TechWeb

Microsoft Windows 8 Has No Time To Waste

Jul 22, 2013 (07:07 AM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=240158680


10 Hidden Benefits of Windows 8.1
10 Hidden Benefits of Windows 8.1
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On Thursday, Microsoft announced earnings that missed Wall Street estimates by the largest margin in a decade. Windows 8 and Microsoft's Surface tablet headlined the disappointing earnings, which prompted CFO Amy Hood to remark, "We have to do better."

Indeed, Microsoft needs to do better and customers need to see the evidence sooner than later.

Hood said the process will take time, but with Windows 8, the company might not be in position to be patient. If the company's recently announced restructuring doesn't start paying off within the next several months, the obstacles standing between CEO Steve Ballmer and his "one Microsoft" vision will only grow taller, and in some cases, become insurmountable.

Ballmer wants Microsoft to be more collaborative, and to produce products that enhance one another. This kind of cross-divisional cooperation is something with which the company has so far had mixed success.

[ Need Windows 8 apps? Read 8 Free, Must-Have Windows 8 Apps. ]

Azure and Office 365 have reinforced one another, for instance, but Microsoft has struggled to use Office to promote Windows 8. The company has declined to release Office for the iPad in an attempt to make Windows 8 and Windows RT tablets more attractive, but so far, only niche users have embraced the Modern UI. Apple, meanwhile, continues to sell millions of iPads.

In a Friday blog post, Forrest analyst J.P. Gownder noted that if only 10% of iPad users are willing to pay $100 for Office, Microsoft would book $1.4 billion in revenue, more than enough to wipe away the massive Surface write-down that the company reported on Thursday. As the unsold Surface inventory attests, Microsoft seems to have overestimated consumer demand for tablets that run Office.

Perhaps once Windows 8.1 hits, that demand will solidify, but in the meantime, Microsoft's strategy is not working.

Microsoft is committed to the Modern UI as the core of its future, so it's not surprising the company is willing to take short-term losses in the pursuit of long-term gains. But there's always a tipping point. Microsoft isn't there yet, but if Windows 8 doesn't start performing, especially with consumers, Ballmer will be forced to compromise his plan.

Microsoft is not on the brink of disaster. The company continues to own the enterprise market, and several of its fledgling projects should prolong that dominance for years to come. The reorg could potentially help these newer projects along.

Bing has lost billions, for instance, but its potential as a development platform is fascinating and far-reaching. Ballmer talks about Windows apps that understand a user's context and needs, and with Bing's intelligence and Internet-spanning reach riding along Azure's backbone, developers might be able to create this vision.

Though this sounds great, certain portions of the market, namely consumers, aren't going to wait around for Microsoft's next-gen apps to materialize. If Microsoft finally has a compelling mass market product by the fall, that will be one thing. But if the company is 12 or 18 months away from being truly competitive, that's another story. Microsoft is already playing from behind, and at some point, the deficit will become almost impossible to surmount, barring a genuinely disruptive new product or a major misstep from Apple or Google.

Following Thursday's earnings report, Microsoft value shed $32 billion. The 11% decline represents the biggest single-day sell-off of Microsoft stock in more than a decade. Steve Ballmer is accustomed to stockholders treating him like a punching bag, of course. But what if Windows 8 is still in disarray after the holiday season? What if businesses that use Windows XP users don't accelerate their migrations? What if most of these businesses stick with Windows 7, leaving Microsoft without a strong presence in the enterprise tablet market?




It was inevitable that Microsoft would feel investor backlash following Thursday's earnings report. But for its core business, things could actually still get worse. Microsoft will still reap billions from the enterprise. For businesses, there is value in the way Office products are becoming better united and more collaborative. Many corporations will be intrigued by Office's emerging business intelligence functions, such as Power BI. Office 365 can also make on-the-go workers more productive while also ameliorating IT headaches. And Microsoft is cleverly positioning Azure as the go-to cloud infrastructure for mobile apps, allowing the company to benefit from the continued popularity of Android and iOS.

But a lot of that doesn't matter to consumers. Business intelligence? Whatever. Office 2010 is fine.

The bring-your-own-device movement has been disruptive, and without consumers, Microsoft will lose out on the windfall. BYOD has limits, and as a result, Microsoft will remain a strong enterprise player in almost any foreseeable scenario. But Microsoft's entire business philosophy has traditionally hinged on the clout it commands with Windows. If Microsoft's reorg can't translate some of that clout to the consumer market, Ballmer's full plan will never come to fruition.

The next generation of Surface tablets needs wider appeal, for example. Intel's new chips will help by delivering better graphics and longer battery life, and Microsoft will need to aggressively promote and develop the redesigned Windows Store that will debut with Windows 8.1.

But Surface tablets themselves need to evidence a more collaborative attitude from the ground up, starting with hardware. From a form factor perspective, the first round of devices hasn't maximized what Windows 8 actually has to offer; Julie Larson-Green's Devices and Studios unit must work closely with the Office, Windows, and SkyDrive teams to fix that.

With Windows 8, Microsoft has already misread consumer preference to an epic extent. The unsold Surface inventory speaks to these missteps, as does the possibility that the device's discounted price might still be too expensive.

Microsoft also dubiously assumed it could swagger into the premium tablet market by simply throwing Office into a nice piece of hardware.

Then there's Win RT itself. The product has confused consumers, who, thanks to Microsoft's misguided but ubiquitous advertising, don't understand why the lightweight OS even exists. The Modern UI also ignores much of what has made the iPad popular. It's natural that Microsoft wants to condition users to use the Search charm, for example -- but deciding not to include a prominent search bar in the Windows Store is just silly. How much momentum did the store lose while users figured out that buying Angry Birds necessitates navigating a series of menus or swiping a hidden charms menu into view? Windows 8.1 will fix this, but it's puzzling that Microsoft made such a stubborn miscalculation to begin with.

Given the company's consumer-oriented mistakes, one could charitably say that Microsoft was high on its own hubris with Windows 8, and that Windows 8.1 is a humbled step in the right direction. Then again, one could also look at Windows 8.1's ersatz Start button and conclude that Microsoft remains as out-of-touch as ever.

For Microsoft to meaningfully expand its consumer footprint, and for Ballmer's plan to stay on course, devices that ship with Windows 8.1 need to show tangible signs of a new, improved Microsoft. If not, the company can still retain much of its enterprise dominance -- but can it still keep Apple and Google from taking over the consumer and BYOD segments?