Can Microsoft turn the tables again?

In 1985 Microsoft introduced Windows 1.0. It wasn’t a big success at that time and there were far better offerings from Atari, Commodore and of course then also Apple. Their Atari ST, Amiga and the Apple Macintosh were true multitasking operating systems with a graphical user interface while Windows was still relying on MSDOS and nothing more than a graphic shell with limited options. But Windows came out victorious eventually. How did Microsoft become the dominant operating system despite starting with an inferior product?  Microsoft had the most important areas covered for making a successful platform: content, hardware, distribution and focus on companies, the main buyers of pc’s. Nowadays Microsoft has a problem on the smartphone and tablet market. The products they offer aren’t really selling well. They even had to write off 900 million dollar on Windows RT tablet stock. Now let’s look into the area’s Microsoft must cover to be successful in the smartphone and tablet business.

Content

The Apple AppStore and Google Play have about one million app titles available. Both offer also music, video and books through their stores. The Microsoft store for Windows Phone offers 160K app titles and Windows 8/RT offer only 80K. This still seems like a large number but you must realize that only half of the top 100 iOS apps are available for Windows Phone. Windows Phone users are missing a lot of really great apps. Another issue the quality of the apps. A lot of Windows Phone apps are written by students and inexperienced developers after financial incentives and competitions from Microsoft. Then there is the factor of a large loyal developer community. How does Microsoft treat their developer community? Well not that good. When Windows Phone 8 was released developers got it two days before consumers got it. Giving them no time to update their apps. Another issue is development tools. Microsoft offers some development tools for free but if you want professional tools you have to pay a lot of money for them. Apple and Google are providing their developer community with professional tools for free. It is clear Microsoft has a big problem attracting developers. License fees dropped from $99 to $15 per year and Microsoft’s piece of the cake from 30% to 20%. Apple and Google still take 30%. So looking at the content part the situation for Microsoft does not look good.

Hardware

Microsoft always relied on partners like HP, IBM, Lenovo, Acer, Asus, etc. to make great hardware for running Windows. But these partners are nowadays less loyal to Microsoft than in the past. The pc market is shrinking and for the tablet market they have in Android a free (except for patent license costs they must pay Microsoft) operating system which customers want. If they use a Microsoft operating system for tablet or smartphone they must pay license costs which makes the entire package more expensive. And being more expensive is not good in a highly competitive market which is flooded by cheap Android devices from China. Another issue hardware partners have with Windows is the rate of innovation. Their hardware evolves much faster than Windows can cope with. And lastly, Microsoft started building their own devices. So Microsoft becomes a competitor instead of a partner. Looking on the hardware side the situation for Microsoft is not good. Partners have better and cheaper operating system options for their devices. And they also see Microsoft as a competitor.

Buyers

Nowadays consumers and not companies are buying the most PC’s, tablets and smartphones. And those consumers are shifting from unfriendly PC’s to more user friendly tablets. Furthermore consumers are the main buyers of smartphones. Look at trends like BYOD (bring your own device) where consumers use their personal devices in a corporate environment. How do consumers think of Windows? Are they happy with it? Well my guess is that most users use it because it came pre-installed on their pc and they can run their favorite programs on it. But for most users Windows remains a difficult hard to manage operating system, most people use it but don’t love it and for sure don’t want it on their smartphone. So looking at buyers it’s not looking good either. Microsoft failed to make Windows more user friendly in the last decennium and buyers associate the newer Windows RT and Windows Phone products with it.

Distribution

Tablets and PC’s are distributed through retail stores. A channel where not Microsoft and its hardware partners are well established. Android tablets and iPads are also and more abundant available through the retail channel.  For smartphones the major channels are telecom providers. In most countries they sell the phones with a subscription for voice and data. And there is problem, telecom providers have an issue with Microsoft: Skype. Telecom providers aren’t promoting Windows Phone a lot, only large sponsoring from Microsoft helps promoting Windows Phone smartphones for a short time. So looking at distribution we can conclude that for tablets Microsoft is not lagging behind. But for smartphones, a new channel for Microsoft, they have a large problem.

Looking into the future

Taking all this into account it looks like Microsoft has a really big challenge to make it on the smartphone and tablet market. They have a better product than Windows 1.0 in the past. But the important areas for becoming a large platform are now more difficult than ever. They must improve on their image and marketing. But also on their relation with hardware producers, developers and telecom providers. And that will not be easy since the competition, iOS and Android, have better products and a huge advantage on all important areas. Does it mean Microsoft is doomed? No of course not. They still have an excellent portfolio of business products, the most popular pc operating system, Azure, Office and lots more. But they will be more enterprise focused and probably have to leave the smartphone and tablet market to Google and Apple. The monopoly of Microsoft for personal computing is gone and will not come back again.