"Cloud first, mobile first."
That's the rallying cry of Satya Nadella, Microsoft's new chief executive. Having swept away the idea that Office, one of the company's two monopolies, should only run on its other monopoly, Windows, by introducing Office for iPad, Nadella has now swept away what was another tenet of Microsoft's operation: software should be paid for.
By removing the licence cost of Windows Phone and Windows for devices with screens less than 9in diagonally, Nadella is being both pragmatic and aggressive.
Pragmatism first. Windows Phone licensing never brought in much money for Microsoft; the biggest licensee was Nokia, which had more than 80% of the market, and Microsoft was paying it colossal amounts in "marketing" to help it cross the chasm from dumping its own Symbian to becoming a Windows Phone powerhouse. The former happened, the latter didn't. In fact, at an estimated $15 per Windows Phone licence, Microsoft was spending far more supporting Nokia than it ever got back. That it had to offer a €500m loan to help the company through its financial problems when it bid for its handset business (a deal that should conclude this month) shows how badly Nokia was doing.
By cutting the Windows Phone licence price to zero, Microsoft achieves a number of strategic aims. For a number of Android handset makers including Samsung, HTC and dozens of others which have signed patent licensing deals over Android with Microsoft, it is now actually cheaper - in licensing terms - to make a Windows Phone handset than an Android one. That's because the Android handset attracts a patent fee payable to Microsoft, while the Windows Phone one won't.
Will that be enough to drive the production of more Windows Phone handsets? That's unclear. Developing a handset involves more than loading some software into a ROM; there's all sorts of chip-specific and device-specific coding involved; firmware has to interact with software, and bugs have to be ironed out.
But if you're producing a handset in substantial quantities, the cost of doing that might well outweigh the "Android patent fee". It will be a fine balancing act for many manufacturers. But it does give Microsoft the chance to capture the interest of Chinese AOSP (open source Android, without Google services) handset makers looking to expand into the developed world.
Price tag: goodbye
The decision to wipe away the price tag is a victory for Google. But in some senses it was inevitable given Windows Phone's failure so far in the market. By pushing the price of a mobile phone OS to zero in 2008, Google gave handset manufacturers a huge incentive to use its software - even previous Windows Mobile stalwarts such as HTC. Given the choice between Symbian (dominated by Nokia), Windows Mobile (pricey) and Android (zero-priced, and with the popular Google brand) manufacturers plumped for the latter. The result: Android dominates handset sales.
Killing the Windows Phone licensing cost won't hurt Microsoft in any meaningful way. And it does give it the chance to sell more handsets; and if it does that, then it could have the chance to get more people using its cloud services.
Say hello to Cortana
Microsoft has also introduced a number of improvements to Windows Phone 8.1, including the addition of a voice-driven assistant called "Cortana", voiced by Jennifer Taylor, who voices the "intelligent assistant" of the same name in the video game Halo.
So we can now say that the table stakes for offering a mobile operating system are: apps, maps, voice recognition and assistance. Arguably, you could add search in there - in which case Apple is falling behind, because it relies on both Google and Microsoft for its search (Google in the browser, Bing inside its voice-driven "assistant" Siri).
Does Cortana change the game by bringing what looks like an impressive voice-driven assistant to Windows Phone? Not of itself. Voice assistance is an element that could be transformative, but its obstacles are less technological than psychological: people seem to get very self-conscious about talking to computers in public. The unpredictable accuracy of voice recognition - as Siri users will confirm, and as Windows Phone boss Joe Belfiore experienced to his discomfort during his presentation - doesn't help.
What about the many other features that are forthcoming in Windows Phone? It already has quite a few which match or better Apple's iOS or Android, such as Kids' Corner (a "safe" set of apps that can be used even while the phone itself is locked). The "live tiles" element is like an Android widget, something iOS doesn't have.
Now it has added "Action Center" which will "enable you to see notifications from ANY app – pinned or not – and to give you a customizable way to quickly access the settings you care about most, like Wi-Fi, Flight Mode, Bluetooth and Rotation Lock." If you're thinking that it sounds very like Android's pull-down notifications, and like iOS 7's pull-up Control Center, you're right - it is.
It has also introduced Word Flow Keyboard, which "is smart enough to learn your writing style and even knows the names of people in your contacts for faster typing". It sounds very like Swype or Swiftkey for Android - though Microsoft claims it's so quick that breaks Swype's world record for onscreen keyboard input. A similar system didn't transform the fortunes of BlackBerry's BB10, but it may offer some people faster typing.
Calendar has a new week view "which lots of people have been asking for". It does seem odd that it has taken four years to include a setting that most calendar apps take as read.
"Data Sense" (limiting how much mobile data you use) and Wi-Fi control is improved - something that was already introduced in Windows Phone 8. This is very similar to what Android does; on iOS you need an app to control total mobile data use (you can decide whether apps, iTunes music and ebooks are downloaded over mobile data, but not what or how much mobile data apps can use).
And Windows Phone is also dealing with what I saw, in first using it way back in 2010, as its information density problem. The main screen will let you have three columns, rather than two, of its live tiles. (Windows Phone advocates insist that what Microsoft actually means here is "six columns rather than four". Here's the screenshot showing what Microsoft means by "two columns" and "three columns" (left and right):
It seems that the big tiles of 2010 are gradually fragmenting and turning into smaller ones, each a quarter of the size of the originals. Is it familiar?
In Windows Phone 7, you could get a maximum of eight tiles on the front screen; now you'll be able to get between 12 and 66 on the front area alone before scrolling. (The iPhone and Android show 24.) That's nearly as many apps as many people have on their phone. (It also looks like arranging the mixture of full-size, half-size and quarter-size ones could turn into a Tetris-like game quite quickly.)
Of course, tiles don't have to be apps, or link to apps; they can be shortcuts, or widgets that update with information. (At their smallest size, though, you may find the concept of "glance and go" challenging.) It's fascinating how the gravitational pull of the grid of icons that has ruled mobile phones pretty much since they had usable screens is exerting its influence again.
But again, the key question is: will adding these features make any difference to Windows Phone sales? In the short term, probably not. That's because the factors that determine phone sales aren't generally about features. In the first place they are the marketing push behind a handset and how eager the carriers are to sell them; for the user, they are dependent on factors such as what peers think of them, what apps are available, and price.
The price is right
Windows Phone - specifically, Nokia - has had some success at the low end of the smartphone market in the developed world: its Lumia 520 has sold well. AdDuplex had it with 26.5% of the Windows Phone installed base in November 2013, and 35.3% of all Windows Phone 8 devices in use; by contrast the top-end Lumia 1020 doesn't figure as a separate entry, ie more than a couple of percent, anywhere except Australia, where it's 4.6% - and the Lumia 520 is 23.9%. Notably, the Lumia 920 does feature in second place in many countries (top in Germany) - but it's the cheap version which does best.
Any sale is a sale - but if you're going to build value around your ecosystem, you need the users who will spend money on your phones and the apps on them.
And apps really matter. For someone under 24, for instance, Snapchat has become pretty much essential. But you won't find an official version on Windows Phone. (There are "might work" unofficial ones.) The dating app Tinder? Not there. This "app gap" is Windows Phone's biggest pain point, and adding the inarguably useful features to 8.1 doesn't change that. Microsoft still hasn't mobilised app developers to write for it, for reasons which lie in its woefully low installed base in every country in the world compared to either the iPhone or Android, and especially the combination of both.
You can talk all you like about "market share" (better phrase as "sales share"), but the installed base data continues to show the combination of iOS and Android growing more quickly, and that's what developers focus on.
It's a chicken-and-egg situation. If Nadella can solve that one, he will have cut the Gordian knot that has been holding Microsoft back in mobile for years.
Having begun unravelling Windows Phone's commitment to giant icons, Microsoft is doing much the same to the insistence that Windows 8 should be all about big icons too. It's already rolling back "Charms", for which you had to know the secret incantation (pull from the right hand side of the screen) to invoke; instead it will have search, power and settings buttons on the main Start screen.
But the new 8.1 will look even more familiar to people who were spooked by the "Metro world" of the original version 8. In desktop mode, a taskbar will let you pin an app as a Favourite, not just those in desktop mode. And there will be a bar at the top of app windows to make them easier to close and minimize.
In short, Windows 8 is becoming more and more like Windows 7. The more things change, the more they become what they used to be. Microsoft still needs Windows to flourish - it generates a huge amount of its revenues and profits. But PCs aren't Nadella's priority, and nor is Windows, as he had made clear through his repeated instruction. Cloud first, mobile first.
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