Windows: It’s Not Over (Yet)

Some analysts believe Microsoft’s attempt at a new interface basically doomed Windows 8.

Earlier this week, ZDNet columnist Steven Vaughan-Nichols wrote an article, “Windows: It’s over,” that sparked a lot of passionate online debate. His thesis was simple: Microsoft’s dominance of the computing market is coming to an end, accelerated by the incipient failure of Windows 8.

“It looks like Microsoft is betting all its chips on the silly notion that Metro will be the one true interface for its entire PC and device line,” he wrote. “There’s only one little problem with this idea. Sorry, but I have to say it again, look at the numbers: Metro-interface operating systems have already failed.”

By “Metro,” Vaughan-Nichols is referring to the Windows 8 Start screen, which features colorful tiles linked to applications; the desktop interface, familiar to millions of Windows users, is buried behind one of those tiles. (Microsoft actually stopped using the “Metro” name after a shady copyright dispute with German conglomerate Metro AG, although sometimes it seems as if everyone in the tech industry still uses it.)

Microsoft created Windows 8’s dual interface in the belief that it would help the operating system functionally equally well on tablets (where users could stay in the “Metro” interface and tap on the tiles to activate apps) and traditional PCs (where power users and office workers could switch over to the desktop to use legacy programs). But instead of conquering the mobile-device and PC worlds in a single stroke, Vaughan-Nichols suggests that Windows 8 alienated Windows’ traditional audience while failing to gain any traction with tablet owners.

“The sum is that Microsoft is failing to hold on to the desktop market and that it has no impact whatsoever on smartphones and tablets,” he wrote. “Unless Microsoft changes course, this may be the end of the Windows domination period in end-using computing.”

Some early numbers certainly appear to back up his assertions: research firm IDC estimated worldwide PC shipments in the first quarter of 2013 at 76.3 million units, down 13.9 percent from the same quarter in 2012, and placed part of the blame on Windows 8. “At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market,” Bob O’Donnell, IDC Program Vice President, Clients and Displays, wrote in a statement at the time.

O’Donnell went on to blame Windows 8’s interface for many of the operating system’s problems. “While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices.”

(Just for good measure, Intel CEO Paul Otellini leapt atop that particular dog-pile, telling analysts and media on a conference call that Windows 8 “didn’t quite have that same kind of adoption curve” as its predecessors, and “requires a bit of training.”)

Windows 8 certainly didn’t skyrocket Microsoft’s profits in the most recent quarter. On April 18, Microsoft reported quarterly revenues of $5.70 billion for its Windows division, a 23 percent increase from the same quarter a year ago. But as the company noted in a press release, “adjusting for the recognition of revenue related to the Windows Upgrade Offer, Windows Division non-GAAP revenue was flat.” That’s despite Microsoft’s massive Windows 8 advertising campaign, and the release of the sleek-and-shiny Surface Pro tablets.

But Are Things Really That Bad?

Make no mistake about it: there’s no way to fudge the numbers in a way that suggests Windows 8 is proving a blockbuster. But maybe it’s not doomsday for the operating system.

Take a trip back in the time machine to 2009. Microsoft was about to release Windows 7, its first major operating-system upgrade since the much-maligned Windows Vista in early 2007. Many Windows users still relied on Windows XP, at that point nearly a decade old, to accomplish their daily tasks; moreover, an anemic economy—Wall Street had cratered only a year before—had kept businesses and consumers from upgrading already-old machines.

The conditions were ripe, in other words, for lots of people to engage in a widespread tech refresh—and refresh they did, buying Windows 7 licenses by the millions. The PC market enjoyed a corresponding rise. Windows 7 quickly began to eat into Windows XP’s market share, and any number of Microsoft executives probably enjoyed a healthy bonus that holiday season.

There was no pent-up demand for Windows 8. Most Windows users seemed perfectly happy with Windows XP or 7; tablet users weren’t exactly clamoring for Microsoft to plunge into an underserved market. PC makers were already struggling to identify innovations and price-points that would help sell their products at a time when customers seemed more interested in thin touch-screens. All those factors contributed to a hostile environment for Windows 8 on the eve of its release.

But Microsoft likes to play the long game: unlike a tiny startup running on a couple hundred thousand dollars and a handful of wired-up kids, it has the cash and patience to keep initiatives running for years—especially if the initiative in question is Windows, which powers a significant portion of the company’s bottom line. And consider the following:

Microsoft Still Dominates the PC OS Market. According to StatCounter, Windows 7 owns 52.61 percent of the global operating-system market; Windows XP, now the aged warhorse of operating systems, still has 23.38 percent. Mac OS X, Microsoft’s biggest competitor in this arena, holds 7.29 percent. Yes, more and more people are making smartphones and tablets the center of their computing lives; and yes, the desktop and laptop market will surely continue to shrink over the next few years—but Microsoft will continue to own it, earning billions of dollars in the process.

Microsoft is Working on a Windows That Works. Microsoft is working on Windows Blue, which could be considered Windows 8.1. It will feature various tweaks and improvements, including (if one believes the rumors) the reintroduction of the desktop Start button so sorely missed by many users. But that’s not all: the company is certainly working on Windows 9, which could seize the collective imagination in the same way as Windows 7.

Microsoft Has Time. As mentioned above, Microsoft has a lot of cash and time to experiment and see what works for its businesses. It has time to cultivate rising stars within the organization, and eject those executives holding everything back.

It Can Still Make a Showing in Mobile. The mobile market is still in its infancy, with big changes still possible in respective companies’ market-share and product portfolios—look at how Android tablets are slowly starting to eclipse the iPad with regard to total units sold. Microsoft’s Surface tablet might not be selling well at the moment, and its hardware partners seem reluctant to release mobile devices running Windows 8, but that doesn’t mean the company can’t still do something that changes the game. It does have time and money, after all.

In other words, Microsoft and Windows aren’t out of the game quite yet. It’s not all downhill from here (to use Vaughan-Nichols’ term), but things can be turned around with enough innovation, time and cash.

 

Image: Microsoft

 

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