Microsoft, smartphones and the cloud – a recipe for success?

Microsoft cloud and mobile first smartphone strategy

Is the cloud and mobile-first strategy making any difference?

Microsoft has set its sights firmly on the smartphone market with the acquisition of Nokia. Since the failure of Windows Mobile, its previous smartphone platform, Microsoft desperately needed to unify their struggling mobile hardware and software business. And Nokia, who had been caught off guard by competitors such as Apple and Samsung, needed a much wider audience than it could achieve on its own.

When it comes to smartphone market share, things have not been encouraging for Microsoft – Windows Phone only accounts for a few percent of smartphone sales (even though Windows Phone has been around since 2010, it has yet to exceed much more than 5-6% percent share), a fact that makes Microsoft more determined than ever to attract users to the platform. While the situation might look bleak in the face of Android and iOS’s domination, Microsoft has a great opportunity to win customers by offering more diverse and attractive devices, as well as leveraging its strengths in the business / enterprise market.

But these days, smartphone hardware capabilities are become increasingly irrelevant (just take Apple, who is often criticised for playing catchup in terms of hardware and features, but consistently sells tens of millions of iPhones). What matters most is a superior ecosystem of cloud-based software and tightly integrated services that work in harmony. And its the relationships with hardware vendors and its own Nokia business that Microsoft can use to redraw the battleground.

What does cloud-first and mobile-first really mean?

Even before the Nokia deal closed, Microsoft was promoting “cloud and mobile first”, in contrast to the “devices and services” ethos espoused by previous CEO Steve Ballmer.

Satya Nadella Cloud

Microsoft CEO Satya Nadella, selling the merits of cross-platform cloud services and apps

When you look closely at what this really means, it is more of a refocus rather than a change of direction. Since Satya Nadella became the CEO early in 2014, the changes in Microsoft’s overall strategy have become clearer and despite the rhetoric, the opportunities for Microsoft to increase adoption of Windows Phone are there to be taken.

“Microsoft has always been about bringing those three constituents together with platforms and applications, and we now do that in a mobile-first, cloud-first world” – Satya Nadella, Microsoft CEO

Windows was once aimed solely at traditional PCs, but is now positioned to address a much wider market that includes tablets, smartphones and even the Xbox. Microsoft sees all these devices as an opportunity to expand, reflected in their desire to create apps for iOS and Android. And it knows that a vibrant, diverse ecosystem is essential to tie users into Windows. Microsoft will never abandon the PC market, but it’s increasingly emphasising its cloud services and trying to attract customers to its Nokia brand.

Cloud first pays off

When you really think about “mobile first, cloud first” it’s easy to see how the cloud part fits in, because Microsoft can easily take its desktop products and rework them into modern cloud-based services. Consider Office – it has been a mainstay of the enterprise for two decades and has now been re-spun as the subscription-based Office 365.

When it comes to Office 365, the vision is pretty straightforward. It is to make sure that the 1 billion Office users and growing can have access to the high-fidelity Office experience on every device they love to use – Microsoft

There’s also OneDrive, which is baked into Windows 8 desktop and Windows Phone allowing users to store any type of documents in the cloud, and according to Microsoft there are now 250 million active OneDrive accounts with over 11 billion photos stored. Microsoft’s other software products such as Skype and Outlook are also incredibly popular, and could be killer apps in its cloud-based future.

And in the enterprise, Microsoft has positioned Intune and Azure Active Directory as cloud-based mobile device management and identity solutions that help IT departments to manage all the various cloud services used by employees, with clear separation between personal data and sensitive company information. Because it works with Windows, Android, and iOS, it’s a convenient and attractive to IT departments trying to cope with the complexity that ‘bring your own device’ entails.

As far as the cloud is concerned, Microsoft is promoting and investing heavily in the technologies, applications and services, and stands a good chance of making them more ubiquitous and seamlessly integrated into all its smartphone and desktop products. For example, using OneDrive as the default location for Word documents on iPad means that you can pick up where you left off on Office 365 without having to save and copy files manually.

More recently, in a sign that its cloud strategy is starting to pay off, Microsoft announced that commercial cloud revenue has doubled this year to $4.4 billion.

Nokia smartphones – the weakest link?

As much as Nadella has touted Windows, he’s made it clear that Microsoft is focusing on cross-platform strategies, highlighted by the Office for iPad release in March this year. Those apps (Word, Excel and Powerpoint) quickly rose to the top of the iPad charts – as a freemium model they are available free to view documents but require an Office 365 subscription to create documents. But by creating compelling products on rival platforms, Microsoft hopes to extend the reach of its most popular applications that users are already familiar with and use every day. With Office on iPad, Microsoft has got off to an encouraging start.

Office is available for rival smartphone and tablet platforms

Office on the iPad has been a success story for Microsoft

However, Microsoft still needs Windows Phone and the Nokia brand to succeed if it wants to remain relevant in the mobile space. And it’s in the more lucrative mid and high-tier segments that Microsoft remains a niche player, though at least in public says it’s happy with third place for now.

Why are Nokia Lumia sales less than inspiring? It’s certainly not hardware capabilities that are the problem; its flagship devices such as the Lumia 930 have been well received by the tech press and offer impressive specifications (for example high-end cameras, quad-core processors and full HD displays) that in many cases exceed what the iPhones offers.

There are also plenty of big name Windows Phone apps in the store now, but Microsoft needs to do more to attract developers who often ignore Windows Phone or that develop for iOS and Android first. Microsoft has improved its developer tools to make it simpler to create apps in Visual Studio, but it’s a chicken and egg situation: without the app store revenues developers won’t create apps, and without the apps consumers won’t buy a Nokia smartphone. There is still much more to do to address the problem; perhaps the ability to develop cross-platform apps in Visual Studio that work on all those devices would make it a no-brainer for software developers?

Finally, Microsoft has hinted it will drop the Nokia brand name at some point in the future. Perhaps that change needs to happen more quickly, as a single Windows brand would simplify its marketing message. Moreover, a truly common OS (Windows 9) on the desktop and Windows Phone would allow developers to create a single application that works on every device. If Microsoft does consolidate Windows, it may help to gain smartphone share and become a legitimate rival for Android and iOS.

Microsoft’s smartphone business looks promising and for now seems to be taking the right approach with its cloud and mobile-centric strategy. It remains to be seen how effective this will be, and whether it translates into higher sales for its Nokia smartphones and Surface tablets.

You can read more about Apple’s Enterprise strategy in our related post.

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9 Responses to Microsoft, smartphones and the cloud – a recipe for success?

  1. Ratkat September 29, 2014 at 1:56 am #

    Interesting article, however to be accurate….

    Far from being behind the others, Onedrive (Skydrive) predates them.

    Onedrive launched August 2007
    Dropbox launched September 2008
    ICloud launched June 2011
    Google Drive April 2012

  2. Ratkat September 29, 2014 at 1:56 am #

    Interesting article, however to be accurate….

    Far from being behind the others, Onedrive (Skydrive) predates them.

    Onedrive launched August 2007
    Dropbox launched September 2008
    ICloud launched June 2011
    Google Drive April 2012

  3. Roland Banks September 29, 2014 at 2:24 pm #

    Thank you for the comment, the post has now been updated accordingly.

  4. AJ October 1, 2014 at 2:09 am #

    Are those dates correct? I definitely remember using .mac or idisk (a precursor to icloud) in 2006 and I’m sure it had existed for a good few years even then. And wasn’t there an early version of Google Drive – I remember saving Google spreadsheets online around the same time.

  5. Ratkat October 1, 2014 at 11:10 am #

    iDisk was around in one form or another since around 2000, it was part of iTools then, but worked in a different way to iCloud etc does. It would appear as a network drive on your desktop, and you had the choice to either sync or not. Wasn’t by any means seemless like cloud storage is today.

    Google used to have Google Docs, which is where you saved your spreadsheets too, but it wasn’t cloud storage as such. Although it was with possible with a little 3rd party help to save files to your gmail account.

  6. AJ October 1, 2014 at 1:03 pm #

    My point is that Microsoft’s service didn’t predate anything. Actually they were very late to the party.

    I remember now – iDisk started out as part of iTools and then became part of MobileMe which was reconfigured and rebranded as iCloud. It may not have been as seamless but iDisk was definitely an early version of what iCloud is today.

  7. Ratty October 1, 2014 at 1:23 pm #

    IDisk wasn’t rebranded, it worked in a totally different way to iCloud, the two ran side by side with each other for about a year, before Apple finally closed it down in 2012.

    It actually hard to compare iCloud with Dropbox/Onedrive/Google Drive. For a start it is not just a file storage, it handles all syncing between Apple Devices, and unlike the others it is very limited, it’s not cross platform. No meaningful way to use with Android or WP.

    I use all of them in varying degrees, if I had to pick a favourite it would be Dropbox, unlike all the others, it has never let me down.

  8. AJ October 1, 2014 at 3:55 pm #

    I said MobileMe was rebranded (and reconfigured) and iDisk was an essential part of that service. Technically, the two ran in tandem for a brief period for people, like myself, who were unable to make the transition immediately but anyone who used iDisk would immediately recognise the link between the two – and it still doesn’t change the fact that they were offering a cloud storage service back in 2000. I can’t believe I’m even writing this because I am so not a fanboy and use Apple and Windows very happily.

  9. maethorechannen October 1, 2014 at 8:53 pm #

    This kind of reminds of one of those “next year is the year of the Linux desktop” articles.

    “Moreover, a truly common OS (Windows 9) on the desktop and Windows Phone would allow developers to create a single application that works on every device.”

    But the UX is going to suck. An app that works well in the hand is not going work well on the 24 inch monitor on the desk (or the pair of 24 inch monitors on the desk). And obviously not every device is going to be well supported (Macs, Chromebooks, Linux boxes, etc).

    “Microsoft does consolidate Windows, it may help to gain smartphone share and become a legitimate rival for Android and iOS.”

    Being a “legitimate” rival usually isn’t enough – see the Linux desktop, or go further back in time and look at things like GEM or the Amiga. Hell, the Mac almost went extinct in the late 90s.

    They’ve had to make Windows more or less free (as in beer) in mobile, tablet and low end PC markets. What exactly is the long term strategy here? I actually wonder if keeping Windows Phone going is ever really going to be worth the bother.

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