Why Microsoft Should be Worried About Chromebooks

For more than 30 years, the Wintel consortium ruled the world of personal computers. This consortium was made up of a partnership between Intel and Microsoft joined at the hip when it came to creating PCs. But about three years ago that partnership began to break up. While Intel had been extremely loyal to Microsoft and its Windows franchise, Microsoft decided to back ARM-based tablets when they got into hardware and created their first Surface product. Microsoft’s move into the ARM space did not take me by surprise. In fact a year earlier in PC Mag, I wrote about the fact Microsoft had an ARM-based version of Windows under works in their labs and suggested even then that they may enter the hardware market with their own product using an ARM-based processor.

But Microsoft kept that news a secret and only a few days before they announced the original Surface tablet did Intel, HP and other PC makers even know Microsoft was not only doing a tablet of their own but had deviated from an Intel processor and used an ARM chip instead. I remember at the time the feedback I was getting from the PC crowd, who had loyally supported Microsoft through the industry’s ups and downs – this was kind of a stab in the back by Microsoft and they were not happy about it.

Unfortunately for the PC guys, Microsoft woke up to the fact they were so behind in tablets and not gaining enough ground in smartphones they needed to be more like Apple and make a fundamental shift towards owning the hardware, software and eco-system if they had any chance of competing with the IOS and Android crowd. This move has not worked out quite as well as they had hoped. The original Surface based on the ARM processor was a total failure and even their Intel based Windows 8.1 Surface models are only doing modestly well against Apple and Google’s tablet partners.

However, Microsoft’s decision to support ARM processors took away any possible guilt of Intel. The PC vendors are aggressively supporting Android and more recently Google’s Chromebook. This is a big deal and one that will have ramifications for Microsoft in the future. I know creating the Surface tablet and support for ARM seemed strategic but it really did impact the way Microsoft’s partners viewed their allegiance to Microsoft. Now Intel, AMD and all of the PC vendors are backing Android and Chrome and over time I think this will eat into Microsoft Windows marketshare significantly. With the momentum of Android, Intel and the PC vendors were going to be forced to join in Google’s quest at some point but when I talk to these vendors it was pretty clear their support for Android only gained real steam after Microsoft supported ARM and starting doing their own hardware.

In fact, it pushed Intel into bed with Google in ways Microsoft surely had not expected. Indeed, Google agreed to work closely with Intel to make sure Android would work well on Intel processors and it’s starting to pay off. Intel hopes to ship 40 million tablets in 2014 and double that in 2015 and most of those will be Android based. But where I see an Intel/Google relationship really impacting Microsoft going forward is their recent partnership around Chromebooks. At an event in San Francisco two weeks ago, Intel showed off the first generation of Chromebooks using their Core i3 mobile processors. Up until now, all Chromebooks had been ARM-based or used Intel’s Celeron processor and, by nature of these chips, they were never considered powerful laptop/desktop class CPU’s. But Intel putting a Core i3 processor in a Chromebook puts them in the class of other Intel Core laptops, albeit at the low end. Still, this is significant.

One thing you will notice when using an Intel Core i3 processor vs the top ARM chip in Chromebooks is how much faster a web page and graphics load.
Sure the apps are all HTML and Web based, but in a laptop or clamshell design, which blurs the line between consumption and productivity, faster speeds in these areas as well as better overall performance brings Chromebooks into the traditional laptop space. Yes, there are cheap Windows laptops but in our research we are finding, especially with consumers, the need for Windows and Windows apps are fading in this consumer market. In fact, we are seeing some school districts buying only Chromebooks now and hundreds are testing them in pilot programs.

What convinced me I had to look closer at Chromebooks was a chance encounter at a breakfast diner in Santa Barbara last fall. In the booth across from me was an elderly woman, probably in her mid to late 70’s, happily typing away on her Chromebook. As I was leaving I stopped at her table and asked her why she chose a Chromebook. I thought price would be the first thing she would say but instead she said “I looked at Windows laptops and Chromebooks and found that a Chromebook would meet all of my needs.” Pus, she added, she liked the sleek and light design. Since then, I have heard this frequently in our research. For a lot of consumers, Chromebooks are all they really need since most of what they do today is via Web browsers and there are a lot of Web apps that replace dedicated apps they might have used in the past on Windows laptops.

That is why Intel has pushed their partners hard to do Chromebooks with the Core i3 in them and all of the PC vendors have at least one Core i3 Chromebook in their lineups now. Even though these Intel Core i3-based Chromebooks have about a $50-75 dollar premium over ARM based Chromebooks, I believe as word gets out about the better performance one gets on an Intel Core i3 based Chromebook, it will convince many who would buy an ARM-based Chromebook or even Intel-based Celeron models that today they are at price parity with one’s using an ARM processor.

This ultimately means Microsoft now has a battle on three OS fronts. Along with Android and IOS in the mobile space, they now have to contend with their partners betting on the Chrome OS and having Intel back it big time. While I see Windows being strong in the enterprise for the foreseeable future, there are chinks in Microsoft armor when it comes to Windows with consumers and I think Intel’s backing of Chromebooks with their Core i3 processors will help these type of laptops gain more ground within education and consumers at Microsoft’s expense.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

23 thoughts on “Why Microsoft Should be Worried About Chromebooks”

  1. Microsoft doesn’t need to worry until Chrome OS can make it past 1.0% market share. After being on the market for over 2 years and with usage stats <1.0%, Chrome OS is not a threat to Windows anytime soon.

    1. Microsoft said the same thing when iPhone was introduced and when the iPad was introduced. Watch Steve Ballmer’s famous interview on YouTube. iPhone destroyed Nokia and Blackberry. Chrome can destroy Microsoft if it spends time ridiculing it. Microsoft must see the slingshot aimed at its temple.

      1. Chromebooks are nothing like iPhone. Their disruption would be evident by now if they were. I have never met a single person who owns a chromebook and have never heard anyone in real life even entertaining the notion of getting one.

        Chromebooks and seniors make sense, since many likely only wanted a computer was so they could connect to the internet, and full fledged computers seem like work to them. That isn’t to say we will all get chromebooks as we get older either. Todays seniors didn’t grow up with computers and so the intimidation factor is higher for them, but future seniors, will not be so computer phobic to need/want an internet terminal instead of a computer.

        Even if somehow chromebooks became all the rage, what would have Microsoft do. Release IE books? A notebook essentially running Internet Explorer and nothing else?

        1. 4 of the best selling laptops on Amazon are chromebooks. I have a couple of tablets, and laptops and the one I go to always is the chromebook for the times a touchscreen wont do.

          Microsoft is a dinosaur, If they did release a notebook just running IE nobody would buy it, because lets face it, IE stinks. Thinking they are a senior machine is quite childish.

          1. I don’t think Amazon “best sellers” list is any kind of definitive market share guide.

            This slide gives an idea or where Chromebooks sit in usage terms, especially when you consider they are almost useless without an internet connection.

            Compared to Chromebooks, everyone should apparently be quaking in their boots over the surge in desktop Linux. After a couple of years on the market, Chromebooks are still barely statistical noise.


        2. I know a few people with Chromebooks. They all bought one because it was cheap, as an experiment, to sit alongside their numerous other devices. I don’t know anyone who has a Chromebook as their primary/only laptop.

        3. Microsoft once tried to do that when it had destroyed Netscape. The Justice department stepped in and Microsoft had to allow other browsers.

          With cloud based service proliferating, Android-Chrome seamless integration would soon catch up with iOS8-Yosemite integration. Open Office, Google Docs etc will become more robust. They are not going to be sitting idle. So this is not a stagnant situation. With Intel pitching in its support for Google, you never know – Chrome books might really take off. Look at the price of those laptops. Unlike Microsoft, Google is a very creative company.

        4. Microsoft has already released “Windows with Bing” which provides Windows to OEMs for free for low-priced machines, with the restriction that the default search engine has to be Bing. This should mostly eliminate the Chromebook price advantage. It could signal game over for Chromebooks in the general consumer market.

          They don’t need to copy the Chromebook concept with IE books. All Microsoft has to do is drop their price.

        5. Ofice 365 is a direct result of google apps for business. Even apple iCloud enhanced to compete with GApps. GApps is/was a disruptor.

          Chromebooks are not for grannies. They are for schools and businesses that don’t need MS BloatOffice and want to access GApps accounts and services anywhere anytime. But go ahead and stick with your MS BloatOffice.

  2. Chrome will do well with a huge market of those willing to trade privacy for price, ads for access, one elderly lady to the countrary.

    It’s a big market no doubt.

    Apple is headed squarely away from Google’s fragmented and unprivate course. Apple will steer a new content stream … private content stream of our health, wealth, work, and home info … private because it will be lock away for our eyes only behind a superb crypto engine built into hardware and software.

    And it’s soon a billion credit card carrying users. Maybe a quarter of all the credit card carrying adults on earth.

  3. This is a smart move by Intel. With Google dominating the mobile world, Chrome based PCs is a good way to enter the mobile market of Android. Intel already makes chips for Macs. Their 14nm technology is sure to cause an explosion of Android based tablets and Chrome based laptops (ultra thin, ultra lightweight, increased battery life, functionality, speed etc.).

    Intel needs to come through this. It is one of the great American success stories and it is one of the few companies that has not moved its manufacturing abroad. Let us all pray that Intel succeeds in getting into the next generation of tablets and gives ARM a run for the money. Microsoft can shoot itself in the foot. But I do want Intel to succeed. Think of all those fabs, the real hitech jobs, PhDs, scientists and the investment into American manufacturing.

    Within a year, Intel will be a proud company of being able to make chips for a variety of customers that range from Apple to Google to even Microsoft.

  4. Microsoft was worried and upset that it’s hardware partners were slow and clumsy introducing new, exciting, competitive (with Apple) hardware.
    And the Hardware partners were dissatisfied with Microsoft for being complacent(arrogant) with it’s software development and design.
    They were both right.
    The product of too long having a captive market.
    They were all, too lazy and slow at the strategic level.
    (because they could be, they were still coining it – why change what’s working…?)
    Right up until their worlds rapidly started imploding.
    Now they are trying to play catch-up – to a fast moving target.
    Good luck with that – Nokia and Blackberry(RIM) won’t be the last victims.

  5. So iPhone/iPad/Android led Ballmer’s Microsoft to panic and make some very poor decisions – launching the ARM-based Surface RT and the Kin, and enlisting Nokia as the preferred Windows Phone vendor. Instead, Microsoft should’ve pressed hard on Intel to design and make chips for a Surface tablet – they probably could’ve started with a 12″ one, and focused it primarily on the enterprise.

  6. I think ChromeBooks are a threat to MS, but currently a minor one. MS definitely has to consider the possibility of losing market share and focus on retaining it. The one thing that MS has over google at this point is an OS that’s seamless across Windows devices (they have that edge over Apple as well). Android and ChromeOS are not the same OS and both are considered fragmented. Therefore you’re still going to have to fumble between devices to get apps to work together. MS has the edge where one app runs on any Windows device (8.1 and up) and is connected to the same cloud which can easily sync app data. Developers can write the app once and it runs on everything (since VS2013 update 2). This makes it much more appealing to businesses (remember, MS is business oriented and google is kind of both consumer and business with a lean towards consumer). The one and only challenge that MS currently has is apps. Since Windows Phone/RT has so little market share, developers aren’t being drawn to their platform. Developers want to make money, so they’ll always be drawn to the larger install base. MS really needs to step up their game, and that’s not by playing catch-up, it’s by being more innovative and giving businesses and consumers a real reason to switch. Their development tooling is light-years better than anything google and Apple have to offer, so it’s a shame that they’re not being used as much because you can develop faster and produce higher quality apps. If MS wants to become culturally accepted again (and I have to say it like that, because let’s face it, a lot of people hate them even though the haters don’t know what they’re currently up to) they’ll need world-changing technology that draws both the consumers and developers. It’s as simple as that. Stop playing catch-up and produce something that’s world-changing and exciting. I really think that’s the only way. Now is the time to do it, because personally, iOS and Android/Chrome is already starting to feel like old tech. MS needs some kind of “wow factor” to draw a lot of attention. Do it now while Apple/google are starting to feel dated.

  7. Hmm it seems to me the present major discussion is between cloud storage,software and security versus local storage,software and security. Somehow the model we have had of duplicating software millions of times locally and storing everything on increasingly larger spinning discs looks outmoded. Just simple things; the discs need cooling, producing some noise and even more heat;they are mostly quite heavy precluding easy portability; neither are they robust – drop one and it’s likely to need an expensive repair.Stuff downloaded can and does allow infection of the machine despite the local security software used viz the Gameover Zeus virus.Everything stored locally has to be backed up centrally in an organisation for safety – an extra overhead.
    Compare this with usage of the cloud, accessed most easily and usefully by the light, nimble, immensely portable Chromebooks. Because their security is taken care of in the cloud, they can be used anywhere there is wifi or 3g/4g access to the cloud. The one I use is very robust, I’ve dropped it several times with no noticeable problems and having no disc to cool it runs almost cold and with zero noise. Everything is stored safely in the cloud – no backup needed – lose the Chromebook,you lose nothing, neither software nor data. It requires no tuition to start using it, the Chrome OS/browser is superbly straightforward to use. In an organisation there is no need for local backup storage. For mobile use it has the major advantage over a tablet or phone device of its superb keyboard and excellent mousepad. The Chrome OS improves in the background month by month with zero hassle. The range and complexity of software available for online use seems to be progressing more and more rapidly. From an employer’s point of view, the present inability of the user to run heavy games on the Chromebook itself may be an advantage.
    Data sharing via the cloud you’d think would have huge potential for national and international collaborations.
    Well that’s my take on the situation solely as a two-year user of a Chromebook. I’ve found it to be fun, enjoyable and have never had any problems in use that Google forums and ninjas couldn’t solve for me – no charge. Cloud usage seems to me the way to go but for sure there are many who differ.

    1. While I agree with most of your points, I’m am weary of using an OS and web browser from a company that makes 90%+ of their revenue by tracking users and selling targeted ads.

      I use Chromium and use a cookie management and deletion app. Adblock also.

      For people that are disgusted by the NSA data collection, they need to realized that the NSA just cloned the data that Google, Facebook, etc… were already collecting. I don’t want any company collecting that much data on me.

      1. Not to mention putting confidential strategy documentation for your business on the cloud. Can you imagine how much money they’d be offered for that info?

    2. Maybe someday when network speed reality matches the predictions will I be interested in a cloud based solution. In the mean time, I’ll stick with the speed of local processing and storage.

  8. I’m reading this with a Chromebook, which is my primary laptop. I own several computers, including a MacBook Air, and desktop computers at home and at work. When I’m on the move, or away from my desk, I use the Chromebook, and I prefer it to the MBA these days.

  9. Chromebooks would have been a good idea if hadn’t been for the iPad/tablet, which is challenging Microsoft far more than Chromebooks.

  10. I find my Samsung Chromebook OK, but it will not replace my Windows laptop. I doubt Microsoft is worried about Chrome OS and Chromebooks. Least not in a big way. Your talking about marginal hardware running a weak and Google defined OS that does not go very far beyond being a web access device. Which is fine at $250 but loses value quickly as prices goes up. If the new Chromebook prices hold true we are talking around $400 and to me that’s too much for what Chrome OS does. I can buy a good Windows laptop with a core i3 and more RAM and storage for $400. Plus I can run Chrome and Google apps if I choose and run Windows apps. That makes a Windows laptop more flexible and of better value at $400.

  11. After years of Apple computers and some months with windows 7 and RT I moved to Chromebook. I am really happy with it, and I think the OS (with some limitation) is perfect for the majority of users. Living in the cloud is not that bad after all. I exclusively use a Chromebook now. But I think that Microsoft shouldn’t be ashamed of RT. RT is actually a good OS for touch screen devices. And with Office (for free) RT (Surface 2 and Lumia 2520) is also a good option to consider. I know a lot of people are saying: the bad point of RT is that you can’t use legacy apps. But to be honest with an iPad you can’t use Mac apps. I think Chromebook (Chrome OS) is great (I use the HP Chromebook 14, new one). http://www.dadmadeinbritain.co.uk/6-months-with-a-chromebook-can-i-live-with-it/

Leave a Reply

Your email address will not be published. Required fields are marked *