With Windows Phone Dead, How Does Microsoft Avoid Becoming the Next IBM?

The smartphone is the dominant global platform in an economy where the platform is the strategic base on which success is built.

By ceding that connection with other services to competitors, Microsoft is limiting its market, its options and its future. Just as IBM did. JL 

Peter Bright reports in ars technica:

IBM doesn't want to be IBM. Microsoft's platforms offered familiarity; the thing you use at work, you use at home. This propelled Windows. Abandoning the smartphone reduces Microsoft's ability to reach consumers, especially in developing markets (w)here for hundreds of millions of people their smartphone is their computing platform. Microsoft's consumer-facing products and its enterprise-facing products are not  independent from one another. Where Windows falls out of public consciousness, so do the other offerings.
For fans of the platform, the official confirmation that Windows on phones isn't under active development any longer—security bugs will be fixed, but new features and new hardware aren't on the cards—isn't a big surprise. This is merely a sad acknowledgement of what we already knew.
Microsoft also announced that it was getting out of the music business, signaling another small retreat from the consumer space. It's tempting to shrug and dismiss each of these instances, pointing to Microsoft's continued enterprise strength as evidence that the company's position remains strong.
And certainly, sticking to the enterprise space is a thing that Microsoft could do. Become the next IBM: a stable, dull, multibillion dollar business. But IBM probably doesn't want to be IBM right now—it has had five straight years of falling revenue amid declining relevance of its legacy businesses—and Microsoft probably shouldn't want to be the next IBM, either.Today, Microsoft is facing similar pressures—Windows, though still critical, isn't as essential to people's lives as it was a decade ago—and risks a similar fate. Dropping consumer ambitions and retreating to the enterprise is a mistake. Microsoft's failure in smartphones is bad for Windows, and it's bad for Microsoft's position in the enterprise as a whole.

Modern Windows in jeopardy

When Microsoft's CEO announced in 2015 that the company was scaling back its smartphone ambitions, we argued that this move drastically undermined the Universal Windows Platform (UWP). That remains just as true today as it did then.
UWP is a common set of APIs that spans Windows on the PC, mobile, tablet, Xbox, and HoloLens, making it easier for developers to build applications that reach all these form factors. UWP is important, because it makes Windows a much more pleasant, modern platform to build on with stronger security, easier application updating, and much better support for things like high-DPI displays. To modernize Windows, UWP is essential. But developing a UWP application means eschewing the Windows 7 installed base, as UWP applications only run on Windows 10.
Make no mistake; if you're writing a Windows desktop application, UWP is a better way of doing so than the traditional Win32 API. It's easier to use, it's more capable, and the Windows Store makes installation, uninstallation, and updating much simpler for end users. And if UWP on Windows Mobile had offered, say, 15 percent of the smartphone market, too, developers might have decided that the loss of Windows 7 users was worthwhile to reach this new audience.
But with zero percent of the smartphone market, using UWP is strictly limiting the target audience. For most developers, the greater reach of Win32 is likely to offset the technical benefits offered by UWP. As such, even Microsoft's efforts to modernize the desktop Windows platform are hurt by the departure from the mobile space.

Enterprise is not an island

Even more significant, however, is the impact of this situation on the enterprise space. This won't be felt overnight, but the enterprise and consumer spaces are interconnected. Windows Mobile's demise and Microsoft's retreat from that significant consumer-facing market has consequences far beyond smartphones.
The problem is that Microsoft's consumer-facing products and its enterprise-facing products are not distinct and independent from one another. Throughout its history, Microsoft's platforms have offered a kind of familiarity; the thing you use at work is the thing you use at home, and vice versa. This familiarity helped propel Windows in the corporate space; it offers a migration path (from one-person startup to small business to medium business to enterprise) that encompasses system administration, software development, and core productivity applications. Diminish Windows in the consumer space, and that migration path is weakened.
iOS and Android, by contrast, have shown just how strong that pipeline can be. Even with much weaker "enterprise" features than, say, BlackBerry or the old Windows Mobile platform, the iPhone found favor in the corporate space, because C-level execs bought iPhones, loved their iPhones, and wanted to use them at work no matter what the IT team felt about it. Android followed suit. The enormous success of the Chrome browser means that Chrome OS may yet achieve a similar kind of success.
Abandoning the smartphone space greatly reduces Microsoft's ability to reach consumer audiences, especially in developing markets. There are hundreds of millions of people for whom their smartphone is their only computing platform, and that's a space now entirely ceded to Android.
Windows in the consumer space won't go away any time soon, of course. For most people it's still a good option for home computing, and for certain demographics, such as gamers, Microsoft will remain relevant for years to come. But the assurance that people will always be familiar with Microsoft's software, and always consider it both at home and at work, is going to become a thing of the past. Microsoft is going to be facing a world where the CEO's kid who "knows computers" is more comfortable and familiar with Chrome OS and the Google Apps than they are with Windows and Office. A generation of new workers may want to use their browser and their smartphone, not a desktop PC.
Of course, this won't wipe out Microsoft in the enterprise space, and strong enterprise products will always find a market—there will still be people using Azure for cloud computing, InTune and the System Center suite for device management, Office 365 for productivity. But such a generational shift can't help but diminish the appeal of these products. Can Microsoft help you manage your Chromebooks and iPads? Sure. But is it the natural choice, in the way that using InTune is the natural choice for your Windows systems? Not really.

Mindshare matters

If it were just Windows that was set to fall by the wayside then perhaps Microsoft could get by. But just as the consumer space is interconnected with the enterprise space, Windows is interconnected with other Microsoft software and services. Where Windows falls out of the public consciousness, so too do the company's other offerings.
Redmond has recognized and reacted to this mindshare gap in other fields; efforts such as the Windows Subsystem for Linux and Visual Studio Code have enabled Microsoft to cater to development communities that otherwise would completely ignore the company and its products. For computer science and software engineering students using Macs and Linux, there wasn't necessarily animosity toward Windows, Azure, SQL Server, and all the other things that Microsoft sells, just a lack of relevance. These new graduates didn't use Windows on their computers or their phones, so they never gave Microsoft's broader range of products any consideration.

Enlarge / Visual Studio Code: one of the ways that Microsoft is making sure that some people who would otherwise ignore it don't.

Microsoft

Visual Studio Code, a cross-platform text editor and development environment, and the Windows Subsystem for Linux, which enables Linux software to run natively on Windows, go some way to redressing this balance. It's not as simple to say that Visual Studio Code means that developers who would have defaulted to Amazon Web Services will now adopt Azure instead. But with Microsoft convincingly showing that it cares about a wide range of developers and builds good tools for them, there's now a greater chance that they'll consider Azure. These things mean that instead of being a company that they never even cared about, it's one that's worth investigating. Some of them will end up using Azure as a result. But it was Microsoft that had to make that first step: to get that broader consideration, it had to put a product in front of these developers that piqued their interest in the first place.
Without its smartphone platform, it's hard to see what the corresponding mindshare play is for the consumer audience at large. Microsoft is investing heavily in virtual and augmented reality, but the jury is still out on whether this is the next big thing with mainstream appeal. The Xbox market is too narrow to serve this role; too few people own game consoles, and they don't have much crossover corporate appeal. Even in pure software, which should be Microsoft's strength, it's hard to see where this success might come from. Microsoft doesn't have a Chrome, for example: a product winning hearts and minds among every kind of computer user.The answer may indeed be that there is no answer and that the company will never regain the kind of universal appeal that it once had. If so, becoming the next IBM may be inescapable. But neither the company's management nor its shareholders should welcome such a result, much less encourage the slow decline into irrelevance that it implies.