Why Microsoft Has Big Challenges Ahead

on March 13, 2012

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.