In the same week that Microsoft introduced Windows CE technologies to drive its Pocket PC penetration in the consumer market (now dominated by Palm devices), Palm announced a major initiative with IBM, igniting the battle against Microsoft for the corporate handheld space.

The Palm PC, and other devices from Handspring and Sony, have dominated the handheld market from the start. Palm actually took a page from the Microsoft marketing playbook and focused on building a community around its device by opening up the operating system and encouraging developers and third parties to extend the device with products and services. The vendor also kept the device price low and continually introduced new brands to keep it fresh.

Microsoft’s approach has been less successful so far, but it follows the familiar pattern that allowed Microsoft to create the juggernaut that is now Windows. It’s almost eerie to read the press clippings between 1985 and 1990 that compare the black-and-white, limited-function Macintosh to the colorful Windows 1.0 and 2.0 that were too slow to be useful on the current crop of processors, and then compare those same concepts to the launch of the Microsoft PocketPC (now Windows CE) devices and the Palm PC.

When a new crop of processors and a new, less DOS-dependent version of Windows (3.1) arrived in 1991, the fate of the Mac as a business computer was sealed. I think the folks at Palm recognize that Microsoft’s new xScale processors and CE.Net system have the potential to do the same in the corporate handheld market. Palm has made a very smart strategic move and picked the right partner in IBM.

Feeding the demand
The announcement is a commitment between Palm and IBM to jointly develop and market Palm handheld computers to large corporate accounts. Over the last couple of years, momentum has been steadily increased for handheld use among not only technology wonks but also average users in sales and marketing groups as well as executives.

More important, enterprises are actually buying handhelds for employees rather than simply providing support access for employee-owned devices (hookup for e-mail and plug-ins to CRM systems, etc.). Companies are also realizing the potential productivity gains to be had by combining the mobility of the handheld with the connectivity of new data and communications networks (2.5G and 3G) that are rolling out this year and next. The ability to securely extend the office to a handheld device on an external network is a key technology principle driving Palm’s deal with IBM.

Yet, capturing the corporate market is a different proposition than getting consumer mind share. Corporations value platforms over which they can build new systems—platforms that simply have a lot of software but limited development tools.

Developing mobile applications
Development platforms have long been Microsoft’s forte. In fact, I’ve argued for years that you can attribute most of Microsoft’s success to the fact that they’ve seen themselves as a platforms company—one that caters to developers rather than a product company that caters to users.

Microsoft has always understood that compelling platforms drive development, which means compelling applications that users will buy. Although there are some very good tools that allow Palm ISVs to create applications for broad distribution, the tool selection for creating integrated, very vertical, and customized corporate applications is sorely lacking. Now you see the logic behind the IBM deal.

With the latest public release of the PocketPC OS, Microsoft added key integration elements that make it an ideal companion to corporate information systems that are Microsoft based. PocketPC 2002 includes instant messaging software that integrates with Microsoft’s IM solution, terminal services software that allows remote management and control of any Windows server, and a portable version of Outlook that will automatically synchronize from a remote location with Microsoft Exchange and Mobile Information Server. (Microsoft also announced that the next Exchange version would have the Mobile Information Server connectivity components integrated with Exchange out of the box.) With the release of Windows CE.Net later this year, Microsoft will have a common programming model and programming languages for all of its devices and operating systems—clearly a real boon for developers.

Palm’s deal with IBM provides a comparable story, although they’re likely to lag behind in the implementation, given that it just happened. IBM will develop versions of its WebSphere software development platform that specifically target Palm devices. IBM will also tightly integrate the Palm/WebSphere runtime environment with its upcoming WebSphere Everywhere Access Server.

This integration across the WebSphere environment will give developers a great new platform to develop next-generation corporate applications—applications that will let users share corporate sales, inventory, and manufacturing data remotely using Palm PCs.

Winners and losers
The big issue out of all this for CIOs is how to analyze who’s actually going to win from these deals, and who’s likely to lose in order to advance the corporate strategy. Picking the right horse means tech leaders won’t have to make a sudden shift in strategy later on.

On the handheld front, I don’t see either the IBM/Palm initiative or the Microsoft CE.Net initiative becoming dominant. Companies with significant investments in MS architecture are likely to pursue the CE.Net strategy, and those more focused on Java, EJB, and UNIX will likely find the Palm/IBM announcement exciting, as it gives them another platform on which to deploy or integrate.

The real loser is Sun. Not only because an endorsement for Palm and WebSphere is a lack of endorsement for the Jini initiative, but also because the deal further cements IBM and WebSphere as the platform of choice for Java and EJB implementations by giving developers a natural, commercially successful, and ubiquitous platform (Palm) with which to integrate future applications.