Microsoft has its sights set on reclaiming consumer market share, while maintaining its hold on the enterprise.
The image of Windows as the stodgy, "all business" operating system that runs boring spreadsheets and database applications while all the "fun stuff" happens on a Mac was the theme of a whole series of Apple advertisements. That conception was visually reinforced by the suit-and-tie clad, glasses-wearing, slightly pudgy PC Guy who was made to look like one of those nice guys who always finish last, in contrast with the hip, cool, young Mac Guy who gets all the girls despite (or maybe because of) his arrogant attitude.
With the iPhone — and later the iPad — Apple was obviously appealing to the consumer market with its simplified, pretty interface. The penetration of those devices into the business space came about not so much because they were made for the business user as because of the consumerization of IT trend that has employees bringing their own devices to work.
Of course, Microsoft continues to enjoy a comfortable dominance in server market share; according to IDC the Windows server market share was 71% of all server shipments in the second quarter of this year. In 2010 Exchange Server had a worldwide installed base of 301 million mailboxes and (PDF) was expected to grow to 470 million by 2014. SharePoint is widely deployed and reported to be on its way to being a $2-billion business.
Apple, on the other hand, killed its Xserve line of rack servers in late 2010, announcing that it would (PDF) be replaced by Mac Pros and Mac Minis running Snow Leopard Server, and has only a tiny share of the server market.
In the consumer market, however, Apple has been wildly successful over the last few years. I recently heard some tech pundits advise that Microsoft should concede the consumer space to Apple and focus on the enterprise, much as IBM has done (quite successfully) since dumping their PC business. I disagree, and I don't think giving up on the consumer market is in Microsoft's plans for the future.
Windows Phone is aimed at consumers
Some of those who say Microsoft doesn't have what it takes to win over the hearts and minds of consumers point to the Kin debacle as "proof" of their allegation. The Kin was squarely aimed at nonbusiness users — in fact, a very specific segment of such users: young people who wanted something not quite as smart (or as expensive) as a full-fledged smartphone but wanted to be able to do social networking and content sharing from their phones.
It made sense in theory, but the omission of some features that were needed to compete with low-cost Android phones disappointed buyers. These included a calendar app, instant messaging support, spellcheck, and, most important, an app store or the ability to otherwise purchase third-party apps to expand the phone's functionality.
In addition, the monthly cost of the service plan required by the carrier (Verizon) was too high for the phone's target audience. With the minimum voice and data plans, kids were looking at a $70/month phone bill — the same as for a fully functional smartphone. Finally, the Kin was introduced "in between" Windows Mobile and Windows Phone 7, which was expected to be a "real" smartphone. This lethal combination resulted in dismal sales.
Microsoft's stumble with the Kin, however, doesn't mean that they can't make a successful consumer phone. Windows Phone (formerly Windows Phone 7 but now transformed into 7.5 by the Mango update) has received many good reviews and has so impressed some analysts that we have predictions from Gartner that it will overtake the iPhone and Blackberry by 2015.
Some might say that those gains will be overwhelmingly in the business space, but a close look at the current iteration of Windows Phone shows that it's really more consumer-friendly than business-friendly at this point. The heavy social networking integration (an idea that was borrowed from the Kin but implemented more effectively in Windows Phone) and the simplified UI appeal to youngsters and grandma — perhaps more than to corporate executives. It's definitely not the first choice for geeks, who want more access to the OS and file system and more freedom of choice; Android fills that bill. Windows Phone is competing with the iPhone, and that means consumers come first.
It doesn't mean Microsoft doesn't want the mobile enterprise market, too, and they are moving more in that direction now — with recent changes to the hardware specs to eliminate the requirement for a camera and new features added by the Mango update that appeal to business users, such as the mobile client for Lync and email server search. I think if Microsoft can capture the imagination of consumers, Windows Phone can successfully make the transition to the business world in the same way the iPhone did. Security is a big issue in enterprise computing, and Windows Phone offers some security advantages.
Windows 8 is likely to appeal to consumers first
One could argue that Windows 8 is all about the consumer. The Metro interface is designed to take advantage of touch-screen technology that's currently found primarily on tablets. And although tablets have started to make some inroads into the business world (thanks again to that consumerization trend), they're still more of a content-consumption device than a content-creation tool.
Consumers do more consumption and less creation than business users, in general. In fact, much of the criticism that has emerged so far regarding Windows 8 comes from those who question how efficient the tile-based UI will be for getting work done.
But even if the Metro/classic desktop combination in Windows 8 turns out to be fine for performing business tasks, it's highly likely that IT departments will be resistant to upgrading networks to Windows 8. Economic factors will make businesses hesitant to upgrade, and it's not just the cost of the new OS. Although Microsoft has promised that Windows 8 will run on any computer that runs Windows 7, in order to have the best user experience with Metro, you need a touch-screen monitor. Most desktops and laptops used in the business world now are not touch-enabled.
In fact, Windows 7 itself may be the biggest stumbling block to the adoption of Windows 8 in the business space. Many, many companies stuck with Windows XP for ten years, and they are just now starting to think about upgrading to Windows 7. Quite a few don't plan to switch even after support for XP ends in 2014. They discovered that the world didn't end and their business didn't fall apart because they didn't have the latest version of Windows running on their desktops, and they may now be thinking that Windows 7 will work just fine for the next ten years. Cost aside, why put users through the angst of learning a whole new operating system all over again after the recent transition from XP to Windows 7?
Consumers, on the other hand, are often far more open to trying something new. And they're looking at upgrading just one or a handful of computers rather than hundreds or thousands — a much more manageable (and more easily reversible) undertaking. Thus Windows 8 needs to appeal to consumers, and there is every indication that Microsoft knows this and is hoping to make Windows 8 the most consumer-friendly OS yet.
Microsoft is still in the game
For anyone who doubts that Microsoft is still able to market and sell to the consumer market, I have one word: Xbox. As I noted last month in my column on how Microsoft could achieve world domination, the Xbox 360 helped Microsoft attain record revenues last quarter.
When the Xbox was introduced in 2001, it faced tough competition from Sony's PlayStation. But a slate of killer games and some unique features such as a hard drive helped Microsoft gain market share. Then in 2006, Nintendo released the Wii with its distinctive wireless controller. But Microsoft fired back with Kinect. The gaming console is the ultimate consumer product, and Microsoft has proven itself in that realm and continues to do so.
I believe those who think Microsoft should abandon the consumer space and retreat into the corporate world like IBM are failing to see the big picture. Luckily, I don't think anyone at Microsoft is listening to them. From what I see, the company has its sights set on reclaiming the consumer market share, while maintaining its hold on the enterprise. Whether and to what degree that happens will depend on many factors — some of which are under Microsoft's control and some of which aren't — but I don't think the company is giving up on the consumer market any time soon.