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Microsoft’s moment of truth is here

Oct 18, 2010 Business Daily, Strategy

“Microsoft made its final roll of the dice in the global smartphone market today, launching a new mobile operating system which the software powerhouse hopes will rival iPhone and Android devices.
The Windows Phone 7 marks a complete break from its past efforts – and the suppression of internal politics in favour of the man and woman in the street.
Microsoft still dominates office and consumer PC computing but is having to sprint to catch up on the lead it has surrendered in the past three years first to Apple and then to Google’s Android platform. Its rivals have grabbed roughly a third of the rapidly expanding market for devices that can connect to the internet while their user is on the move, as well as making phone calls.”

The Guardian (12 October 2010)

Microsoft, which has dominated world computing for two decades, now faces its sternest test. Everything hinges on, of all things, a mobile-phone operating system.

You know the history. Microsoft grew on the back of two of the most lucrative products of all time: the Windows PC operating system, and its Office software suite. Both held a vice-like grip on most of the world’s business professionals, and were intensely profitable. They still are. But while Microsoft was happily protecting its twin fortresses, the battleground was shifting to more distant realms.

It is not that Microsoft does not have good products – both Windows 7 and the latest Office version are state of the art. It is just that the PCs industry is not where the excitement is. Microsoft made hay during many years of sunshine in the PC industry by being the emperor of the enterprise game. Apple, on the other hand, was dismissed as a ‘consumer’ company – sexy, but not serious.

These days, when I meet leading Kenyan management teams, I am astonished by the number of iPhones and iPads in the room. Soon, I am sure I will observe arrays of Google Android phones and RIM tablets as well, for those are the companies with a head-start in the race of tomorrow – to dominate mobile, not desk-based, computing. The number of smartphones and tablets in the world will soon overtake the number of PCs, and computing will become truly mobile.

And that is why it is so vital for Microsoft to catch up. Its share price is down 20% this year, allowing Apple to surpass it in market value. The market is saying PCs are passe; tomorrow’s consumers are not going to choose between ‘enterprise’ and ‘consumer’ products – they will want it all. Devices that are portable, that carry immense computing power, that keep them always connected – and allow them to have a lot of fun as well.

Apple and Google have a great headwind behind them. RIM’s BlackBerry and even the weakened Nokia remain mighty contenders. All have different approaches but one goal: to dominate the future world of mobile devices connected to cloud computing. It is this race that Microsoft has just belatedly joined, after many missteps, with the launch last week of its Windows Phone 7 operating system.

After years of ignoring the fact that its brand connected more with IT managers than with young, hip and savvy consumers, the signs are good that Microsoft has finally ‘got it.’ The first reviews of the new mobile system are positive and its interface is slick. A number of leading handset producers have signed on. Microsoft has a reportedly massive $400 million marketing kitty with which to promote this make-or-break product.

Here are today’s starting positions in the world smartphone operating-system market, according to research firm Gartner: Nokia (40%); RIM (18%); Google (17%); Apple (14%); Microsoft (5%).

Who will win this race? A fascinating battle awaits us, with many different approaches and twists and turns to come. Strategy lovers should take their seats now…

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