The END of the OEM – What Microsoft’s purchase of Nokia may imply

Microsoft took a uniquely middle-ground stance when they released Windows Phone in 2009. Admitting that their hand-off approach to Windows Mobile led to lackluster hardware from their OEM partners, Microsoft announced their new, more restricted mobile operating system. Complete with a rigid hardware spec, walled app ecosystem, and closed-source software, Windows Phone imposed far more stringent requirements on OEMs (Original Equipment Manufacturers) than either its predecessor, or the then-burgeoning Android platform. However, one important detail was their commitment to the OEM partnerships who would be making hardware for the platform, which, along with Android, was counter to Apple’s ownership of both the hardware and software of iOS. With Microsoft’s Labor Day acquisition of Nokia’s devices business, this model is in some question.

Eyebrows were raised in 2011 when Microsoft and Nokia announced a high-profile partnership that involved billions of dollars, and a much closer relationship between the two companies. The choice of platform seemed obvious, with Nokia’s Symbian OS struggling to remain competitive with newer mobile platforms, the Android market becoming increasingly dominated by Samsung, and the recently appointed CEO Stephen Elop being a former Microsoft executive. At the time of announcement, many already suggested that Elop may be a Trojan Horse for Microsoft to gain control over Nokia, but the decision seemed to make sense.

The plan went as expected. Nokia’s first Lumia phone was announced some months later and brought some limited attention to the struggling Windows Phone ecosystem. Nokia continued to release a large number of handsets, spanning a wide set of price points. While neither company was seeing breakout success for the platform, it became increasingly clear that Nokia was dominating the market for Windows Phone, accounting for 87 percent of all Windows Phone usage by August 2013. Launch partner LG had announced no plans to launch new phones, and the Windows Phones made by HTC and Samsung seemed to become increasingly lackluster.

With the acquisition of Nokia’s devices division, it seems likely that all other OEMs will abandon the platform. After all, their Windows Phones typically see far less demand than their Android ones, and managing multiple operating systems requires considerable resources. With Nokia (or Microsoft?) receiving even greater preferential treatment, remaining competitive in the Windows Phone market would simply be too challenging for not enough reward.

The consequences of this may seem trivial considering nearly all Windows Phones were Nokia’s anyway, but the longer-term implications may be more complicated. The power of the OEM model is what made Microsoft successful in the PC market, and is what made Android successful in mobile. Everyone has different needs, and choice is the best way to cater to them. In fact, Nokia’s success with Windows Phone became apparent as it catered to many markets, and price points, and color options, a fact made obvious by the popularity of the budget Lumia 520.

Though at the present it feels that Nokia is the only choice anyway, there was hope that if Windows Phone increased its marketshare and consumer demand, old partners like Samsung, HTC, and LG may start investing in the platform again. However, with Microsoft’s acquisition, this seems unlikely.

Traditionally, it was uncommon for a company selling a platform (like Windows Phone) to also make their own hardware. For a company to preserve its relationship with OEMs, there had to be assurances that the game was being played fairly. No secrets or favoritism. However, this landscape may be changing. Google-branded Nexus phones and the acquisition of Motorola Mobility did not slow the production of third party Android devices, and Microsoft seems to have maintained its relationship with PC makers while producing their Surface tablets. Whatever happens looking forward, Microsoft needs to remember the importance of choice and find a way to provide that to consumers either with its recent acquisition, or with a continuing relationship with other OEMs.

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1 comment
  1. Its like you read my mind! You appear to know so much about this, like you wrote the book in it or something.
    I think that you could do with a few pics to drive the
    message home a little bit, but other than that, this is excellent blog.

    A fantastic read. I will definitely be back.

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