A year or so ago, clients first started asking me what I thought of the prospects for Chrome OS. What I told them was this: if you want to know about Chrome’s chances, then find out what Microsoft is up to. After all, it was Microsoft’s missteps that gave Google’s cloud-centric PC platform the gaping hole in the desktop market to drive through. And it is the software giant that has the power to mute Chrome’s outlook by righting the badly listing Windows ship.
Clients still ask the question today. I still answer the same way, though the range of possible outcomes is better for Chrome than it was last year — and worse for Windows. A healthy Windows would still pinch the spread, but it could no longer eradicate Google’s upstart OS like it could in 2012.
In a year, I might still be giving the same answer. But the clock is ticking. At some point, Chrome will have secured enough critical mass to be a viable force on the desktop no matter what Microsoft does.
When Google introduced the first Chromebooks three years ago, the devices were seen as a head scratching curiosity. Why was Google trying to launch a new OS when it already had a wildly popular mobile operating system in Android? Besides, Microsoft was well entrenched on the desktop with Windows 7, which was about as solid a platform as anyone could ever ask for — from Microsoft at least.
Chrome began modestly, with a pair of OEM partners in Samsung and Acer. They each sold a few units, but mostly to tire kickers in the government and enterprise IT segments.
Modest though its beginnings were, there wasn’t any substantive improvement for Chrome’s fortunes in 2012. Google hadn’t managed to expand its partner base beyond the charter pair. Sales remained anemic.
The Chrome environment may not have changed much that year. But the Windows ecosystem did. That summer, Microsoft’s hardware partners were shocked to learn the software giant was planning to come out with its own Windows 8 systems marketed under the Surface brand. Though few said so publicly, many OEMs were dismayed by the revelation.
Microsoft didn’t manage to sell many of the original Surface devices, but that didn’t soften the OEMs’ jaundiced view – in no small part because their Windows 8 hardware didn’t sell well either. I won’t belabor the many shortcomings of Microsoft’s brain dead OS here. (Although it is a favorite pastime of mine. Anyone who’s jonesing for a diatribe might want to detour HERE ). What I will say is the OEMs could see Microsoft was moving far too slowly to fix Windows 8 and they needed to sell systems.
By this time last year, the PC makers had grown desperate for an alternative. Aside from a few Windows/Android dual-boot schemes, there wasn’t another horse to saddle up beside Chrome. So, many of them decided to develop Chromebooks and get behind them.
Dell, HP, Lenovo and Toshiba, which sat on the sidelines before the Windows 8 launch, introduced and heavily marketed Chromebooks in 2013 and into this year. Shipments blossomed in 2013 from a pittance in 2012 to more than 2 million units.
The vast majority of those systems were sold within two segments and in one region: in education and at low end retail price points in North America. But they did well in those two segments. Chrome, which barely registered in education in 2012, snagged nearly 20 percent of the PCs sold into K-12 education in the third quarter of 2013, according to a study from FutureSource Consulting. And in US retail, Chromebooks were as much as one fourth of all PCs sold in December, according to NPD.
Indeed, Chrome is in far better shape than it was a year ago. Earlier this year in fact, Google reportedly decided it no longer needed to subsidize Chromebook development and marketing. (Interestingly, Microsoft began incentives at about the same time for OEMs building Windows 8.1 systems addressing the price points Chromebooks targeted in retail.)
Cisco announced it has ported its pervasive Webex videoconferencing app to Chrome, a sign momentum continues to grow. In the Windows camp, Mozilla revealed it is scrapping the Modern UI version of its Firefox browser, saying only about 1,000 people were relying on it.
Chrome still has a long way to go before it could hope to take on Windows globally. Aside from two segments in one geography, the world is oblivious to the upstart platform. Despite all the turmoil, a compelling version of Windows would be a devastating counterpunch. Today. Or in a few months. Maybe even in a year.
At some point, though, it won’t matter what Microsoft does. When that happens, Google is clearly ready. Even if Microsoft isn’t. Especially if Microsoft isn’t.
I appreciate that you clearly state that Chromebooks are still only successful in two segments in one geography. Having an accurate assessment of the current situation is vital but unfortunately rather rare.
I have some questions.
What would you consider to be the critical mass for Chromebooks? If you look back to Netbooks, they managed to sell I think 35 million units in 2010 which I think was about 20% of global PC sales. However, that still wasn’t critical mass. Of course Chromebooks and Netbooks are not directly comparable, but they do share many similarities. And I think Chromebooks have only about 1-2% global share so they are still 1/10 of what Netbooks were at their prime.
Also, how do you think that “Free Windows with Bing” will affect the outcome? This will obviously narrow the price advantage that Chromebooks have over similar Windows laptops.
My take is that Chromebooks are still very far away from critical mass, and it is even not certain that critical mass even exists because Windows can run Chrome as well (hence the switching barrier from a Chromebook to Windows is almost non-existent). On the other hand, Windows is fighting back with “Free Windows with Bing”. Looking forward, Microsoft could afford to cut prices more if they can increase Office 365 subscriptions through this offer.
You’re right – netbooks aren’t analogous. That was a companion PC concept that extended Windows reach, not threaten it. (Netbooks topped out at only 10 percent of global PC sales, by the way, not 20 percent.)
There was a reason that netbooks peaked in 2010: that was the same year that a better companion device – the tablet – arrived on the scene.
As the incumbent platform, Windows has inertia on its side. It would take years to unseat Windows, particularly in core markets like enterprise computing. That said, things are changing fast. Tasks are becoming more cloud-based and device independent – and that’s the real long-term threat to Windows. Chrome encapsulates the trend well, but it’s more of a poster child for the movement than the movement itself, if that makes any sense.
Whether Netbooks are analogous is a complex decision on which we probably would only agree with the benefit of hindsight. That said, it does illustrate just how dynamic and plastic the market is. That is why I am doubtful of the existence of “critical mass”.
The exception is when the ecosystems are separate. Then there are high switching costs and a certain mass provides a lock-in effect.
The problem is that the ecosystem for Chromebooks is a subset of that for Windows. That was the same with Netbooks. Hence zero lock-in. Thus critical mass is irrelevant.
Having said that, if Google added proprietary extensions to Chrome OS like what Microsoft did with ActiveX, and a lot of developers used that technology, then we would start to see “critical mass” and “lock in” effects, just as we saw with corporate IT’s reliance on IE.
That is not however what’s happening now.
There are lots of ways to lock consumers in besides proprietary extensions. Habit and inertia are two very big ones. It’s why TV network programmers place promising new shows after a big event. With apologies to Newton, a viewer at rest stays at rest … 😉
How many customers will Chrome OS have to acquire before habit and inertia kick in? I’m basically rephrasing my first question that was, what volume is the critical mass for Chrome OS?
Sorry about that. I haven’t gotten to it because it’s a very complicated issue. There are no hard-and-fast share numbers to use as a metric. It varies depending on so many other conditions.
Let’s take a look at the two segments that Chromebooks have penetrated. In both cases, share is in the 20-25 percent range. It’s inconsequential in retail. Retail is all about what can you do for me at this price … today. The answer could be different tomorrow. The “Free Windows with Bing” should help turn the tide there later this year.
The share is significant in the education market, however. That’s a tough market to turn so quickly,and it’s astounding that Chrome has been such a quick hit. That share will be very tough to reverse. I don’t think a no-cost Windows will make much difference in that segment.
Hope that helps.
Thanks!
A no cost WinPhone7 OS isn’t making much headway… It’s the pointless ecosystem that’s keeping them away in droves. Price of the OS isn’t the issue – it’s the lack of freedom to innovate and the lack of network effect.
MS squished (Linux based) netbooks when it became clear that they were a runaway success – they cowed OEMs into agreeing to a hobbled spec (2GB RAM, low res screen, no SSD, etc.) running a re-released Win XP instead of Linux using the leverage of favourable pricing for Windows licenses on the OEMs’ bread and butter higher-end Windows XP and 7 systems. Chromebooks aren’t much like Netbooks… and I think MS no longer wields the influence they once did with OEMs, particularly after showing how they’re willing to sell them out with their Surface.
What I’d like to see is a robust and reliable alternative to MS Office. The alternative has to be very affordable, more capable than Excel and powerpoint and may be have elements similar to Adobe photoshop. That is the punch that will drive the wedge on the MS monopoly. Cross-platform portability and ease of use etc will force Microsoft to make a better and cheaper MS Office. Competition is the only way to force companies to do their best. I know there are things like Google Docs, open office etc. But they are still at an infancy stage. If they offer a reliable alternative to MS Office, then the change would be welcome. This does not mean I wish for the demise of MS Office or Microsoft. It is just that as a customer, I need good alternatives. The more the better.
But will ChromeOS be growing into a shrinking/stagnant market, due to tablet growth?
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