I was reading a brilliant article by Ben Thompson, Another Nokia Explanation Same Conclusion.

Let me elaborate on what I mean:

  • The problem for Microsoft in mobile is that Android has completely destroyed the value of a licensed OS; Microsoft’s traditional software model is broken. The only way to make money is to sell hardware to a segment of the market (with lower margin percentages relative to software), or services that sit on top of OSs (with lower prices relative to software).

  • A services model is horizontal; a devices model is vertical

If your strategy is services, like Google, then you seek to serve every platform. If, on the other hand, your strategy is devices, then you seek to differentiate your platform alone.

My main disagreement is that there has to be some acknowledgement that if Google is “winning” it is as a direct result of Android, and that Android itself represents a kind of loss leader that promotes it core services (revenues come almost exclusively from search). Given this, I just do not understand why that cannot work for Windows Phone (situated as a loss leader for compelling backend services). If that strategy does not work (and it may not) I think it will be more a function of just being too late to the consumer mobile market.

The other issue I see is that, contrary to popular opinion, Microsoft is a business company first and a consumer company as a distant second, this balance and relationship is almost the exact opposite for Apple and Google. So when we discuss Microsoft as service company we have to ask “services for whom”, and then “devices for whom” and what scenarios do they contradict.

The one problem I do foresee, and Mr. Thompson highlights this, is that Microsoft is dragging its feet in producing native Office 365 apps for competing mobile platforms, and it seems to be in order to differentiate its own platform. This is a mistake and it is not working, business’ and consumers would pay a premium to use these types of services everywhere. What is less clear is whether consumers will continue to pay for Windows (phone or desktop) when the idea of an OS plays second fiddle to hardware.