Microsoft Flexes its Muscle

Somewhere in Microsoft's vast Redmond, Wash., corporate complex, a new wireless strategy is percolating. The computing behemoth wants to bring Windows to mobile devices, continuing its dominance in the operating system world. But Microsoft being Microsoft, the company is trying to create its own rules.

Instead of following standard channels like selling OS licenses to vendors and allowing them to push Microsoft products, the software maker is going directly to carriers. The logic is sound: Carriers, especially in the U.S., control the proliferation of the world's mobile devices.

Heading up Microsoft's new initiative is Pieter Knook, corporate vice president for network services and mobile devices. As his title implies, Knook isn't just hawking PDAs and smartphones — he previously oversaw Microsoft's carrier division and was also head of Microsoft Asia. Now Microsoft wants him to focus on wireless, hoping he'll leverage that expertise into carrier agreements.

To Knook, the data-device equation is a simple one. “If it's got a radio in it, you need a carrier network for it to work on,” he said. Convince the carriers your widget is the best, and the world will follow.

So far, the strategy seems to be working. With only six months on the job, Knook and his new mobile devices unit have announced partnerships with T-Mobile (a.k.a. VoiceStream), Orange, Verizon Wireless and, most recently, AT&T Wireless. Oddly, however, not a single device has changed hands between Microsoft and its new customers. In fact, in many cases the carriers haven't decided — or haven't announced — who their vendors will be.

What they HAVE announced is their intent to use Microsoft's Pocket PC and Pocket PC Phone Edition platforms. And Microsoft in turn has agreed to provide that crucial link between business servers and the mobile device.

“We're pretty confident we can get these devices into people's hands,” Knook said. “What we're not going to do is sell those devices to them. Vendors are good at that. But we'll make these devices work with the applications they want them to work with.”

Microsoft's strategy, however, appears to be at odds with conventional wisdom. The business of selling wireless devices to carriers falls within the domain of vendors, and so far Microsoft hasn't been successful in convincing handset manufacturers. The company has signed deals with smaller vendors and computer manufacturers such as Compaq and Casio, but the big three — Nokia, Ericsson and Motorola — still back their hand-picked OS developer Symbian.

Therefore, Microsoft is not just trying to get carriers to adopt its mobile OS. It faces the additional hurdle of convincing carriers to deal with entirely new vendors to get Microsoft-powered products.

Paul Crockerton, Symbian's head of corporate communications, said Microsoft's carrier strategy is simply a reaction to Symbian's vendor success.

Having failed to make its case with the vendors, Microsoft is now making its case to the carriers, Crockerton said. The problem with that strategy is that carriers are still technology-agnostic, while vendors are taking distinct sides. Communicating with carriers is important, Crockerton admitted, but ultimately the manufacturers of the vast majority of the world's mobile devices hold the aces.

“Microsoft has the experience and the pedigree,” Crockerton said. “They have the relationships with the carriers. But when you have Nokia saying that half the world's 3G phones will contain the Symbian OS by 2004, that shows a pretty strong commitment to the Symbian OS.”

Microsoft, however, wields a bit more influence than Symbian gives it credit for, Knook said. Quite simply, Windows makes the business world go 'round — its servers and software populate the IT departments and office PCs of the Fortune 500.

Understandably, Microsoft is counting on large enterprises to be the first to adopt mobile data and smartphone technologies, and they'll expect their new devices to access Exchange mail servers as easily as their desktop PCs, Knook said.

And while Symbian brags about its sizable developer community, there is no larger developer program in the world than that of Windows, Knook said.

In Microsoft's latest deal with AT&T Wireless, for example, the companies didn't just strike a deal to push the Pocket PC platform; Microsoft is also providing VPN solutions, MSN Messenger and location-based service applications. While AT&T said it's still agnostic about operating systems, an AT&T spokesman said the carrier has been impressed with the ease of the software's installation and how well it integrates with other applications.

“Talk to any CIO, and they want to wirelessly enable their work force,” the spokesman said. “But they want to do it simply and elegantly. They don't want to send a technician to install software on every laptop and PDA out there.”

Of course, wireless data is still a virgin market. Despite the enormous fuss the industry has made over data, carriers have launched GPRS and cdma2000 networks only within the last year. Knook and company have a level playing field ahead of them, but analysts expect that situation to change.

Ovum Research predicts that by 2007 there will be 260 million 3G connections in the world and three-quarters of a billion devices capable of receiving on-air data. But just because the market is big doesn't mean Symbian and Microsoft can — or will want to — share it. Microsoft showed the world that personal computers gravitate to one operating system. And as phones and PDAs become more like miniature computers linked into the global data network, the same consolidation will probably occur with the mobile OS.

You can bet Microsoft will do everything it can to make Pocket PC that one operating system. How? If you ask Knook, he'll tell you about the ubiquity of Microsoft's desktop software and its colossal development community. But press him further, and he'll boil it down to its essence: “Basically, people love Microsoft devices.”