Sometimes it is fun to look back on posts I did – this is five years old and dare I say still as relevant today as it was then in light of recent announcements…

As I said when I started my blog this was not just going to be a Microsoft love fest and now we enter an area where I was probably the most disappointed in the company. With the announcement of Windows Phone 7 it may be a good time to look back at Microsoft’s entry into the mobile phone business. It has been a rough ride of late for the mobile business at Microsoft. I will admit even when they thought they were doing well I was never that impressed with the products they were delivering. I may be a “non” Microsoftee on this analysis, but it is how I saw things and though I never worked directly in the group I sat in the building (Building 117) with them for several years and saw how they went about their business. I also covered some of the accounts that they called into; ATT Wireless, Western Wireless and T-Mobile.

The first time I ever saw a Microsoft phone was around 1999 at a Microsoft Telecom Service providers event in downtown Seattle. At the time it was a project code-named “Stingray” or “Stinger”. It was as expected a brick, but it was the first step. For Microsoft it made sense to go into the Mobile space, simply for one reason: During the 90’s the mobile phone had gone beyond being just a phone, it now had a user Interface (UI) which you could do things with, like texting. If there was a UI then there was an opportunity for Microsoft to play, in fact it was so ingrained into Microsoft’s DNA that it had to play and it had to be the leader.

Early on Microsoft tapped a former exec of Symbian, the OS used in most mobile phones at the time, he was a Dane (so naturally I thought that was cool) named Juha Christiansen. Later on they would call back from Asia, Pieter Knook to act as Senior VP reporting straight to Ballmer. They decided early on that Microsoft’s strategy would be to take down Research in Motion (RIM) with their cool Blackberry device. Microsoft wanted to focus on business professionals and the smartphone market. I think this strategy was significant as it meant that Microsoft would not provide consumers with an offering for mobile phones. Second I will add I am not a big fan of the term “smartphone”. To me all that means is feature creep, as phones get more powerful they add more features and before you know it all phones are “smartphones”, but I guess marketing people like these kind of things to show they are monitoring something important, no matter how obvious it is.

A second thing that Microsoft was thinking was the role of software with the phone. Microsoft viewed hardware and software as two different things and were still under the guise of Bill Gates who said “you are either a hardware vendor or software vendor but not both”. Microsoft thought it could sell the software separately from the phone, so if you bought a mobile phone and an update came out for Windows Mobile, you could purchase for $5-$10 off of a website and upgrade your phone. Then and today it is still amazing to me how Microsoft was so not in tune with the end-user. Microsoft also wanted to replicate the OEM channel like it had with the PC by getting Motorola, Samsung, LG, Ericsson, and all the big mobile phone providers, minus Nokia to act as a channel. The problem here is unlike the PC, which was virgin territory and created companies like Dell, Compaq, and Gateway, Microsoft was dealing with mature established companies. These companies did not need to be educated about the mobile market place.

A third area was Microsoft did not get SMS (texting). Texting had become a global phenomena, driven by the younger audience. It is a crude technology as you have a limit of 160 characters (140 bytes). It looks like a mobile version of DOS. But it is useful. I asked one of my nieces once why she liked it (we shall call her the Russian Princess) and the Russian princess relied, “A lot of times I just have a question I need answered and I do not want the formality of a phone call”. Smart girl. I can only guess here what the discussions were at Microsoft but based on the actions of the Bus Development folks, I think Microsoft looked at SMS as old, simple and stupid. Why not use a rich email client to do the same thing? Microsoft Outlook offered way more for the end-user than a text message. Two reasons why that did not really work: 1) consumers wanted light and simple (outlook is feature rich and big) 2) Telecom carriers make a huge amount of money per text and what Microsoft was offering was part of a flat rate data plan. Telling Fortune 1000 companies to cannibalize their revenue stream was not a smart idea. Today over 2 trillion text message are sent annually around the globe, which in monetary terms equals billions of dollars of profit to telecommunications carriers.

The first task for Microsoft Mobile was to get a carrier to resell the Microsoft phone and that duty fell onto my client ATT Wireless. The hardware manufacturer was a Taiwanese company, HTC. The first phone cannot be called elegant. It was not great, but it was the first and soon thereafter a lot of people on the Microsoft campus had them. It was a significant change as now as an employee you get your email anywhere (at Microsoft email is king). Microsoft was on its way. Pieter Knook had laid out a plan to ship 1 billion phones with Microsoft software in 5 years.

As time went by the phones went global and more manufacturers came on board Motorola and Samsung released Windows Mobile phones and through time I would own about 10 different phones. Some good, some bad none were great. My issues with the Microsoft Mobile offering were more corporate. For starters corporate marketing required that the phone experience be in line with the Windows OS, so the look and feel was Windows. It had a start button. The browser experience was usually not good and sometimes just plain awful. It really highlighted to me a lack of the fundamental understanding of the end-user experience.

A second issue that cane to light was internal politics. As the realm of mobile applications became larger it was natural that other groups within Microsoft would have their own mobile offering. There was CRM ERP and MSN offerings. The problem was from the Mobile team not all offerings were Windows Mobile specific. The MSN team could not limit themselves to Windows Mobile phones since that covered less than 20 percent of the market place. However the bus development folks would make a point of trying to keep them out of accounts. I can certainly understand a passion for your product, I know the people in Windows Mobile worked hard, but at the same time I felt arrogance got in the way of reality. To say you needed to limit MSN offerings like Hotmail to Windows Mobile would cede the market to the main competition at the time: Yahoo and AOL.

Despite all the issues with Windows Mobile through the first part of the decade they did pretty well as they saw global market share increase, but as in many things you do not know reality until you look under the covers. The core code was fragmented and it seemed like rather than innovating new features Windows Mobile was just trying to replicate what others were doing in the market. This would all catch up to Microsoft on June 21, 2007, that was the day that ATT launched the Apple iPhone. It was hilarious in an infuriating way how the Windows Mobile team tried to downplay this launch and provide info on all the things the iPhone could not do. For example it could not copy and paste. Funny I did not know Windows Mobile could do that, but then I have never used Pocket Word to write an essay. How stupid could I be. When Bill Gates saw the iPhone he said, “Microsoft did not set the bar high enough”.

I think Apple hit a home run in several areas. First and foremost was the touch screen which remains to this day the best I have seen and used. It enables everything from there. When I clicked on apps it was responsive. By being so responsive it created the apps for the iPhone phenomena. Finally the browse experience was the best I have seen. It is easy, useful and responsive. In short Apple controlled the whole experience.

It raises significant questions about business models. Apple’s experience is contained in one form factor (there is only one Apple hardware/software experience). RIM does this to a certain extent but has more form factors. Microsoft and Google Android chose to distribute to any hardware vendor who is interested. Microsoft was really big into choice. I always thought this was a big mistake and frankly positioned very poorly. First off consumers always had choice. It was not like Microsoft invented it. You walk into any ATT or Verizon Wireless store you have wall to wall choices in phones. Microsoft does not enable choice the carrier does. Second user experience is very personal and it is based on the hardware and software experience. I met a sharp girl in San Francisco once at a Microsoft dinner. She had a Motorola Razor. Why? She liked the color (Pink) and it was so slim she could put it in her back pocket, without a bulge. Girls do not like to look fat. If Microsoft could develop Mobile software for that, well then they would be on to something.

When I left Microsoft there were 7000 iPhones on the Microsoft network. Certain groups (XBox and Zune) encouraged employees to get an iPhone as a challenge to the Windows Mobile team. They even embarked ona “skunk’ works project to develop a Zune phone. One of the last executives I ever saw talk was Scott Guthrie, VP of development Tools. He had a iPhone and mapped out what was happening. The kernel code for Windows Mobile had to be scrapped and they needed to start over. Andy Lees, VP of Windows Mobile was brought over to revamp the team (Pieter Knook had left and taken a job with Vodafone). Andy did not want the job, but when SteveB tells you this is what you will be doing it is not a negotiation. the few times I have seen Andy speak he has not looked comfortable. I think he realizes that mobile software and the mobile industry in general require sex and sizzle. Andy is a very smart guy but he has no sex and sizzle.

With Ballmer’s recent announcement of the launch of Windows Phone 7 for the holidays (which is 9 months from now) it will challenge the Microsoft partner model. All I can say is every phone I have had though they have the same look the experience is greatly different. The market is also getting very crowded (Apple, RIM, Nokia, Google, Palm, Samsung, LG, Motorola etc..). Form factors are also getting more plentiful as the world of mobility expands. You have Laptops, Tablets, Netbooks, PDA’s, Smartphones etc..It is a very exciting time in the world of mobility but the question will be what is Microsoft’s role?

Good night and good luck.

Hans Hoffmann

February 24th , 2010 (Happy B-day to me eldest son)