Tag: Windows

Why The Wheels Are Falling Off Microsoft

This week, highly respected web and technolgy analyst, Mary Meeker, released her end of the year 2012 report on internet trends. The slide deck is 88 slides long and is highly recommended. You can view it here.

As I reviewed Ms. Meeker’s slides, some thoughts on Microsoft’s current prediciment and future prospects jumped out at me. I thought I would use the slides to help illustrate and examine those thoughts.

1. iPods, iPhones, iPads

Take a long hard look at the graph, above. That little green sliver you see represents the growth of the iPod. The very same iPod that powered Apple from near-bankruptcy to a genuine tech contender in less than five years.

Now take a good hard look at the much larger red portion of the graph. That represents the iPhone. The iPhone was the device that rocketed Apple from just one of many to the largest tech company, then the largest company, by market cap, in the free world. For context, that red portion of the graph, alone, is now worth more than all of Microsoft put together.

Now look at the much, much larger blue portion of the graph. Take a long, hard look. Now look at it again. That blue ramp represents the growth of the iPad. It’s growing at three times the rate of the iPhone. Three Times. If you are not awe-struck by the iPad’s rate of adoption, well, you should be.

If you want to know why Appe is rapidly expanding its influence in computing – and why Microsoft is scrambling to catch up – look no further. The above graph says it all.

2. Android And iPhone Adoption

Most people look at the above graph and conclude that the iPhone is in trouble. But you’ll notice that the iPhone is still growing in real terms.

Do you know who’s really in trouble? Anyone not named Samsung and Apple, that’s who. Apple is doing just fine, taking in most of the industry’s profits. Samsung is doing just fine. Google? Not so much. All that market share and little to no profit to show for it has to be worrisome. But this article isn’t about Google. This article is about Microsoft. And no matter how closely you scour the above graph you won’t find a Microsoft product on it anywhere.

(Chart via AllThingsD)

3. Microsoft’s Minuscule Phone Market Share

According to some reports, Microsoft’s phone market share may actually be falling. In the past six years, Microsoft has managed to take its 12% share of the mobile phone market, combine it with Nokia’s 30% share, and convertert it into Windows Phone’s current 2% market share. That’s reverse alchemy – like turning gold into lead.

Steve Ballmer recently claimed that Windows Phone was selling four times faster than it was a year ago. But four times very little is still very little. Microsoft sold 2.8 million Windows phones a year ago. In the same quarter, Apple sold 35 million phones and there were roughly 123 million Android phones sold. So yeah, Microsoft is selling more phones. But so is everyone else that matters.

4. Operating Systems

People think that Microsoft’s Windows is still a powerhouse because it runs 90% of the world’s personal computers. That’s nonsense. Take a look at the chart, above. When you combine phones and tablets and notebooks and desktops, Windows’s only runs on 35% of the world’s personal computers. Android already runs on more personal computers than Windows does and iOS is expected to pass Windows by the end of 2012.

Just as importantly, look at the direction in which Windows is trending. Windows runs almost exclusively on notebooks and desktops, which are a rapidly declining portion of the market. If Windows doesn’t escape its notebook and desktop base and spread to phones and tablets, it is rapidly headed for niche status.

5. Smartphones + Tablets > Notebooks + Desktops

I know that the above graph has a legend, but let me spell this out so that there’s no mistaking the significance of what you’re seeing. The orange portion of the graph represents desktop PCs. The blue portion of the graph represents notebook PCs. Look at how those two portions, combined, are shrinking while the green – representing smartphones – and the yellow – representing tablets – are rapidly growing.

If you look at the above chart, you can clearly see Microsoft’s dilemma. Even if Windows were to power each and every notebook (blue) and desktop (orange) computer made going forward – which they won’t – their share of the market would soon dwindle to near nothingness. Microsoft NEEDS to get their operating system onto phones and tablets and they NEED to do it now.

6. Microsoft Isn’t Even Trying

Here’s the thing. Microsoft isn’t even trying to break into the pure tablet (yellow) portion of the market. Instead, they’re trying to create a hybid device, a new category, a new color, if you will, on the chart above.

In July, I wrote an article entitled: “The PC is the Titanic and the Tablet is the Iceberg. Any Questions?” The purpose of that article was to demonstrate the multitude of tasks that could be done well by a tablet but poorly or not at all by a traditional notebook computer. Windows 8 tablets – with their 16:9 aspect ratio, their desktop mode and their reliance upon keyboards – fall far closer to the notebook than they do to the tablet. One can’t help but feel that, even now, Microsoft still doesn’t totally believe in the stand-alone tablet form factor. Windows 8 tablets are notebooks first – and tablets only in emergencies.

After failing to field a competitor to the iPad for two and a half years, Microsoft is now ceding the tablet market (yellow) to Apple and the rest of the industry – yet again.

7. Conclusion

Microsoft faces a host of problems in the the years to come. Their competitors are far ahead of them in phones and tablets. Their bastion of strength – the notebook and the desktop – is an ever shrinking island. And their strategy to compete in the tablet market is, in my opinion, fatally flawed because it doesn’t even attempt to create a true tablet competitor.

Take a look at that last graph again. The green and the yellow portions are the future of computing. And in that future, Microsoft is nowhere to be found.

Windows, iOS, and Android All Have Something to Prove This Week

Prior to Apple developing iOS and over the last 25 years, there had never been much of a threat to the Windowsecolove ecosystem. With iOS, Apple proved many things, including the value of a holistic experience delivered through purpose-built combinations of hardware, software and content. Now in mobile, it’s Microsoft looking into the window wanting to get inside. After iOS came Google’s Android, which was focused on the same areas as iOS. This week, with multiple announcements, Windows, iOS and Android all have some things to prove and I wanted to dive a bit deeper into some areas.

Windows 8 Launch

For decades Microsoft has been the uncontested PC market share leader. Macs made a little bit of a dent, but for the most part, Microsoft ruled and for years it looked like Microsoft would have uncontested dominance. That was until the iPad. While the iPad isn’t trying to be a PC, it did provide an optimal experience for specific usage models the PC once delivered. Sure, you can surf the web on your PC, but when kicking back on the couch is it the best way to do this? Not for me and not for 100s of millions of other people. I still must have my PC, but I prefer my iPad for certain tasks my PC previously performed.

With Windows 8, Microsoft hopes to bridge the gap between PC and tablet. They will attempt to do this by releasing Windows 8 on about every conceivable form factor possible and seeing what sticks. This is a huge risk in that they are also sub-optimizing the experience for desktop-only experience by adding the Metro layer and removing the start button. The Windows 8 experience is optimized for devices with touch and an accessible keyboard, turning the devices into a Swiss Army device. I have used my iPads for years with an extended keyboard, so I absolutely see the value here. This week, Microsoft must prove that flexibility of Windows 8 trumps the purpose-built focus of an iPad.

Windows RT adds another proving ground. For decades, Windows equated to compatibility with the past, which is inextricable linked to Microsoft’s IT roots and the fact that many consumers are peeved about wasting a prior, large investment. I am not saying that consumers care less about backward compatibility, but they care more about what the device does today and in the future then the past. Unlike Windows 8, Windows RT will not run all the older Windows 7 desktop applications. Microsoft bridges the gap with some key Office apps, but forget about loading up iTunes or Quicken that you have. Hardware compatibility with USB devices is an unknown as well. This has never been an issue with the iPad, but then again, neither iPad or Apple stands for backwards compatibility.

Finally, we have Microsoft Surface, the first Microsoft-branded PC that directly competes with its ecosystem. This test will take a long time to play out but rarely do these examples of suppliers competing with customers work out well. While we don’t know exactly how pricing and features will work out over time, few premium-branded Windows tablet makers are excited about this. If Ballmer’s email to its stakeholders wasn’t clear enough, future Microsoft does two things: devices and services, and those devices that its customers currently provide.

While we will need to wait months and some cases years to fully understand how all these play out, the official launch for Windows 8, Windows RT and Surface this week will give better indications on where Windows is headed.

Windows Phone 8 Launch

Windows Phone was very respectable in the early days of smartphones and was one of the few phones until RIM’s Blackberry to be accepted by businesses. Then came the iPhone and iOS, which undoubtedly changed Microsoft’s mobile fortunes for the foreseeable future. Instead of a commanding 90-95%% OS market share like it does in PCs, in mobile, Microsoft is looking right now, at best, 3% share of the mobile market. Given how Windows Phone 7.X has done, there must be some huge change for Microsoft to start gaining share.

Microsoft’s biggest challenge in smartphones is consumer apathy. Metro is differentiated, the maps are good and Nokia has some really good imaging but consumers are not yet all that excited about Windows Phone. Microsoft needs more black and white, differentiated, and demonstrable features to break consumers out of their addiction to iOS and Android phones if they are to make big progress.

With the launch of Windows Phone 8, Microsoft could start to reverse its fortunes. If Microsoft can show that a Windows Phone 8 is a must-have device to pair with a Windows 8/RT PC or tablet and an Xbox, I do believe they can start to make faster traction with those audiences.

iPad Mini Launch

Apple, plain and simple, invented a new category with the iPad. Sure, there were previous Windows Tablets, but the biggest issues were a lack of apps, pen requirement and very high prices. Tablets , particularly iPads have started to eat into the PC market. It’s not that an iPad can replace a PC, but some consumers are choosing to buy the new category (and shiny thing) instead of buying a replacement PC.

The iPad Mini will be interesting for Apple. Apple has always been able to command a price premium in, quite frankly, all devices. Whether it’s an MP3-playing iPod, iPhone, iPad, or Mac, consumers are willing to pay more. The iPad Mini will test this pricing elasticity more than ever. I believe to hit its profit goals, Apple will need to be priced at least at $299, which puts it into that 30-40% gross profit range. They could margin blend on the rest of the iPad line to get the price even lower, but that’s pushing it.

With Amazon Kindle Fire at $149, a $299-349 price will be pushing the pricing power farther than I have seen in a long time. I do expect an iPad Mini to have a much better experience than a $149 Kindle Fire, but with many consumers just glad to be able to have an affordable tablet, many will opt for the Fire. Apple will sell truckloads of the iPad Mini this holiday season, but not nearly as many as they could have if the Nexus 7 or Kindle Fire didn’t exist.

Google Nexus 10” Android Tablet Launch

While Android has done well on smartphones and 7” tablets, anything above 7” has been a business and marketing disaster. Google had clearly deprioritized the 10” category as the smartphone market eclipses the size of the tablet market. At some point though, Google needs to bring their “A” game to large tablets and incent developers to create high quality tablet apps. Right now, Google does not allow anyone to easily count the tablet-specific apps as they number in the 100’s. Not 100’s of thousands, I am saying hundreds.

Google is rumored to announce this week a Google Nexus 10” tablet with Samsung. Price is almost inconsequential in that without more native Android tablet apps, a new Nexus tablet could be worse than bad. I expect 10″ Android tablets this holiday to be relegated to the bottom of the pricing barrel below Windows 8 and iOS. Unless Google can pull off something completely amazing and unexpected, this Nexus 10” will sell as well as all the other Android 10” tablets, not well.

An Amazing Week

Yes, this week will be one that all the ecosystems will have something to prove. When I step back a bit, I marvel at the amount of innovation and competition that is happening and just know this will be great for consumers this year and five years into the future. Competition and innovation are important as evidenced more than ever by this week’s announcements.

Why Microsoft Has Big Challenges Ahead

I genuinely desire for Microsoft to succeed with Windows 8 and beyond. I believe it is healthy to have competition in the market of personal computing and I like the way I see Apple, Microsoft, and Google with Android, pushing each other. Of course everyone has their opinions on who is doing more but I don’t intend to cover that here. Rather, I want to focus on what some of the challenges ahead are for Microsoft to succeed with this next round of software.

Do Consumers Care About Windows?

At the core of this challenge for Microsoft is going to be creating demand and consumer interest around Windows 8. There is a lot of momentum for Apple’s ecosystem and their hardware and software. As I survey and observe the market I don’t see that kind of interest around Windows in general but specifically Windows 8. Granted, Windows 8 is not in the market yet but in a general sense we can confidently say that Windows itself is not the reason notebooks and desktops are selling.

What I think has to be noted is that Microsoft and partners can not simply expect to slap a piece of hardware on a shelf at retail and simply assume that Windows 8 alone will be a driver of interest and generator of consumer demand.

I feel the same way about what is happening with UltraBooks. Just because these new form factors are thinner, lighter, have decent specs, and run Windows 8 does not ensure success in any way shape or form.

My biggest concern for Windows 8 can not be answered yet but it lies with the question of when these products hit the market, will consumers even care?

The Software Challenge


When it comes to software or the selling of software, things like the OS as well as individual software suites, etc, the market has changed drastically for Microsoft. Microsoft has traditionally been in the business of selling suites like their Office solution as well as their Operating System for well over $100. Yet we are now in an “app economy” where consumers are now used to paying quite a bit less for software. Even in Apple’s ecosystem around OS X many of the highest selling software titles rarely go above $29.99. Even Apple’s own operating system, productivity apps, etc, are all well below what Microsoft is used to selling software for and unfortunately for Microsoft I think these software economics are here to stay.

Given Microsoft’s prior business models, which got them to where they are today, I don’t see how the new app economy and software economics are going to work in their favor.

Microsoft has done some good work around re-inventing their operating system. But I still think there is some work that needs to be done for Microsoft to also re-invent their business model around software.

If Microsoft were to have to sell both their new OS as well as stand alone elements of the Office Suite, like Word for example, in the same price range that Apple does, it could have a significant impact on their business. Ultimately I feel that consumers have come to expect this new software pricing ecosystem so I don’t see how Microsoft sells their software for the prices they used too.

The manufacturers who make desktops, notebooks, tablets, and more, are relying on Microsoft to get this right the first time. They simply have no other choice and neither does Microsoft to get it right the first time.

In the end, consumer demand / interest in Windows 8 and the new software economy are all things that I believe present real challenges for Microsoft. All one needs to do is look at the foot traffic in an Apple store vs. the foot traffic in a Microsoft store to see the glaring difference in consumer interest in each companies products.

The world has changed drastically since Microsoft’s last operating system hit the market. It is going to be interesting to watch how they adapt to a fundamentally different landscape than the last time they released on OS.

Windows 8 on ARM: The Big Questions

Microsoft released a lengthy blog post yesterday on their website specifically around Windows 8 on ARM. Although the post shed some insight into a number of the looming questions we all have about Windows on ARM, there are still a few things I am concerned about.

Windows 8 on ARM has the potential to be either wildly successful and disruptive but it also has the potential to fail in the short-term.

How Will Microsoft and Retail Position the X86 vs the ARM hardware Versions?
When I put myself in the consumer buying mindset for a new Windows-based PC, I see some potential confusion when it comes to product positioning. Microsoft has a challenge on their hand that I am fascinated to see how they figure it out.

What Microsoft, their hardware partners, and their retail partners can not do is position ARM notebooks or other form factors as limited devices. So they can’t use terms like “full Windows experience” or “the Windows you know and love” types of terminology for non-X86 devices. Taking this direction would cause consumers to ask of their ARM counterparts: “I don’t get the full Windows experience I know and love on these products”? Which would essentially deem Windows on ARM devices to fail because they would be positioned as truncated.

This is actually an area where I am intrigued to see if the Intel inside branding efforts of years past have any relative spill over. It actually could if consumers are on the fence. Consumers may consider going with a product with Intel, or AMD for that matter, the “safe bet” if there is any confusion what-so-ever.

Unfortunately, or fortunately depending on who you are, I don’t think any of the ARM companies benefit by touting their brand name in a Windows 8 on ARM device. For example saying “Runs Nvidia Tegra 3” or “Qualcomm Snapdragon”. In fact that may add to the confusion rather than help clear it up.

It is of course possible that Microsoft and retail partners ignore trying to position Windows on X86 and Windows 8 on ARM differently at all. However, unless the device experiences have no difference at all this would be a mistake.

Will All Drivers Be Supported?
To quote the blog post directly:

“Our device strategy uses standardized protocols and class drivers extensively”

“Of course Windows has many class drivers inside, which you experience when you plug-in a wide variety of USB devices, such as storage, mice, or keyboards.“

“The majority of printers selling today are supported using the class driver, which means you’ll be able to “plug and print” on WOA without additional drivers”

This must be true and must be delivered upon. I want to be optimistic about this and take Microsoft at their word that drivers won’t be an issue, as they appear to insinuate. However, I will feel better once I see Windows 8 on ARM working with a wide variety of peripherals.

Are Consumers Willing to Invest in New Software?
This may be perhaps the biggest point to wrestle with. As I have stated before, I believe Microsoft, with Windows 8 in general, has come as close to fundamentally starting over with Windows as they possibly could without completely starting over. Windows 8 is a step in the right direction to optimize Windows for the future of computing.

Consumers being willing to start fresh with software is the wild card for me. Unfortunately I have no hard data (yet) on this but I will offer some observational logic as to why this may be the case.

Firstly, consumers switching to the Mac platform at incredible rates is an indicator. Apple continually mentions their stats on each quarterly call that 50% of Mac sales are to first time Mac buyers. This would mean that many of those customers have made investments in Windows software and are willing to start over. Perhaps this same buying psychology could translate to Windows 8 on ARM with a reality that legacy Windows software isn’t as important as many would think.

Secondly, reports came out in late December from Flurry that on Christmas day there was a 125% increase in app downloads mostly coming from the 353% increase in device activations on the same day. This leads us to believe that as consumers get a new device they go app shopping.

Lastly, the economics support this trend. The reality is that the new app economy has driven the cost of software down. This is not only true of mobile devices but of desktop / notebook as well. The days of selling software and software bundles in the hundreds of dollars are over. If you look at the top-selling apps in the Mac OSX App store there isn’t a single one over $29.99 and most are well south of that figure. With lower overall app pricing becoming the norm it makes it feasible for consumers to actually start over with software.

Could it be Netbooks all Over Again?
In all of these scenarios I am generally concerned that Windows 8 on ARM devices may be headed down the path of Netbooks in their early days if we are not careful. Netbook return rates were north of 30% in their early years mainly because consumers bought them expecting a “full PC” experience and early Netbooks didn’t deliver. This was primarily because early devices were Linux-based. However, even once the devices ran Windows, they were still positioned as “not full PCs” mainly because they were underpowered. It was a positioning mess in my opinion.

I am not as concerned of these devices being underpowered as much as I am them fully delivering on the full PC experience. This will have to include a robust list of software, which Microsoft and partners are working on. There are a number of form factors outside of the clamshell PC design that I think will be more successful for Windows 8 on ARM vendors and Hybrids being the most interesting potential.

Even with all the questions still looming, ultimately the positioning of these products is what will make or break Windows on ARM devices.

Microsoft’s Future in Tablets: Forget Consumers, Go for the Enterprise

Only huge a company with massive cash flow can make a mistake of the magnitude of Microsoft’s error in missing the movement from PCs to smartphones and tablets and survive as a major player. Legacy cash flows allowed IBM to recover from its errors of the late 1980s and the money flowing in from Windows and Office can do the same for Microsoft. But time is growing short. With the latest version of Windows Phone and its partnership with Nokia, Microsoft is at least making a play in smartphones. But it’s a long way from even playing in the increasingly important tablet market.

Apple iPads and Amazon Kindle Fires are flying off shelves now and even the justly criticized Android tablets could become attractive in coming months with a new version of the the operating system, Microsoft is at least a year away from tablets running Windows 8 on either Intel or ARM processors. But Microsoft has to make some critical decisions right now about what these tablets are going to be.

The first thing the company should recognize is that by the fall of 2012, the consumer market is likely to be lost. Over the next year, Apple is likely to sell at least 50 million iPads, Android tablets should gain traction, and Kindles and Barnes & Noble Nook Tablets will be gobbling up the low end of the market. In consumer markets, Microsoft is shooting at a moving taget that’s not moving in a favorable direction.

The enterprise market, on the other hand, is wide open. iPads have definitely been turning up in the enterprise in large numbers. And Apple has worked hard, including some quiet cooperation with Microsoft, to make the iPad play reasonably well in an enterprise environment dominated by Microsoft back-end services such as Exchange. But enterprises need more than Exchange mail, contacts, and calendar. They require support for all of Microsoft Office, including the SharePoint collaboration and document management service on which many enterprises depend, far better document handling than today’s tablets provide, and better ways to load and maintain custom applications.

Office is the key, and it is where Microsoft faces the hardest choices. The cool kids, startups, ands tech pundits may be happy with Google Apps or perhaps OpenOffice and emacs, but the fact is that business (and government) runs on Office. Documents are written in Word, numbers are crunched in Excel, presentations are shown in in PowerPoint, mail is read, meetings are scheduled, and calendars and contact lists are kept in Outlook. And it is all tied together with Exchange and SharePoint.

There have been large-scale corporate deployments of iPads, but as ancillary tools, not really as replacement for computers. For example, airlines have given thousands of iPads to pilots as replacements for the paper documents that used to fill their weighty flight bags. Tablets will remain in enterprise niches until they can offer reasonable support for corporate Office installations. This is unlikely to happen on iPad, even if rumors about some sort of Office version for the Apple tablet are true, and even less likely on Android, where the lack of standardization and built-in security are a huge barrier to enterprise adoption.

Related post: Who Really Needs a PC anyway?
Related post: A Scenario Where Smartphones Take Down the PC

The problem is just what does Office on a tablet mean? While Microsoft has been very transparent about the development of Windows 8, an accompanying new version of Office remains nothing but a bunch of fragmented rumors. It’s clear that a dramatically new version of Office is needed for tablets; five minutes spent with Office 2010 on a Windows 7 tablet will convince you of that. Making office work on a mouseless, keyboardless touch tablet is not a matter of tweaking the user interface–the UI most be radically rethought. Menus are the essence of Office, but menus are death in tablet apps. How many of Office’s existing features–thousands of them–could be supported in a  drastically simplified interface? How many can you lose before Office ceases to be useful for enterprises? (Few consumers care or know about Word’s Track Changes feature; enterprises cannot live without it.)

More needs to be done than just fixing the UI. The current Office is a multi-gigabyte resource-sucking monster. It’s probably an order of magnitude too big to be a reasonable fit on a tablet. Microsoft promises tablets running on both Inter and ARM processors. The current Office, particularly Outlook, is a slug on Intel Atom processors and a converted version would likely be even worse on ARM. Office has to become dramatically smaller and lighter without losing its essential character, a daunting task.

Maybe Microsoft is well along in solving all these problems, but they have been uncommonly quiet about the process. For a new Office to ship together with Windows 8, I’d expect to have seen a technical release by now and a large scale beta early next year. There have been rumors of a beta being made available at the consumer Electronic show in January. I hope so, but I am dubious.

 

 

2012: A Year of Innovation?

One of the things I look at in order to get an idea of what the next years worth of innovations will bring is the semiconductor industry. Given what I am seeing from the various ARM vendors like NVIDIA, Qualcomm, Marvell and TI as well as from Intel and AMD, I am encouraged.

The primary industry that stands to gain from new semiconductor innovations is the mobile industry. Namely the hot category of tablets and smart phones. That is not to say that the PC will be left out, for example Intel brought attention to the concept of “Ultra-Books” at this years Computex.
Continue reading 2012: A Year of Innovation?