Welcome to the World of Mobile, Microsoft

The first time I went to meet with Bill Gates and his team, Microsoft was located in a brick office building in Bellevue, Washington and had only 80 employees. I have had the privilege of covering the company since its early days and over the years, I've watched it grow. From time to time, the company even tapped me to help on various projects, mostly related to mobile. However, I did do a full review of Microsoft Office for Windows when it was first created. I even caught the fact that the early version of Office did not include a word count and I recommended that it be part of this application. Soon after, it became part of the program.

Throughout its history, Microsoft has diversified well beyond the world of operating systems. It now drives most of the servers in corporate markets and even has a hardware business with the Xbox and the new Surface tablet. Its Outlook mail client drives most of the business email created and sent and the majority of presentations and spreadsheets are done through MS Office apps.

While Microsoft's growth and market reach has been tremendous, I have had trouble understanding its strategy. Keep in mind, this was the company that first started backing tablets and touch as early as 1991. Its Windows CE OS was the first real consumer operating system on the market. As early as 1999, Microsoft was working on an OS for mobile devices, with an eye on what we today call smartphones.

 

Yet, the company is now playing catch up in the tablet, smartphone, and consumer electronics markets. So how did Microsoft fall behind in areas it once pioneered? Well, it all has to do with money and management of its resources. I won't spend a great deal of time on the details, but I will say that once the Windows OS sold more than 50 million a year and the Office app business hit a billion dollars in sales, these two products became its main focus because they were the main moneymakers. Then, when the company created Microsoft Server architecture and got huge adoption from IT departments, this too became a hugely profitable product and set in motion the core business for Microsoft.

From a management resources standpoint, Microsoft then started to silo its business divisions and groups that in some ways isolated it from the other groups. For example, at one point there were two mobile divisions working on separate yet similar products. Its Xbox group was totally focused on games and the games network, while another group was focusing on consumer services as a standalone product. Because of the large revenue that Windows, Office, and Windows Server hauled in, these products took priority over things like consumer and mobile, even though for some time, those two market segments showed great growth potential.

Windows, Office, and Microsoft Server still make up the core business, but about three years ago, Microsoft really got serious about the changing market landscape and accelerated its R&D in touch, mobile and consumer electronics services. We are finally starting to see the fruit of that labor.

After spending time with the new Windows touch UI, Windows 8 on tablet, and Windows Phone 8, I now see that the company really does have a unified strategy going forward and that, thankfully, mobile is a key part. This is critical to Microsoft's future since mobile is where the growth will be for the next seven years. And whether Microsoft likes it or not, PC sales will remain steady and possibly decline over that time period, thus seriously impacting its earning potential with traditional products.

I have been using all three Windows 8 products and of them, Windows Phone 8 is the most mature product in the line to date. I like the tiling metaphor used in its UI and the Live Tiles added to the lock screen is great. That said, it's still a very distant third to Apple's iOS and Google's Android OS and I don't see it gaining much ground anytime soon.

The same goes for the Windows 8 tablet. It also is so far behind Apple's and Google's tablets that I am not sure if I can imagine Microsoft ever catching up.

But never fear; Microsoft has a secret weapon in this war. From now on, every PC and laptop will ship with Windows 8 and its touch UI. As people use the Windows tiling metaphor and become familiar with it, I believe that, at least for those with touch-screen PCs and laptops, it could pique interest in Windows 8 tablets and smartphones using the same UI. This level of familiarity is important. Apple uses it across the iPhone and iPad and I expect that the iMac will soon operate with a similar UI. Android runs the same UI on smartphones and tablets. Once people get used to a UI, they tend to stay with it.

Microsoft will spend more than $1 billion to advertise Windows 8 on all three device platforms and this marketing alone will be hard to miss. I expect ads that show the touch tiles on PCs, tablets, and smartphones all working together. If you have a SkyDrive account as well as a single Microsoft login account, the data you have on one device is available on all other devices as well. Apple does this already and Google is working on this seamless data layer in its Android ecosystem.

While I have concerns that Microsoft came too late to the party, it is very clear to me that it finally believes in mobile. From testing so far, I can confirm that the products are very competitive. And as one who has seen Microsoft grow over the years, I actually am rooting for the company since it has a long and important history in the world of tech. It needs remain relevant to keep the competition on their toes.