Will Microsoft Follow IBM's path?

By Doug Mohney July 22, 2014

Rumor has it that Microsoft is planning to announce its strategic future beyond Windows after its next earnings report. Can Microsoft abandon its core focus, finding new businesses and investing in fundamental research to discover new things; IBM did.

After decades of stodginess, IBM launched the Personal Computer in 1981. It started a continually reinvention strategy that continues today, embracing the Internet, open source, and enterprise services while shedding hardware assess Lexmark and the original PC line. Today, it is investing hard on the Watson DeepQA question answering system and pumping $3 billion into how it can take today's chip beyond silicon.

IBM successfully broke its "blue suit" image and mentality of mainframe dependency and continues to be a leader -- as well as generating profits. Exciting inventions and ideas flow out of IBM Research, something that can't be said for Microsoft.

Microsoft CEO, Satya Nadella, is refocusing the company on a "Mobile first, cloud first" strategy, where end-points such as sensors and mobile devices feed into servers.  In this future, Windows and the desktop are not center stage.

It's going to be a hard pivot; Microsoft’s desktop market share for Windows is around 90 percent, but its collective market share for the larger universe of smartphones, tablets, and PCs is only 14 percent.  Apple and Google currently dominate the mobile space, while Microsoft plans to push an integrated strategy revolving around quality hardware running Windows and connecting to cloud services.

Until the Microsoft Surface family of tablets was introduced, Microsoft has had little critical or market share success in the mobile device market. The Surface family of hardware is well crafted, but at a price point aimed at the high end, not at the mass market. Its Nokia acquisition provides Microsoft with an entry into the low-end and developing markets, but success in that arena will be based upon a combination of selling a lot of handsets and very affordable tablets and smartphones with hooks to monthly cloud services.

The high and low-end strategy leaves a large untapped "middle" that Microsoft needs to address.  It also doesn't speak to how the company retains and potentially migrates its core enterprise business.  A radical option may be for Microsoft to provide the core Windows operating system experience as a cloud-based experience. The company has ported the Windows desktop to its Azure cloud as a service called Mohoro. Users can run Windows program in the cloud, accessing them through a remote desktop client app on Windows, Mac OS X, iOS and Android.

If Windows-in-the-cloud (WiC) catches on, it would provide a transitional model for many software companies dependent upon the operating system and a PC-based instance. WiC transforms Windows into one big huge app store, assuming enough companies can successfully and reliably port their code to a cloud-based offering.  Data and graphics-intensive apps, such as CAD/CAM design and video editing will/should remain desktop based, but there are a lot of packages that could be transitioned to WiC.

The only flaws to WiC are data and graphics-intensive applications better run locally, as noted above, and the fact a lot of companies started moving beyond Windows into web-based models several years ago.  If you don't need a Windows environment, why bother to pay for it?  Many companies are going to start asking that question in earnest over the next few years.

Finally, Microsoft needs to do some deep investment in chip-level companies if they want to play hard in the mobile space.  Apple has shown its dedication to the high-end by buying several silicon-focused companies.  Microsoft should consider buying some ARM, LTE, and WiFi-ish expertise so it can get a better deal on silicon and optimize designs for high-end and low-end use. 

Edited by Adam Brandt

Contributing Editor

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