SEMA News—February 2013
By Joe Dysart
Microsoft’s Big Bet
Sporting a radical redesign that’s expected to charm some and disappoint others, Microsoft’s new Windows 8 operating system (OS) faces a tough slog, including a slow adoption rate, analysts said recently.
“The challenges of a new user interface, a complex set of processor choices and a long ramp to a compelling set of app offerings in the Microsoft Store will translate to a slower-than-usual Windows upgrade cycle,” said Frank E. Gillett, an analyst with research and advisory firm Forrester.
Gillett is the lead author of a new Forrester report entitled “Windows: The Next Five Years”. The study predicts a grim forecast for Windows 8 next year, concluding that Microsoft could re-stabilize long-term market acceptance of its Windows product line with the right moves.
Microsoft is betting big on the new OS, which is driven by touch-screen controls for the first time. The change makes Windows much easier to use on smartphones and tablets. But the new interface comes across as clunky and inefficient on traditional desktops, according to many early adopters.
“This common design language is being used across all of Microsoft’s products and services, including Xbox and Bing,” Gillett said. “Users will switch to ‘desktop mode’ to run existing Windows desktop apps and to access some systems settings and features. This dual OS personality will likely confuse many users, at least at first.”
Gillett said that even though Forrester is encouraging enterprises to look at Windows 8 in all use cases, the new Windows 8 UX Start screen is prompting concerns about the need for extensive employee training.
“Having finally migrated to Windows 7 in significant numbers and released their death grip on Windows XP, many enterprise IT shops are content to stand pat,” he explained.
Microsoft CEO Steve Ballmer sees things differently.
“We have re-imagined Windows, and the result is a stunning lineup of new PCs,” he said. “Windows 8 brings together the best of the PC and the tablet. It’s perfect for work and play, and it is alive with your world. Every one of our customers will find a PC that they will absolutely love.”
Not surprisingly, Microsoft is putting significant marketing muscle behind the new rollout—including the release of its own, Microsoft-manufactured tablet for Windows 8, the Surface.
“We decided to do Surface because it’s the ultimate expression of a Windows PC for us,” said Steven Sinofsky, president of MS Windows Division. “It’s an extension of Windows. It’s a stage for Windows.”
Microsoft partners are also releasing their own studies, which indicate that user interest is more enthusiastic than others have found. For example, PC Helps—a Microsoft gold-certified partner—said that 25% of employers with 500 or more employees anticipated migrating to Windows 8, according to its Windows Pulse Survey. And 17% of those employers said that they expected to start migrating to Windows 8 as soon as the OS was available.
Besides facing initial resistance from desktop users, Windows 8 is also in desperate need of cool. Currently, it’s all too fashionable for consumers to bash anything new from Microsoft, while they genuflect at the altar of all things Apple.
For example, an Associated Press/GfK poll conducted just prior to the release of Windows 8 found that 52% of 1,200 people surveyed were not even aware that Microsoft was releasing a new operating system. Moreover, 61% of those who were aware of Windows 8 expressed little or no interest in the software. And only 35% of those in the know thought that Windows 8 would be an improvement over previous versions.
That’s a far cry from new releases of Apple iPhones and iPads, which are regularly accompanied by news stories of hordes of diehard Apple fans camping out for days to snatch the latest version of their digital nirvana. And there are other market factors outside Microsoft’s control conspiring to make Windows 8 a tough sell.
“PCs are going through a severe slump,” said Jay Chou, senior analyst at IDC, a market research firm. “The industry had already weathered a rough second quarter, and the third quarter was even worse. While ultrabook prices have come down a little, there are still some significant challenges that will greet Windows 8 in the coming quarter.”
In addition, stubborn economic times are a continued drag on the market.
“Businesses slowed their refresh cycle as they remained concerned about the broad economic outlook amid a busy political season,” said David Daoud, a research director at IDC.
While that’s sobering news for Microsoft, others celebrated the challenging outlook for Windows 8. They saw the anticipated resistance to the new OS as a resounding confirmation that Microsoft’s often stultifying monopoly over the personal computing market—which lasted for decades—has finally been crushed.
Essentially, personal computing has evolved from a desktop-only affair into a decidedly on-the-go market, they said. Microsoft now faces two formidable competitors—Apple and Google—which also have smarts and very deep pockets.
“Until smartphones arrived, Microsoft ruled the PC industry roost,” Forrester’s Gillett said. “Now smartphone and tablet sales—where Microsoft has little share—vastly outnumber [desktop] sales.”
Indeed, in the new reality of personal computing via smartphones and tablets in addition to desktops, Microsoft’s share of the personal computing market has shrunk from 95% penetration on all devices to just 30%, Gillett said.
“From 2008–2012, global smartphone sales exploded from about 140 million to more than 660 million, and tablets emerged to similarly explosive growth,” Gillett said. “And we’re only part way through the shift. The PC’s share of total personal devices will continue to decline in coming years—even as PC unit sales gradually grow.”
Through it all, Microsoft’s attempts to become a player in the smartphone market have been rebuffed.
“So far, Windows Phone has captured only a small share of the largest personal device market, some of it with the now obsolete Windows Mobile OS,” Gillett said. Ergo, Microsoft’s big bet on a touch-centric Windows.
“Early adopters will jump at Windows tablets,” Gillett said. “Beyond that, individuals will be slow to adopt. Windows will ramp in 2014 and gain almost a 30% share of tablets by 2016 but will miss out on phones.”