Microsoft’s Other Mobile Problem

In the fourth quarter of 2011, smartphone sales topped more than 151 million worldwide, most of them Apple iPhones and Google Android devices. In the same period, more than 37 million tablets shipped, again most powered by iOS and Android. Microsoft is barely a footnote in this mobility race, but there’s one area where Microsoft remains king: rugged devices.

The hardened devices carried by UPS drivers, utility workers and emergency first-responders are where Microsoft Windows Mobile has reigned supreme for much of the last 15 years, since the introduction of Windows CE in 1996. The same operating system is the essential ingredient of many embedded devices, too, such as automated kiosks and bank ATMs.

Microsoft’s dominance in rugged and embedded devices – a market with two to three million unit shipments a year – is now in question as the company has all but forgone the rugged OS in favor of its still-struggling commercial Phone 7 platform. The inattention is giving competitors an opening to attack and displace Microsoft.

The New York Times’ Bits column last week wrote of Microsoft’s precious position in rugged devices. It correctly surmised that Microsoft’s failure to update Windows Mobile 6.5 is giving competitive platforms the opportunity to nibble – if not crunch – into Microsoft’s share.

Unfortunately, the Gray Old Lady’s digital column missed a lot. The 2112 Group, publisher of Channelnomics, conducted a study on behalf of an enterprise mobile device vendor in 2010. The big question: What impact would the adoption of Android on some rugged enterprise mobile devices have on its network of independent software vendors and resellers?

What the Bits column failed to recognize is something 2112 uncovered nearly two years ago: The opening for competition is based in technology roadmaps, and Microsoft’s near-abandonment of Windows Mobile in late 2010 was the perfect opening for Android and Apple.

2112 interviewed dozens of ISVs and mobile device resellers around the world, and each had a similar tale to tell.

• They were standardized on Windows Mobile 6.5 and earlier versions.
• They weren’t interested in supporting Android or other operating systems because of the added expense of designing and supporting multiple versions of their applications.
• Most – if not all – wanted to stay loyal to Microsoft and remain standardized on Windows Mobile.

The problem is that Microsoft wasn’t working with them. In fact, Microsoft was confusing its ISV partners by either withholding or sharing incomplete mobility roadmaps.

You see, ISVs need advanced insight into the technology framework and specifications of future versions of operating systems so they can plan updates and new applications. ISVs overwhelming reported feeling confused by Microsoft’s proceedings on the development of Windows Phone 7 for consumers, which had no backwards compatibility with legacy applications, and its failure to articulate future Windows Mobile development.

ISVs expressed reticence to adopt Android or any other mobile operating system. However, customers were beginning to ask for Microsoft alternatives by name – Android and Apple in North America and Blackberry in Europe. They didn’t like the inconsistency in Google’s Android release cycle and felt trapped by Apple’s iOS restrictions. Nevertheless, Microsoft’s lack of clarity and inaction was compelling second thoughts on alternatives.

2112 and our client shared the summary of our report with Microsoft’s Embedded team. We received no comment and no request for follow up.

Following the pre-release of Windows Phone 7 at the Microsoft Worldwide Partner Conference, Microsoft did articulate a strategy for enterprise mobility and embedded devices. It separated the operating system’s development from Phone 7 and planned to have two quick and successive updates by fall 2011.

In reality, mobile device manufacturers pressured Microsoft to act. At the launch of Motorola’s ES 400 handheld rugged device, CEO Steve Ballmer made a video pledging Microsoft’s commitment to Windows Mobile, which would become Windows Handheld Embedded.

Microsoft’s commitment to Windows Mobile lasted about six months, when development efforts were shelved with virtually no comment. The fate of Windows Mobile – or whatever it was supposed to be called going forward – was couched as a delay. That delay is now in its second year, and the last update to Windows Mobile is now entering its third year.

In the previous two years, enterprise mobile device manufacturers – Motorola Solutions, Intermec, Panasonic and others – have introduced more than a few rugged Android-based devices. Motorola Solutions (not to be confused with Motorola Mobility, the consumer handset company bought by Google) is even introducing a rugged Android tablet. Samsung has released its own rugged devices running Android with its homegrown interface, and many corporate mobile consumers are using after-market accessories to convert Apple iPhones and iPads for commercial use.

Back in 2010, independent software vendors told 2112 it would take two years before they could gear up for building and supporting non-Windows applications. It appears they did just that, and Android is flooding the rugged market.

Microsoft isn’t just in danger of losing the ruggedized market; it may have already lost it.

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