Nokia, Microsoft and the quest for ecosystems

The smartphone market just isn't what it used to be, and amid the flurry of product launches at the Mobile World Congress new battle lines are being drawn.

The Mobile World Congress is up and running and amid the flurry of product launches there’s a clear theme emerging: the smartphone market just isn’t what it used to be, and to make money you have to dig a lot deeper.

That means cutting some old ties, making some new connections and, in Samsung's case, trying to breathe fresh life into a system that has lain dormant for too long.

Nokia, Microsoft and Samsung dominated the action on the opening day at MWC, at least when it comes to devices.

Facebook founder Mark Zuckerberg and his latest acquisition WhatsApp managed to make quite a splash as well.  

Microsoft, to its credit, offered a raucous start to the proceedings with its declaration that the Windows Phone was now more popular than the BlackBerry.

But beating Blackberry just isn’t as a big a deal as it used to be.

What is big, however, is Microsoft's clear signal that it’s willing to do whatever it takes to ensure its Windows Phone has a future. That includes cutting the price of Windows 8.1 by 70 per cent for makers of low-cost computers and tablets.

Manufacturers will reportedly be charged $US15 – instead of the usual fee of $US50 – to license Windows 8.1 and pre-install it on devices that retail for less than $US250.

The bottom line for Microsoft is commitment. Not just to the mobile segment but also to the Windows Phone platform. The first step in that process is the addition of nine new hardware partners. Equally important is the drop in the Windows Phone license fee which is clearly designed to drive wider usage of its platform.

And the last piece of the puzzle, according to Ovum Research analyst Nick Dillon, is Microsoft’s decision to provide support to less expensive chip sets from its existing supplier, Qualcomm.

Dillon says the significance of a Qualcomm Reference Design (QRD) for Windows Phone should not be understated.

“In theory the QRD will enable even companies with little knowledge of handset design and manufacturing to launch Windows Phone devices,” Dillon says.

The relaxed hardware requirements could just be the ticket for Windows Phone to look past its Nokia-centric existence – and not a moment too soon, because Nokia has finally succumbed to the lure of Android.  

Nokia’s move to welcome Android developers on its latest device portfolio may seem like a necessary – albeit unpalatable – compromise for Microsoft, but the plan may have been afoot for some time.

According to Asymco’s Horace Dediu, in an era of mass commoditisation the only area of real competition is the ecosystem. Devices, operating systems and platforms like Android are all commodities, and Dediu says there’s no real value to be captured in these.

“Ecosystems are another matter. It’s where Facebook (and its acquisitions) reside. It’s where Google lives and it’s where iTunes has been for a decade,’ Dediu says.

That makes Nokia’s move a pragmatic one and Microsoft, which probably has had an inkling of it for quite some time, has no choice but to feel comfortable.

Combine Nokia’s announcement with Microsoft’s aspirations in the emerging markets segment and suddenly a new, more enlightened Microsoft comes to the fore.

Which is all well and good, but there is an awful lot of legacy that will need to be cleared before the new strategy starts to pay dividends.

Samsung smarts up

Speaking of legacy, the latest version of Samsung Electronics’ flagship smartphone, the Galaxy S5, hits all the right notes as far as an update is concerned.

Let’s face it, when it comes to premium smartphones there’s not a lot of innovation in the market. Rather than introducing a new raft of features, the focus for the likes of Samsung and Apple is to focus on incremental enhancements.

The Galaxy S5 is betting big on fingerprint reading, while camera auto-focus and the same look and feel for its hardware and software will keep the fans happy.

Samsung’s not keen to mess with its winning formula but the challenge will be to convince existing users that they should upgrade.

What’s more interesting is Samsung’s continued pursuit of making it big in the wearable devices market – a sector that just might prove to be fertile ground for Samsung's very own operating system, Tizen.

There was talk that the Galaxy S5 would run Tizen OS but Tizen is unlikely to see a major handset launch anytime soon. If anything, Tizen may be more of a permanent fixture in the wearable market, with the new Galaxy Gear 2 and Neo 2 both running on the system.

Samsung may have been a fast follower in the smartphone space but when it comes to wearables it’s keen to be the trendsetter. Its early efforts in the space may leave a lot to be desired but the renewed focus on Tizen gives Samsung an opportunity to leverage some of its hardware expertise to a more software-oriented outcome.

There’s no denying that wearables will have a key role to play in the future of mobility and there’s no harm in Samsung trying to make Tizen the iOS or the Android of the wearables space.