Microsoft’s Embedded Technology Creates Opportunities for Smart, Connected, and Digital Devices

Scott Horn, director of marketing, Embedded Devices.

REDMOND, Wash., Jan. 26, 2003 Among the new products that created a buzz at the 2004 International Consumer Electronics Show earlier this month in Las Vegas were new Portable Media Center devices. These devices, which store and play digital music, video, and other media, are based on Microsoft’s Windows CE .NET embedded operating system. The warm reception the devices received from the media and others at the event is just one example of how Microsoft embedded technologies are changing the personal electronics and other industries that rely on powerful, versatile, yet extremely compact operating system to power their devices.

To get a sense of Microsoft’s roadmap for embedded devices, PressPass spoke with Scott Horn , director of marketing for the Embedded Devices Group at Microsoft.

PressPass: What do people mean when they refer to

embedded devices?

Horn: Embedded devices include any electronic system that combines a microprocessor and software to perform a series of programmed instructions, but that isn’t used as a general-purpose computing platform, like a personal computer. Embedded devices span a wide range of devices — personal productivity devices such as personal digital assistants (PDAs) and cell phones; consumer electronics such as digital televisions and set-top-boxes, and commercial systems such as building automation, factory-floor equipment and retail point-of-sale systems. The diversity of devices makes this area both very exciting and very challenging because there are many different customers with unique needs.

PressPass: What is Microsoft’s Embedded Devices Group responsible for?

Horn: We focus on embedded devices that incorporate advanced 32-bit microprocessors; are connected to other devices, PCs and servers; and are differentiated via rich application and service experiences. To enable OEMs (Original Equipment Manufacturers) to create these kinds of devices, we deliver Microsoft’s embedded systems platforms, which include the Windows CE .NET and Windows XP Embedded operating systems. We work with OEMs worldwide to help them bring to market a wide variety of smart devices, including automatic teller machines (ATMs), consumer electronics, robotic systems, point-of-sale terminals, phones, network gateways, and thin clients. Our group also incubates new device platforms — such as the Portable Media Center product based on Windows CE .NET — that we believe offer an opportunity to catalyze a compelling customer experience with OEMs.

PressPass: What trends are you seeing in the device industry?

Horn: We’re seeing several important changes in the embedded market that have affected how manufacturers evaluate operating systems for devices.

First, the people who buy devices increasingly want devices that provide compelling value via a rich application and service experience. They’re demanding experiences like Web browsing, digital media, advanced networking, and integration with PCs and servers. These customers also want to be able to integrate these devices with the other technology and devices they already own` and to be able to upgrade these embedded devices as new advances become available. These needs are powering a shift to more powerful hardware platforms, which is making 32-bit processors the mainstream choice in embedded devices.

All of these changes are taking place against a backdrop of increasing global competition and ever-shorter product life cycles. Taken together, OEMs are more focused than ever on applying their scarce engineering resources to developing ways that uniquely differentiate their products and their company in the marketplace.

As a result, there is an overall industry shift away from traditional
software approaches. Instead, the industry is increasingly using commercially available software platforms that enable OEMs to create a wide range of devices. Microsoft is benefiting from this trend because we made an early bet that a device platform capable of supporting rich experiences for a wide range of devices would be the right approach for OEMs.

PressPass: How is Microsoft’s view of a

device platform

different from the traditional embedded industry view?

Horn: We recognized that there would be a wide range of different device types and that traditional industry approaches wouldn’t enable us to support the needs of all these customers. Instead, we bet on developing a very rich software platform delivered as a set of components that OEMs could choose from, modify or add to in order to build a wide variety of devices. Part of that bet was that a consistent programming model and tool set would span this range of devices.

We think that’s been a very good call for two reasons. First, we’re increasingly working with multiple types of devices with our largest OEM customers, often in parallel. Our ability to provide these customers with consistent technologies, tools and engagement programs enables them to maximize their engineering talent and their investments. Second, we’re also seeing that technologies that are initially part of one particular device often end up being used in a wide range of devices. A great example is Voice over Internet Protocol (VoIP). We initially saw demand for this capability in enterprise desktop VoIP phones, but because we have a platform philosophy we integrated VoIP capabilities into the Windows CE operating system so they could be used in any device. Now we’re seeing demand for VoIP capabilities from OEMs that create vertical handhelds, residential gateways, and even set-top boxes. [Residential gateways are home routers, such as wireless LAN networks or satellite boxes.] Because we made VoIP part of the platform, all these OEMs can easily add this capability to their products. That wouldn’t have been the case if we had created a specific VoIP for Desktop Phones product.

PressPass: How is Microsoft enabling its customers and partners to be successful?

Horn: In addition to the technology bets we’ve made, our business model is based on
“shared success”
with our OEM customers.

There are three key propositions in our business model. First, we provide very low-cost tools and the ability to easily evaluate and create prototypes with our platform. Ours are among the lowest tools prices in the industry and we make no-charge evaluation versions of both Windows CE .NET and Windows XP Embedded available via download from We’re very focused on enabling any developer anywhere to easily try our platforms and see what they can do.

Second, we rely on our partners for services. We are not in the fees-for-service business. We think we’re best aligned with our customers if we have an incentive to get them to market quickly; often, having services as a revenue component can have the opposite effect. We also want our customers to benefit from a broad set of innovations and the specialized knowledge our partners can provide, so we have the largest partner ecosystem in the industry and we believe that we invest more in it than any other platform provider. Doing so enables us to focus on what we do best — listen to customer and partners, and build the best platform and tools we can based on that feedback.

Finally, this all rolls up to our revenue model. As I mentioned, we don’t use services as a revenue generator. A lot of our competitors base their revenue on services, which are typically paid up front, regardless of whether a product ships. Therefore, it is not in the best interests of our competition to see that device get to market quickly. Instead, our model is based on
“shared success,”
meaning we only make money when a customer actually gets paid for shipping successful devices and shipping them in volume. Therefore, if our customers’ product doesn’t get to market, we’re not going to make any money. It’s really an overall bet on explosive growth in both the number of types of devices and the total number of devices.

PressPass: What are the key opportunities for OEMs and other device manufacturers in the embedded industry during the next few years?

Horn: The opportunities are endless. OEMs can be as creative as they want in building their devices. In specific areas, there’s a lot of opportunity around certain categories. There are amazing opportunities in consumer electronics and the use of technology in the home. There continue to be opportunities in the industrial and business automation space for example, what’s being done to run large buildings, what’s being done to enable systems to run in a factory-floor environment as well as what we call the vertical handheld environment. That includes small devices such as scanners in the retail space, or the growing use of handheld devices in the field for example, in forestry, tracking and sending information via a wireless connection back to a home office.

There also are a lot of opportunities in the area of VoIP, taking a phone and making it more of a centralized system to track all of your information. They call it
in the United States. For example, in an office where some workers don’t have their own cubicle, people share spaces. Wouldn’t it be great to have a phone that sits on the desk and has the ability to let me put all of my information, my contacts, and my calendar on that phone, and when the next person comes in, the phone is able to make all that information available for the next person?

PressPass: What are the key device categories for Microsoft in the future?

Horn: If we had to prioritize it, the areas that are most interesting are those where we are optimizing our software to bring really great devices to market. For the mobility space, the biggest are Pocket PC, Smartphone, and the new Portable Media Center product. In addition, we have optimized Windows CE .NET and Windows XP Embedded to make it even easier for developers to build great devices, including residential gateways, IP set-top boxes, retail point-of-sale devices, VoIP phones, thin clients, and ultimately all varieties of consumer electronics.

PressPass: What are your priorities for the business during the next year?

Horn: They’re fairly simple. The first priority is staying focused on listening to customers and partners as we’re building the next versions of Windows CE and Windows XP Embedded. We do a lot of things to get this feedback, everything from face-to-face design reviews to active participation in online chats and newsgroups. The second priority is enabling our ecosystem to be successful. We have the biggest partner base in the embedded industry more than 2,000 partners, ranging from silicon vendors to systems integrators to trainers and consultants. Our third priority is helping developers quickly learn how to use our products in new and exciting ways and, ultimately, enable them to be successful in building great devices.

PressPass: What are you most excited about for the business right now?

Horn: There are so many opportunities in this space right now. It’s incredibly exciting to see so many new products being developed that are improving people’s personal and work experiences. We’re working with OEMs that are building everything from exercise bicycles to the next generation of factory automation systems. The collaboration we have with these OEMs is extremely positive: we focus on building a broadly applicable rich device platform that enables them to focus on creating unique and compelling products for their customers.

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