Implications of the Nokia Microsoft alliance

If you didn't think the mobile operating system business was dead, this week's announcement of a new alliance between Nokia and Microsoft makes it clear by signaling the death throws of the mobile OS market. Windows Mobile is essentially the only stand alone high level mobile OS that charges a license for its software and is loosing miserably in the smart phone market. The numbers from the second quarter of 2009 reveals the smart phone market growing 27% with Widows Mobile shipments down 6%.

It is hard to compete in a market where your competition is giving their software away for free. Clearly, the ability to add value in the software stack is not in the operating system but higher up in the stack and in the network.

The one competitive advantage that might have justified the Windows Mobile license fee was the tight integration and compatibility with Microsoft desktop operating system and Office applications. With Microsoft building applications for the Symbian platform, that advantage is being transferred to Nokia.

While this move by Microsoft was unavoidable, the decision to partner with Nokia, a once intense competitor, is a smart move. As part of the announcement, Nokia will renew its Active Sync license and ship Microsoft applications on the Symbian platform. Presumably this comes with a attractive licensing arrangement for Microsoft.

What does Nokia get? A position in the mobile enterprise market, a market they abruptly exited last October.

To focus on the news that Word, Excel, PowerPoint, etc. will be shipping on Nokia devices would be missing the big picture. No one really builds spread sheets on their smartphones, and editing documents on mobile devices is also relatively rare. What is compelling is the Microsoft collaboration software that will be available on Nokia devices including access to Sharepoint and Microsoft Communicator. Microsoft provides the synchronization and collaboration technology that has eluded Nokia and is the foundation of the Microsoft's future strategy championed by Ray Ozzie. As the computing industry continues to move more computing to the cloud, synchronization across devices will be key.

In the short term, both companies working together will provide tough competition for RIM in the enterprise market but the long term implications of the partnership may have more impact on the wider marketplace. One long term benefit for Microsoft is the avenue Nokia provides to access emerging markets. Nokia has seen strong growth in developing markets where PC's are often too expensive for most consumers and small business people. Should the alliance between the two companies blossom, new Microsoft customers first experience with Microsoft software may be on a Nokia phone.

The collaboration of the two of the largest technology companies and most loved Global brands may make this weeks announcement a pivotal point in the evolution of the industry.