Thoughts on Windows Phone 7

Microsoft just released some "sales" figures for Windows Phone 7. Reporting that 1.5 million devices have been "sold" since it's launch in late October. To put this in perspective about 18,000,000 Android devices have been activated in the last two months.

I give Microsoft a lot of trouble on this blog. It's not because I dislike the company or its technology. Like millions of IT professionals, I have worked with Microsoft technology for most of my career as a user and as a consultant. I could rock SharePoint, Outlook, Word, Excel and PowerPoint (even Groove) as well as anyone and often served as the super user helping others utilize the software as effectively as possible. Microsoft has tens of thousands of super smart employees and lots of great technology. I give Microsoft trouble because it's the status quo - somebody has to be. Microsoft technology is great, but the day of the client/server has passed. You simply can't be the world's most profitable client/server software product company and also lead in the cloud - especially at the same time.

The Internet is one of the most disruptive innovations in our world's history. Right up there with the plow, the printing press and the combustion engine. From an economic perspective, the most important characteristic of a disruptive innovation is that it totally destroys business models that had previously been correct. Microsoft created the world's richest man by selling client/server software products more effectively than any other firm. They're going to continue to rake in billions of dollars in profits annually as a mature software product company of their size should. Nearly all of Microsoft's profit is driven by Office (client) and Windows (server). Before the Internet, client/server was the most effective means of providing the broadest range of technology to as many people possible in as efficient manner as possible. But we live in a world with the Internet now. The web rules! One company makes more money from the web than any other, Google. But Google's a consumer company that makes its money from search. Sure, but that's only half the story. Google's going to do about $30,000,000,000 in business this year, they're not getting that money from consumers. They're getting that money from businesses. Including 10 out of 10 of the Fortune 10. They're providing these firms global-scale Software as a Service (SaaS) applications. Big companies spend millions of dollars every month with Google. What looks like disruptive innovation from Microsoft's perspective creates the very foundation of every cent gobbled up by Google's business. In short, one company was created before the Internet and the other was created for the Internet.

Back to Windows Phone 7. No, Microsoft did not sell 1.5 million devices - their press release was misleading. They've "sold" that many phones to partners, not to customers. Microsoft has tons of cash, they're going to stay in mobile. But that doesn't mean it's a good option for people. Windows Phone 7 is an improvement over Windows Mobile as Windows 7 is an improvement over Windows XP but so what? The world has moved on. Most people know this intuitively. Anyone who compares an iPhone 4 or Android 2.3 device to a Windows Phone 7, 9.9 times out of 10 is going to choose the incumbents. Apple and Google have 3 and 2 year leads respectively, they're not slowing down and Microsoft's not speeding up - the gap in functionality will continue to increase.

Apple passed Microsoft as the world's most valuable technology company. The iPad was the fastest consumer product to $1,000,000,000 in history. The updated MacBook Air line redefines a 20 year old form factor and pushes the limits of display and storage technology. The iPhone has essentially redefined how people view their relationship with technology - it is personal. Google has pushed Android to the #1 smartphone platform in the US in just about 24 months. They push the limits of their architecture in their core business with innovations like Google Instant and more powerful search indexing. Google has invested around $9,000,000,000 in their infrastructure over the last 5 years - this infrastructure not only powers Google.com - it powers Google Apps. Google Apps is the leading service in higher education, has more than 30,000,000 business users and adds new functionality about every 2 weeks rather than every 3 years. Google Apps powers more than 3,000,000 businesses, our country's second largest city as well as the federal government's General Services Administration. Washington D.C. moved to Google Apps in 2007 under the leadership of Vivek Kundra - now the Chief Information Officer of the United States. The Chrome browser continues to add market share and now ChromeOS is being tested by consumers and businesses. The Google Apps Marketplace was one of the first business-centric App stores. Google App Engine for Business is to ramp up in 2011.

This isn't about being a "fanboy" of one firm over another. This is about the cold objectivity of economics. It is about the role of disruptive innovation and consumerization in today's marketplace. This is about knowing that tomorrow will be different from yesterday. Microsoft is sitting on $40B in cash but all the cash in the world can't change who you are at your core. It's important for individuals and companies to understand how our world has changed so we can get the most bang for our buck - the buck that matters.