The Failure of Windows Phone and the Next Big Thing

Microsoft has artificially kept Windows phone on life support since its mid-2015 decision to wind down its smartphone ambitions. There are a lot of theories about why the software giant is doing this. But here’s the real reason.

First, let me redirect you from the obvious answers, as any tech enthusiast topic like this one comes saddled with too many conspiracy theories to even count. And most people’s opinions about why Windows phone failed in the first place, let alone why it’s still here despite having failed, are either untrue or only a minor part of a wider story.

It’s not because of HP or other partners. It’s not because of the Universal Windows Platform (UWP) or its still-non-existent gotta-have-it apps. It’s not for business customers, none of which were asking Microsoft to create a phone platform that could be managed like PCs. And it’s certainly not for the few remaining fans of the platform. Sorry, guys.

No, Microsoft has kept Windows phone chugging along on life support for one simple reason.

It’s so they don’t miss out on The Next Big Thing.

When I spoke to Microsoft about its Windows phone failures in mid-2015, I was told many things, both on and off the record. But what it boiled down to was this: Yes, I was correct in my assertion that Windows phone had failed. And yet, Windows phone would be kept limping along regardless. Why would Microsoft do that, I asked?

In July 2015, the answer was this: Microsoft had institutionally failed to meet the iPhone threat and had, as a result, failed to gain any traction in what has proven to be the most popular personal computing era in history. This was problematic for this maker of platforms for a number of reasons. But the most obvious is that, by essentially missing a generation, Microsoft risked becoming obsolete on the client.

So, I was told, Microsoft would continue to at least maintain its mobile operations. It would wait out this generation and try to latch onto The Next Big Thing more quickly than it had with mobile. The expectation at the time was that this Next Big Thing would be hardware related. Perhaps wearables. Perhaps augmented/virtual reality. Perhaps the Internet of Things.

If that sounds awfully vague, you’re right: It was. But over a year later, and thanks to inroads by Amazon, Apple, and Google, we now know what that Next Big Thing is. It’s not the Internet of Things, and it’s not wearables. (And it’s certainly not HoloLens.) Though to be fair, these devices, like PCs, tablets, smartphones and various home and work appliances, will play a role.

The Next Big Thing is AI. Artificial Intelligence.

And you Microsoft fans in the audience are hopefully feeling a bit better right now. Because Microsoft is only one of a handful of firms that has any chance at all at being successful in this emerging field.

Of course, the others are Amazon, Apple, and Google, none of which are particularly interested in opening the door for the company that formerly loomed over the industry. Thankfully, each has its own challenges. And Microsoft’s biggest challenge, ultimately, is the reason Windows phone is still a thing: It’s the only way that Microsoft can show off how its AI and client-side capabilities can really work together.

Consider the competition.

Amazon, inexplicably, has pioneered the AI push into homes. We will look back on this with wonder, because Amazon has never created a consumer hardware product with any staying power. And yes, I am quite familiar with the Kindle e-reader, a single-use product that being swept aside by multi-use solutions like phones and tablets. Two businesses in which Amazon, by the way, has failed mightily. (Kindle makes sense as a content platform, of course.)

Apple has the weakest position in this emerging market, as any Siri user can tell you. But it has chosen to live or die by the i-sword: By relegating Siri only to its own devices, and by eschewing the cloud-based machine learning capabilities that its competitors deploy with abandon, Apple’s solutions will never be as good as those from Amazon, Google, or Microsoft. In fact, their only saving grace is that Apple benefits from several hundred million compatible devices out in the world. But this is a platform ripe for defeat, and then for more capable cloud-based partners.

Google should have both pioneered this field and dominated it, and the smart money is that they will eventually do so. They have the strongest position: Google technologies are quite popular on PCs (via the web) and on newer mobile devices like phones and tablets. But because Google made Android an open(ish) platform, it faces the possibility that others (cough, Microsoft) could undercut them on their own platform, much as rival browsers did to Windows and IE a decade and a half ago. Its recent efforts at combining hardware and software for the best possible experience is a belated response to what Apple—and even Microsoft—are doing. And an attempt to avoid Microsoft’s fate at the hands of antitrust regulators, which sidetracked Microsoft in the early 2000’s and prevented it from crushing its web browser competitors.

Speaking of which.

Microsoft is in a unique position. There are allegedly still 1.5 billion Windows-based PCs out in the world, but I think I can fairly state that few Windows users are passionate about the platform, at least in the same way that they may be about their smartphones, tablets, smart watches/wearables, and other devices. I suppose it’s the productivity focus, but the reasoning doesn’t matter. PCs are yesterday, and they’re for work. In any event, they are declining.

In the past, Microsoft was able to leverage Windows to gain access to new markets and to hobble competitors. It did this with office productivity software. It did this with the Internet and web browsers. And then … antitrust happened. Microsoft was unable to respond effectively to Apple and Google in the mid-2000’s. Today, these firms dominate the personal computing market, and they’re making inroads into business as well. Microsoft is no longer on top, and the best outcome it can expect is a three-way tie of sorts. Or at least to be a player.

And this is why we’re stuck with the embarrassment of Windows phone.

On the back-end, in the cloud, Microsoft has it all. It has the makings of a first-class cloud-hosted, machine learning-based AI superstructure. But what it doesn’t have is a way to get those capabilities to users. In the past, it would have simply leveraged Windows to make its back-end services popular. Today, there are challenges.

Microsoft has of course pushed its back-end services in Windows. It has brought Cortana, a front-facing, client-side interaction point for its AI and machine learning capabilities, to Windows. And it can claim over 100 million daily users.

Which sounds good until you realize that there are over 400 million Windows 10 users, so 3 out of 4 are ignoring Cortana. There are over 1.5 billion Windows PC users overall. Over 1.4 billion Android users. Over 1 billion iOS devices sold. And several mobile apps with well over 1 billion users.

Worse and perhaps most obviously, Cortana and Microsoft’s back-end services are only front-and-center on old-school PCs and on the one smartphone platform no one wants or uses, Windows phone. And Microsoft has no clear path for changing that.

Android is, of course, Microsoft’s best hope. And Microsoft fans should be praying that Google’s future also unravels in an antitrust nightmare that prevents it from keeping competitors out of Android. That we will one day look back on this moment, as we do to the early 2000’s, as a time when everything changed because the dominant platform maker was made ineffective by legal issues.

Apple will never give Microsoft the same access to iOS, of course, but there is still hope there, too: As I noted earlier, Apple cannot and will not be able to match the cloud-hosted capabilities that Amazon, Google, and Microsoft can muster. One of these firms, I think, will eventually partner with Apple to make Siri more useful. And that firm should be Microsoft.

In the meantime, Microsoft needs to prove that it can in fact push its emerging cloud competence down to the client and make it work. Not just on PCs. But on mobile. On today’s platforms. A big part of that work will naturally happen in the cloud, and I think that Microsoft’s Azure efforts speak volumes for its capabilities. But mobile is necessary.

Trouble is, the client side is a bit trickier. PCs are what they are, but Microsoft also needs a mobile story and here, we’re stuck with Windows phone, the little mobile platform that couldn’t. Like Steve Jobs’s Next in the 1990’s, it is a failure, a vision of what could have been. But like Next, it could provide a blueprint for the future. But that future is AI, not mobile. Just like Next’s ultimate future was mobile, not the PC.

If you didn’t watch yesterday’s Google event, please do so. In his opening remarks, Google CEO Sundar Pichai basically makes the case for what I am saying here, noting that AI is the next major platform shift after PC, the Internet, and mobile.

“We are at a seminal moment in computing,” he said. “Computing has always had big shifts every ten years or so … When I look ahead at where computing is headed, it’s clear to me that we are evolving from a mobile-first [world] to an AI-first world.”

This is the future of which we’ve often spoken. A future of pervasive computing, where, as Mr. Pichai puts it, “computing is always available, everywhere in the context of a user’s daily life.”

In this world, mobile devices as we now know them will eventually fade away, much like PCs are doing today, because they will be less necessary: At home, out in the world, wherever, there will be more and more places where we can simply get what we need—the time, the weather, a sports score, an update from a loved one, whatever—at any time. We will look back on a time when we needed to grab a device in our pocket with the same wry smile we get when we think about walking to a particular room in order to sit in front of a desktop PC. It will be old-fashioned.

Mobile couldn’t have happened without previous investments and advances in PCs, the Internet, and the connectivity that makes them both work together. Likewise, this pervasive, AI-based future, wouldn’t be happening without mobile and the cloud coming first. It will lead to devices around our homes, at work, and around the world, devices that we do not own but will use.

This is the next platform, the Next Big Thing. And once again, Microsoft faces an opportunity to get it right, to get in early, and to be a major player. No, it will probably not unseat Apple or Google, though I think Amazon’s time in the sun is ending. But it can be a major player. Should be a major player.

And that is why Windows phone is still limping along. Microsoft’s experience in mobile, though a failure in the market, will help guide how the software giant makes this next step. It lead to Cortana on phones and then on PCs. And it should lead to Windows Mobile-based devices that we can sprinkle around our homes, and workplaces, and in public infrastructure. One day, Windows Mobile could be secretly successful, just like OS/2 was in ATM machines. Something that is part of the fabric of our lives, even though we don’t realize it.

So yes, Windows phone has failed. But rather than face another generation of what could have been, Microsoft is keeping it around so they can fight for the future. It’s a future for which they are uniquely positioned.