Windows 8: What Went Wrong

Steve McCaskill is editor of TechWeekEurope and ChannelBiz. He joined as a reporter in 2011 and covers all areas of IT, with a particular interest in telecommunications, mobile and networking, along with sports technology.

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Windows 8 has not been the PC industry’s saviour, nor has it set the tablet world alight. Is this Microsoft’s biggest disaster yet?

It wasn’t supposed to be like this. Windows 8 was meant to be the saviour of an ailing PC market and allow Microsoft to establish itself at the forefront of mobile computing, squaring up to Apple’s iOS and Google’s Android tablets.

It was billed as the first version of Windows to work equally well on both traditional PCs and touch screen displays, with a special version called Windows RT allowing the operating system to run on the ARM-based architecture favoured by most mobile devices.

But rather than revive the fortunes of PC manufacturers, Windows 8 has even been blamed for accelerating the decline in sales, while its impact on the tablet market has been limited.

Adoption of the platform among consumers and enterprises has been sluggish and those who have made the jump have complained of usability issues. Manufacturing partners have been alienated by Microsoft’s decision to release its own tablet and Windows RT has been unable to convince consumers of its charms.

Windows 8 is not yet a complete disaster for Microsoft; it has sold 100 million licenses after all. But that doesn’t mean it’s a success. Far from it. In the leap towards a mobile future, one where Apple and Google are set to dominate, Microsoft might get left in the past.

Mobility challenge

Asus Transformer AiO Windows 8The rise of the tablet has cannibalised PC sales as consumers have been drawn to smaller, cheaper devices that perform all of the functions desired by the average user, such as browsing, music, movies and basic word processing, in a more portable form factor with a cheaper cost. And it’s here Microsoft needs to pull of some near miracles.

“Tablets are a much better match for most consumer requirements compared to a PC,” Richard Edwards, principal analyst at Ovum. “The market has presented the consumer with more choice.”

Not only are tablets more suited to consumers’ needs, they are easier to use, have superior battery life and have a reduced risk of infection. The trade-off is that there are restrictions on software and some tasks, such as lengthy word processing and data entry, are not yet suited to the touchscreen.

Windows 8’s unique selling point is it can offer all the advantages of the tablet format with all the functionality of a PC, while Windows RT devices are cheaper and have a longer battery life. So how can a platform that supposedly offers the best of both worlds struggle to catch on?

Windows RT confusion

Part of the problem is that Microsoft has not been able to effectively communicate the advantages of Windows RT. Edwards says the value proposition of the platform is simple – it can provide a tablet-style device with a full version of Microsoft Office (although that productivity suite has now made its way onto iOS, making Microsoft’s strategy that little more confusing).

However, marketing has been poor and retailers are unable to tell consumers what the benefits of Windows RT are. Edwards explains that because Microsoft Office has never been a key differentiator until now, retailers find other tablets an easier sell.

Even if Microsoft is successful in conveying the advantages, the lack of applications available on the Windows Store is a serious disadvantage, especially since Windows RT can’t run legacy PC applications.

Analysts at Forrester say that because of this shortfall, Windows RT devices are unable to offer the convenience and fast access to information that tablet users demand. Compounding this fact is that, until recently, users did not have a version of Outlook – an amazing oversight when you consider Microsoft is billing Windows tablets as productivity machines.

If it ain’t broke

microsoftsurface3By chasing both the tablet and PC markets with the same OS, Microsoft is effectively a jack of all trades, but a master of none, in the personal computing space at least.

The imposition of a touchscreen interface on top of what has always been a mouse and keyboard operated platform has made simple tasks more difficult. On the PC side, the cost of putting a touchscreen on a powerful laptop or desktop has encouraged consumers to look for cheaper alternatives. This, along with the fact that most people are now willing to let their PCs age longer, has limited their appeal.

And, as much as it sounds silly, the omission of the Start button has become symbolic of the changes that Microsoft has forced on users. The company has tried to split the old desktop OS from the touchscreen interface, but, with it’s little changes to the old desktop model, it has failed to convince users this is the flexibility they want.

The rapid adoption of touchscreen devices means you can hardly blame Microsoft for some of the changes, but Windows 8 feels as though it is abandoning its existing user base without attracting tablet consumers.

Migration fatigue

It isn’t doing a great job of convincing enterprise users either. After all, many of the changes are aimed at consumers, not enterprises, who appear to be totally uninterested in Windows 8 as they are currently in the middle of migrating to Windows 7.

Forrester has called Windows 8 the “boldest release of the operating system since Windows 95”, yet suggests only a handful of firms will be willing to migrate to a platform that has few proven business benefits and includes too many fresh features for their employees to learn.

It notes that although Windows 7 and Windows 8 are similar in many respects, the former is seen as a stable, proven operating system that has a high employee acceptance rate and is compatible with their applications.

Ovum agrees, suggesting 70 percent of all business computers today are running Windows 7 and, with just one year to go before Microsoft ends support for Windows XP, it is unlikely many will upgrade to Windows 8.

“The nature of the corporate IT manager is to play it safe so Windows 7 is the obvious path forward,” said Edwards.

Manufacturer alienation

If Windows 8 becomes an outright failure, Ballmer and Company won’t just annoy shareholders and customers. They’ll irk valuable partners too.

The decline in the enterprise PC market has not been as severe as that in the consumer space, but the failure of Windows 8 to gain traction is harming manufacturers. During the first quarter of this year, IDC reported the lowest ever PC sales figures it had ever seen, specifically blaming Windows 8 for the lower than expected 76.3 million units sold.

Many are angry at Microsoft’s decision to create its own tablet , the Microsoft Surface, and have subsequently scaled back or completely abandoned plans to release Windows RT tablets, including Acer and Toshiba. Some hardware partners are electing to release tablets running Android and PCs using Google Chrome OS. Others are starting to push out mixed OS devices, running Android and Windows, at least giving Microsoft a look-in.

And despite Surface, figures show it is yet to make its presence felt in the tablet market. Even though Microsoft recently entered the top five tablet manufacturers for the first time, thanks to combined shipments of the Surface Pro and Surface RT of 900,000, Windows 8 tablets accounted for just 3.3 percent of the market and Windows RT just 0.4 percent, according to IDG. Surface might not have been worth the backlash from allies.

Head in the sand

But Microsoft has no regrets about the decision and believes that the performance of the Surface has justified its decision to enter the hardware market.

“I think the Surface itself has been very successful,” said Robert Epstein, senior product manager of Windows consumer. “The reaction from consumers when they get their hands on it is tremendous.”

Qualcomm, which produces ARM-designed chips for Windows RT devices, shares this optimism and suggests it is still too soon to draw any conclusions. It remains confident there will be enough demand for RT tablets and is excited about the products its customers have planned for 2013.

“I think RT is still very new and it’s still only a single digit number of months old. For anybody who’s building a chipset for a new operating system, you make a multi-year commitment to investing. That’s where we are,” Qualcomm’s Tim McDonough told TechWeekEurope.

“If you went back and looked at the media coverage of every major operating system Microsoft has written, there’s always been doom and gloom. It’s really nothing new.”

Windows 8.1 more chance?

Windows 8.1 StartBut even by Microsoft’s standards there’s been a lot of “doom and gloom” and the inevitable question is whether it is capable of turning things around. Windows8.1, due for imminent release, is now critical. Not just for the operating system, but for the future of Microsoft.

Windows 8.1 is an acknowledgement of many of the noted problems, and a strategy of incremental updates will gradually ease users into the changes the software giant ultimately wants to introduce into Windows.

The upgrade will make Windows 8 much more user friendly, improving standard applications and making the new interface more suited to mouse and keyboard users. But there are also signs that Microsoft is still being stubborn.

The Start button will indeed be returned, but without much of its original functionality. As it stands, it will simply take users to the new Start menu, a feat that is currently achieved by hovering the mouse on the bottom left corner of the screen.

There will be no application shortcuts either, nor easy access to recently viewed documents or the control panel. All of this suggests Microsoft isn’t willing to listen to users.

Restart Windows

What should Microsoft do? Microsoft chairman Bill Gates has previously admitted mistakes in its mobile strategy have prevented it from assuming a leadership role and it is in danger of falling further behind unless it makes its tablets more attractive.

Firstly, the company should be doing everything it can to educate customers about the benefits of Windows RT. Ovum’s Richard Edwards suggests improved marketing would help but Microsoft itself would be able to put together a better sales pitch than retailers. However, he warns that any move into retail could potentially damage a business ecosystem built around a symbiotic relationship between itself, manufacturers and resellers.

“Microsoft has to play it very carefully,” he said, adding that it should also address the disadvantages of the platform, such as a comparative lack of applications. The addition of Outlook in Windows 8.1 is a start, but the Windows Store must be made a little less barren. Microsoft can throw all the money it wants at developers, but it will need a larger slice of the market if it wants to titillate software makers.

The fact that Microsoft completely overlooked smaller tablets in its original strategy is alarming too, but at least it has responded to the popularity of the seven-inch format by promising more compact devices.

But Edwards says manufacturers must be allowed to lead the way, especially with regards to Windows RT, or they could be alienated still further. If Microsoft is able to do this, then it could benefit from the fact that there is some demand from those who want to experiment with different form factors. Even still, smaller tablets might not be enough.

BYOD, you are my only hope?

“The notion that this will be the saving grace is flawed,” said Ryan Reith, programme manager for IDC’s Mobility Tracker project. “Clearly the market is moving towards smart 7-8 inch devices, but Microsoft’s larger challenges centre around consumer messaging and lower cost competition.”

Tablets might be a tough sell, but the greatest advantage Microsoft has right now is that most consumers buying a new PC have few celebrated alternatives to Windows 8, no matter how much techies like Linux options and how much Google thinks Chrome OS is the future. It is now almost impossible to purchase a new computer using Windows 7 at retail, something that won’t turn around PC sales, but will inevitably improve market share for Windows 8.

This will eventually trickle into the enterprise sphere thanks to the growing trend towards Bring Your Own Device (BYOD) environments, as employees show off their shiny Windows 8 machines. In businesses that have no truck with BYOD, this will be more difficult to overcome, but Edwards says there will be some “niche adoption” by those who need touchscreen devices with full PC capabilities, if not widespread adoption.

What next for Microsoft?

If it is unable to reverse sliding PC sales then Microsoft must expand its share of the tablet market. But its approach thus far has been characterised by confusion and oversight.

Ballmer fistThe most damning thing about its mobile strategy is that the company apparently predicted the explosion of portable devices more than a decade ago, yet it has been unable to translate that foresight into market share.

There have been calls for CEO Steve Ballmer to step down because of these failings, and Gates himself has been fairly non-committal towards Ballmer’s future, but the paradox is that Microsoft is still doing well financially.

It just posted a £4 billion profit during the third quarter of its 2013 fiscal year, but tellingly, it made virtually no revenue from Windows 8. The blow was softened by gains in servers and video games, an area in which Gates has singled out Ballmer for praise, but should the situation continue then even he could be under threat.

Windows 8 is not beyond salvation, but the radical changes it has introduced have not pleased tablet users, PC users and manufacturers – the three groups it needs to keep happy. Windows RT’s future is less certain, thanks to Microsoft’s befuddling strategy, but cheaper, smaller devices with a clear marketing message could save it yet.

The biggest obstacle to success, however, appears to be Microsoft’s unwillingness to compromise further.  The most important change in strategy it could actually make is to listen to what the consumer and enterprise markets want, rather than dictate what they want.

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