Microsoft Build – The great trade off

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One thing at Build 2015 really stood out.

• Microsoft launched its Build 2015 developer conference with a plethora of announcements but at its heart only one thing really stood out.
• Microsoft has launched Software Development Kits (SDK) that allow developers to bring the code they have written for Android or iOS directly into Visual Studio and re-compile the code for Windows.
• This is a crucial announcement because if it works, it could fix the problem which has kept many users away from Windows Phone: lack of decent apps.
• Microsoft is on a mission to make of the most of the “post PC” opportunity focusing on mobile and cloud.
• In terms of cloud, Microsoft is doing well.
• However when it comes to mobile Microsoft is floundering.
• Buried in the last set of results was another market share loss in smartphones to just 2.6% with gross margins in negative territory.
• It is clear that there is far more to Microsoft’s mobile strategy than just devices but when one is creating an ecosystem, it is much more difficult to succeed if one does not control the platform.
• There are four reasons for this:
  • First. Using the devices of others means that one is just one of many clamouring for the user’s attention and the owner of the platform can cut one out at any time.
  • Second. Without being able to marry the hardware and software to optimise performance, one’s ecosystem will always be at a disadvantage to the ecosystem of the platform’s owner.
  • Third. Monetisation of the ecosystem through hardware, which is the most effective method, is no longer possible.
  • Fourth. Ecosystems exist on multiple devices but still the smartphone is the device upon which the user spends most of his time and it is on the basis of this device that the choice of ecosystem tends to be made.
  • Hence it is much more difficult to be the ecosystem that user choses if there is not a successful mobile platform available.
• Consequently, I believe that it is very important for Microsoft to have a mobile device portfolio that is capable of offering Microsoft’s Digital Life and Digital Work services in their best light.
• Hence, it cannot allow this business to quietly die in the background.
• Although the financial analysts won’t notice, it will substantially undermine a huge part of what Microsoft is trying to achieve.
• Microsoft is losing share in smartphones because the availability of apps is poor and because the offering is badly marketed to users.
• There are two ways to fix the apps problem.
• Microsoft can either create software in its platform that emulates iOS or Android or make it as easy as possible for developers to get their apps onto Microsoft.
• The first route is the easiest as it requires no involvement from the developer, but history has shown that the apps in emulators never run at their best.
• The second route gives the best performance of the apps but it requires some input on the part of the developer as recompiled apps have to be debugged and tweaked before they will run properly.
• This is where there great trade-off is to be found.
• Microsoft has chosen to optimise the performance of the app but requiring developers to have some input is very risky.
• This is because the credibility of Microsoft in mobile is now so bad that many developers simply can’t be bothered to develop for Windows no matter how easy it is.
• This is why Microsoft must fix its market share problem in mobile devices because if share continues to decline, the developers will increasingly think that they were right not to bother.
• Windows 10 offers a unified code base between PC, console, tablet and mobile phone and it also represents Microsoft’s last chance to get mobile right.
• Failure in mobile will mean that a large part of the opportunity that it sees will pass it by and long term profit growth will be much lower.
• Fortunately, everyone expects Microsoft to fail in this space and so success is not built into its valuation.
• I remain happy that it is safe to live in hope.