Cross-posted to my company blog (wds.co)

The industry is awash with Windows Phone 7 right now. But of all the commentary that’s flying about, very little has really touched on Microsoft’s key motivations for the OS.

Had this  ‘just‘ been about smartphone operating systems,  I don’t think anyone would have been surprised by Microsoft’s retirement from the race. Redmond’s marketshare for smartphone OSs  has been on an annual slide for many years and now sits around 5%. Given the dramatic shift in the market since it’s last major releas, from the open source trend to an app-centric experience, why is Microsoft investing so much ($500m according to some estimates) to make this work?

Well, here’s the answer. Look at where Microsoft generates its revenues. Make no mistake, Windows Phone 7 is about protecting its core business; Windows and the Office suite.

If you can’t see the connection, think about Apple and Android. These aren’t just operating systems, these are ecosystems.  Both Apple and Google leverage their smartphone platforms as springboards to complimentary products and services, both on and off the mobile platform.

Android users quickly tie themselves to Gmail and cloud-based Google Docs. No more Outlook and Microsoft Office for them. And iPhone users, once bought into the brand and experience, will be less inclined to dismiss a Mac as a second-runner when it’s time to buy a new desktop or laptop. No more Windows for them.

Microsoft needs to protect its cash-cow and it needs millions of eyeballs on the world’s most pervasive computing platform – the mobile device – to do this.

It’s one reason why Windows Phone 7 is so community-driven and so integrated with Microsoft’s existing online brands, Live, Bing, Xbox etc. These may not be the key revenue generators for Microsoft, but it’s communities that drive brand loyalty across wider product portfolios.  The 360m Hotmail users, 299m messenger users and 23m Xbox live users are the ones that will be helping to drive early adoption and reigniting a lost sense of brand loyalty for a Microsoft ecosystem.