With a new year come changes: new product releases, technological shifts, and evolving expectations. And 2012 will be no different. This year, we’ll see the release of Windows 8 (unless something goes horribly wrong), giving Microsoft a toehold in the crucial tablet market. This year, Windows Phone will establish itself as the clear number three in the handset market, or it will simply fade away.

And this year, Microsoft will edge further from its roots in traditional software markets and move inexorably to the cloud and connected services. I can’t wait to see what 2012 brings.

Evidence of the Rise of Windows Phone...

It’s going to be a while before unit sales of Windows Phone handsets are strong enough for Microsoft to begin calling them out in financial reports. As of the end of 2011, Windows Phone was racking up single-digital market share at best, well behind Google Android, Apple iOS, and Research in Motion (RIM) BlackBerry, and, embarrassingly, even behind the nebulous “other” category. But with a new generation of software and capabilities (Windows Phone 7.5), new handsets (including the reintroduction of Nokia to the US market), and missteps by competitors, Windows Phone, finally, might be gaining a foothold.

It starts with developers. Looking back on the first year of Windows Phone, I see perhaps one major success story: the platform’s developer story. Microsoft made a lot of right decisions around the Windows Phone platform, basing the developer tools on existing languages, frameworks, and environments that are already familiar to programmers.

This means C#, Visual Basic, and other familiar .NET programming languages; Microsoft Silverlight and XNA frameworks, which are familiar to anyone who’s written apps targeting Silverlight, Windows Presentation Foundation (WPF), or other .NET frameworks on Windows; and Visual Studio (VS), hands-down the best development environment, period.

Microsoft has also done an exemplary job courting the right developers. As I write this, the total Windows Phone app count is at about 40,000 apps—not too shabby for a platform that’s been around for all of 15 months. And of the top key apps on both Android and iOS, over 90 percent are available on Windows Phone. This includes heavyweights such as Facebook, Netflix, Evernote, Spotify, and YouTube, and of course games such as Angry Birds and Plants vs. Zombies.

Microsoft has also gone out of its way to provide reams and reams of Windows Phone developer documentation, which takes the form of (often free) eBooks, printed books, web-based documentation, and videos. An amazing array of ever-growing content is out there, aimed at developers of all levels.

This effort is paying off. A joint survey of mobile developers by IDC and Appcelerator claims that Windows Phone has “decisively” moved ahead of RIM’s BlackBerry OS to become the clear number-three mobile OS behind Android and iOS. This is thanks to four major changes in 2011: platform improvements in

Windows Phone 7.5 (the curiously named second major release of Windows Phone), the full backing of cell phone giant RIM, the ongoing “collapse” of BlackBerry, and HP pulling the rug out from underneath its Palm webOS platform.

“Windows Phone 7 separated from the pack to become the clear number-three mobile platform this quarter,” the report reads. “The OS climbed 8 points to 38 percent of respondents saying they are ‘very interested’ in the platform, the highest ever for Microsoft.” Granted, the companies have only been tracking this information for two years. But by comparison, the iPhone is targeted by 91 percent of mobile developers and Android handsets rack up 83 percent of the market.

BlackBerry, as expected, is dropping off the face of the earth. The platform fell 7 points to just 21 percent interest, and as the report notes, even Nokia’s new Windows Phone–based Lumia handsets garner more interest among mobile developers than does BlackBerry.

...But Still a Lot of Work Ahead

Of course, with Windows Phone, it’s hard to write anything positive without introducing some caveats. Indeed, many questions arise.

The first concerns Windows 8. With Windows 8 adopting and enhancing Windows Phone’s Metro-style UI, it’s hard not to imagine the two platforms coming closer together. In fact, when you consider the hardware that runs at the heart of Windows Phone handsets—1GHz to 1.5GHz ARM-based processors, hardware-accelerated graphics, 512MB to 1GB of RAM, 8GB to 32GB of storage—you see that these highly mobile devices are, in many ways, tiny PCs.

So one’s mind turns to the notion that Windows Phone 8 could simply be a highly modified version of mainstream versions of Windows 8, bringing the two platforms to a logical combination. Heck, Apple did it with iOS, which is a modified version of OS X.

I’ve heard from two reliable sources at Microsoft that that’s exactly what the software giant is planning. There’s no public confirmation on this rumor, so take it with the proverbial grain of salt. But I think it’s happening. In fact, I think it’s inevitable.

One way or the other, Microsoft will have to offer minor Windows Phone updates in the first half of the year, a release some are calling “Tango,” which seems to be largely about making Windows Phone more accessible to the lower end of the market. (This part of the market is less expensive and larger from a volume standpoint than the traditional smartphone market.)

After that, there will be a major release as well. With Windows 8 expected in the second half of 2012, a Windows Phone 8 release around the same time does make some sense.

There are compatibility issues to consider around such a transition, not to mention developer-related concerns, since the underlying runtime on Windows 8, called WinRT, isn’t the same as that in today’s Windows Phone OS.

So developers would need to make yet another transition, which might not be as horrible as it sounds, given the language/framework/environment similarities between the two platforms. But it’s still a transition.

Regardless of what Microsoft does with the “guts” of Windows Phone, I see a pressing need for the company to conceptually advance the Windows Phone platform in some key areas in 2012. That includes removing its reliance on the terrible Zune PC software, which hasn’t been updated in a significant fashion since well before

Windows Phone. I recommend that Microsoft get rid of this weird dependency and build Windows Phone connectivity directly in Windows 8 for those few people who need such things (as well as for those who need to seamlessly download phone-based photos to the PC, another area where the Zune PC software comes up limp).

And I do mean those few people. Smartphones have evolved from PDA-like PC companions and are now full-fledged portable computing devices in their own right. We need to evolve with them, moving the hub for our personal- and work-related data from the PC to the cloud. In such a system, the PC becomes an endpoint for that data, just like a phone or tablet.

In Windows Phone today, some areas that previously needed PC connectivity for accounts management (email, contacts, calendar) have already moved to the cloud, but other areas—media management, primarily, and photo downloading—still require PC connectivity.

Removing these ties will put Windows Phone on par with competing platforms such as iOS—which uses the iCloud services for media management and photo downloading, among other things—and make the platform more universally relevant. Supporting PC users and Mac users would be basically identical.

And resetting a device would be less painful because everything on that device is stored in the cloud.

I’ve been told by sources that Microsoft does intend to better integrate Windows 8 with the next versions of Windows Phone and the Xbox console, though what form that integration will take is still unclear. I’ve heard terms like “embedded Silverlight” for the next Xbox, code-named TEN, and “Apple-like integration” between the various pieces. We’ll see.

Windows 8 Beta

Microsoft is expected to deliver the first (and only) beta version of Windows 8 at or around the 2012 Consumer Electronics Show (CES) January 10–13. This release is notable for many reasons, not the least of which is that it’s only one of an expected three major prerelease milestones for the product.

Whether Microsoft is able to deliver this crucial beta release at CES will say a lot about the coming schedule for the final version of the product.

Windows 8, as you know, is a big bet for Microsoft and a potential disaster in the making if consumers and business customers don’t embrace its new “touch-first” usage model. Yes, it should be close to fully compatible with Windows 7–era applications and hardware. But it’s the forward-leaning Metro-style UI, the Start screen, and the underlying Windows Runtime that will make or break it.

Last year, I was told to expect a feature-complete version of Windows 8 at what became the BUILD Conference. But the prerelease Developer Preview wasn’t feature-complete and provides only a peek at the full Windows 8 user experience. The key here, as I discussed in “The Windows 8 Paradox, A Mobile Market Reshuffle, and RIM’s Nosedive Into Obscurity," is that it’s jarring moving back and forth between new, Metro-style apps and classic, legacy desktop applications. But since all we have today are the legacy applications, we’re not getting the full Windows 8 experience.

What’s going to change isn’t just the platform improvements that Microsoft brings to the beta, but also the opening of the Windows Store, where Microsoft and third-party developers will sell and give away new, Metro-style apps.

My understanding is that the Windows Store could open for business as early as the launch of the Windows 8 beta in January, meaning that we will be able to more reasonably assess how well this new OS will perform in the real world.

Also up in the air is the status of the ARM-based versions of Windows 8. Microsoft is characteristically coy about how it will implement these versions, but I expect that ARM-based

Windows 8 versions will appear exclusively (or nearly so) on iPad-like tablet devices and not provide any access to the legacy Windows desktop or its applications. That would leave more traditional x86/x64 versions of the OS to a wider range of “true” PCs, which would include desktops, laptops, tablet PCs, and slates. I hope Microsoft will clear this up early in 2012 as well.

Whatever happens, 2012 is going to be a huge year for those who are interested in Windows 8. Microsoft’s next OS will ship, one way or another, and I expect we’ll be dealing with the repercussions of that for some time to come. And that will be particularly true if Windows 8 doesn’t catch on as well as Microsoft expects.