Microsoft Says The iPhone Opened Its Eyes

"To be entirely candid, the iPhone opened our eyes as to some things that needed to be done that were not in our plan. "Some execution had really gone astray," Terry Myerson, vice president of Windows Phone Engineering at Microsoft, told The New York Timesover the weekend.

Windows Phone 7 is Microsoft's bid to halt its steadily eroding mobile market share and redefine Windows Mobile as something consumers can embrace. In addition to a completely overhauled operating system and developer platform, Windows Phone 7 ushers in a new era for Microsoft's OEM partners, who've had free reign in the past when it comes to designing devices.

With Windows Phone 7, Microsoft will work with OEMs in a more structured fashion, setting minimum hardware requirements and increasing the amount of Microsoft-developed software on devices. Microsoft says the goal is to have Windows Phone 7 software and hardware working together in optimized fashion, which is a step in the direction of what Apple has created with the iPhone.

In the opinion of some channel partners, Microsoft would do well to emulate Apple's approach to the iPhone. "I'd be surprised if Microsoft said anything other than what they did. The iPhone took the smartphone to a level where the features are now simply taken for granted," said Scott Stanfield, CEO of Richmond, Calif.-based Microsoft partner Vertigo Software.

Still, to hear Microsoft officials say anything positive about the iPhone is surprising given the steady stream of Windows Mobile denial that's been flowing from Redmond over the past few years. Last October, Microsoft CEO Steve Ballmer scoffed at the notion of smartphones becoming replacements for PCs.

"Let's face it, the Internet was designed for the PC. The Internet is not designed for the iPhone," Ballmer told the Associated Press. "That's why they've got 75,000 applications — they're all trying to make the Internet look decent on the iPhone."

Last July, Robbie Bach, president of Microsoft's Entertainment and Devices division, told financial analysts that Windows Mobile 6.5, a release that was met with lukewarm reviews, provides a superior Web browsing experience to that of the iPhone.

"You will have a very rich browsing experience on [Windows Mobile] 6.5 devices that will give you access to more Web sites than you will be able to get to on an iPhone that will work actively and work well. It really is a much better experience," Bach told financial analysts.

In June 2007, just prior to the iPhone's launch, Microsoft COO Kevin Turner told Channelweb.com that the positive market response to Windows Mobile-powered devices like Motorola's Q and Samsung's Blackjack show that Microsoft would still have plenty of chances to hit a "home run" in the mobile space.

"The big opportunity we have in the mobile space, yes, we have some commercial opportunity inside enterprises. ... We're cheaper, our stuff works better, and most people run Exchange anyway, and it's a natural extension," Turner told Channelweb.com at the time.

Microsoft may have an advantage over Apple in the enterprise, but that's quickly eroding as the iPhone catches on in the corporate world. Apple says it has sold more than 40 million iPhones to date, and 70 percent of Fortune 100 companies in the U.S. are currently in the process of deploying or testing the iPhone, Apple COO Tim Cook said last week.

Apple, which has also taken to calling itself a "mobile device company," also has the App Store developer ecosystem, which includes an additional 35 million iPod Touch devices and will soon add the iPad to this equation. In contrast, Microsoft's Windows Marketplace For Mobile hasn't generated much buzz since launching last October, and with Windows Phone 7 devices not slated to arrive until later this year, that's not likely to change in the near term.

Microsoft may have learned lessons from the iPhone, but so did many other companies. So while it's refreshing to see the company stop denying the obvious, Microsoft will have to connect on a series of home runs in order to get back in the mobile game.