Microsoft/Nokia – could this be BYOD with `free’ phones and tablets?

Following up on Microsoft’s acquisition of Nokia’s mobile phone business, covered here, some additional thoughts occurred that could – should they actually form part of Microsoft’s vision for the result of the transaction – make for a really rather powerful combination in the marketplace that many businesses would find attractive: so much so that, in a conversation I had with Ian Murphy, Principal Analyst with research company, Creative Intellect Consulting, the suggestion arose that such results from the deal could raise some powerful forces against it.

It could also, however, be a significant demonstration of a major shift in the future direction for much of the IT business, especially when it comes to selling access and consumption rights to a complete, `through-service’ from soup to nuts services to business customers. And when it comes to cloud services that will, increasingly, be what they are selling.

The more I think about it, by buying Nokia Microsoft puts itself in a position to help its channel give smartphones and tablets away as part of any service package where BYOD is an important component of the service requirement.

These will be end-to-end services largely based around the existing applications that millions of businesses use. The availability of BYOD as a component will make sense here, as having staff working with smartphones and tablets rather than lugging around laptops or being chained to `their' desktop PC has real potential to make them more productive, if only through working in a better overall environment.

It is possible that there will still be a need for unassigned desk spaces equipped with thin clients where a staff member's `workspace' appears when they need it.   

What is more, making the hardware part of the deal – appearing to `give it away’ – will arguably be just a marginal cost once Microsoft owns the means of production.

More to the point, I suspect Apple might find it hard to compete except perhaps in the advertising, graphics and video-based markets where it has some traction as a business services provider. To get into mainstream business, Apple would have to buy some business services providers in order to get a real foothold – and big ones such as Salesforce and Netsuite for example - and that would cost real money now.

And because of Apple’s targeting of the consumer market, I can’t see the company looking at the end-to-end BYOD-oriented business services sector as an opportunity worth the investment.

The only real obvious competitor at present would be Google. It has the Android operating system which is widely available and already a major contender in the phone/tablet market. It also has its own product line, the Nexus tablets, and it has Google Apps, which are already getting traction with some large enterprises as an alternative to Microsoft Office and server applications.

There are, however, likely to be some significant stumbling blocks that could prevent such a model developing. As Murphy pointed out: “if they provide them as give-aways for the channel, I would expect to see competition authorities give such a move very close scrutiny. There is also the question as to how that would be perceived by the Telcos as they would have to be unlocked phones. As far as I am aware, the IBM/Apple deal excludes giveaways because IBM is formally an Apple reseller.”

Here, of course, then might come the creative part that business managers often love. Could it be the case that they might not actually `give them away'? They could, for example, be a component part of the overall, soup-to-nuts service that is being rented - part of the package in exactly the same way that a user of Netsuite or Salesforce is, of necessity, renting `space' on a virtual server or 10 when they sign up for a SaaS service.

In addition, there is an argument that the phone or tablet is an integral part of the overall service package - and could be proved to be so just in terms of security management requirements. After all, security issues are regularly cited as one of the BIG stumbling blocks in the take up of BYOD at the moment.

But there is an anti-trust argument that will need to be considered, as well as consequent interest from national authorities on subjects such as taxation. So would such a Microsoft/Nokia/Channel Partner model mean that users could be `over a barrel’? I’m not I see that as a given. After all, there are still all the current ways of doing BYOD available. And I can’t imagine there would not be stiff competition from Google.

“The problem is, Microsoft would need to play those games across all its channels and then deal with some interesting tax issues,” Murphy observed. “Remember a few years ago when it said that one of the ways it gets out of tax is to claim that it licences the software to the country units? That saved it import tax because it only ever supplied one master copy and each country was then responsible for manufacturing. In Europe, of course, that became one-stop low tax.

“It cannot do that with phones as they will need to be shipped around and will have to have customs and other values. Besides which, the phones already have value attached to them. Can you really see the Telcos accepting that a deal gets a phone for 50p but they are paying £100 for them?”

This is a particularly important observation and could be one of the major stumbling blocks for such a model going forward. It might also depend upon what gets to be accepted by national authorities as the landed price of the phones, a number which of itself could then turned into an interesting marketing tool.

However, another possibility is that the Telcos could end up getting a large volume of business-rate payments for voice and data services without having to invest in buying stocks of phones, which could prove attractive to them.

And when it comes to the vexed question of taxation, if a `contribution to national taxes' was then an integral part of the service fee users paid, then even Governments might be happy.

Indeed, such a full-service package could marketed as the ultimate virtuous circle - users could declare themselves good citizens for paying tax up-front. They could also get an end-to-end service that (while there may well be better/faster/more sexy ways of doing BYOD) make the whole thing a no brainer for them, if only because they get to carry on using the applications they run their business on.

For Telcos, the advantage then becomes that they just provide services (at business rates) and don't have to worry about buying in and marketing hardware.

And underpinning all this, of course, is the fact that cloud service delivery, together with the social connection that smartphones and tablets have introduced, is about to radically change the way IT provides business services, and how the businesses – and the authorities – cope with it all.