Microsoft is the rabbit caught in Apple’s headlights… and about to be run over by the Google juggernaut. Microsoft’s income comes from two major sources, Windows and Office. The need to maintain the stream of licence fees for these two products is at the very core of everything Microsoft does. Windows has three major groups of customers: consumer PCs, business PCs and business servers. Microsoft is the incumbent in all three markets, it can’t grow any more by taking market share, its income can only increase at the rate of growth for these markets as a whole. The only way Microsoft can break out of this static lock is by creating new markets for its products. But it must be careful not to injure it’s existing Windows franchises in attempts to get market share elsewhere.
But it’s a tough world to be selling operating system licences. Unfortunately for Microsoft, the situation is far from static. It’s core source of income is under threat. The iPad has created a new class of consumer product that is eroding Microsoft’s market for consumer PCs. Many people have no need for the full power of a desktop PC. For browsing, reading and writing email and watching YouTube, an iPad, or one of the many Android competitors is perfectly adequate. Android in particular is becoming more and more able to do PC like tasks with every release. For many people a PC is overcomplicated and unreliable.
Windows is also under threat in business server rooms. The main challenge here is from cloud based services. Why employ expensive people to look after servers running Exchange when you can simply sign up for Google Apps? For many small and medium businesses, cloud based services are a very attractive alternative to running in-house IT.
Windows is probably safest of all on the business desktop. There’s no real alternative for running productivity applications like Office. However, with many line-of-business applications becoming cloud based, there is a risk that a Chrome OS style browser-only desktop might look attractive to some business. Also when everyone’s got an iPad or an Android tablet at home, having a similar device at work will start to make more sense.
So is Windows 8 an answer to any of these challenges? It’s obviously designed to answer the first, the erosion of the consumer PC market by iPad and friends. Fundamentally it looks like a simple UI layer, derived from WP7, stuck on top of Windows 7. Microsoft’s strategy seems to be to offer a simple touch-UI for ‘consumer’ tasks, but which allows you to switch back to Windows 7 for running desktop applications like Office. John Gruber makes the point here, that simply skinning Windows 7 for tablets is probably a mistake.
Microsoft is not the leader in the tablet market, it’s playing catch-up from quite a long way behind. Will consumers be willing to pay the Windows tax when they can simply buy a more mature iPad or Android device? Microsoft can’t start offering it for free like Google does with Android because they would immediately kill one of their main sources of income. There is no way they can do anything other than ask people to pay more, for what will, at least initially, be an inferior device. It doesn’t strike me as a winning strategy.
It’s a confusing time for us developers. I think Microsoft still have a very strong position on the business desktop. If you are building line-of-business applications for a living with .NET, there’s probably still some millage in that. But the feeling is very much that .NET is now middle age, like many of its developers. No matter how nice the technology is, and it is very nice, it’s part of a platform that’s perceived to be part of the past, not the future.