Earlier this week at Mobile World Congress in Barcelona, Spain, Microsoft took the stage and finally announced a product that people in the mobile space have been waiting for for a long time: Windows Mobile 7, or more appropriately (since Microsoft re-dubbed the product a couple of months ago “Windows Phone,”) Windows Phone 7 Series. Windows Phone 7 will be Microsoft’s new mobile operating system, replacing the aging and unattractive Windows Mobile 6.5 that’s the mainstay of a number of enterprise-class and tech-savvy smartphones currently on the market.

Faced with stiff competition in the smartphone space from companies like Apple and Google, Microsoft was forced to come to the table with something strong or risk falling even father behind in the smartphone space – a slip that likely would have met with their downfall in the mobile marketplace. Microsoft’s Windows Mobile has never been a particularly strong OS, and the bulk of its functionality came from the fact that because it’s a Microsoft product and Exchange is also a Microsoft product, the only competition for it on the corporate side has been RIM’s BlackBerry, which unseated Windows Mobile in a huge way. Now, Windows Mobile looks dated, aged, and reminds us of an era when it’s major competition was the old Palm OS (not to be confused with Palm’s WebOS, which is on its new smartphones.)

Windows Phone 7 on the other hand, looks incredible. It’s been updated, it looks modern, it looks sleek, it’s got integration with your social networks and services, it’s got a stunning touch-screen interface, and it brings in two of Microsoft’s most successful properties to the mobile space: Zune and XBox Live. That’s right – your music and your Windows Phone 7 Series device will sync with Zune marketplace and you can snag your music from there, and your mobile gaming experience will be integrated with XBox Live. This alone proves that Microsoft means business and is rolling up its sleeves in the mobile space again.

But it’ll take more than rolled up sleeves and determination to make people abandon their iPhones and G1s for a Windows Phone 7 device.

Before we dive into why, here’s a hands-on video with Windows Phone 7 by my friend Sascha Segan at PC Magazine, who was out at the Mobile World Congress and got to see a live demo of the new operating system:

Windows Phone 7 Series looks great, I have no doubt in my mind, and I’m very excited about it, but there are a number of things I can’t help but think, having watched the technology industry as long as I have.

Apps, Apps, Apps!

Pre-installed apps don’t sell mobile phones anymore. Apps do. The iPhone’s “There’s an app for that” campaign isn’t successful for nothing – it’s because people like having the ability to do just about anything they can think of doing with a mobile phone with their device. They like the idea that if there’s something they want, not only do they have full access to the internet, but there’s probably an app that will make the process easier, whether it’s finding someplace to eat tonight, buying movie tickets, chatting with their friends, or letting their buddies know where they are so they can meet up for a drink. There are apps on the iPhone and in Google’s Android mobile OS for all of those purposes. The question stands: will Microsoft be as open with Windows Phone Series 7 as they have been in the past?

The Windows Mobile story has been a good one for software developers – people have always had access to development tools and kits for Windows Mobile. Windows Phone 7 on the other hand represents a fresh start for Microsoft, and they have the choice to either go as open as possible with the platform as a development stage or clamp down in the Apple model and build a walled garden where they have control over the user experience.

There may have been a time where it would be insane to build in so much control over the user experience, but Apple’s made it work, so it must be at least tempting. At the same time, Google has had tremendous success with Android as a strong challenger to the iPhone and the iPhone OS. It’s likely Microsoft will try to take a middle-path with Windows Phone 7 development, opening the door slowly and trying to control the flow of apps in some fashion.

However, even as that’s likely, the number of available apps for the Zune HD (literally, less than 10) isn’t much encouragement that Microsoft will open the floodgates all at once, and it’s not a positive sign. Again, Microsoft could take the very attractive page from Apple’s book – they’ve managed to make the walled garden approach work, even to the grumbling of their own partners and developers, so anything is possible.

Even so, I still think Microsoft will open the doors. It won’t be completely wide open like Android, but it may be too close to the Apple model for some people. I doubt Microsoft really wants individual developers redefining the Windows Phone experience…just yet.

Agility

Microsoft doesn’t exactly have a reputation these days of being a very agile company. Some of their product lines have seen tremendous success because of their agility and ability to adapt to a changing marketplace, namely their entertainment arm: the Zune, Zune Marketplace, XBox and XBox 360, XBox Live, and Games for Windows. Even so, Microsoft is like a massive ship – steering it takes strategic thinking and the ability to look ahead a long way, and immediately starting to turn that massive ship to move in the direction of the market.

While I wouldn’t say Windows Phone 7 Series is too late, a few more years and it could have been. Also, Microsoft has been telling analysts and reporters for years that they needed to make this shift, and that they were planning to, but it’s taken them that long to respond to these changes in the marketplace.

What remains to be seen is whether or not Microsoft can be fast to market with Windows Phone 7, and whether or not they can be quick to adapt to the market when their competition capitalizes on their weaknesses and re-engineers their strengths. You can bet some of the beauty of Microsoft’s sliding display and actively updating widgets off-screen will be in future iterations of the iPhone OS and Android. Whether or not they’ll get there before or after Microsoft is in the market with Windows Phone 7 is a different matter.

Additionally, when the playing field is level again and everyone adopts (assuming it’s successful) home-screens full of widgets and utilities and blocks that provide you real-time updates from your social services and e-mail instead of flat, static icons you press to open apps, what will Microsoft do then to up their game? I ask because I guarantee that more historically agile companies like Apple and Google will be thinking about it, and especially companies that partner with Google to build on top of Android – like HTC and Motorola – will be thinking about how they can innovate their interfaces as well.

WrapUp

None of this means that I don’t think Windows Phone 7 will be anything but a huge success. I’m almost certain, looking at it and it’s built-in ability to integrate with your social networks, your gaming platforms, and all of your media, that it will be. Out of the box it’s an incredibly strong competitor to the iPhone OS, and it has more built-in seamlessly than Google Android does (which relies heavily on its openness and other apps to provide) but Microsoft will have to bring it fast and bring it strong in order to be real competition for both of those companies.

Additionally, the user experience will have to be as good as we see in the demo, and people will have to be able to get the tools they need to do the things they want with their mobile phones. Otherwise all of the glitter and glamor will be for nothing.

Windows Phone 7 looks like it’ll be a winner and I can’t wait for Microsoft to begin making it available to its hardware partners – I’m cautiously optimistic, and I hope they do it right. I take a bit more of a skeptical and rational approach than some other bloggers I’ve read (I’m looking at you, Gizmodo) but I should stress I’m more optimistic than cautious.