Microsoft’s Sneak-Attack on Apple: SkyDrive, Xbox Live Show the Way

Microsoft won’t compete with Apple by going head-to-head in the hardware business. But the software pioneer could still climb back into the fight by offering connected software services that work on every platform—including Apple’s.

That’s the read from Charlie Kindel, a Seattle-area entrepreneur and angel investor who spent some 20 years at Microsoft. In a discussion at Redmond’s Thinkspace co-working office, Kindel batted aside suggestions that Microsoft might launch itself into a serious hardware business, even with potential acquisitions like Nokia or Research in Motion lying around.

“That is not a business I believe Microsoft actually wants to be in. If they went down that route, it would mean they wanted to compete with Apple on Apple’s terms,” Kindel said. “And I have bunch of things I can say about Steve Ballmer. A lot of them aren’t very positive. But he is a very smart man. And I do not believe he’s so dumb that he would go and try to compete directly with his biggest competitor.”

Kindel

What about the raved-over Surface tablet, which still hasn’t hit the streets? It will remain a “North Star” product intended to guide other manufacturers, rather than a major standalone product, because Microsoft doesn’t intend to sell the device anywhere other than its own few Microsoft retail stores and online. (You can read more of Kindel’s thoughts on Microsoft and hardware here.)

Instead, he said, Microsoft may be going after Apple’s dominance in computing “by playing a different game.” That means finally shifting away from its legacy business of licensing operating systems, and instead sprinkling consumer and productivity apps across the new computing ecosystems that have roiled the computing landscape since the introduction of the iPhone five years ago.

That’s a much different strategy than the money-losing Web-centric model of years past, which revolved around the Internet Explorer browser, consumer e-mail and search services, online advertising, and media portal websites.

One of the seeds in this new approach was seen earlier yesterday, when Microsoft released its SkyDrive online storage app for Google’s Android mobile operating system. The service was already available for iOS, “and on both of those platforms, it’s as good as it is on Windows,” Kindel said.

“So here you have a core service of Windows—the storage service for Windows—that runs equally well on the competitive platforms,” Kindel said. “Hmm, why is Microsoft doing that?”

His “reading of the tea leaves,” Kindel said, points to Microsoft finally moving away from its licensed operating system business model, which is in jeopardy as technology prices fall and new types of computing (think iPads in the enterprise) eat into the traditional dominance of Windows PCs.

In this newer model, Kindel predicts Microsoft is “going to try and monetize end users via a subscription service, where they get an annuity per user over time. And for that to work, it can’t just be Windows. As a matter of fact, to beat Apple, it has to work really well on Apple devices.”

Other early examples of Microsoft cross-platform services are the Xbox Live entertainment app and the OneNote productivity app available on other platforms.

You also have to note the recent re-jiggering of good old Hotmail into Outlook.com, raising many hopes that the premier business e-mail service could finally make the leap into a solid, widely available online service.

“You’ve got to imagine that Office has been built for iPad. It’s sitting there, it’s ready to ship, it’s on a shelf,” he said. “And all Microsoft is doing is waiting for Windows 8 to ship and get out there and get a little momentum so that it doesn’t pre-empt it, and they’ll release it.”

Here’s the video of Kindel’s full talk, which includes more on this line of thinking, great high-level breakdowns of the major players in mobile, and why he doesn’t think Amazon or Facebook will get into the smartphone business.

Video streaming by Ustream

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