What if Microsoft gave up on devices and went all in on services for iPhones and iPads?

What if Microsoft gave up on devices and went all in on services for iPhones and iPads?

Right now Apple makes money on their own devices like the iPhone and iPad, Google makes money on the advertising attached to services for everyone, and Microsoft struggles for breath somewhere in between. What if Microsoft decided to cede the device market and become a full-on competitor to Google in the services space? What if they leveraged their cloud-savvy to provide a true online alternative for iPad and iPhone users, and maybe even Android (AOSP) as well? Ben Thompson writing for Statechery:

  • Apple makes money when you buy devices, and they differentiate those devices by making their own operating system. This incentivizes them to make the best devices and best operating system, and, in my opinion, they do
  • Google makes money when you access their services. This incentivizes them to make their services available, with the best possible implementation, everywhere, regardless of device. And, in my opinion, they do

In this context, Microsoft is divided against itself, licensing Exchange — and maybe even bringing Office to iPad to help services but hurt Windows Phone, keeping Halo on mobile exclusive to help Windows but hurt software sales revenue. Read Thompsons's piece, and then come back here and let me know — would you rather Microsoft go all in on devices against Apple, all in on services against Google, or continue to try and do both?

Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, Review, The TV Show, Vector, ZEN & TECH, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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There are 36 comments. Add yours.

Premium1 says:

I think it would be smart. Save all that development and $$ and focus on what they are doing right which is the software front. WP clearly isn't taking off(enough)

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Premium1 says:

Also, why not focus on all platforms. Make their services great (and available) on both IOS and android, and that opens a huge revenue opportunity with all the devices that run either IOS or android.

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wtrmlnjuc says:

They already do focus on all platforms. And if they really want to compete with Apple and Google, they HAVE to be a Devices+Services company.

jordanm341 says:

I think if they need to do a complete more unique revolutionary design to actually know that they will have or have a good piece of the smartphone/tablet market.

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iLoveiStuff says:

They wouldn't make enough money focusing on either. If they do just services/just software, it would be very difficult to compete with Apple's iCloud, and like-software when it's integrated so well in the ecosystem. They couldn't compete with Apple on the hardware side, because no other company on planet earth is capable of manufacturing products as well as, or better than Apple. And as for Google? Google is so established and so good at services, they could provide the same, if not better services for a much better value than Microsoft. Microsoft should target a specific section of the market and focus on that. I mean continue what they're doing now, only devote greater focus on enterprise - for example.

Armin Mhd says:

Haha what? Apple's icloud aint no shit that microsoft cant compete with! For god's sake they have a full operating system functioning over the cloud! What does icloud have? A couple of pic uploads wont help apple in the cloud. Skydrive(onedrive) is way more professional+ dont forget office365 my friend;)

Rowanova says:

"would you rather Microsoft go all in on devices against Apple, all in on services against Google, or continue to try and do both?"

I'm not convinced MS itself has an answer or strategy to address the question asked. Until they dial down to answer that question they'll continue driving backwards in the fog.

dalyapp says:

I'd really like to see MS keep promoting Windows phones and tablets because I feel we need more choices than just Android and iOS. 5-10% of the market would be better than nothing.

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wezra says:

I agree... My Surface 2 is the best tablet I have used... period. It's more innovative than the iPad and the build quality is exceptional. And guess what ... I can expand the memory and plug in a USB device. Microsoft has done a great job on this tablet. The screen is equal to the Retina display ... maybe better. I would like to see Microsoft expand the offerings to a smaller version as well.

ShameerMulji says:

It's great that you love your Surface 2, different strokes for different folks. But seriously, how is it more innovative than the iPad Air? Capabilities of general purpose computing devices essentially boil down to the apps. So as long as developers do what they do best, each device can potentially do what the other can.

Every time someone says that the Surface 2 is more innovative, it comes down to having Office and a built-in USB. Office for iPad is coming first half of this year;

http://www.zdnet.com/microsoft-office-on-ipad-its-alive-and-coming-soone...

And you can attach a USB adaptor to the iPad (yes, it isn't the most elegant solution but still works). As far as the screen goes, the only screen that I've seen that matches or bests the iPad's in over quality and color reproduction is the screen on the iPhone 5s.

wezra says:

I completely agree... we all have different likes and requirements for our technology needs. In my case I feel the Surface 2 meets more of those requirements than the iPad.

First... the ability to expand the onboard memory without having to go to the cloud. Secondly, a simple, hassle free, USB port. I also like the two stage built in stand. It is extremely convenient. The HDMI connector is a nice touch as well. (I don't remember if the iPad has that or not.).

In regard to the display I have put the Surface 2 up against the latest iPad and I really don't see any difference. From my perspective the are at the very least equal in quality.

Don't get me wrong... Apple makes incredible products. I have a 7 year old iMac that is the best computer I have ever had. My iPhone 5s is untouchable as far as I'm concerned. I can't wait for the iPhone 6 to hit the market. But in terms of tablets I believe the iPad is over rated and the Surface 2 is under rated. Just my opinion to be sure.

Joebin says:

I agree. Competition is usually good for the consumers. MS still has tons of money to throw at mobile. They got to let go of this one OS for all devices approach though.

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HeyImAlexD says:

I'd be all for it. Office is no longer the necessity it once was for me, but there are a select few things I use from Windows from time to time. It would be great having them work with bout iOS and android if it were to happen.

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ShameerMulji says:

Considering that the $8 billion Nokia acquisition is close to being finalized, MS is not getting out of the devices business. They're not going to do what Google did with Motorola and accept a huge multi-billion dollar loss & change course. Windows is Gates' baby. As long as he's Technology / Product Advisor, he will die fighting for Windows. I'll eat my undies if that he lets that happen.

MikhailT says:

In order for Microsoft to justify the loss of the hardware divisions, they need to earn more profit by switching to iOS. That's not going to happen, Apple is never going to have enough of a market share for MS to earn enough profit that their own hardware can't produce for them. I seriously doubt that a majority of iOS customers would pay for Office apps when they're getting iWork suite for free. Why did you think Apple went free here, they knew this would put a big dent on Microsoft's ability to grab as much as they could.

They'd earn more from switching to Android than switching to Apple. Yes, I've heard of the revenue numbers for developers on both platforms and that Apple still dominates it but that gap has been decreasing every year.

Microsoft just needs to stop the silliness of switching mobile OS platforms; Windows Mobile 6 > WP7 > WP8 was a freaking mess and don't get me started on Surface RT / Surface Pro. If they could just keep the same platform for several more years, keep producing better software, and so on, they'll get there.

Surface's pretty good as well now that Surface Pro's getting more attention than Surface RT, it just need a few more iterations before it's a serious competitor to MacBook Air, assuming Microsoft don't drop the ball again and not kill Surface RT. They've learned the bad lessons but they need to get some balls and kill RT completely to use Surface Pro as the only Surface model. Also, they need to stock up, those Surface 2 Pros are constantly out of stock not because that people are buying them but simply because they screwed up with the production or they're seeing some problems of some kind.

Once they start dropping the prices on Surface based on continual technology innovations over the next few years, iPad/Macbook Pro is going to start taking a dent if Apple doesn't improve their software offerings.

Apple have more to lose from their crappy software offerings than Microsoft have more to gain.

Trappiste says:

Given that Android is the new Windows, and Google hence the new Microsoft, the question is rather should MS go all-in on Android on mobile, that is, forgo with Windows on mobile devices amd keep Windows desktop only. At any rate, iOS market share is dwindling so fast it is quickly becoming increasingly irrelevant for MS, I would think.

verpeiler089 says:

Enterprise wise iOS actually has a pretty good standing, and that's the primary market for MS.

Metro1088 says:

I agree. At this point it's either devices, or services. Microsoft so far has been a complete failure in selling devices. So that leaves services as an option and I think they might nail it with office and cloud stuff.

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Samir Shah1 says:

Not a bad idea at all. But where does that leave Nokia?

tigerinexile says:

Selfishly, I'd rather they went all in on services, as I could use theirs then.

If they go all in on devices, I simply won't use them.

That said, as a matter of market space, it isn't clear where a good opportunity exists. Google and Apple are trying to price them out of software, and hardware is a tough market...

lubbalots says:

The world would suck having to use two similar ui, apple and android.

sirmrgeek says:

I don't believe Microsoft giving up easily.

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Rob White says:

It's all just a guessing game at this point. Satya Nadella has a big challenge ahead of him getting the ship righted in Redmond. And if anybody thinks it'll be a quick turnaround, look right over his shoulder at Bill Gates standing there as the newly returned Founder/Technology Advisor & you can see the kind of fights that are to come. Gates was never a technology forward thinker so much as a shrewd businessman who drove a hard bargain & got Microsoft into regulatory trouble as a result.

If Microsoft goes to a complete services model they admit total defeat & lose billions. If they go to a devices model & close it off to only themselves they again admit defeat & lose billions. Microsoft can't afford to go it alone since virtually every competitor has an acceptable solution to what Microsoft doesn't offer. The technology world has grown & expanded in such a way that Microsoft isn't the 1st or many cases the 2nd choice of consumers today. Gov't & enterprise are largely still safe but recent reports show that isn't a completely safe bankable market for Microsoft any longer either.

The facts are clear that Microsoft was late to the party when computing shifted from the desktop to the palm of your hand. Third place is at best all they can hope for & it'll be on shaky ground to the upstarts who will be nipping at their heels along the way.

vinny jr says:

I find it hilarious that you spend at least 1/2 your day trying to find ways on killing Google but you probably use as many Google apps as I do. What are we all suppose to do, use Bing?? Not me, I want and use as many Google apps as I can, they are free and they all work. I could care less how they make their money. Windows will never be able to compete with Google not to mention Windows will never give up their Mobile business to support Apple. All your editorials are always anti Google but correct me if I'm wrong, don't you use their HangOuts app to do your podcasts daily. I don't like or feel this competition that you try to push at the readers, I try to incorporate the good from both and make it work for me. I can not see me using my iPhone 5S without Google Search, Maps, YouTube, Drive, Google+ and on and on. Where is the love for the company that you depend on for your podcast? Way too much negativity. Just My Opinion

robotaholic says:

I totally agree except that I use Samsung hardware instead of Apple. I can't imagine using Bing or Internet Explorer. I gotta have my Chrome browser syncing my desktop computer, Galaxy Note 8 tablet, Galaxy Note 3 phone, and Samsung series 9 Ultrabook and chromecast for my Samsung TV. I really like my Galaxy Gear watch too. Yes Windows 8.1 is on my computers and I don't mind the tiles but I mainly use the desktop anyway.

vinny jr says:

I also own the Note 3 along with the Galaxy Gear, both in black and I love them. I basicly run my construction company of them. Don't know what I would do without that S-Pen. Just thought I would throw it out there.

SockRolid says:

Q: "What if Microsoft gave up on devices and went all in on services for iPhones and iPads?"

A: Then they would slavishly copy IBM instead of Apple.

iDisturbia says:

Short memory problem, eh?!!

Let me help then ...

Microsoft has so much $$ they can afford lose until Android dies! And, it will ....

asuperstarr says:

The services approach appears to be a good direction. Either way will continue to make services and devices better.

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RavenSword says:

We'll, considering in thinking of using windows phone, I certainly hope not.

Gazoobee says:

I think the big problem with this scenario is that Microsoft does not currently offer or know how to offer *consumer* services. For all the criticism Apple gets in this regard, iCloud is a much better, much easier to manage and understand, and much cheaper solution for most consumers.

Microsoft is big in services, but only in business services which is an entirely different animal. The big indicator here is their plans for Office. They don't actually plan to offer stand alone apps on iOS for Office they intend instead to offer access to an online suite. They are not likely going to allow for any Office apps to connect to iCloud or any other third party services, they are only going to let you use Office if you buy into their entire online services package. Needless to say this is a no-brainer for businesses and corporate customers, but it's exactly the opposite of what consumers actually want, need, or are going to be willing to pay for it.

Office on iOS will no doubt be a complete re-hash of the original Office strategy which is an attempt to co-opt iOS as a platform by offering products and services that draw the user over towards the Windows platform. But the market and the OS's are different this time. It won't work.

No one who is currently happy on iOS and uses iCloud is going to throw all that over and use Microsoft's services and Microsoft's cloud and no average consumer can afford both. It simply won't work this time.

What they should really offer is just plain old "Word for iOS" (or Excel, etc.) as a stand-alone product that saves files locally as well as being able to connect to *any* cloud based service, but you know they won't. If they did that, they would have a good chance of knocking Pages off the board, but they are too stupid to realise this and won't even try.

Carioca32 says:

Just to put this in perspective, according to the IDC, in the Brazilian market, one of the largest in the world and where Apple has just opened the first Apple store in Latin America, Windows Phone has just overtaken the iPhone as the second most popular smartphone platform, following what had just happened in Peru and Mexico, only behind Android.

The reasons are the ones we all can guess, better prices and more plentiful model availability. So the marketing formula Apple has consacrated in the north american and european market might not work everywhere, and Microsoft just might have the upper hand on developing markets, where most of the growth is happening now., thus I don't think Microsoft has any reason to give up on its devices and treat Apple as the dominant platform.

Firdaus Fauzi1 says:

You'll see a lot of improvements on windows phone 8.1 update.

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narest says:

Should be cool! Bill Gates probably dies but...

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Nicholas Kathrein says:

This ship has sailed. Once they "had" to buy Nokia because they were running out of cash and needed to be purchased this went out the window. Would they have been better off doing services instead of doing both hardware and services. Maybe. It sure would be cheaper either way you cut it. It's a very interesting idea but it's to late to go down this road.