producers.

 

The same can be said about partnerships between Microsoft and other hardware manufacturers. Manufacturers like Hewlett Packard, Dell, Compaq, Acer, etc were reduced to being ‘dumb’ producers because standards had already been introduced by IBM and widely accepted by the public. We tend to visualize these companies as long factory production lines where PC after PC is being churned out. While that image is quite rightly the correct viewpoint of how the market was, hardware manufacturers began to be disgruntled as the PC market hit saturation. With no new markets to expand into, profit margins began to fall. There was little any manufacturer could do to differentiate itself from the comeptition. They tried black boxes after beige boxes. They tried attacking every market segment. They tried fancy case designs. But that was all they could do. Every PC produced was a Windows machine. Brand loyalty did not lie with hardware manufacturers, it was held by Microsoft.

With little points of product differentiation, the PC market turned into a mad race for the bottom. The race that benefited consumers. PCs became cheap. Consumers were buying mostly value for money hardware and the profit margins for hardware manufacturers became razor thin.

 

 

 

The Mobile Computing ‘Era’ 

Fast forward five to seven years on, a new product category and era of computing emerged. The mobile era. It can be presumptuous to call it an era especially since PCs are still the dominant form of computing. Nonetheless, no one can deny that this is the general direction things are heading towards. It may take 5 more years or even 15, but we will move towards mobile computing. The question is not ‘if’ but ‘when’.

This new product category was jumped on by hardware manufacturers. It was like a spring of new profit flows in a desert that had been drained by competition. This spring was different. When you buy a PC, everyone knows that the PC is a Windows machine running on ABC manufacturer’s hardware. But in this fresh start, hardware manufacturers were given the opportunity to begin product differentiation right from the level of the operating system. This was the birth of both Android and its fragmentation.

Android: Every phone's software experience is different for better or worse.

Android: Every phone’s software experience is different for better or worse.

Android’s fragmentation was ridiculed by early tech observers for messing up a rather good Google experience. We banged our heads in frustration when HTC’s version of Android (Sense UI) was different from Samsung’s (TouchWiz) and Motorola’s (Motoblur), etc. We asked why couldn’t they just run Google’s pure Android on their hardware. The answer is simple – they would be completely stupid to do so. Do these hardware manufacturers really need reminding of what happened the last time they allowed themselves to carry a pure operating system consistent among competitors? No, they had learnt enough from the Wintel days. Android gave each manufacturer the chance to differentiate themselves on a software level. Something they couldn’t have done before.

 

Android gave each manufacturer the chance to differentiate themselves on a software level.

 

And so the Android looked different on different brands. Sure they are all Android 4.x.x but Touchwiz operates and looks very different from Sense. Better (or worse) still, Samsung’s Android had features that HTC’s didn’t and vice versa. However, this evil that we beheld allowed former ‘dumb’ manufacturers to finally kick start their own differentiated product lines. Android’s greatest weakness was the most attractive feature for hardware manufacturers. Then, Microsoft walked in with Windows Phone.

 

 

 

Microsoft Wants it like the Old Days

A clear Windows identity leaves little for hardware manufacturers.

A clear Windows identity leaves little for hardware manufacturers.

It is no surprise that Microsoft wanted to launch Windows Phone the way they did with traditional Windows. Hardware manufacturers could do nothing on the software platform. Every phone out there would be seen and labelled as a Windows Phone. Be it Nokia, Samsung, HTC or LG, it is the 1990s market model all over. It is no surprise that everyone bar Nokia (who has nearly zero experience in producing microcomputers) responded with reluctance. The race to the bottom is something they have already got sick with since a decade ago.

Would you support a platform that clearly relegates you to providing production support? No. Comments by Samsung’s VP have already shown that hardware manufacturers want a greater say in the software experience. They want to own part of it, they want the device to be co-branded. When Samsung launches a phone, it doesn’t say ‘Hey this is an Android phone on our hardware!’. They go ‘This is a Samsung device’. Period. This is something they can never do with Windows Phone.

 

Every phone out there would be seen and labelled as a Windows Phone. Be it Nokia, Samsung, HTC or LG, it is the 1990s model all over.

 

Microsoft has to re-look its strategy in working with hardware vendors because these manufacturers no longer just want to simply be vendors. Microsoft needs to find ways that make hardware manufacturers feel valued and appreciated by consumers. The current model that Windows Phone is based on pays nearly no heed to that. This time, there is no IBM to force it through as well.

I love Windows Phone. I was very tempted by the Lumia 900 and continue to be ready to switch the moment the platform matures. But the problem with Windows Phone goes beyond the lack of apps, the problem is that hardware manufacturers dislike the manner in which it is rolled out and history will not blame them for doing so.

Windows Phone cannot take off until hardware manufacturers embrace it. Your call, Microsoft.

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