Thoughts About The Partnership Between Nokia And Microsoft

Recently Teresa Cottam asked me what I thought of the Nokia/Microsoft alliance. A number of people have said it is the marriage of two failures, while a few others think it is an astute business move.

My take on this is that Nokia had to do something radical. They are losing market share to Apple’s iPhone (and probably to Android smartphones too). Their Symbian smartphones were just dreadful – the user experience was horrible and they couldn’t compete with the application functionality offered by Apple through the iTunes AppStore.

Nokia used to be the clear leaders in phone design – their hardware was distinctive, relatively sleek, nice-looking, robust and reliable. Sometime in the mid 2000s things started to go wrong. The hardware started to look old, or the same as everyone else’s. Everyone else caught up with them in terms of the quality of user experience. With the advent of the iPhone Nokia looked like it had really lost its way, and when Android phones started to come out they started to look like the fourth best option (after Blackberries).

So Nokia could have decided to continue with Symbian, or to trash Symbian and create a new phone OS to replace it. Instead they took the only viable option – to adopt an OS from a company that did it as a core competency. The only real decision was which one: Windows or Android. This is one of those (few) situations where I think that outsourcing makes perfect sense. What are Nokia good at: making phones. What are they not good at: making smartphone operating systems. What are Microsoft good at: making operating systems. What are Microsoft not good at: mobile devices. A strategic partnership with Microsoft means that Nokia not only get a decent mobile operating system, but that they get to influence its direction as well – key to taking their smartphones to the next level.

Nokia realise that it is not enough to just create better smartphones, the only way to challenge Apple is to take on the whole ecosystem. A cool phone without integrated music purchasing and app store is no challenge to iPhone dominance at all. Partnering with Microsoft makes this a realistic possibility.

From Microsoft’s point of view the deal makes a lot of sense too. They need an alliance with a credible smartphone manufacturer who won’t abandon them to Android to give them the market share they need to stay and play in the increasingly important mobile device space. They also get access to Nokia’s vast experience in designing mobile devices and in the mobile device marketplace.

Will this strategy succeed? I don’t know – and I’m certainly not going to predict. But, was it the right thing for Nokia and Microsoft to do in the face of Apple’s dominance of the mobile market? Absolutely.

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One Comment to “Thoughts About The Partnership Between Nokia And Microsoft”

  1. Nice article Doug. It’s probably also worth noting that Nokia phones generally have the best signal / reception of any. Though I love the usability of my HTC Desire, the signal is never as strong as my old Nokia. And iPhones have also suffered from well publicised reception problems. So with the right OS Nokia could once again rise up the Smartphone charts. Only time will tell if Windows is the right choice…

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