Microsoft Windows Mobile – Open Source or Bust!

Posted on: February 17, 2010
Posted in Mobile, Strategy

Microsoft Windows Mobile - Open Source or Bust!

Microsoft’s announcement yesterday that they will charge for Windows Mobile 7 licenses was jaw-dropping bizarre given how bad the company has flailed in the mobile space. Silicon alley insider did a nice piece today showing that mobile OS revenue contribution will likely be about 0.5% of revenues in 2011.

If Microsoft looks around they will see few licensed OS’s remaining in mobile. Even Nokia, which for years has licensed Symbian for $10-15 per handset, has made it free (while also joining w/ Intel to pursue an open source Linux based OS). Samsung’s Bada (notably they didn’t adopt Android) will be open source. Okay, Palm’s Web OS isn’t open source, but look how it’s done. And RIM’s growth has stalled.

All these companies clearly believe that competitive advantage in mobile will depend on the platform (Nokia realized it late). Apple’s closed platform is different (I discussed it here) but still relies on the power of complements and an ecosystem that began w/ iPod connector / accessory reuse, and flourishes through application compatibility across its iPod/iPhone/iPad line.

Android’s developer community draws on the network effect of programmers collaborating across the software’s open source core – LOTS of programmers. People deride Apple for being closed, but don’t forget that iPhone OS has an open source BSD/Unix background. And their best-in-class mobile Safari browser is based on WebKit – free, and totally open source (RIM finally demo’d a decent browser based on WebKit).

So MSFT is going to arrive 4 years late with a closed OS and proprietary browser and charge for all of it??

MSFT’s reluctance to let go of the desktop model demonstrates a lack of understanding of how the mobile market differs from PCs. In mobile, the software and services layers around the OS drive the base value (and for Apple transactions and HW sales drive further value). By going open source on the OS, rivals have weakened any opportunity that Microsoft has of capturing platform value from the operating system.

That is clear to all but here is what Microsoft is also missing: The network effects of a distributed platform really only work if MSFT has strengths in other complement areasbut guess what? They doMicrosoft has built a solid cloud platform and has many of the complementary software pieces – specifically Office, Azure, Search, and Sharepoint – that will be important in mobile.

The operating system NEEDS to be a commodity in order for these pieces to take root. By open sourcing its mobile OS (okay open source may be asking too much… but at least making it royalty free!), Microsoft could focus on developing a platform consisting of the aforementioned applications & service layers. If this platform is good enough it could spur a network effect of users which would then drive additional platform value from the ecosystem of complements (for the best background on commoditizing complemements, see Chris Dixon’s blog here).

Fortunately for its competitors in mobile, Microsoft’s unwillingness to get disrupted at the operating system level seems destined to stall its hugely revamped mobile platform from attaining critical mass. At the very least, it will be an uphill battle.

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