Monday Note’s Jean-Louis Gassée writes about the death of Windows Phone:

How could Microsoft’s Windows Phone licensing business model stand a chance against Google’s Free and Open Android? None of the Redmond giant’s complicated countermeasures worked, its smartphone platform is dead. And yet, inexplicably, Microsoft failed to use a very simple move…

Source: Fiction: Who Killed Windows Phone? – Monday Note

For a long time Windows Phone was a better phone operating system than Android. By better, I mean it was easier to use, understand and navigate than Google’s phone operating system.

It was also better because it provided essential information in a straightforward way. You could glance at your phone and see the important things straight away.

A better phone OS

Windows Phone was better because it integrated well with Windows on desktop and laptop computers. It was also better in that it played nicely with Microsoft Office. If you were wedded to Windows and Office, you could get huge productivity gains choosing a Windows handset over an Android.

Today’s Android phones have improved on all these things. Yet at the time Windows Phone was first introduced, it was streets ahead.

I know this better than anyone. I used Windows Phone everyday for the best part of two years. For me, at the start of that time, the advantages outweighed the negatives. Before the two years were up, the balance tipped the other way.

From a user point of view, Windows Phone lost its charm because third-party software developers ignored it. At best they neglected it. If any third-party developer did create an app, they failed to upgrade it as fast as their Android or iOS versions. But many apps, including important ones, never made it to Windows Phone in the first place.

Never mind that many of those apps were worthless one-trick ponies. There was a lack of choice, there was a feeling Windows Phone was becoming a forgotten backwater.

In his post, Gassée takes his time getting to the nub of how Windows Phone became a backwater. He writes:

Microsoft made a number of bad decisions that stem from its hardened culture…

For a long time, Microsoft’s orthodoxy placed the PC at the center of the world. When smartphones took center stage, the company’s propaganda censured talk of a Post-PC world. Smartphones and tablets were mere “companion devices”.

The simple move mentioned at the top of this story was making the operating system free to phone makers. That’s what Google did with Android.

Momentum

Gassée argues that Microsoft’s culture meant it didn’t think to make its phone operating system free until it was far too late. That’s true. By missing that boat, Microsoft’s phone OS never gathered enough momentum to attract third-party app developers. Meanwhile the Android and iOS app stores were filling with every imaginable phone application.

Which is odd, because know how to attract developers was a Microsoft strength with MS-Dos and Windows as it was building an empire.

From there it all went downhill fast.

Could Windows Phone return from the dead? Probably not. Apart from anything else, Microsoft has moved its focus to more lucrative markets like cloud computing.

wellington cloud
wellington cloud

Four years ago Microsoft lost its mojo. The software giant had failed to compete in web search.

People questioned whether Microsoft was on an IBM-style path to irrelevance. When the phone business flopped, it looked like Microsoft’s time in the sun was over.

Today it is back. The 2017 Microsoft is a different beast, the main reason for its revival is a successful transition to selling cloud computing services. Microsoft’s birth isn’t yet on the same scale as Apple which came back with the iPhone, but that can still happen.

This week Microsoft reported quarterly profits that are more than twice the level of a year earlier.

It’s not all good news. Some of the jump was down to the company realising a tax benefit after writing off its failed mobile phone business.

Fast growing cloud transition

Yet that’s the past The important part of the quarterly announcement is that Microsoft’s cloud business is growing at a clip. That was enough to send the share price up three percent.

This wasn’t the first quarter where Microsoft’s cloud business was the star of the show. It’s been climbing for years now. In the latest quarter Intelligent Cloud revenue was up 11 percent to US$7.4 billion. Revenue for the company’s Azure cloud services was up almost 100 percent.

While Azure still trails behind Amazon Web Services, there is clear blue sky between Microsoft and the next set of cloud service providers. Being second in the most important market of the day is a huge win for Microsoft.

Azure profits

At the same time, cloud economics means it is close to a winner takes all game. Amazon and Azure share almost all the cloud profits.

The other cloudy good news from Microsoft is that revenue from the cloud version of Office 365 went past traditional software sales for the first time. There are now 90 million Office 365 users on iOS and Android. That is a big thumbs up for CEO Satya Nadella’s decision to support non-Microsoft operating systems.

Although Microsoft is doing a better job of transforming than rivals like IBM, Oracle or Google, it isn’t in the clear yet. Sales of Surface devices fell two percent during the quarter. Meanwhile enterprise service revenues fell. Yet it appears to be keeping pace with AWS, that’s something no-one else can manage.

Microsoft is cutting ‘several thousand’ employees, mostly in its sales organization, following a reorganization earlier this week.

Source: Microsoft to lay off ‘several thousand’ employees | ZDNet

Mary Jo Foley writes:

“One source close to the company said Microsoft would be cutting “several thousands” of employees. CNBC said Microsoft would be shedding up to 3,000 employees, but didn’t cite the source of that number.”

Microsoft has been here before. The company cut around 10 percent of its staff in 2014. That was mainly to do with the failed Nokia devices acquisition.

If the 3,000 number is correct, that’s around 2.5 percent of the employee total.

Sure, it’s a smaller number, but there’s a danger Microsoft is in a place where it has continuing rounds of redundancies. If you want to know how that story ends, look at IBM. The company never recovered once it started making big cuts to its staff numbers.

Cuts are not good for company moral. Employees constant wonder who is next. They become cautious, take fewer risks, play only the safest bets. This kills innovation culture.

Stressed survivours

Those left behind are often stressed. The more employable workers evaluate their prospects. Often, in technology companies the best, most valued employees — even the ones left after a round of cuts — decide they may be better off elsewhere anyway.

IBM’s cuts became a destructive vicious cycle that, eventually, undermined the company’s ability to innovate and serve its customers. They may have unleashed short-term value to shareholders, but the board ended up killing the golden goose.

Microsoft is not yet at that point. This is a trimming exercise. Most of the jobs that will go are in sales and the company is in transition to a new model where it will emphasis its Azure cloud computing over traditional product lines.

Yet, the jobs-cut-easy-fix can become an addictive and damaging habit. If it happens again in the next year or two, you can take it as read Microsoft is doomed to irrelevance.

Microsoft Windows 10SAt first sight Microsoft’s Surface Laptop and Windows 10S launch is all about education. That was the company’s emphasis at the product roll-out in New York.

Yet there is more at stake here than putting computers in school bags.

The announcement outlines a strategy for the next stage of personal computing. If Microsoft pulls this off, it will once again dominate the sector.

On the Surface

Surface Laptop is Microsoft’s most ambitious touch screen hardware product to date.

Previous Microsoft devices; Surface Pro tablets, Surface Book, Surface Hub and Surface Studio, are all niche products. They cater for minority tastes.

The Surface Laptop is mainstream. It competes head on with hardware from brands like HP, Lenovo and Asus. The Surface Laptop is a direct challenge to Apple’s MacBook range.

It doesn’t directly address Google’s Chromebook, but Microsoft developed the Surface Laptop with that product in mind.

Chromebook

Chromebook is a basic, low-cost, easy-to-manage laptop. It has sold well. It is one of the few PC success stories of recent years. Chromebook sales have climbed while sales of most other computer formats have been in free fall.

It is more sucessful than Google’s rivals expected. Above all else the Chromebook is strong in education. Yet that’s only part of the story. IDC’s latest market survey says Chromebook are now selling well to commercial customers.

We can assume Microsoft understands the Chromebook threatens its PC business.

Chrome OS

Chromebooks run Google’s Chrome OS. In effect, the operating system is the Chrome browser.

Chrome OS is light on features. You can’t do everything with Chrome OS. You don’t have as much low-level control. But that’s a good thing for many customers.

Lots of users don’t need all the personal computer trimmings. They just want to get a limited set of tasks done in an unfussy way. This applies in spades to young school students.

More to the point, school students and their families are not willing or able to pay for a more powerful computer with a full operating system.

You can buy a Chromebook in New Zealand for less than NZ$400. Brands like HP, Asus, Acer and Lenovo all have versions. This is less than half the price of a mainstream laptop. It is about one-quarter the price of the cheapest Apple Mac.

In many schools Chromebooks have displaced Windows laptops.

Microsoft bothered

That bothers Microsoft. Aside from the impact on today’s market share and revenue, there is a risk people will get a taste for Chromebooks.

Youngsters growing up with school Chromebooks may stick with them later in life. Or if not Chromebook, something else that doesn’t involve Microsoft Windows. The no Windows habit could rub off on their families, friends and workplaces.

Microsoft wants to counter that threat.

The Surface Laptop looks great but it is not going to do that. For a start it is too expensive. It sells in the US for $1000. That’s four or five times the price of a Chromebook.

It is a premium 13-inch laptop, more a competitor to models like the MacBook, HP Spectre and Dell XPS 13. It’s lighter and thinner than a MacBook Air. It costs less and is more powerful.

That comparison is a whole other story that needs closer inspection. Maybe another post. We’re going to look at something more fundamental here.

While Surface Laptop is inexpensive compared to, say, a MacBook Pro or Surface Book, it’s not going to shake up the education market.

That job goes to Windows 10S.

Where Windows 10S fits

There are, of course, plenty of low-cost Windows laptops to choose from. Asus, Lenovo and Acer all have PCs in New Zealand that sell for under NZ$400. If you can afford a little more, there are plenty of better models for less than NZ$500.

Low-cost Windows laptops tend to be clunky and inelegant. They are not powerful by 2017 standards. But, like Chromebooks, they get the job done.

At least they would get the job done but for one problem. To claw back the dollars makers don’t earn from hardware sales, they load them with trial software. This often makes more money for the computer maker than they get from the hardware sale.

Crapware

Software makers pay to have their apps included as standard on PCs. They may call their products trial ware or use some other coy name. We know them as crapware.

The name is well deserved. These programs are ugly. They make for an awful user experience. They bombard people with messages. At times they can frighten less experienced or tech-savvy users. Some include marketing messages that border on blackmail.

Crapware often slows computers down. It can introduce security risks. More than one of these programs has included a serious malware payload in the past.

Other crapware programs report key information back to their owners behind the computer user’s back.

Even the best crapware is annoying. It can pop up with a distracting, unwelcome message at an inappropriate moment.

In effect, you can get a great deal on a low-end PC in return for accepting a steaming pile of crapware. What a time to be alive.

Windows 10S

By locking down the computer, Microsoft says Windows 10S will improve security and performance. It keeps things simple. Windows 10S makes it easy for administrators to manage fleets of computers.

And it locks out crapware.

If you choose to stick with Windows 10S, and that’s optional, then you’ll only be able to install apps from the official Microsoft app store.

Now that may not be what you want from a computer. But there are people who like the sound of this.

Remember Windows RT?

We’ve been here before. Windows RT was the Microsoft operating system on the first Surface Tablets. It had the same lock-down approach and similar restrictions. It was a commercial flop.

RT cost Microsoft hundreds of millions of dollars.

In practice, Windows RT was not an awful OS. After all Apple’s iOS is locked down in a similar way and that’s been a winner.

The issue is that Microsoft Windows users want different things from their devices to Apple users. One of them is the ability to run tons of obscure, esoteric and, in some cases, poorly written niche apps.

Creating a version of Windows that can’t run most Windows apps was a mistake.

Unlike Apple, Microsoft failed to make sure the app store was packed with all the must have apps. Using the RT store was like walking into a shop with dusty, empty shelves and few recognisable products or brands.

This time is different…?

You may ask yourself what’s different this time. The simple answer is that Microsoft will force Windows 10S on the market.

Most or at least many future Windows PCs will come with Windows 10S installed at the outset. Customers can upgrade, if upgrade is the right word here, to a full unlocked version of Windows 10 by paying US$50.

Inertia and a reluctance to spend any money means many customers will never upgrade.

Big guns buy-in

Another difference this time is that Windows hardware makers are joining the lockdown party.

Some of the biggest names will have Windows 10S laptops on sale within weeks. It’s going to be hard for PC buyers to ignore these machines. The list of companies already signed up is a who’s who of the hardware business.

With Windows 10S users will only be able to get apps from Microsoft’s App Store. That means the company gets to clip the ticket with every purchase.

Independent developers may whinge, but the same approach has worked well for Apple.

App gap

When it arrives a lot of popular Windows apps will not be available for Windows 10S. Among the stand-outs are the Chrome browser and iTunes. The pair may not be your favourite apps, but they are popular.

What happens when a user, who has paid a bargain basement price for their PC, learns they need to shell out another $50 to run Chrome or iTunes?

The deal is worse than that. When you switch to the full version of Windows, you lose a lot of the security benefits. The responsibility of managing your system returns. Again that may not worry you, but it will be a problem for some others.

Competition bashing

If you read the above section and thought Windows 10S will cause headaches for Microsoft’s biggest competitors, you’d be right.

It’s no accident Chrome and iTunes were mentioned above. Google and Apple need to put their games theory strategists onto this one. Do they invest in creating Microsoft app store versions of their software?

If they don’t they run the risk of being cast adrift from large numbers of their customers. Although it’s possible the disconnected customers might be the kind that don’t use their software anyway.

Ecosystem

If Google and Apple do build app store versions, they help Microsoft create a formidable ecosystem that may bash them again later.

Windows 10S is likely to be a hit with schools and organizations that want to impose order on PCs.

Otherwise there’s always a chance Microsoft’s customers may walk away from Windows 10S.

People don’t have many other places to go. Chrome OS is even more locked down. Apple is less so, but the nuances of its approach aren’t always understood.

Microsoft still accounts for the vast majority of PC operating systems. So it looks like it will succeed this time. But there’s always a possibility Windows 10S will be an RT rerun with even higher stakes.

You can slide a wafer-thin device between Apple and Microsoft’s New Zealand slate market share.

IDC New Zealand reports Apple shipped less than 1000 more detachable or slate devices than Microsoft in 2016.

The total market for the year was 80,000 units. Apple had a 32 percent market share, which is around 25,600 units. Microsoft was at 31 percent, a shade under 25,000 units.

Detachable is a curious market to measure. IDC defines it:

“A slate tablet is a portable, battery-powered computing device with a screen size 7-inches to 16-inches.

In addition to the attributes of a slate tablet, a detachable tablet is designed to function as a stand-alone slate tablet as well as a clamshell device through the addition of a detachable keyboard designed specifically for the device.”

IDC New Zealand mobile device market analyst Chayse Gorton says this includes Apple’s 12.9-inch and 9.7-inch iPad Pros. Yet both sell without detachable keyboards and not every buyer uses them with one1.

The category includes Microsoft Surface Pro, Surface Book, HP Envy and others.

Slate-tablet distinction blurry

It is distinct from traditional laptops. The distinction between slates and tablets like non-Pro iPads is blurry.

Either way, Apple topped the market in 2016. Microsoft is second. It had been number one for the years 2013, 2014 and 2015. Microsoft’s shipments climbed three percent from 2015 to 2016.

It was a bonza year for detachable sales. Shipments2 increased from 55,000 in 2015 to 80,000 — a year-on-year increase of 45 percent.

The runners-up are, in order: HP on nine percent; Samsung on seven percent and Acer also with seven percent. Other brands were less than 15 percent.

Microsoft competition

Gorton says Microsoft faces competition from a range of models running Windows. Its share of the Windows detachable market fell from 58 percent in 2015 to 50 percent in 2016.

“Competing windows detachables often have similar specifications to Microsoft detachables, but are frequently sold at a lower price. Given New Zealand is a price conscious nation, a lower price, even by small a margin can be enough to entice a consumer to purchase from a competing vendor”, he says.

Gorton says Microsoft sharpened its premium market position introducing high-end models and halting low-end models. It introduced the Surface Book early in the year and dropped the Surface 3 from its line-up.

IDC expects detachable shipments to grow between 25 and 30 percent in 2017. From the market will start to flatten off.


  1. You could argue the iPad Pro and Windows devices are not direct head-to-head rivals. It’s possible there are buyers who would weigh up an iPad Pro against these Windows devices. Yet for the most part the two groups inhabit parallel universes. ↩︎
  2. Shipments is a normal term for this kind of survey. Most of the time it means how many devices vendors sent from warehouses to retailers. It gets tricky with detachables because Apple and Microsoft sell direct. ↩︎