In-Depth

Windows Mobile's New Moves

Facing strong competition from Apple and Google, Microsoft looks to re-tool Windows Mobile for the enterprise market.

• By Paul Korzeniowski
• 05/01/2009

The University of Kentucky's IT department operates like Switzerland: It's vendor-neutral and supports any platform its users want or need to work with. This approach has been applied right down to cell phones, which are playing an increasingly vital role in the university's overall IT strategy. There are 5,000 staff and faculty members who currently rely on their phones to access, manipulate and share university data. Typically, they access this information via mobile e-mail applications, but more recently software vendors have been adding support for mobile devices to their apps.

Over the course of 2008, Doyle Frisney, the university's CTO, saw a dramatic shift in users' preferences. Many rely on the BlackBerry, from Research In Motion (RIM) Ltd., but interest in Apple's iPhone has skyrocketed; about 1,000 users now work with that device. "The faculty members love the iPhone's user interface," explains Frisney. As a result, the iPhone has surpassed Windows Mobile-based systems on campus.

As similar trends develop in other businesses, the Microsoft mobile platform now finds itself at a critical crossroads. The operating system had been making slow and steady progress in the cell phone market. The Microsoft offering trailed Symbian Software Ltd.'s platform among consumers and RIM among business users, but was gradually climbing up the market-share ladder. However, Apple Inc. has blunted that momentum and, given the unveiling of Google's Android platform, the Microsoft device is now officially under siege.

"There's definitely a lack of buzz right now with Windows Mobile," says Bill Hughes, principal analyst at market research firm In-Stat. Microsoft unveiled Windows Mobile 6.5 in February, and phones based on the updated OS will be available in the second half of this year. However, the question remains: Will version 6.5 be too little, too late to restore Windows Mobile's lost momentum?

Smarter than the Average Phone
While cell phones have been largely a consumer device, their more evolved brethren, dubbed smartphones, have found their way into many enterprises. These devices have more than enough memory to support business applications. One need only look to RIM, which has built a multi-billion dollar business by catering to the mobile needs of corporate executives, to realize how many enterprises rely on these mobile devices. Underscoring their growing influence, unit shipments of smartphones have already shot past those of laptop computers, according to In-Stat. In fact, the market-research firm expects worldwide smartphone revenue to grow at a heady 30 percent compound annual growth rate for the next five years.

Because of its robust support of Microsoft's Office suite and its familiar Windows-like look and feel, Microsoft's Windows Mobile has become a key player in the smartphone market, with many businesses deploying the platform. In-Stat determined that more than one out of every five Windows Mobile devices finds its way onto corporate networks. Microsoft has successfully used that pitch to establish its product as the third-most-popular smartphone operating system after Symbian, which has widespread international appeal, and RIM's BlackBerry line, among business users.

That was until Apple came along and steamrolled Windows Mobile. Market researcher Gartner Inc. found that Apple's success with the iPhone propelled the Mac OS X past Windows Mobile for the first time during the third quarter of 2008. In that period, iPhone sales increased 320 percent from their 2007 numbers while Windows Mobile sales decreased by 3 percent. One reason for the dramatic change is that Apple did an excellent job with its device's user interface, according to some analysts. "Apple wasn't the first cell phone supplier to use a touchscreen, but it did the best job of making such a device very easy to use," In-Stat's Hughes says.

Android Attacks
Apple isn't the only vendor that Microsoft has to worry about in the smartphone market. Competition from Google Inc. has now crept over the horizon. Given the market's mature status (smartphones have shipped in various iterations for almost 10 years), Google has tried to differentiate itself from other suppliers in this highly competitive space in a couple of ways. The Android handset is based on the Linux OS (the natural enemy of Windows Mobile). Google also took an open source approach to building its ecosystem, while cell phone suppliers have traditionally relied on proprietary approaches.

As a result, the Google device seems to be gaining traction. In September 2008, T-Mobile International AG launched the world's first Android mobile phone. The T-Mobile G1 features touchscreen functionality, a QWERTY keyboard for easy data input and integration with Google desktop applications, such as Gmail, Google Maps Street View and YouTube. The initial response to the new product has been positive. HTC Corp., which is manufacturing Google's handsets, increased its Android production projections by 50 percent. By the end of 2008, HTC expected to ship about 1 million G1 handsets, up from 667,000, projected just a few months before the device's launch.

In addition, cellular network carriers are showing interest in the Android. They think Google may help them solve a long-standing problem: a slow ramp up in mobile advertising. "Carriers aren't realizing much money now from mobile advertising," says Alex Winogradoff, research vice president at Gartner. Many carriers expect Google to translate its advertising success from the Internet to the mobile market. Consequently, the vendor has been garnering support from various third parties. In December, 14 companies, including Atheros Communications Inc., Huawei Technologies Co. Ltd., Softbank Mobile Corp., Sony Ericsson Mobile Communications AB, Toshiba Corp. and Vodafone, committed to supporting the Android.

One reason Android has gained momentum is its open source approach. Unlike Apple and Microsoft, which have tried to keep tight reigns on third-party app development, Google flung its development doors open and encouraged developers to create as many diverse applications as possible for Android. Google helped foster the Open Handset Alliance, an open source community developing Android add-ons. Developers don't need to get Android apps certified by anyone, nor are there any hidden APIs. In most cases, handset vendors make their APIs accessible only to mobile operators.

Google has also been trying to help third parties quickly build viable businesses. When Android supporters sell software, Google doesn't take a percentage of the revenue. In contrast, Apple takes 30 percent for any application sold in its store. Google was even rewarding developers with cold, hard cash for building unique applications. The company donated $10 million for various competitions and has awarded developers with amounts ranging from $25,000 to $250,000 for developing innovative Android add-ons.

Following Google's initial success, the open source movement seems to be gaining traction in the mobile handset space. Since its inception in 1998, the Symbian OS had been closed, but it's now moving to embrace an Android-like model. In June 2008, Symbian's board of directors voted to launch the Symbian Foundation, which is intended to transform the mobile operating system into an open source system. Initial supporters included AT&T Inc., LG Electronics, Motorola Inc., Nokia, NTT DOCOMO Inc., Samsung Electronics, Sony Ericsson, STMicroelectronics, Texas Instruments Inc. and Vodafone.

To make the transition, ownership of the mobile operating system entity (which had been shared among its supporters) had to change. In December 2008, Nokia, which had always held a dominant position, acquired all of the outstanding shares of Symbian. These changes have attracted additional supporters. In October 2008, 12 new backers, including Fujisoft Inc., Huawei and Visa Inc., threw their weight behind the Symbian OS.

Redmond's Enterprise Play
The emergence of the iPhone and Android, as well as acceptance of open source initiatives, stalled Windows Mobile's momentum in 2008. However, Microsoft still has some chips it's playing in 2009 that could help its product regain its lost luster. Many handset suppliers are looking to the business market to drive sales for a couple of reasons. One is that smartphones' high prices -- starting at $200 and going up and beyond the $700 mark -- are often too high for consumers. Also, the increased functionality found with these devices makes it more likely that they can support business apps. Traditionally, they lacked sufficient memory and the intuitive interfaces needed for use by executives, but that's no longer the case. This shift plays to Microsoft's strengths. "Microsoft is much more focused -- and much more in tune with -- the enterprise market than the consumer segment," In-Stat's Hughes says. In comparison, the iPhone has been largely a consumer device, with only about one out of every 10 iPhones being used by executives, according to In-Stat.

Business users have special needs. While Apple and Google have created a buzz with their new cell phones, there are questions about how well their respective products operate in the corporate space. "Security on new devices is often an open question-especially for enterprise users," says Neil Strother, an analyst with Forrester Research Inc.

Google has already encountered problems with Android's security. The device originally included a back door where anything a user wrote could be viewed as a system command, essentially providing hackers with entry to the system's internal features. (The problem can be easily illustrated. In any text entry box -- even on a Web page or in the address book -- a person can hit the Enter key, type "reboot" and hit Enter again; the handset will then suddenly restart the OS. Commands executed like this run as root users, with complete access to all of the system's controls. This flaw lets hackers reprogram devices and complete their dirty work.) After the problem was discovered in November 2008, Google issued a fix, but the slip-up underscored the company's fledgling status in the cell phone market. This has done little to encourage enterprises to rely on Google's new system.

Windows Mobile Weaves a Web
Traditionally, Microsoft has fared well in building software ecosystems. Recently, however, it has found itself following rather than leading developments in the mobile handset space. One problem is that the company has lacked a compact, fully featured, standards-compliant Web interface. The company plans to address those issues with a new release, Windows Mobile 7.0, but according to multiple press reports that update is not expected to arrive until 2010. The new operating system is expected to include a more robust Web browser, an improved user interface and support for more third-party products.

Version 7.0 is expected to feature Internet Explorer Mobile 6, the latest version of Microsoft's mobile Web browser. This latest browser is expected to run on handheld devices that have at least 128MB of RAM and a 400MHz processor. Rather than being sold as a separate product, the browser will be integrated with the Windows Mobile 7.0 OS. The new browser is also expected to include several new features. Traditionally, mobile handsets have lacked sufficient processing power to support full-function browsers. But this time, Internet Explorer Mobile is expected to include a full HTML engine. A dual-mode feature will let users switch between full HTML browsing and browsing of Web site content specifically designed for mobile devices.

The popularity of Apple's iPhone has led to a change in user interfaces. "Every vendor needs to offer touchscreen capabilities," Forrester's Strother notes, and Microsoft is no exception. Its new mobile OS will include touch features, including support for panning, Web search integrated with the browser's address bar and multiple levels of zooming.

Windows Mobile 7.0 will also be better able to work with other vendors' applications. The device is expected to support Adobe's Flash Lite 3.1, a mobile version of its Flash runtime engine that's widely used by Web sites to display interactive and video content. It's also expected to work with AJAX and XML and JScript 5.7, so third parties can design interactive, mobile apps.

So while Microsoft has made attempts to consistently improve Windows Mobile, upcoming improvements take on more significance than those of the past. If Redmond can't leverage these improvements to regenerate some of the buzz it had around Windows Mobile, and if the iPhone and Android continue to nick away at its market share, its status may be relegated to that of a second-tier product in a strategically important enterprise market.