The number one question that has to be asked is this: does Google take a version of Android and go of its own reservation, essentially abandoning the Android market in favor of its own hardware and software combination?
This question is the right competitive question to ask for Apple, who already operates in that mode. If Google becomes the only player in the Android market, then the competitive landscape becomes clear, unlike the muddled one that exists today. If Google keeps a foot in both camps, it starts looking a bit like Microsoft, with the looming threat of partner cannibalization always on the horizon. Keeping a foot in both camps also increases the threat that one or more Google Android partners will create an implementation of Android that is better than Google’s, and perhaps keep Google in the second-tier level, at minimum, make it less relevant and this investment less profitable. (BTW, when looking at what Nokia could do, I originally suggested that they partner with Google and create the best Android phone possible, but it appears, perhaps, that this becoming a manufacturer thing may have been on Google’s roadmap for some time. That advice now applies to Google itself, either create the best Google devices possible or leave the market quickly).
And then there is Microsoft. Does this force Microsoft to go into handset manufacturing? Do they buy Nokia? Do we end up with HTC, Samsung, LG and other handset/tablet makers completely disenfranchised? I certainly don’t see another OS taking off, though versions of Android could morph and proliferate, eventually challenging the creator. But Microsoft already owns all of its code so it could become much more like Apple much more quickly. Microsoft making a handset and tablet using Windows 7/8 would also make their strategy more clear. They are disadvantaged because no one knows what a Windows device really is, and in the case of both Android and Windows phones, none of the players owns enough of the value chain the challenge Apple at all levels. Same issue with Android. If Google and Microsoft where to acquire their entire design and supply chain (or the influence thereof), they could also innovate more quickly because, like Apple, they would just do what they wanted to do, as fast as they wanted to do it, with no need to sell a partner community.
Over the course of time, we will discover how this move is a game changer: it will either means that Google becomes a real competitive threat to Apple because of its integrated control of the platform design and its execution; or if they allow for multiple versions of Android, just create a messier market than the one we have today. The next thing to watch for is Microsoft acquisition moves. Does it rapidly respond or does it wait to see if Google turns the acquisition into value, thus, once again missing the open window. My advice to Microsoft: let’s make this a real hotbed of innovation. Go buy Nokia tomorrow and let’s create a rational handset market where the five competitors (RIM and HP remain players) raise the stakes for the technology, their shareholders, and oh, the consumers too.