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2/28/2014
09:06 AM
Michael Endler
Michael Endler
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Microsoft's Windows Strategy: A New Hope

Microsoft's Mobile World Congress announcements suggest a successful, and overdue, new direction for its Windows 8.1 strategy. Now Microsoft needs to build momentum.

Windows XP Shutdown: 10 Facts To Know
Windows XP Shutdown: 10 Facts To Know
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Does Microsoft finally have a viable strategy for Windows 8.1?

At Mobile World Congress, the company confirmed Windows and Windows Phone updates that will open the platforms to broader ranges of hardware. The Windows 8.1 update should make the touch-oriented OS easier to use on non-touch devices. Both updates should allow OEMs to manufacture much cheaper products, delivering Windows 8.1 devices into the same price brackets that have made Chromebooks and Android devices so popular.

The lower price ranges are important because they represent the greatest growth opportunity. According to the research firm IDC, smartphone shipments will dip to single-digit percentage growths by 2018, with most of the expansion coming from low-cost devices sold in emerging markets. IDC has said the tablet market is maturing even faster.

[Will Microsoft Office be a success on the iPad? Read Microsoft Office For iPad: Do It Right.]

IDC projects Windows platforms will account for 7% of the smartphone market in 2018 and 10.2% of the tablet market in 2017. In both cases that's a distant third behind Android and iOS. Predictions like these demonstrate why some Microsoft critics resist the company's device ambitions.

Microsoft defenders like to spin such forecasts by pointing out that Windows platforms are poised to achieve better percentage growth than iOS or Android-based ones.

This is the wrong way to look at it. High-percentage growth is easier to achieve when the base volume is low. If a company sells 10 units one year and 50 units the next year, it achieves remarkable growth in percentage terms -- but unless each unit is incredibly profitable, the company still probably isn't making much money. This is the dilemma Microsoft faces: Because it arrived late to the mobile market and stumbled once it got there, it faces few growth avenues, most involving little direct profit. It's worth noting that even though IDC projects Windows growth, it expects Apple to maintain its lead in the most lucrative segments.

Will Microsoft score with cheaper hardware and a UI that's better suited to mice and keyboards?
Will Microsoft score with cheaper hardware and a UI that's better suited to mice and keyboards?

Microsoft's forthcoming updates could improve the situation in several ways. First, they enable Windows platforms to cut into Android's slice of the emerging-market pie. Microsoft hasn't confirmed reports that it is cutting Windows Phone or Windows licensing costs, but at Mobile World Congress, its dedication to low-cost devices was clear. Windows devices have made modest progress as prices have slid lower -- and with a likely fleet of sub-$200 options on the way, that progress could outpace IDC's expectations.

By creating a larger footprint in emerging markets, Microsoft impedes Android from becoming the reference point for a new generation of users -- a battle Nokia CEO Stephen Elop referenced when he explained how the Android-based Nokia X platform could still benefit Microsoft. With victories on this front, Microsoft could not only sell more of its software and services, but also create a market for potential device upgrades. This could give the Surface line some breathing room.

Essentially, Microsoft could become to its own operating systems what Samsung is to Android. Even though Google's OS commands more users than any other platform, Samsung is the only Android OEM that really makes much on devices. It's a problem with emerging-market domination. High volumes of low-margin devices don't necessarily translate to a lot of profit. When Microsoft launched the Surface RT, it assumed it would capture premium market share simply by showing up. As last quarter's record iPad sales indicate, this hasn't been the case. But the updates give both Windows and Windows Phone OEMs more incentive to do the heavy lifting in budget markets. If the tactic attracts more Windows 8.1 users, demand for the Surface 2 and other, more expensive, devices can only increase.

At the same time, this Windows update demonstrates Microsoft's awareness that traditional designs aren't going away. Windows 8's reliance on touch alienated many longtime Microsoft customers, and Windows 8.1 appears to have undone only some of the damage to the product's reputation. The update coming this spring appears to still lack a Start menu, which will disappoint desktop users.

Still, a version of Windows 8 that works better on non-touch devices can only help. Combined with increased attention to emerging markets and a renewed push from OEM partners, Windows 8's prospects are better than they have been in some time.

Microsoft's next challenge will be to sustain this momentum in April, when it will hold Build, its conference for developers. After taking so much heat for Windows 8, it could use a home run. If online chatter is any indication, the company might have some more surprises in store for Build, such as Cortana, its long-rumored Siri competitor, or perhaps even an early peek at Windows 9.

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Michael Endler joined InformationWeek as an associate editor in 2012. He previously worked in talent representation in the entertainment industry, as a freelance copywriter and photojournalist, and as a teacher. Michael earned a BA in English from Stanford University in 2005 ... View Full Bio

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anon5351707475
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anon5351707475,
User Rank: Apprentice
2/28/2014 | 12:31:18 PM
Re: Not just for touch.
Really sick of this, tired of hearing that. What's next...tell those darn kids to get off your lawn!
ricegf
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ricegf,
User Rank: Guru
2/28/2014 | 12:12:40 PM
Re: The Elephant in Microsoft's Living Room
Yes, you're exactly right - with 81% of the worldwide smartphone market, Android is looking suspiciously like a monopoly-in-waiting on its own. I'm not really a proponent of Windows as a reaction, though - they already had a desktop monopoly, and that didn't end well.

Fortunately, we have several recent Linux-based challengers from which to choose - Firefox OS is shipping from several vendors on low-end phones, Jolla (the guys who bolted from Nokia when they switched to Windows) just began shipping a well-received mid-range smartphone from Finland colloquially known as The Other Half (cool hardware!), Canonical just announced two Ubuntu-based phones that will ship late this year, and Samsung has announced an actual Tizen-based phone and smartwatch after several delays.

If you're concerned about Android becoming a monopoly, I'd suggest supporting one of these products - but the price is that none of them are yet as polished as Android or iOS.

Personally I'm fond of Ubuntu, as they have a cleaner convergence story that anyone else I've seen. YMMV, of course - but if you're concerned about Google's growing market dominance, do consider voting with your dollars for ABA (anyone but Android).  ;-)
rradina
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rradina,
User Rank: Ninja
2/28/2014 | 11:27:07 AM
Re: The Elephant in Microsoft's Living Room
Competition restored?  Maybe.  We might just be witnessing a passing of the torch to a new monopoly.
rradina
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rradina,
User Rank: Ninja
2/28/2014 | 11:24:31 AM
Re: Not just for touch.
I agree.  Every time Microsoft has ever changed something they alienate some/most/all existing customers.  I'm certainly not dismissing the idea that improvements to Win8's non-touch UI aren't needed or welcome  I'm just agreeing that any change always generates a certain amount of hate and that it's way past being thoroughly debated.
ricegf
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ricegf,
User Rank: Guru
2/28/2014 | 11:03:20 AM
The Elephant in Microsoft's Living Room
The elephant in the room, not mentioned in this enthusiastically optimistic story, is Microsoft / Nokia's introduction this week of 3 new Android phones. While the announcers tried to put on a brave front as to how this would "drive more volume to Microsoft services", it's pretty much an admission that they need Android to compete in the high-growth emerging market segments - in effect, the (very nice) Windows-based economy phones just aren't cutting it.

This is further evidenced by the actual market research, which shows that while Windows smartphones show promising growth rates as a percentage of market percentage (!), both Android and Apple sold a lot more additional phones than Microsoft / Nokia (the article hints at this quite gently). In effect, the math tricks hide the actual dismal state of Windows mobile product sales, to which the slow growth of the Windows application store attests.

And then there's Chrome OS's incredible surge in the 4th quarter (as every major laptop vendor introduced new Chromebook models), and utter domination of such bellweathers as the Amazon laptop bestseller list (4 of 5 are now Chromebooks, not Windows 8 laptops). This only adds to Windows 8's dismal failure in the desktop and laptop market. As XP's long delayed demise finally arrives only 5 weeks hence, XP still has a far larger installed base than 8.

Microsoft almost certainly has several more years of locked-in rich corporate "software assurance" revenues on which to subsist, not to mention their patent fees extracted from Android vendors under threat of massive legal action, which to date has kept their balance sheet looking healthy. Unfortunately, BYOD threatens to tip even corporate income into a death spiral, as when people bring their own devices to work, they tend to buy what they use at home, where Android and Apple reign and Chrome OS shines - which may leave Microsoft as a mere patent licensing and litigation shell of its former self in a few years.

The monopoly has clearly cracked, and competition has returned to computing. Finally.
mikemuch
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mikemuch,
User Rank: Apprentice
2/28/2014 | 9:27:38 AM
Not just for touch.
Really sick of hearing this stuff about Windows 8/8.1 being only for touch devices. I've been using it on a desktop with mouse and keyboard and find it smooth and quick. After learning just a couple new habits, I feel like I can get around the OS faster than in legacy Windows OSes. Also sick of hearing the lamentation over the loss of the start button. The Start screen is just a full screen start button! With a little experience and setup, you can actually get to what you want--new or old-style app--faster with it. Just as with the old start button, just start typing to show the program you want. Or just put tiles for programs you use all the time in easy click reach.

Another thing I'm tired of hearing is that no one wants a touch-screen on a desktop or laptop. I just visited an older friend who got a new touch-screen Windows 8.1 laptop, and he very much likes the ability to just poke the item on the screen to start it.
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