Last month, reports suggested that Microsoft was looking to slash its license fee to get more manufacturers on board, especially local manufacturers in growth markets such as India. And now it looks like the company is going to do one better.
A report in the Times of India quotes sources from Indian phone companies saying Microsoft has agreed to give them the OS without any licence fee. This after companies such as Lava, Karbonn and Micromax have been known to be in discussions with Microsoft to launch low-cost devices. Last month, Lava and Karbonn announced plans to produce Windows Phone devices. Xolo too is looking at Windows Phone and has already released plans for a Windows tablet. So obviously Microsoft has been making headway with companies here and the Indian connection with Satya Nadella now being the CEO must surely have helped in discussions, but as the report says, “the agreements were clinched only when Microsoft agreed to remove the licence fee.”
Microsoft has been known to charge between $20 and $35 per unit produced from companies which make Windows Phone devices. But in India even a low fee was not acceptable to manufacturers given Windows Phone’s low market share. Popular belief is that Android is free, but manufacturers still have to pay a fee to get access to Play Services and the Play Store. While Indian companies do not pay this fee directly (they are passed on to Google by the Chinese ODMs these companies use), they still have to absorb the cost. In the case of Android, they are more than happy to do this, given the demand and the market share of the OS, but that’s not the case with Windows Phone. Which is why Microsoft had to sweeten the deal.
“Free Windows Phone is part of a strategic partnership. For both Microsoft and us, it is an experiment. Windows Phone still doesn’t have lot of appeal in the market but now that it doesn’t have any licence fee, it becomes easier for us to experiment with it,” one executive with an Indian phone company was quoted as saying by the paper.
But the deal is essentially a two-pronged attack on the growth of Android. For Indian companies, having Windows Phone products gives them another front to chip away at the market share of biggies like Samsung, LG and Sony, who are fully focussed on Android. That’s one way to curb Android growth and it’s a win-win for both parties.
Secondly, having more device options in the market will lead to competitive pricing, which will also boost adoption rate. Indian companies are known for their aggressive pricing models and if there’s a repeat of anything like the Android smartphone explosion, you could soon have a huge number of Windows Phone devices in the market, at very attractive prices.
Things are not all bright though; there’s still the app hurdle, which will only go away gradually, but at least this is a bold move. And having more devices will convince more developers about the chances of the OS. With much of India still an untapped market for smartphones, Microsoft is finally making some shrewd business calls that could end up boosting its market share.
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Dec 20, 2014