Microsoft Will Finally Have Its Own Devices After Buying Nokia

ITCB-TimBanting

Tim Banting

Summary Bullets:

  • In order to increase revenue in the “post-PC” era, Microsoft needs to create a compelling proposition to attract consumers and business buyers in foundational smartphone and tablet markets.
  • To fulfill its vision of becoming a devices and services company and to maximize profit, Microsoft needs to decouple its reliance on its current platform partners through building its own hardware. Nokia provides the much needed means of doing so.

My old school badge on my blazer read “Nemo Sibi Nascitur” (Latin: “No one is born unto himself alone”) highlighting the need to work together and support each other, something that true partnerships are all about.

If the poorly received Surface device wasn’t enough to convince hardware manufacturers to question their Microsoft partnerships, the recent deal to buy Nokia’s mobile phone business for 5.4 billion euros has spelled out Microsoft’s strategy (in bold 36 point font) of its intent to become a devices and services company.

With a mixed history of manufacturing its own hardware products (on the plus side – Xbox, mice and keyboards, on the minus – Kin, Zune and Xbox with its “red ring of death”) and facing the risk of being shut out of the smartphone OS market, this acquisition may not have come as a huge surprise to industry watchers.

Windows 8 hasn’t got the traction it needs in the marketplace and definitely has not sparked a renaissance in the declining PC market. Emerging economies (such as China and Latin America) are turning to smartphones and tablets rather than heavy, battery hungry laptops or expensive ultra-books.

Nokia will at best help stave off Microsoft’s declines in the slowly dying PC market. Bringing Nokia’s smartphone design and manufacturing capability into the Redmond fold provides a greater level of vertical integration and economies of scale than its rival Apple, who continues to contract out its manufacturing. This offers Microsoft a better chance to increase market share for Windows Phone and keep the profit it would have paid to OEM partners.

However smartphone and tablet devices are but part of the overall solution. A complex mix of content, services and applications go hand in glove with shiny, high-tech gadgetry.  Whilst Microsoft certainly has an “app gap” when compared to Apple and Android, it is clear that integrated services such as SkyDrive, SkyDrive Pro, Yammer, Skype, Lync and Office 365 make the whole mobile proposition more appealing to both consumers and businesses alike.

However this move leaves me wondering what this means for not only hardware manufacturers but Microsoft’s systems integrator partners over the long term. After all, the core competency of said systems integrators is designing, deploying and maintaining Microsoft applications that run in enterprise data centers. What role will they have to play in an emerging, end to end world that consists of Office 365 cloud-based services tightly integrated with Microsoft’s homegrown device portfolio?

About Tim Banting
As Principal Analyst within the Business Technology and Software group, tracks and assesses the rapidly evolving communications and collaboration marketplace. His areas of coverage include collaboration platforms, unified communications, video collaboration and social analytics

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