Microsoft and the handheld market

There are not too many desktop or personal computing related opportunities that Microsoft missed out to capitalize in the past twenty five years. In most cases they were early enough to react to the changing market needs by either innovation or adaptation of other cool technologies. However, Microsoft seems to have missed a trick or two when it comes the voice-centric devices and the related platform requirements.

According to Gartner the handheld devices can be broadly categorized into data-centric devices and voice-centric devices. The PDA devices fall into the first category where as the smart phones represent the second category. There could be PDAs that offer cellular connectivity but they are still ‘data-first and voice-next’ devices. PDAs usually have a higher memory, processing power, bigger form-factor as well as keypad compared to the smart-phones. The other differentiator is the usability – PDAs are supposed to be used by both hands where as smart phones are targeted mostly for one hand keyboard/wheel operation.

Microsoft has been the undisputed leader in the PDA operating system market for a while now. According to the sales statistics for the year 2006, they command 56% of the market share where as their nearest competitor Research In Motion (RIM) have got less than 20% of the PDA O/S market. Palm may be a leader in the Americas but overall they get only 12% of the market share. The story is totally different when it comes to the smartphone O/S market.

Microsoft devised a plan five years back to enter the smartphone market but the ground reality is that they were not successful at all in this war field. The Nokia led Symbian O/S commands 67% of the market share in the smartphone category as far as 2006 sales data goes. Blackberry has been a disruptive innovation (Read: Disruptive Innovation Model by Clayton M. Christensen) that thwarted Microsoft and several other market players and going forward probably even Symbian. Probably the Windows Mobile story didn’t click as much in the smartphone market.

Though a little late, Microsoft seems to be realizing their mistake now. Since 2006 they have been a bit more aggressive on stabilizing and positioning Windows Mobile. Year 2006 saw Microsoft market share growing by 200% but still that figure contributes to less than 10% of the market share. Gartner projects that the PDA market is growing at a much slower pace (CAGR of 5%) compared to the smartphone market that is growing at a CAGR of 47% for the next 4-5 years. If Microsoft is smart enough to do a good job with respect to Windows Mobile for smartphone, it is highly likely that they can rule the market by 2010. After all, the success of smartphones is generally governed by the quality of its O/S, usability and accessibility – and Microsoft is good at all these aspects. It is also interesting to read another research report published by the Diffusion Group. They project that Microsoft will have 29% market share, followed by 26% and 22% respectively for Linux and Symbian in the year 2010. This could be true if they continue to grow at the way they did in 2006!

Personally I believe that the success of smartphones will also be driven by the easy to use Personal Information Manager (PIM) features along with accessibility. Since Microsoft is the undisputed leader in office products, they are the ones who should emerge as leaders in the handheld market as well.

Finally, symbian and RIM may be the leaders in the cellphone (smart or otherwise) market purely based on usage. However, both these platforms are
nowhere near Microsoft Windows Mobile based handhelds and smartphones when it comes to running powerful applications for Mobile Sales, Service, Retail or Logistics business scenarios. For that RIM and Nokia smartphones have to be reborn and have to start supporting pure J2ME than limited device profile frameworks that can be used only for small applets, alerts and basic PIM usage.

The beauty of the Microsoft WM platform is that the same .NET application, without any change, will run on a Smart phone as well as PDA device. This is the
area (on top of PIM) where Microsoft will beat their competitors big time as the question of recoding the business applications several times for device types will not arise in the case of Windows Mobile. So my final take on the handheld market is that Microsoft and Linux will be ruling the enterprise mobile business market (including smartphones) in the mid-term future where as Nokia will continue to be the undisputed leader in the cellphone market.

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