This morning Matt Rosoff wrote an interesting piece, arguing that Google should stop offering an open source version of Android.
This is an interesting argument and Matt is one of the more knowledgeable writers on the subject. Yet there are valid reasons why Google maintains its open strategy that weren't considered in the article.
The most significant is the rise of Xiaomi. Thinking of this issue as just Xiaomi grossly underestimates the scope of this problem - Huawei, Acer, Coolpad, Lenovo, ZTE, and even Alcatel sell mind numbing amounts of smartphones in the Chinese and international markets. They all run the Android operating system, usually forks of the open source platform localized to the Chinese market.
What is certain about these companies, given both their heft and their Chinese allegiances, is that they would not use Android if it were not open source. They have all dabbled (and continue to dabble) with competing operating systems of their own creation but have stuck with Android because Google saves them a ton of effort and requires nothing in return. Google creates a compelling economic case to use its compatible product versus something new and incompatible.
The result is a rich ecosystem of apps, the lifeblood of a successful operating system platform, that are compatible with versions of the platform Google makes more money from, as well as the open system which is makes nothing from. App makers, vital to Google's success, aren't in opposition to big G.
Better to make nothing than have all these players attack you as one, no?
If these phone makers switched away from Android Google would be facing a vast threat to their OS business. Switching to some other platform would create a unified front against Android which would be catastrophic to its business. Such a rival would then compete directly with Google for OS market share. It is better for Google to have a compatible platform it makes no money from than a well backed rival looking to take over the non-iOS market.
It's also naive to think that Google will ever get its services onto Chinese mobile phones. Its stance towards China has been non-conciliatory and because of this homegrown rivals, notably Baidu, enjoy a commanding place in the market. Baidu is effectively state backed and enjoys numerous advantages Google will never replicate (for example, compare load times of Baidu Maps and Bing Maps in China - Baidu loads faster than any service you've ever seen).
Google is rightly not concerned about making nothing from these manufacturers as it understands the risks of a unified rival far outweigh any lost revenues it feels it should be entitled to. For this reason Google needs to hold the course and keep Android open running alongside the closed and paid version.