Five years ago, when Android was introduced, it was met with wide skepticism and little enthusiasm by many pundits and experts. It delivered on that skepticism with a lackluster initial commercial launch. But today, Android is the dominant mobile operating system – preloaded on 70% of smartphones shipped worldwide in 2012 – and it is now poised to be the OS that runs the world.

Android has turned out to be the cheap, flexible yet powerful new OS of the future, not just compared to iOS, but compared to Mac OSX, Linux and Windows as well. Some of the early Android-powered non-smartphones attempts include Samsung Ativ Q, NVidia Shield, OYUA, Nikon Coolpix Camera, and of course Google Glass. It’s only a matter of time before Android is built into home sensors, cars and anything else you can think of.

How did this happen? Android proved itself first by filling a specific void in the wireless marketplace, where major hardware manufacturers needed a smartphone OS to compete with iPhone. Historically, competition in the highly fragmented mobile OEM ecosystem was based on hardware differentiation, not software innovation, as the OEMs didn’t have the necessary software engineering competency in house. Then iOS launched and OEMs knew they couldn’t compete with Apple on software and hardware. By offering Android for free and nurturing a developer ecosystem that rivals Apple’s, Google was the answer to iOS for OEMs.  Much like iTunes was the answer for the music industry’s piracy challenges. Whoops!

Wireless carriers were the other major gatekeepers in mobile and Android appealed to them by changing the economic rules of OS distribution even more dramatically than Linux. Google’s Android model was the most compelling answer for carriers given iPhone’s “over the top” strategy that provided no revenue share & customer disintermediation but was being demanded by consumers worldwide.

For its next act, Android is set to overtake Windows and OSX to become the de facto OS and development platform. As mobile devices become more powerful, and as screen sizes inch up, users will shift their computing time from PCs to a combination of smartphone and tablet. This is further accelerated by cloud-based services, single purpose devices and M2M data offerings such that fewer and fewer devices will need to run Windows, OSX or Linux OSes to meet user needs.

At the same time, entrepreneurs are starting to find creative uses for Android beyond the smartphone and tablet sectors, putting Android in the pole position to be the base operating system of a big new emerging technology market, the much-anticipated Internet of Things (IOT). The IOT refers to everyday products such as thermostats and scales enhanced with microprocessors and Internet connectivity. A large subset of those devices will need an operating system, application platform and an active engineering population to develop for it. Android is the obvious choice.

Structurally, this implies a whole generation of engineering talent is likely to never be exposed to Xcode, Visual Studio or COM.  Instead, they will learn to develop and publish apps using the free Android Studio toolchain. They will think in terms of product experiences and have the ability to experiment with revenue generation with practically zero barriers to entry. I have to imagine this is Bill Gates’ worst nightmare come true.

So what will Android-powered devices do? I listed a few of the early examples above that use it for things like SLR cameras and game consoles, but it has hardly been the land rush you might expect. My money is on China serving as the primordial soup that spawns several new Android use cases & variations. Watching their market dynamics from the outside indicates they are about 5 years ahead of the world in terms of Android ecosystem evolution. The China market also experiences more chaos and innovation, as Google has lost control of Android there, so more interesting stuff will emerge as part of natural selection process.

Irrespective of its likely lock as world’s most important OS, Android still has several weaknesses that need to be addressed to maximize its potential. Android’s current shortcomings include a long upgrade cycle, a proliferation of versions and customizations, the lack of a standards body, and a current lack of enthusiasm for Android-related software startups. Let’s take them one-by-one:

• The long upgrade cycle has been cited by many as Android’s Achilles heel. Even as Google aggressively moves to combat this I think it is a forever fact of existence for Android. It’s the downside of an open-source OS that commoditizes OEMs, forcing them to differentiate their products via proprietary features. This results in private forks of the OS for each OEM with forward and reverse integration into the “public” source trunk. As fast as Android is moving, and as the prices of mobile devices plummet, OEMs have little incentive to back port to last year’s device. This means that app developers have to account for the differences, and apps may not run on some devices or may otherwise be impaired.

• All the different versions of Android, not to mention flavors, on the market means that developers have to make an important decision about what to support.  If you want the most reach, you have to target the current versions plus previous two major releases (as of now effectively Jelly Bean, Ice Cream Sandwich and Ginger Bread, since Honeycomb was a ghost release).  However, if you want to create the best possible user experience, you’ll likely want to focus on the features introduced in the most current version of the OS, which will cap your market size significantly. Who knows what you have to focus on to generate meaningful revenue on the platform. So this becomes nothing less than a “bet the company and/or product” decision, since it affects the software architecture and product experience design so deeply that it is virtually impossible to change once product development is underway.

• Android customization also means that developers have to find ways to build inroads with multiple Platform Vendors (at the very least Google, Samsung and Amazon if you are U.S.-centric) that are all competing with each other and looking for exclusive differentiation.  Globally, the landscape is even more challenging. Loath as I am to suggest it, I actually think Android needs some sort of standards body that leverages developer influence to apply pressure to the different Android Platform Venders as API levels evolve. This will become even more necessary in the next few years as more companies do what Amazon has done in forking Android to create the Kindle Fire OS thus break “Android” for developers.

• Android is still a second-class citizen in Silicon Valley and among U.S.-based software companies. I live and work in Silicon Valley and can count on one hand the number of Android phones I see everyday. My sense is this is changing, as I’ve recently been pitched about a dozen different Android launchers in my short tenure as a VC, though that may be because I started the team that launched Facebook Home more than an increase in the popularity of Android. I’m still hoping to discover start-ups that are thinking much more broadly than launchers about the level of disruption Android enables, both on mobile and non-mobile devices.

I’m eager to see the creative ideas entrepreneurs will have about how to leverage Android to build amazing products!