And Then There Were Three: Why Microsoft Is the Vital New Underdog in Mobile Computing

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which version of Android ships with the latest Droid phones or Xoom tablets? And Microsoft doesn’t own smartphone factories, but it essentially assimilated Nokia by sending Stephen Elop, the former head of its business division, over to Espoo. And it’s got good relations with HTC, which makes most Windows phones. In fact, it wouldn’t be too surprising to see Microsoft courting HTC more aggressively now; the Taiwanese manufacturer, which makes both Windows and Android phones, has got to be feeling a lot less allegiance to Google now than it did a week ago.

Obviously, the fiercest battle in the mobile OS market right now is between iOS and Android. Apple ships more smartphones and tablets than any other single company, but Android outsells iOS overall when you add up the numbers from HTC, Samsung, Motorola, and the smaller players. With Windows Phone 7, however, Microsoft finally has a credible alternative to Android and iOS. If I were Steve Ballmer, I’d be handing more resources and more autonomy to Joe Belfiore, the Microsoft vice president leading the Windows Phone effort.

With the impending release of Mango, the latest version of Windows Phone 7, Belfiore has the opportunity to put Microsoft on a par with the other smartphone makers, at least in terms of features. For instance, Mango phones will have the ability to store documents and other files on Skydrive, a cloud storage system that is Microsoft’s answer to Apple’s iCloud. (Or maybe it’s the other way around—Belfiore tweeted in June, when Apple previewed iOS 5, that he was “flattered” by all the “great WP ideas headed to iOS” such as automatic cloud storage of photos.) The “live tiles” system in Windows Phone 7 arguably makes these devices’ home screens more interesting, interactive, and informative than the static home screens on iOS devices—though Apple is rolling out an improved notifications system in iOS 5, and Android is ahead of both in this area.

The point is that Windows Phone is no longer vaporware: you can have a real debate about which of the three mobile operating systems is coolest. No doubt, Windows Phone will have a hard time catching up with iOS and Android when it comes to the number of third-party apps available to consumers. And Microsoft, like Google before Motorola, is slowed by the need to get OS updates okayed by the handset manufacturers, not to mention the wireless carriers. (Belfiore caught a lot of grief this spring over the snail’s pace at which two interim updates were delivered out to Windows Phone owners.) But at least Belfiore is giving Microsoft’s still-formidable sales operation something to work with.

Windows Phone 7 is important in another way. Just as Apple has already begun to remake the Mac operating system to incorporate innovations from iOS, Microsoft has made it clear that the user interface for Windows 8—the next version of its PC and tablet operating system—will draw heavily on Windows Phone 7. It’s yet another sign that the old walls between device types are coming down, and that the simplicity and discipline that are absolute requirements when you’re designing software for handheld gadgets are actually pretty good ideas on bigger screens as well. Microsoft may not be Apple’s equal when it comes to user-centric design, but I think it’s way ahead of Google, where engineers clearly rule and designers have had a notoriously hard time being heard, at least until recently.

Am I about to run out and buy a Windows phone? Frankly, no. But Microsoft is now the only force that can save us from an Apple-Google duopoly in mobile computing—which increasingly means all consumer computing. If Microsoft can get its act together and come out with a great tablet device, for example, it ought to be able to draw on its strengths in productivity software to show how tablets can be a bigger part of our daily workflow. (Personally, I’m rooting for a return of something like the Courier digital journal that Microsoft briefly previewed in 2010.) I never thought I would hear myself saying this—but a stronger Microsoft means more innovation for everyone.

[Update, 8/22/11 8:00 am PT] Microsoft may be alive to the possibilities of the moment—turns out that Brandon Watson, senior director of Windows Phone 7 development, is offering all webOS developers free Windows phones. Also, it seems my comments about the Google-Motorola deal’s impact on Android handset makers were spot on; Frank Meehan, CEO of phone maker INQ, told GigaOm over the weekend that “We see a number of major vendors very seriously considering Windows Mobile as a core platform and therefore we are following their lead and examining it as well to complement our work in Android to date.” Finally, new data from NPD Group shows BlackBerry’s market share continuing to drop.

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Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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