Nokia X – the Trojan Horse

by Brian Katz on February 25, 2014 · 0 comments

Nokia today introduced their X smartphone series, devices that are based on Google’s Android, or more specifically, the Android Open Source Project (AOSP). AOSP eschews all of Google’s basic services and provides the bare Android OS to the Original Equipment Manufacturers (OEMs) that then must layer a set of services on top of it so that apps can have more than basic functionality.

Trojan_HorseIn order for Nokia to be successful, they need to provide those services that aren’t in AOSP and that is exactly what they’ve done. They’ve replaced all of Google’s services with a set of Microsoft/Nokia ones. These include the Nokia Appstore, Here location services, Outlook, Skype, Bing and Mix Radio. 70% of Android apps should work with little to no modifications and the rest have to be recompiled to use the new Nokia’s/Microsoft’s services. The phones are priced at below a 100 Euros except for the XL. As Stephen Elop, the CEO of Nokia said “Nokia X becomes the feeder system for Lumia”. People will experience Microsoft services and design on the X and when they buy another phone they will look to upgrade to the Lumia line, or so his theory goes. The focus is on using the Nokia X t o monetize the Lumia line later on.

While this is a great theory, giving “people a gateway to Microsoft”, I think it is flawed reasoning and misses the opportunity that Nokia has presented to Microsoft. As their new CEO, Satya Nadella has said, Microsoft is now a devices and services company. The more devices that Nokia sells from the X line, the more that Microsoft’s services are used. Everything from Skype to Bing become part of people’s daily use in arenas where they hadn’t been previously.

Microsoft has been on a tear in recent years building up entire platforms of services that can be provided to any device or OS. Their Azure cloud platform has specific hooks for mobile that will work with both Android and iOS apps, not just Windows Phone Apps. They have expanded that platform so that it not only exists in the cloud but can also exist in a local data center if needed through their Azure in a box program. They have been pushing the ease of building cross platform apps on top of the services that they provide and have had even more success with partners/startups like Xamarin, that allow you to code most of the app using .Net and visual studio. They have built Bing into a search engine service for all. Microsoft is in it for the long haul and wants their services used on all devices, not just Windows Phone. They understand that it is the ecosystem that is important and the ecosystem doesn’t depend on what OS someone uses.

The Nokia X is the gateway for the next billion people to become part of Microsoft’s ecosystem. Once they are using Microsoft’s services and fully part of the ecosystem does it really matter if they upgrade to a Lumia Windows Phone…not really. The goal at that point is keeping them in the ecosystem so that they continue to use Microsoft’s services and money is made from each transaction. Skype calls are made and a few cents ends up in Microsoft’s pocket for each one. They’ve got mobile payments as part of Nokia’s carrier agreements and in many countries mobile phones are used for banking. These are all just more plays into strengthening their ecosystem hold on new users.

The opportunity becomes even more interesting based upon a set of tweets between Ben Bajarin, Ross Rubin and myself. This culminated with Ben’s tweet that Microsoft/Nokia should offer their AOSP fork to other companies as well.

Around 30% of all Android phones sold this past year were based on AOSP. Most of these phones were sold in places where they went for less than $100. This is the fastest growing tier of smartphones, those priced at less than $200. They aren’t the most powerful phones but they are functional and being used by more people every day. If Microsoft/Nokia were to give away this AOSP fork, Microsoft’s services footprint would grow exponentially over the next few years regardless of the fate of Windows Phone. This Microsoft AOSP fork would actually become the next Windows Phone, or more importantly, the next Windows, indoctrinating a whole new set of users in to Microsoft ecosystem where they are using the services that Microsoft is monetizing. Nokia X could truly be a Trojan horse for competing and beating Google.

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