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Will “Windows as a Service” Model be successful for Microsoft?

Ever since Microsoft came out with the Windows 10, Redmond has been positioning this Operating System (OS) as the final direct release, with all the future versions being built off this foundation. Microsoft is trying to capture back market share which PCs have lost to mobile computing. Microsoft allowed for program compatibility and ecosystem support blunders with Windows 7 Mobile, Windows 8 Mobile, Windows 8 x86, and Windows 8 ARM (RT). The company let its Windows ecosystem to become fragmented, removed backwards compatibility, and many of its consumer developers moved away from Microsoft to focus on iOS and Android OS created by Apple and Google respectfully.

With Windows 10, Microsoft is trying to rebuild its ecosystem partners which Windows 8 alienated in addition to continuing its goal to have a united OS system for Enterprise, Consumer PC and Mobile platforms. In a way, Redmond is moving Windows to its Office business model, subscription base. The question lies in are people willing to pay monthly for a computer’s OS in perpetuity before anyone even gets to the questions of Apps, Programs, and other consumable media?

Refresh Cycle Questions

In the recent past, the average refresh cycle for a personal computing device i.e. PC was 4 years. The improvements in compute power brought on by Moore’s Law have now moved this to 5-6 years as older hardware can still run non-intensive CPU and GPU consumer or business tasks effectively. PC hardware manufactures have been trying to position the PC market similar to the mobile market where there is a refresh cycle of two years leading to greater profits.

In the mobile market, refreshing every two years brings with it a better & higher resolution screen, a better camera unit, a better music player & speaker quality, and a new non-removable battery. However, the push the make mobile products better all in on devices have led to repair and upgrade compromises as it is cheaper to buy a new mobile device than to try to repair an old one – even for the simple fix of a new battery. Mobile devices such as smartphones and tablets are not designed to last the same as a PC. Mobile devices today are priced anywhere from $100 to $1000, showing the direct cannibalization of the low and mid-range PC market and the probability of the sector as these devices are built around people basic computing needs; browsing the internet, listening to music, and watching television or movies. In recent years, this led OEMs to create 2 in 1 PC devices. However, the concessions to “fixability” and ability for Windows to adapt in Windows 8 led to the alienation of consumers and dilution of Windows market share. The majority of Enterprise customers had no need for some mobile features (such as touchscreens). Additionally, Windows never build in easy methods for consumers in general to upgrade PCs and still retain all customization and hidden settings files from one PC to the next. Finally, the non-existence of a 21st century app ecosystem with the latest apps turned off support even though the majority of PC game and productivity software were developed for use in Windows. Microsoft had to play catch up to Apple & Google to risk becoming a technology relic and its solution to these problems became known as Windows 10.

Windows 10 for all (Future) Times

Windows 10 was designed as modern day OS, flexible enough to power entertainment devices (console), general purpose (PC and mobile computing) as well as the Enterprise segment without sacrificing any interface issues. However, a year and a half in, Windows 10 still has multiple redundant systems (such as the settings and control panel) and has issues with transferring program settings, system settings, and files between old and new PCs easy enough. Windows 10 makes great strides in computing speed but still is trying to fix all the GUI issues which Windows 8 created.

Windows 10 to some is like the Steam Early Access program or pre-ordering a video game, pay a fee up front on the hope the product developed into a quality piece of software. There are more stories of “over promising and under delivering” versus under promising and over delivering in this business model.

This is why Apple and Android both give their software away for free as a way to sell their hardware with their other apps and services.  At a time when Windows and Android used OEMs like franchisees to create and sell hardware, Apple developed halo products with simpler GUI, better hardware/software integration, and focused on app developers to create killer apps to sell incremental yearly product upgrades. The tight integration between hardware and software reduced fragmentation of the ecosystem which promoted simpler app development which led to increased user population and sales.

This simplicity has led to an IBM VP coming out saying Apple is cheaper from an IT deployment point of view than Windows is. Android originally followed Microsoft approach to using OEMs but gave away its OS similar to Apple realizing it was the killer app and user communities which lead to bringing more profit to its search, web ads, and enterprise products. Over time as consumers craved better products and software/hardware integration, Google took matters into its own hands developing its own halo devices such as the Nexus and Pixel phones. After the failures of Windows on Mobile, write off of its purchase of Nokia, and Windows 8 platform; Microsoft has copied Apple’s business model and approach to technology, creating hero products to feature innovations in its software to improve sales and quality of the computing experience.

This has left OEMs out in the cold in terms of app ecosystem profits and decreased margins as mobile computing sales have slowed similar to PCs before them due to platooning of incremental improvements in the technology and lack of true hardware form factor innovation and leading to industry cannibalization. By Windows copying Apple, it is trying to capture the magic Apple created with its hardware and app ecosystem. This is not possible so long as Windows is not a free product.

Enter “Windows as a Service” Model

“Windows as a Service” (WaaS) is what Microsoft CEO Satya Nadella wants people to think of Windows 10. Windows 10 is like an app, always updating to a better experience and never truly complete. This is the approach Apple and Google use with iOS/OSX and Android respectfully. However, Apple and Google built new consumer technology categories when it released these OSs, Microsoft is trying to change its existing customer base to a new mindset and it is hard to change stubborn minds. Ideally, Microsoft is trying to get everyone from general consumers, enthusiasts, and enterprise customers to buy into Windows 10 on the promise of pay once and have a product continually get better.

Satya Nadella, CEO, Microsoft'

However, the initial quality may not always be the best. Apple does a similar approach to sell new hardware, updating its OS to use higher base specs, which after 3 generations will not run or be supported on older hardware forcing the user the upgrade or be left behind. Google uses this approach to sell more Android phones with updates for most phones ending after two years to match phone carrier contracts i.e. subsidies. Originally, Windows best features were its “customization” and ability to run its OS on multiple generations of hardware without losing functionality of the basic OS features or experiencing heavy operational lag. Read: no planned obsolescence. However, the world we live in, like it or not – wants obsolescence. Low Cost Carriers (LCC) airlines are not enough, we now have the Ultra Low Cost Carrier (ULCC) model. Customers buying Apple know their products have a timer the moment they buy it – and hundreds of millions of people are ok with it.

Now, Windows is trying to move to Apple’s approach of heavily controlled OS, app, and update policies which is in effect distancing its original customers who cannot change their mindset regarding what Windows should be and moving to say Linux to retain certain computing freedoms. However, the majority of users are willing to give up some customizability in the name of increased connivance and additional features.

Microsoft will not giving the OS away; users and OEMs are still paying for it and then needing to pay additional fees for application, programs, and other media to use on these systems. Apple and Google giveaway their OS to sell more hardware and other services and no longer change for their OSs losing some initial profits but making them back by enabling app developers to create killer apps which then Apple and Google get a cut of the app sales to users on its platforms. Microsoft may be able to make its Enterprise customers pay a fee which would come with increased server, service, and security features but for Redmond to be successful, it should fully embrace the move to profits off of services versus the OS like it has for Microsoft Office. Microsoft gave away Windows 10 for the first year with moderate success in converting its fragmented and annoyed user base from XP to 8.

However, for “Windows as a Service” to truly be a success, it needs to focus on its app ecosystem and hardware and the only way for that to be achieved is for its famous operating system to be free.