Microsoft is involved in many of the things that Google is,
and in that sense they compete on many levels. Although, the core business of
the two companies and the main platform that they operated in used to be
different, with the advancement of the internet and integration of many
ecosystems and platforms into it, companies that were not involved in certain
industries find themselves in a situation where they have to expand their core
business or redefine it.
Google’s core service was the search engine just as
Microsoft’s was the Windows OS, but the development of the internet industry
has pushed each company to enter the initial territories of the other, in
addition to new territories. Even though Microsoft was a pioneer in developing
OS for mobile devices, it soon lost its market position to Android and iOS. But
the smartphone market is not something that Microsoft could easily lose and
remain indifferent; today with the spread of internet into different devices
(PCs including laptops and tablets, and smartphones), it’s impossible to view
them as separate, unconnected systems whereas they are actually today the
members of a bigger ecosystem or platform. Microsoft still makes most of its
money from Windows either directly or as a platform for other products and
services.
Therefore, it is very important to protect Windows as a platform that
spans over different devices including smartphones. Microsoft was trying to do
that through its cooperation with Nokia as its means of delivering the Windows
Phone OS. In fact, Nokia was probably Microsoft’s only hope to stay in the
smartphone OS market as most other OEMs had put their biggest bets on Android
whereas Apple has its own exclusive market.
On the other hand, Nokia had made its own strategic mistakes
and even though it was a pioneer in smartphones, it failed to appreciate the
network effects that would determine the success of an OS and fell behind Apple
and Android. But even when they realized that and decided to discontinue using
Symbian, they chose Windows and not Android. One reason that they did so was
perhaps the prospect of partnering up with Microsoft, using their Windows
Mobile OS and creating a platform that could ultimately compete with iOS and
Android, even if that meant having the biggest chunk of a smaller market. The
other reason that Nokia didn’t go with Android could have been the dynamics of
the Android device market; half of the market is very fragmented with Samsung
owning nearly the other half the market. Entering the Android market would have
meant competing head to head with Samsung and a bunch of other OEMs. This could
have been brutal, so Nokia decided to play it rather safe and avoid the “red
ocean”.
Even though Microsoft and Nokia had this cooperation planned
out, there were still problems and incompatibilities and things weren’t going
as smoothly as they could have. This meant accumulated opportunity cost for
Microsoft as Android (read Google) was growing, dominating the smartphone
market, and moving from smartphones to tablets. This is a threat to Microsoft
and its flagship product, Windows; with the advancements in the internet
technology and capacity and the introduction of and improvement of cloud
computing, it seems that there is less and less need for sophistication when it
comes to an OS as most computation can be done in the cloud.
Therefore, it’s
not impossible that Android (again, read Google) would keep moving towards a
more sophisticated OS (compared to the smartphone OS) that could cater to PCs.
It would be much easier for Google to do so if it has a strong monopolistic
grip on the smartphone and, on a higher level, the tablet OS market. By
acquiring Nokia, Microsoft can make sure that it not only has a guaranteed
means of delivering its Windows Phone OS but also that there will be a tight
management and supply chain that would assure integration and prevent
compatibility issues. If Microsoft can establish a strong market base, like
that of Apple’s iPhone even though it’s a little ambitious in short term, it
can benefit from a network effect that could potentially put pressure on the
Android and iOS market by attracting consumers as well as OEMs. This would be
aligned with the overall strategy of sustaining Windows as the dominant OS and
guaranteeing the survival of its related ecosystems.
It is certainly very interesting to see that two companies,
Google and Microsoft, do things that seem somewhat different, if not opposite,
in the same industry; Google sells Motorola not long after acquiring it and
Microsoft buys Nokia after a period of cooperation. But if we look closely
enough we can identify the possible strategies that led those decisions and
will shape the future of those companies involved and the related industries
and ecosystems for years to come.
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