MDEP Calling Microsoft
Will Microsoft return to smartphones? Never say never. The time to return is likely approaching.
Microsoft’s high-profile retreat from the mobile market, which included the write-off of the Nokia acquisition and shuttering Windows Phone, the Apple-Google mobile OS duopoly was reinforced. Oops. Smartphones have replaced desktop computers as the most important and ubiquitous computing devices. Today, most PC applications, and every Microsoft application, have a mobile version. This means Microsoft directs its customers to Apple and/or Google for access to its services. That’s gotta hurt.
Microsoft has lacked influence over mobility and is at the mercy of its competitors’ licensing and distribution policies. Adding insult to injury, AI is expected to shift users away from traditional software subscriptions. Suddenly, Microsoft is exposed on mobile, AI, and SaaS.
It won’t be long until Microsoft fixes this. At least that’s my opinion as the pieces are now all in place. The changes are hiding in plain sight. Microsoft already built its mobile OS: it’s called MDEP, or more formally, the Microsoft Device Ecosystem Platform. It made its first appearance at an Enterprise Connect keynote in 2023 and was released in late 2024.
MDEP is simply described as a Microsoft version of Android. Google created Android, and most of it is open source and managed by the Android Open Source Project (AOSP). Most Android derivatives originated from AOSP. When Microsoft announced MDEP, it was presented as a solution for Teams Meeting Room (MTRs). At the time, Teams required dedicated PCs for meeting rooms, and Android offered a lower-cost path. Several partners were already using Android for Zoom Rooms, and pressured Microsoft to support these products in Teams environments.
The early days of Android forks were filled with inconsistencies and security problems. Patch management was a big problem as each vendor addresses them independently. HP, for example, recently announced VideoOS 5.0, which now supports Android 13. Google released Android 13 to its partners in 2022.
Microsoft’s concern was that a “Microsoft Teams Room” might have security vulnerabilities from third-party Androids. By creating its own, controlled version of Android, it could ensure its customers that Teams Rooms met its security requirements. It also transferred the burden of Android expertise from OEM partners to Microsoft, reducing the cost for more partners to participate in the Teams ecosystem.
MDEP is doing well. Within a year of release, most of the Teams hardware partners have embraced it. It has also expanded to Teams phones, and more recently into digital signage. That’s a multi-billion-dollar market for wallboards, kiosks, and shared displays. The expansion was anchored by silicon partnerships with Qualcomm, MediaTek, NXP, Rock Chip, and many leading systems vendors. Microsoft is building a partner ecosystem around MDEP. The leap to putting MDEP on a smartphone isn’t that big.
MDEP was never a part of Teams; it’s an MS operating system like Windows. Android is the most popular operating system in the world. Call me crazy, but I expect MDEP will end up on smartphones and catapult Microsoft back into the mobile OS foray.
[For additional information on MDEP, see this post or this research note by my colleague David Danto.]
The Chromium Blueprint
Does building a product based on a Google open-source project sound insane? Let’s revisit Microsoft Edge. Google Chrome had replaced Internet Explorer (IE) as the most popular browser, and the two ecosystems had numerous incompatibilities.
By jettisoning its proprietary IE browser in favor of the open-source Chromium project, Microsoft ended a losing war and gained immediate ecosystem parity. Microsoft became relevant again in browsers, with minimal switching costs for partners and customers with relatively low development costs.
Microsoft used the same playbook with Android and AOSP. Partners that have already built Android apps can easily adapt them for MDEP. This version of Android comes with assurances of security and simplified management via Microsoft Intune.
From Rooms to SmartPhones
During his testimony in the US v. Google antitrust trial in October 2023, CEO Satya Nadella expressed deep frustration over the lack of a mobile platform. He essentially admitted that Microsoft is at a severe disadvantage because it doesn’t own a major app store or mobile OS. He described the current market as an “oligopolistic arrangement” between Apple and Google that is nearly impossible to break.
He argued that because Google controls the entry points (Chrome, Android, and the Play Store), it controls the data flow that makes search engines smarter. “Everybody talks about the open web, but there is really the Google web,” he said, and it impacts Microsoft’s ability to develop and improve Bing!
The testimony revealed a CEO who deeply regrets that Microsoft missed the mobile revolution. Bill Gates has characterized Microsoft’s failure to dominate the mobile operating system market as his “greatest mistake.” Without a mobile OS app store, Microsoft can’t distribute mobile apps without going through Apple or Google. Adding insult to injury, it must also share revenue with these competitors on any in-app purchases.
MDEP is not the same Android that comes on most Android phones. Those versions are GMS (Google Mobile Services) certified. This is how Google controls Android: certification is required to access the Google Play Store and proprietary Google APIs. Certification has many requirements, including Google-provided user credentials and the default use of Google Search and Chrome.
For MDEP to become smartphone-ready, Microsoft will need to create its own store, much like Huawei initially did when it forked Android into HarmonyOS. I expect Microsoft to announce its own app store within a few years. I tentatively call this the Microsoft Work Store, as an alternative to Google’s Play Store.
This Microsoft-managed app ecosystem will initially focus on business and productivity solutions rather than consumer entertainment, but the boundary is blurry. The store will undoubtedly be linked to the Windows App Store, Microsoft 365 subscription services, and its Copilot offers. The wave of AI disruption might be creating the right window for timing. News recently leaked that Amazon is also planning a return to the smartphone market. Amazon’s “Transformer” phone is expected to be an AI-centric, minimalist device.
Google also recently announced that it is centralizing Android development into an internal branch, effectively restricting external contributions to AOSP. This pivot suggests the company has realized it’s leaving too much on the table for others to leverage.
The Time is Right
The story goes that Bill Gates encouraged Microsoft to exit the mobile operating system race, arguing that it was too late. He believed that the software market only has room for two major players. Microsoft was distracted with its antitrust litigation and missed it. Realistically, that was never a forever decision. Microsoft is very good at reinventing itself. It navigated the shifts from command-line interfaces to graphical interfaces, from standalone PCs to networked systems, and then to cloud computing.
A mobile device optimized for business is reasonable. The smartphone has been the exception to the rule, in which business and consumer requirements are normally so different that they call for different ecosystems. An MDEP-powered device could become an extension of an enterprise IT solution, enabling management, control, AI, and shared licensing across systems. A new enterprise mobile OS that offers the flexibility of Android with the security of Windows. No tax due to Google or Apple.
Microsoft has everything it needs to launch a mobile operating system again, including potential users. Before the iPhone launched in 2007, Microsoft’s mobile operating system was called Windows Mobile (Pocket PC before that). It was growing in popularity and positioned to take on RIM’s Blackberry empire.
The timing also favors a shift from software-only to hardware-and-software plays. AI is forcing us to evaluate processes and assumptions, including portfolios and business models.
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Up Next
Dave Michels heads to Orlando for the first time this year. The destination is Microsoft M365. It was the SharePoint Conference community event, and was renamed when Microsoft co-sponsored. On the surface, it looks similar to Ignite, but that event has become very focused on AI. M365, as the name implies, is more about the suite apps, including Teams. It appears to be more focused on how-tos, with many sessions led by its MVPs. My objectives are to learn more about Teams, especially Teams Phone Mobile. This is the first year Microsoft is adding an analyst track to the event. Hope to see many of the Teams partners there, and with luck, I will score a good price on a Surface Hub.
David Danto will be at the National Association of Broadcasters (NAB) conference, which has drawn the attention of the content creation community (everyone’s now a broadcaster). David intends to try every new device aimed at the creator community and will share his impressions in future coverage.
This was originally published via our Substack.