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What Microsoft Windows 8 License Numbers Don't Say

May 07, 2013 (10:05 AM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=240154345


8 Things Microsoft Could Do To Save Windows 8
8 Things Microsoft Could Do To Save Windows 8
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Microsoft revealed Monday that it has sold more than 100 million Windows 8 licenses, a number that roughly matches Windows 7's sales volume at the same point in its lifecycle.

The disclosure continues an ongoing war of emphasis between Microsoft and industry observers -- since the new OS launched, Microsoft has touted robust license sales, while analysts have emphasized Win8's modest market share and role in the slumping PC market.

This time, however, the software giant acknowledged that many users have been dissatisfied with Windows 8. A significant change in tone, the concession emphasizes the importance of Windows Blue -- an update expected this summer -- in determining if Windows 8 joins the ignominious ranks of Windows Vista or climbs to the heights of Windows 7 and XP.

[ Windows 8 convert? Here's how to outfit your laptop for less than $25 total. Read 8 Windows 8 Apps Under $25. ]

To date, public discussion of Windows 8 has followed a simple, two-step cycle: analysts and reviewers declare that the OS has underperformed, and a short time later, Microsoft insinuates the exact opposite. Win8 launched to middling reviews in October and failed to make waves over the traditionally lucrative holiday season, for example, but that didn't stop Microsoft from boasting in early January that the newest Windows had sold 60 million licenses, on par with the debut of its well-received predecessor, Windows 7.

This back-and-forth has persisted throughout the spring: headlines proclaimed doom and gloom for the ailing PC market only to have Microsoft report relatively decent Windows earnings; multiple sources indicated that Windows 8's real-world adoption has been sluggish, only to have Microsoft announce that 100 million licenses have been sold. And so on.

Some of the dissonance stems from simple math. There are more PCs in the world today than there were when Windows 7 debuted. To match the previous version's market share growth, Windows 8 would have needed to sell substantially more licenses, not merely kept pace.

Moreover, even if Windows 8 were the most praised OS in history, enterprise refresh cycles essentially prohibited it from bettering Windows 7's launch. Many businesses either just migrated or are in the process of migrating from Windows XP to Windows 7. Given that Win7 has come to be appreciated as a reliable performer, businesses had little incentive to investigate a new OS, especially because Windows 8's touch-oriented interface doesn't yet provide obvious benefits for the bulk of enterprise users. Windows 7 also had the benefit of following Windows Vista, which was generally panned by critics and abandoned by many users. Lacking a weak predecessor or immediate access into the enterprise, Windows 8 was limited from the start.

Not all of Win8's struggles are easily excused, however. With widespread enterprise deployments at least a year away, Microsoft hoped consumers would embrace its newest offering. The company's decision to de-emphasize the traditional desktop UI in favor of touch-sensitive Live Tiles, for example, was motivated largely by tablets, whose popularity among consumers has contributed mightily to slowed PC sales. Despite Microsoft's ambitions, many found the OS's hybrid interface confusing. A dearth of both apps and attractive touch-enabled hardware only compounded these criticisms.




In discussing the new license figures, Windows division CMO and CFO Tami Reller admitted to the New York Times that Win8's learning curve must be addressed. Windows Blue, whose enhancements are expected to be announced at Microsoft's BUILD conference in late June, will help, but Reller also stressed that retail staffers are being trained to highlight not only the new Live Tile UI but also the continued importance of the familiar desktop. Early Windows Blue rumors suggested that the update would focus on touch capabilities, sparking concern that Microsoft was forgetting its core audience of mouse-and-keyboard business users. Subsequent rumors, however, have suggested Microsoft is working to more harmoniously unite the two interfaces, and Reller's statements only reinforce this expectation.

Despite her candor, Reller extended Microsoft's efforts to cast Windows 8 in a favorable light. She said that when Gartner, IDC and other research firms describe the slumping PC market, they're describing only the sales channel, not the number of customer activations. Online activations of new machines, she said, have actually exhibited growth.

It's not clear how these activations break down among traditional PCs, tablets, Surface models and ultrabook convertibles. Nonetheless, that Microsoft has shipped 40 million additional licenses since January supports Reller's statement. Windows 8 discounts expired only a few weeks into 2013, making it unlikely that new licenses were being installed on old hardware. New devices, therefore, likely drove the majority of sales.

Even so, there's a big difference between selling 100 million licenses and gaining, or even retaining, 100 million customers. Microsoft's license figures refer only to Windows 8 copies sold to OEMs. They do not reveal if these licenses have found their ways into consumers' homes, or if they remain in warehouses or on store shelves. Reller's statement somewhat supports the former possibility, while Windows 8's lowly market share more strongly endorses the latter.

The 100 million licenses also excludes enterprise sales. Technically, this means Microsoft might have sold substantially more than licenses than anyone has guessed. But business adoption has so far been muted, with most deployments limited to specific verticals that can benefit from mobility.

Reller suggested that Windows 8 would have fared better if more touch-equipped devices had been available at launch. Such theories somewhat sidestep the extent to which UI dissatisfactions have hurt sales, however. The fact that Microsoft's Surface Pro has been only a good -- not great -- performer also diminishes Reller's claim.

Even so, Microsoft and its partners are currently putting Reller's theory to the test. It's possible that many consumers want a Windows 8 Ultrabook but are deterred by generally high prices; if recent cost reductions drive sales, the lack-of-hardware thesis will be validated. New touch-optimized models are also rolling into the market, raising the possibility that consumers who weren't impressed by the first wave of Windows 8 devices might be more tempted by the second.

If lower prices and a greater variety of options don't catapult Win8 to success? It will be up to not only Windows Blue but also a forthcoming range of mini-tablets. There have been indications that these 8-inch models could drop as low as $300, potentially bringing the functionality of a full OS into a market segment currently dominated by the iPad Mini and a number of Android tablets. A new Surface model is rumored to be among these new devices, and thanks to Amazon jumping the gun with a since-removed product listing, it's already known that Acer is readying a small Windows 8 device, too.

By this fall, new devices will include not only Windows Blue but also Intel's new Core and Atom processors, which are expected to offer substantially improved graphics and battery life, among other improvements. Between improved internals, a refined OS and more competitive prices, the forthcoming models should help Win8 improve its market standing. Businesses, many of which are currently too invested in Microsoft infrastructure to widely deploy anything else, could also join the Windows 8 party in the months and years that follow.

If Microsoft ultimately retains its business audience while claiming a decent share of consumers, Windows 8, despite taking early lumps, will be hailed as a success. But if enterprises resist Win8 by clinging to Windows 7 as long as possible, and if consumers continue to purchase iOS and Android tablets in lieu of Windows 8 devices, it will be clear that Microsoft's touch-centric gamble isn't paying off.