"The world is shifting from a battle of devices to a battle of ecosystems," Nokia CEO Stephen Elop stated during his keynote speech at this week's Mobile World Congress in Barcelona. What he means is that it's no longer going to be about what manufacturer's device or model you use - it's going to be about what mobile operating system it runs. Will it be Apple's iOS or Google Android? Or will it be, as Elop certainly hopes, a Microsoft phone?
Microsoft/Nokia Deal Shakes Up Mobile Industry
"Microsoft and Nokia represent a natural partnership," Elop explained. "And people are getting it."
With Nokia's announcement before the start of the annual event, the mobile industry has seen a major shakeup - the company announced it would scrap its plans to continue work on its own smartphone operating system (OS) called MeeGo and instead license Microsoft's new Windows Phone 7 software for its devices. Although there will be one MeeGo phone to ship this year, the technology will remain an open source R&D project, and not the future of Nokia's smartphone compete strategy, as had been planned.
For Microsoft, of course, the deal was a no-brainer. Its newly launched mobile OS received favorable press and reviews, but has had a slow start in consumer adoption. Microsoft isn't releasing actual consumer sales numbers, a telling sign that it doesn't have a number worth bragging about yet. However, it will talk about licenses sold - 2.1 million, by last count. The number represents the faith the mobile operators have in Microsoft's OS.
For the record, Microsoft's official statement on handset sales is that it "doesn't know" the numbers - that's data the operators have, not it. "But returns are low," Microsoft's mobile director Brandon Watson claims. And based on exit surveys done by a third party outfit, Microsoft found that 93% of new Windows Phone 7 customers are reporting that they're either "satisfied" or "very satisfied" with their new devices.
An "Operator-Friendly" OS
Microsoft and Nokia are positioning their partnership as the most operator-friendly mobile ecosystem. "It is our belief that this is good news for operators," said Elop. "Nokia has a long-standing relationship with operators all over the world. We understand what it means to be the most friendly partner for operators."
Because of its close ties to operators, Nokia has been able to work out billing arrangements with 103 operators in 32 countries. For Nokia end users, that means the apps they download can be paid for via their next mobile bill, a practice known as "operator billing." It's expected that this same feature will come to Nokia's Windows Phone 7 devices, too, at some point in the future.
Stephen Elop wasn't the only one talking up the operator-friendly relationship this week, either. Microsoft CEO Steve Ballmer, whose keynote speech preceded Elop's, also used the part of his time on stage to express similar sentiments. Microsoft, said Ballmer, is "working to ensure that the mobile operators can add value over and above connectivity, distribution and customer service."
Operators Fear Being "Dumb Pipes"
What Ballmer is referring to is operators' fears that the other mobile players - namely Google, whose disruptive Android OS was dominating in terms of shipments and market share - just want to turn their services into "dumb pipes." That is, Google wants operators to simply exist as the movers of data from point A to point B, without letting them also take part in mobile ecosystem themselves.
Now, with Microsoft's deep pockets and Nokia's distribution, not to mention its excellent hardware designs (yes, those were real designs leaked to Engadget Elop confirmed), combined with the pitch to operators that this is the OS for them, it's clear that the market has shifted - it will now be a 3-horse race between Google, Apple and Microsoft. And maybe RIM too, although that's looking less likely these days. Even though RIM's shipments are high enough to put it in the #2 position, its respective market share has been declining - 19.5% in Q4 2009 to 13.7% in Q4 2010. It looks like Apple, #4 in market share, may one day soon take over RIM's position - especially now that it's on another U.S. carrier.
How Soon Will We See Nokia Windows Phones?
With the ink still drying on the Microsoft deal, the question now is how fast can Nokia actually ship a product (or products) running Windows Phone 7 on its hardware? Elop says he's trying to get Windows Phone 7 out this year. And the company will have a "significant volume" in the market by 2012. The company won't speculate much beyond that, however. But 2011 is shaping up to be an interesting year.
Image credit: Engadget
Disclosure: The author's travel, hotel and conferences expenses were paid for by Qualcomm.