Microsoft is backing into the abyss. It has yet to accept the danger
of losing a large part of the home market, of education, and of
businesses and divisions of businesses that use images to sell to and
communicate with customers.
A World of Choices
In today's economy, traditional IT departments too are at risk, and
every time a senior executive is sold on using an iPad or a smartphone,
the question inevitably rises: How can we use these to build our
business? And no business can afford to wait for Microsoft if its
competitors can sell more effectively.
Crying Windows everywhere, as if it were ten years ago,
doesn't help. Windows Phone 7 was a step in the right direction to
reestablish Microsoft in mobile, and the partnership with Nokia may
still rescue it, but it looks as though the Windows bureaucracy has
won. With the emphasis on Windows rather than Phone,
Microsoft risks pricing itself out of the market in the way that Apple
did with the Mac, before Steve Jobs returned.
The MS-DOS and Windows monopolies were established with low prices,
and mobile computing needs to be treated the same way. In mobile,
laptops are not growing at anything like the rates of smartphones and
tablets, but traditional PCs is the only part where Windows has a real
foothold, and that means desktop pricing won't work while Android, the
established alternative, remains free.
Microsoft's Shrinking Share of the PC Market
PC sales were down again in the last quarter according to IDC and
Gartner, although Mac sales were up (as usual), outgrowing the PC
market as it has every quarter for the last five years. The worrying
trend for Microsoft is falling PC sales in wealthier markets like the
US and Europe, markets where many have the money to buy the consumer
electronics they want - and for a growing number of users, PCs are
already good enough. When they want a new computer, Macs and iPads are
increasingly part of the choice.
Of course, when iPad and Mac sales are counted in with PCs, the
sales trend is still up - it's just that Microsoft is not benefiting,
and if it doesn't make Office readily available on tablets, it will cut
itself off from one of the fastest growing markets.
According to Canalys, Apple already has 9.5% of the PC market when
tablets are included. If the iPad manufacturing ramp up lets it sell 10
million iPads this quarter and the same 25% increase in Year on Year
Mac sales as last quarter, Apple will be challenging HP for the top
spot in the market.
Changing Platforms Means Changed Expectations
Many people are used to Windows and think that changing will be too
much of an upheaval, but few are power users, and tablets are
different, so iPad users don't expect them to work in the same way as a
PC. People look for similarity with something else they use, for how
something new should work. As touch is the main tablet interface,
iPhone and iPod touch and Android phones are the obvious starting
points, not Windows. Any survey suggesting that people would like or
want to wait for Windows on a tablet overlooks this wish for something
familiar to reduce the time it takes for the tablet to become useful -
the more people that use smartphones, the more people will be used to
driving their apps by touch, and the less Windows will be the starting
point.
Microsoft missed its chance to dominate phones and tablets in the
same way it did the PC. It has already lost its largest Windows
customer, HP, to WebOS, and Dell is trying to be an Android player.
Motorola has moved completely from Windows Mobile to Android, and HTC
went from being the company making most of the Windows Mobile
cellphones to being one of the largest Android manufacturers.
Samsung, HTC, and others have tried shipping Phone 7 handsets but to
lackluster sales, which haven't been helped by Microsoft's failure to
update the OS at anything like the speed of Apple and Google. Now the
best Microsoft can hope for in phones is sufficient success with Nokia
to show that it can still be a player. Nokia has already lost first
place in revenue and profitability to iPhone 4, and its first
Phone 7 handset will be competing with iPhone 5.
Microsoft has never managed to establish the Windows home server as
an essential. Now that opportunity has likely passed with the inclusion
of OS X Server as part of Lion, the 10.7 release due this summer -
unless Microsoft is willing to bundle its server as part of most
versions of Windows 8 on PCs. Even then, the problem will be making it
usable by and for the family. Apple spends a lot of time making
software look simple so that new users can do something with it, but
Microsoft, with its strong hold on the technical user and the IT
departments, has never had to make that effort.
The Gaming Market
PCs used to dominate games. Then much of the market shifted to
consoles, where developers could give players a consistent experience.
It was no longer down to designing around the hardware, trying to find
a large enough market for a game to make a profit without it playing
poorly for the highly vocal enthusiasts with high-end graphics cards.
Then the Wii picked up casual players in their millions but, judging
from Nintendo's figures, many of them don't often buy new games.
It is these casual players who will migrate to tablets. Many of them
are used to playing for a few minutes here and there on iPhones, iPods,
and smartphones. Similarly, iPad games are much cheaper than console or
PC games, and players can pick them up when they want to and don't need
to take over the family TV or go to another room. In the same way that
the iPhone/iPod touch games market is already larger than the Nintendo
DS and Sony PSP markets, so tablet games will be larger than console or
PC games in a few years, and Microsoft's Xbox too will be
struggling.
Microsoft Marginalized
Internet Explorer has ruled web access for over a decade. This year
its share should drop below 50%. It's not as if people are using the
Internet less, but that more people are choosing alternatives like
Firefox, Chrome, and Safari, and this will accelerate as
more of that access is on iPhones, tablets, and smartphones, where
Internet Explorer is not a contender.
Also, when IE's share drops below 50%, it will be less of a standard
and so taken less into account in website design decisions. If, as
looks as likely, the new standard is WebKit, then another part of the
Web will be open.
To the extent that Windows survives outside of the office, it will
be one OS among several - and it will no longer the most important in
many sectors, certainly not worth the money that Microsoft currently
charges.
However, the business sector will keep Microsoft highly profitable
for the foreseeable future. There are too many entrenched systems that
work, for change to be other than glacial in the workplace. But
monopolies don't last forever - it only seems like that when you have
to deal with them. 
