An eerie silence is present just before Windows 8 launch. The big stories of the day are the battle between Apple and Samsung, iPhone versus Android, and Google versus Apple. The trending topics on Mashable are in order: Twitter, Google, Apple, iPhone, Social Networking, Google+, Social Media, YouTube, Business, Android, iPad, Google Chrome, and… down the ladder somewhere is lurching Microsoft. No trace of Windows 8.
GigaOm, proudly promoting its own brand of research has almost no trace of Microsoft or Windows 8. Today on its navigation bar there is a prominent Apple menu item and a long list of articles on the home page, only one of which mentions Microsoft related story, although even that is about Xbox music service to launch on Android and iOS. Top articles menu bar has iPhone 5 on a prominent position.
Others are more preoccupied with the imminent invasion. ZDnet and C/Net have tons of articles on Windows 8, but they also have articles criticising the new operating system and predict failure (see below prediction for Win 8 RT certain failure). However, if you browse these two sites, it strikes you how many announcements of new Win 8 products are rushed by a large number of vendors even before the official launch of the platform software. The latest one is from Samsung, the Korean electronics powerhouse who unveils an ultrabook and tablets.
None of the media outlets dares to look into the significance of the new operating system. Sure, it’s risky and judging by the success of Windows Phone 7.5, Microsoft has had an aura of outdated technology. I may be wrong, but I don’t understand why they fail to see the magnitude of Microsoft’s transformation. I can see how they would want to avoid publishing risky prediction, but at least they should take a look at what is going on deep under the surface and forget for a moment the buzzwords of the day. The online journals have columnist who cultivate a loyal relationship with its biased readers. This is always a gold mine for ratings. Whenever and article is published about Apple or Google, an army of loyal fans work hard to make their presence felt. The ratings go up and everyone is happy. Postings about Windows phone 7 have a far smaller ‘stir’ factor.
I don’t have that kind of problem, so I am at an advantage. I can write what I want. To me, Microsoft has achieved an incredible turn around and it has become the innovator, while the others have acquired the status of the conservative incumbents. The tiles introduce a very novel and powerful concept. Because they are designed to be dynamic displaying real-time information pushed by various digital services, the combinations across the massive array of technical services starting from cloud computing platforms, to music, emails, weather, and anything in between, Microsoft is building a super-ecosystem using a quasi-seamless operating system . An example of what kind of services is possible in this super-ecosystem is Xbox Music. This is very difficult to replicate. Google has an excellent search and social network platform, but its operating system is fragmented to say the least. Apple is mono-cultural and built around one service: the AppStore/iTunes.
The signs of adoption of innovation are there: first, all vendors have announced a myriad of products, many of them quite innovative. Secondly, the new products are creating new categories which promise to fill the gap between tablets and laptops. Microsoft Surface is leading this trend. For Microsoft the innovation cycle starts anew.
Thirdly, the IT managers show a great deal of interest in Windows 8. It is interesting that in a survey published on InfoWorld Google Android is loosing share, while iOS is gaining. This is pointing to a problem that Android has in the enterprise space: fragmentation. This makes it difficult to support. Windows 8 will not have that problem and because of its strong compatibility with the legacy Windows platform it will have a faster adoption than the other two. And finally, Windows Phone 8 and Windows 8 RT have a strong support from all vendors. This is where Apples win against Samsung might prove to be a very costly mistake, a Pyrrhic victory. I should also mention Nokia, which released Nokia Lumia 920. For the first time, Nokia looks better on paper than its main competitors, Samsung and Apple.
Windows 8 may have an impact on the education market. iPads are great looking devices, but they are difficult to integrate and use as effective learning tools. The new detachable and convertible ultrabooks may prove to be more practical and for the same reasons IT managers are ready to adopt Windows 8, education systems may have a strong interest in the new devices.
Microsoft still has something reminiscent of its old magic touch. Its like a wand gently tapped on Barnes & Nobles business field to cause an explosion of vividly coloured flowers. It remains to be seen if this field will keep blooming in the years to come.
Microsoft is building strategic partnerships to prepare the launch of its massive Windows 8 ecosystem. Compare this approach with Samsung’s business style. While the South Korean is obsessed by operational excellence and hardware design brilliance, Microsoft is investing in non-IT business partnerships which are the life-blood of the ecosystem.
I suspect we will hear more of this kind of deals from Microsoft, many of them aimed at mobile computing platform.
We haven’t heard or seen anything yet about Windows 8 tablets other than some vague prototypes. I have a hard time to believe that Nokia will not play a major role here. It is going to be interesting, even fascinating to see how the competition between Apple, Microsoft, Nokia and Samsung will unfold.
AT&T hyped the launched of Lumia 900 so much that almost everyone expected to see fireworks in each capital city dedicated to the new Windows phone. Instead stories of sedated customer representatives who would happily talk about iPhone and its apps rather than Lumia keep coming up in many reports that came out today. So why all those noisy promises of a mammoth campaign, bigger than ever, promoting Lumia? It’s a mystery that left anyone scratching their heads. AT&T should care about this if they spend $150m on this campaign.
But the Amazon’s online business never sleeps and it did a much better sales job than the bricks-and-mortar AT&T shops. This is another example why Amazon is eating the lunch of traditional business. It all started on Easter Sunday. The sales started to push Nokia up the sales charts reaching the number five spot. I am not sure how the tally is determined, but there is one detail that tells me how the product fares: the customer reviews. If the number is high is usually a good sign that the product is hot. On Sunday, the number was about ten for the black Lumia 900. That is not impressive at all.
However, in the next day, Lumia 900 reached the top. The black model was top and the cyan was third initially, but then it reached the number two spot. So Nokia got the 1-2 pole position. But to me the most remarkable thing was the number of customer reviews. In one day it climbed up to go past 60 reviews for the black model and 20 reviews for the cyan model. What is going on?
It is impossible to figure out if Nokia will be successful in its attempt to revive its fortunes, but there are a couple of interesting things here that could predict a positive start for the Finish phone maker and for Microsoft through extension. The first one is the rapid increase of the number of the customer review. By comparison, the Droid which used to be on the top of bestseller list and Samsung Galaxy, the second on the list had 54 and 16 reviews, respectively. Nokia did reach those numbers in one day, while the other two phones had at least three months to get those reviews. Secondly, the reviews have almost perfect five stars. This is quite something.
There is something else. Reading randomly those reviews, one could notice some reviewers are encouraging of Nokia and Microsoft. This is interesting, because it shows emotional attachment to the new device and its user interface. Windows Phone is new; it has an unusual design, certainly distinct from the other two operating systems and in combination with an exceptional hardware design, it offers something to the new owners making them proud of their acquisition.
Nokia is currently running a cute ad showing how a guy with a new cyan Lumia 900 gets the attention of a girl to the dismay of his other mates who obviously own iPhones or Androids. I have a sense that the ad cleverly taps into that emotion that comes with ownership of something new and beautiful. It is the only way Nokia can fight the negative of having fewer applications. It is a smart approach, because otherwise, by just comparing technical specs and numbers people will not feel motivated to go for a change.
And by the way, how good is Amazon? Who needs to go through the experience of dealing with sales people that are unprepared to help, when you have great information and all you need to do is to just press a button to get what you want?
Big moves are made by Apple and Nokia in trying to set the path for long-term domination in the Chinese market. The way Tim Cook’s visit in China, was presented by the media you would think he is actually a head of a large state than the CEO of Apple. But if you think about it, Apple IS like a country as it has a market cap that makes it larger than many countries and the European Union’s officials would kill to have its cash reserves. During his tour, He visited Foxconn’s iPhone production line, which employs 120,000 people, just after it was revealed that Foxconn bought a 10% stake in Sharp, he met with Beijing’s mayor, and he had long discussion with the Chinese Vice Premier Li Keqiang who may be the next China leader.
Meanwhile, Nokia worked out an exceptional arrangement with AT&T. The carrier will start selling Lumia 900 at a price that defies gravity, $99, and its device head Jeff Bradley promised the biggest smartphone launch ever.
But this is nothing. Nokia has a very stronghold in China. To protect that advantage, while attacking Apple’s strong base in US, Nokia has accelerated its work in China as well. China Telecom will launch Lumia 800C and Lumia 610 with other carriers lined-up to do the same. Let’s not forget, in China Nokia is the largest smartphone maker. Stephen Elop, the CEO of Nokia has been pressing flesh in China recently working hard to support and grow Nokia’s relationship with the local partners.
Nokia also recruited Adam Guli to help Nokia in its race against Google’s Android and Apple’s iPhone. The US market is big and key to success, but as China will become the largest smartphone market in the world at the end of this year with over 140 million handsets estimated to be sold this year, conquering the Chinese market is vital in the quest for the world domination. The exciting part is that China is far from being done yet.
This is almost like a diplomatic battle with scenes cut from historic movies. And then, somewhere, barely noticed, Mark Zuckerberg, casually dressed, walks through Chinese cities claiming he is on holidays. Yeah, right! There are 460 million reasons why he shouldn’t be just a tourist. Besides, in these smartphone wars, Mark is not really a 100% neutral observer. He needs to pick a winner and have Facebook show up on as many smartphone screens as possible. I would not be surprised he will do something with Nokia, since Facebook has a slight affinity with Microsoft and tensed relationships with the other two.
Who else is missing in China? Steve Balmer? He is too quiet. Something is going on there.
This year will be a huge year in mobile computing. And Windows 8 hasn’t been launched yet! The stakes are high. A lot of commentators have already concluded who the winners are in the mobile phones market. However, I am not so sure. The Asian market has not matured yet, and the Android platform is too fragmented. Nokia new Lumia handset line based on Windows Phone operating system looks superb. Nokia is one of the finest operators in this market and it is perfectly capable to challenge both iPhone and Android systems. Almost everyone has written off Microsoft. Does Apple or Google think the same? That would be a serious mistake. These action packed visits in China are a strong indicator that the fight in this market hasn’t revealed the long-term winners yet.
18 months have passed since Apple launched iPad creating in one single swoop an entire new market. Several hardware manufacturers were selling a class of devices referred to as tablets, but they were based on Windows, the same operating system that powered the PC in general. The iPad tablet used an operating system that was designed entirely for user interaction based on gestures and touch, a proposition that was instantly embraced by the public.
For more than a year Apple has enjoyed almost an absolute supremacy in this market. Samsung, one of the most notable competitors, barely made a dent into that dominance. Late of 2011 Amazon issued a challenge that was considered by some pundits as serious, launching a new tablet, the Kindle Fire. This ménage a trois relationship is still evolving with no apparent forgone conclusion. Who is going to win?
Deloitte predicted in its annual Technology, Media and Telecommunications Predictions that in 2012 almost five percent of tablets will be sold to individuals that already own a tablet. This represents about five million tablets worth between $1.5 and $2 billion spent by people who buy their second tablet. This is quite remarkable, a historic record for any device. But the most interesting part of this prediction is that Deloitte anticipates that tablets will come in a broad range of size factors, not just the iPad’s 10-inch size.
In the quest for satisfying the huge demand for tablets and for carving up the largest stake possible out of this market, hardware manufacturers will try to fill in this space using different strategies. Some will make cheaper tablets, smaller in size or less powerful, but good enough to do most tasks, or larger tablets for more demanding applications, better graphics.
The business model will change. Currently Apple has a huge gross margin of 24%, but this may be about to shrink to more earthy levels. Currently 85% of overall gross margins come from iPad and iPhone. Deloitte predicts that hardware manufacturers will be willing to forgo gross margin on the device now and recuperate that later through profits made on subsequent service revenues: content purchases, subscription and rentals.
This just highlights the real game in the tablet wars. It is not about the hardware, it is about the ecosystem. The tablet is only the sweetener designed to tempt the buyers to enter the theatre and stay captive to content attractions. This is where the real action is. This is where Samsung is at a great disadvantage because it doesn’t have anything that comes close to iTunes. And again, this is not about what you see, the iTunes software, but about the market place behind it where major media houses agreed to sell their wares. The core of the ecosystem is to have this multi-layered engagement that binds the content creators, distributors, networkers, software operating system and device manufacturers together to the level at which the choice is too good to resist and too easy to effect for most of the potential customers.
Amazon is probably the best better prepared to fight that battle. Google is a formidable player, but it has spread too thin and over the years had a few tensed episodes with some of the key participants in the Android ecosystem. The Google market place is at times chaotic, some would say.
What about Microsoft? This is a big unknown. Its marketplace hasn’t competed nearly well with Apple’s iTunes and AppStore. Zune looks OK, but it is not as good as iTunes. The range of offerings makes Microsoft’s global marketplace look like a lemon stand versus Wal-Mart when compared with iTunes.
Apple forged great relationships with major content providers much better than anyone else. Until this situation changes, the other tablet manufacturers will face an uphill battle because they cannot recuperate the manufacturing costs which will prevent them from competing successfully in this market.
In the end, it is all about content, simplicity of delivery, user friendliness and the positive vibe of the marketplace. This is where the likes of HTC will have a really hard time to compete. Even Nokia will find it difficult to survive if Microsoft doesn’t build a more consumer friendly and richer ecosystem. This is something that I expect Microsoft will improve this year in preparation for an innovation-reboot with Windows 8.
Tomorrow, Apple will launch the new iPad 3. Things will get pretty interesting this year.
Now that the dust settled and everyone forgot about Nokia’s decision to partner with Microsoft, I can write quietly about why I think this is a good deal for both Nokia and Microsoft.
If you have a look around in the news world you will see that all the rage is about Apple versus Google, iPhone against Android iPad fighting the Honeycomb wave. Microsoft and Nokia are off the radar, as if they don’t exist. December 2010 saw Google activating 300,000 phones per day. This is a nightmare for Microsoft and Nokia is not doing much better on the much publicised “burning platform”.
But maybe in the long run, the evolution will not follow this trend in a linear fashion. We are wired to extrapolate past and present events and “predict” the future based on educated expectations. The expectation is that Android will keep growing at this pace and dominate the market copiously. I challenge this expectation.
The fact that so many manufacturers are crowding the Android space is because the mobile computing is really hot and growing fast. Google is the cheapest way for these manufacturers to have a piece of action with zero investment in the operating system. Consumers cannot get enough of it. Apple opened the floodgates with the launch of the iPhone. In one stroke Steve Jobs changed the telecomm space and moved the centre of gravity from network services providers to computing ecosystem makers.
If you browse the media chatter about mobile phones, the talk is still focused on handsets. The reviews analyse new models based on a few hardware design considerations; the operating system is never a differentiator within the Android camp. This is where things are going to be interesting in the next couple of years. A true complete design is not solely about the handset, but about integration in an ecosystem that is useful, practical, innovative, secure and aesthetically pleasing in the same time.
When it comes to the ecosystem, Apple has an edge against Google. One example is that all models in the Android space are compared with either iPhone or iPad. This is free advertising for Apple all the way. For individual manufacturers of handsets in the Android space the innovation process is limited to hardware details and there isn’t much room for playing outside the boundaries set by Google. Each one of them wants to gain market share not only against Apple but against the other Android players. For now the market accommodates all participants and it rewards them handsomely. But the day of reckoning is coming fast because the market has a limited size. Someone will loose badly.
This is why I believe Nokia made a good decision, provided Microsoft will do its part. Microsoft and Nokia can combine their research capabilities and resources to create an ecosystem rivalling Apple’s in a way that Google and the Android manufacturers cannot accomplish because there is too much inconsistency and strategic conflict among all the participants. In the long run Samsung, HTC and Motorola will compete among themselves at hardware level with little scope for value add.
Microsoft and Nokia have a chance to do something different and start a really interesting race with Apple. Nokia has outstanding customer service and it can exploit this partnership best by focusing on innovating this product category in a way the Android partners cannot dream of. Because of the critical strategic overlap between Microsoft and Nokia, it is possible that Nokia will be able to influence the direction of future design. One space in which these two partners can innovate is in shopping experience, such as for instance purchasing using the mobile phone and instant access to product information (Microsoft is a leader in the advanced product tagging). The Windows ecosystem can be developed to create a better market place experience. That is IF Microsoft will be able to support the partnership in a more creative way. Until now it hasn’t shown much and sometimes their effort in this space reminds me of the days when IBM was trying desperately to revive OS/2 when they failed because they could not get rid of the habit of behaving like a massive rigid corporation and compete with a much nimbler Microsoft.