Windows 8: Will Microsoft’s Latest Big Bet Pay Off?

  • Share
  • Read Later
AP

This post is in partnership with Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania. The article below was originally published at knowledge.wharton.upenn.edu.

When Microsoft CEO Steve Ballmer officially launched Windows 8 on October 25, he touted a “re-imagined Windows” with touch-screen capability, a new user interface and the elimination of the traditional Start menu. However, analysts are questioning whether Microsoft’s new operating system — along with more than 140 different Windows 8-powered hardware designs from partners such as Acer, Dell, HP and Samsung — will catch on with consumers.

For one thing, PC sales are declining globally, and the trend doesn’t show signs of reversing. According to research firm IDC, PC shipments fell 8.6% in the third quarter of this year. By contrast, IDC’s tablet forecast was adjusted upward to 122.3 million units in 2012, from 117.1 million, courtesy of Apple‘s iPad mini tablet. Analysts note that the Windows 8 launch hasn’t boosted PC sales, and that Microsoft’s newest flagship device — the Surface tablet/laptop hybrid powered by Windows 8 — hasn’t taken off, either.

“So far, it appears Windows 8 has not been the major catalyst many expected: We are reducing our Windows revenue estimates to reflect the lack of a meaningful reaction in the PC market from the launch and a weak ramp in Surface unit volume,” wrote Barclays analyst Ben Reitzes in a research note. “Data points from the PC supply chain remain negative, with no reversal in sight. The traditional Windows business will continue to be cannibalized by tablets.”

The strength of Windows 8, according to Wharton faculty and other experts, is its ability to span multiple devices — from PCs to tablets and mobile phones. The company could not risk being solely tied to PC sales when that market’s growth is slowing. With Windows 8, “[Microsoft] is attempting to leverage touch-screen technology and bring it to the traditional PC market,” says Andrea Matwyshyn, legal studies and business ethics professor at Wharton. She adds that Microsoft is on the right track with the idea that it can bridge multiple devices with one operating system, but it’s unclear what device will make Windows 8 a must-have.

“Credit Microsoft for trying to bridge the gap between tablets, desktops and mobile,” says Wharton marketing professor Peter Fader. But significant changes in the user interface — required to make Windows 8 compatible on multiple devices — could prove to be a hurdle to adoption by users who are accustomed to the old Windows operating environment, some analysts warn. “Customers are still wait-and-see,” Fader adds.

“Windows 8 is a big deal [for the company], and Microsoft made more than incremental changes to its flagship product,” notes Knowledge@Wharton technology and media editor Kendall Whitehouse. “It’s nice to see Microsoft being more aggressive and taking a big leap.” Still, Windows 8 will be a significant test for the firm, Whitehouse adds. “Microsoft is very good at focusing on profitability, but its track record for developing breakthrough products hasn’t been very consistent.”

Reading the Numbers

Microsoft has reported that it sold 40 million Windows 8 licenses from October 26 to November 27. Speaking at an investment conference on November 27, Tami Reller, chief financial and marketing officer of Microsoft’s Windows division, said that the pace of Windows 8 sales is on par with that of Windows 7 when it launched in 2009. “Each release of Windows has its own characteristics,” said Reller. “The 40 million is roughly in line with Windows 7. If you think about the timing of Windows 7, there was a lot of anticipation, and it was also the type of a transition that didn’t really require much hardware change. It didn’t require the level of change that Windows 8 has required.”

The amount of change needed to make Windows 8 both tablet- and PC-compatible is a primary reason that analysts are mixed on Windows 8’s prospects. Those concerns were magnified when Microsoft replaced Stephen Sinofsky, head of the Windows 8 effort, with Julie Larson-Green as president of the company’s Windows and Windows Live division on November 12. Ballmer said the move was made to “drive alignment across all Microsoft teams” and products.

According to Fader, it’s too early to tell whether the company’s radically revised operating system will do well. And it’s certainly too early to call it a failure, he adds, since Windows 8 may see a long adoption curve as consumers navigate multiple hardware designs and new device interfaces. “So many people are locked into Windows and like it,” Fader notes. “They will adapt. But even if Windows 8 fails, it won’t be the first time Microsoft launched a bad OS.” Microsoft’s Vista and Windows ME operating systems both disappointed due to performance issues and weak sales, but the company rebounded with strong products in their subsequent operating systems.

Matwyshyn isn’t so sure. She says that Microsoft’s competition is decidedly different this time. By changing Windows 8 so dramatically with features like “Live Tiles,” which bring content to the user from multiple sources, and offering new hardware designs from Microsoft and its PC partners, the company “has caused user angst” through disorientation. “When you disrupt user comfort, you create unnecessary tension,” says Matwyshyn.

In an interview with MIT Technology Review, Larsen-Green said that internal data are showing that consumers become accustomed to Windows 8 after an initial adjustment period. “There’s a cutover point, around six weeks in, where you start using the new [features] more than the [ones] you’re familiar with,” she said. To facilitate the transition, Microsoft has included an option to use some features from the older Windows 7 desktop on Windows 8.

Whitehouse likens the revised Windows 8 interface to that of Microsoft Office 2007, which introduced Microsoft’s “Fluent user interface.” The new Office interface, with its “ribbon” feature that shows a changing display of menu items at the top of the application, initially caused a great deal of consternation among users. Once Microsoft tweaked a few details, however, the new interface settled in as the standard across the Office product suite. Should Windows 8 stumble, Microsoft is likely to retool and respond to customers with updates to the core operating system. “Microsoft has a lot of room to dodge and weave,” says Whitehouse.

  1. Previous
  2. 1
  3. 2
9 comments
oolzie
oolzie

Two things: 

. The PC market will continue to decline because tablets have shown people that if all you do is surf the web and check email, you don't need a full on computer anymore. I don't know why people are still pretending this isn't a fact and accept that computing culture has changed. It doesn't not mean PC's are dead. 

 I love windows 8. I've used it since it was first available and now use it across desktop, laptop and several tablets (both RT and win8). What it does, it does fantastically, melding the ease of touch interface for casual use and the power of a desktop and familiar file management and peripheral support when you need to get work done. With that said, IMO, Microsoft has completely botched the marketing and presentation of the product. Here are some of my opinions on what they should have done. 

1. They never should have made Metro the centerpiece of what Windows 8 was about and they never should have forced it on everyone. I like it, but there's no reason it couldn't have been optional. There are enough "under the hood" improvements in windows 8 for it to stand alone. OsX has gotten by for years by touting incremental improvements and IMO a lot of what is in windows 8 is better than just incremental and that doesn't even include the new UI. Let those who want it, keep their start menu and those who like metro use it. There's no reason they couldn't exist side by side. 

2. Let apps and its unique integration and information-centric flow be the catalyst for driving people to use metro. Some people, like me, would instantly love it, the look, the usability and the live tiles, but that's not enough for many. Over time those people would find apps that fit them, they would see the coolness in the integration and before you knew it the new UI would be integrated in how people use computers and what they expect to be there. You would get strong, organic growth and people wouldn't feel forced. 

3. Window RT should never have been named RT. It should have been called Windows 8 Tablet or something that makes more sense to the average person. Sell it as a "metro only" solution that only offers you a desktop for file management, but otherwise everything flows through Metro. Then with this they could sell the "bonus" of having any app you buy in the new UI available across all your devices, desktop, laptop or tablet. That would be seen as a value add, a feature and not something being forced on people. 

4. Their marketing has yet to show me anything, beyond colorful tiles and flashy commercials, about how Windows 8 is supposed to change and evolve computing. When I use a Surface, what I find amazing about it is that I can sit at my desk and work in office just as I do on the dekstop or via RDP/Citrix, get real work done without buying apps or hacked on peripherals to feel like I'm using a business device. Then when I'm done I can flip the cover back, plop down on the sofa and use metro in a casual, touch-centric way, but in an instant I can go right back to getting real work done if needed. There isn't another device out there that does this, that caters to both natively, in such a seamless way. 

5. This goes back to some of my other points, but if Metro had been billed as an add-on feature on everything except the RT tablets, it would set the stage for them to also integrate that into the xbox platform and again, this would be viewed as a huge value and option for people who want it. 

6. There needs to be greater integration between Windows 8 across devices. The fact that there isn't any sort of "app sync" where you can designate some apps and their settings to automatically sync to all your devices is a huge let down. 

7. Windows phone 8 needs to function more like windows 8's new UI and the integration between them should feel like the phone is really an extension of windows 8 and not another platform. You should be able to swipe down to kill an app, more familiarity. 

DriveHeadquarters
DriveHeadquarters

Windows 8 gets Microsoft ahead of the game. Now Apple is lagging behind. MS has one OS core than spans all devices from smart phones, tablets, laptops, desktops, servers and game consoles. Apple does not have a touch enabled MacOS yet. MS will win when OEMs launch more win8 and touch optimized ultrabooks at a more affordable price. MacBook sales will drop until Apple launches a new touch enabled MacOS

SomeGuyInVegas
SomeGuyInVegas

@DriveHeadquarters I disagree, I have worked in IT for over 25 years, I have achieved and maintained Microsoft MCSE and MCDBA certifications since 1998. I have made my bread and butter predominantly in Windows IT shops since WFW 3.11. At one time you could have fairly called me a Windows fan boy.

In my review Windows 8 is the biggest catastrophe Microsoft has released yet, Balmer should be fired for it! Today I am a VP of IT systems and security at a healthcare company, I assure you none of our 800 desktops will ever upgrade to Windows 8. My peers in the IT field I know feel the same way. The start screen along with all the other convoluted nonsense in Windows 8 on a desktop system was the worst idea in a long history of bad ideas. I predict Microsoft will either back peddle it's OS or it will die.

oolzie
oolzie

@SomeGuySomeWhere @DriveHeadquarters What "convoluted nonsense" are you referring too? I agree that the new UI should have been optional, but beyond that (which I love btw) Windows 8 is great, has a lot of great features under the hood and is better than windows 7 in every way. 

HarryA.Madden
HarryA.Madden like.author.displayName 1 Like

I just setup a new Windows 8 PC (desktop) for a customer.  They were used to the older Windows interface.  Their reaction?  Confusion, followed by anger at Microsoft for forcing them to go through a fairly steep learning curve.  Did I mention that they had been using various versions of Windows since version 3.1?  I often repair computers, and have likewise been unimpressed by Windows 8.  For a touchscreen tablet, maybe it's OK.  But for the vast number of PC users out there, it sucks.  Microsoft should have included a choice of interfaces for the user, Windows Classic, or the new one.  It's typical of Microsoft.  The did much the same thing when they brought out Office 2007.  Their philosophy seems to be "We going to change whatever we want, when we feel like it, and if you can't keep up, too bad."  I, for one, don't like it.  Touch screens may be the future (and I'm fine with that), but I don't want Microsoft forcing me to buy one, or to punish me for keeping my mouse and keyboard.  I'm keeping Windows 7.

HarryA.Madden
HarryA.Madden

Update:  The customer I mentioned is so unhappy with Windows 8 that he's about ready to return the new PC to the store and go back to his old one.  Pissing off your customer base is never a good idea.  Remember New Coke?

OldGuyGeek
OldGuyGeek like.author.displayName 1 Like

The only 'agnst' is the one that journalists have when they don't have a real reason for maligning a new technology.  Sure Windows 8 is different, but only because it needed to be. There have been tablet computers for years that didn't sell well at all.  A new interface that worked well with touch had to be created. Because Microsoft, like most large companies, actually studied the problem with design professional and then tested it with focus groups and the largest preview program ever, Windows 8 will succeed.

It's taking time and sales aren't as good as Windows 7 for several reasons.  One, the economy. Two, Vista needed a fresh look that separated the Windows OS platform into a newly named OS.  So people bought it quicker.  Three, many people held off of buying Windows 8 because it was released just before the shopping discounts were going to set in.  Who would buy a new computer if two weeks later it would be on sale.  Lastly, more and more touch screen systems will be out and some are waiting for the best of those to show up.

The Windows 8 interface is easier to work with that the old Start menu with it's cascading list of programs that get installed into the endlessly confusing list.   As indicated at the end of this article, the Start screen is so easy to use, most people get accustomed to it quickly.

You can check out our tutorials on YouTube/oneconnection or at OldGuyGeek.com

MarioJesusPabon
MarioJesusPabon

Obviously PC sales are declining... who's going to pay $600-$1000 for a computer when it's only going to be used for Facebook/porn?

BrentonKlassen
BrentonKlassen like.author.displayName like.author.displayName like.author.displayName 3 Like

I think Windows 8 will pay off in the end.  Touch screens are the future.