Cloud and AI are Microsoft’s future bets
”We want to move from people needing Windows to choosing Windows, to loving Windows. That is our bold goal,” said Microsoft CEO Satya Nadella three years ago. At the time, Microsoft was unveiling more details about Windows 10, and surprising people with technologies like the HoloLens headset. It was an exciting time of opportunity and optimism that had Microsoft betting on people loving Windows so much that Windows 10 would be running on 1 billion devices within three years. Neither wager worked out — which is fine, because Windows as we know it is no longer critical to Microsoft’s future success.
Microsoft announced a new reorganization yesterday. It’s the fourth major shuffle inside the company over the past five years, and the most significant of Nadella’s tenure. Microsoft is splitting Windows across the company, into different parts. Terry Myerson, a 21-year Microsoft veteran, is leaving the company and his role as Windows chief. The core development of Windows is being moved to a cloud and AI team, and a new team will take over the “experiences” Windows 10 users see like apps, the Start menu, and new features. There’s a lot of shuffling going on, but Nadella’s 1,300 word memo leaves little doubt over the company’s true future: cloud and AI.
WINDOWS HAS BEEN DEMOTED AND SPLIT APART INSIDE MICROSOFT
The first big clue about the OS’s future is that Microsoft’s “Windows and Devices Group” is now “Experiences & Devices,” and it includes Windows, Office, and Surface. Microsoft’s Office chief, Rajesh Jha, is now in charge of this entire division, with Joe Belfiore delegated to lead the Windows experiences. Myerson used to sit on the senior leadership team at Microsoft, but nobody with Windows in their job title is there to replace him. Jha, who is also a senior leader, is simply expanding his responsibilities to look after a bigger team where Windows is a smaller slice of the larger pie.
Experiences, instead of Windows, is also a big hint at how Microsoft and Nadella see the operating system in the broader aspect of computing in general. Android has 2 billion monthly active devices, and more than 1 billion Apple devices are in active use around the world. Microsoft always claims that 1.5 billion people use Windows, although there are signs that number could be dropping. Windows 10 is now running on more than 600 million devices (as of November), including PCs, tablets, Xbox One consoles, HoloLens headsets, and even Surface Hub devices and phones. Microsoft’s own Windows trends show that Windows 10 was running on 45 percent of all PCs and tablets back in November, meaning overall Windows usage might actually have slipped to 1.33 billion.
600 million Windows 10 users is still a massive number, but it’s just over half of Microsoft’s original target. Microsoft had three years to reach the 1 billion goal, but it was clearly based on Windows Phone being a success. The software maker gave up on its bold target after just a year, blaming its phone business failures. Missing mobile has meant Windows is no longer the dominant way people use computers, and Microsoft is now chasing the “experiences” across devices. Even the Xbox division is gearing up for cloud gaming, and a future beyond the Xbox itself.
Microsoft retiring from its bold goal is just a part of trying and failing to woo consumers for years, and it’s part of a recent broader retreat over the past year. The software giant killed off Groove Music, its streaming music platform, in favor of Spotify. Kinect is officially dead, and Microsoft finally confirmed the death of Windows Phone, too. Microsoft now wants iOS and Android devices to work better with Windows 10, and the company has recognized that it’s no longer the mostly widely-used computing platform thanks to the rise of mobile.
Windows 10 has been focused on “creators” over the past year, with two big updates that added Mixed Reality, 3D Paint creation, and pen / touch improvements. Universal Windows Apps were supposed to be the future of Windows across multiple devices, but they’ve largely flopped without a widely-used mobile operating system to run on. Developers are mainly just re-packaging existing desktop apps for the Microsoft Store, and the future of Windows 10 apps looks to be fundamentally about web apps.
Windows is certainly more respected than it was three years ago, though. Windows 10 has been an impressive return to form from the controversial release of Windows 8. Microsoft has listened to those still using Windows, and it’s adapted the operating system wisely. But while Microsoft has always been Windows obsessed, especially under Ballmer, it’s clear that Nadella sees the future differently — and rightly so. Microsoft’s cloud business has grown massively, competing directly with Amazon’s dominance and beating Google.
Windows isn’t dead, but it’s clearly not as important to Microsoft anymore and it will play a very different role in the company’s future. Microsoft needs to follow and provide cloud services and apps to people on the platforms they’re using. The company has seen great success with Office 365 and apps like Outlook for mobile, and Microsoft expects that two thirds of its Office users will have moved to its subscription cloud service by next year.
Windows is being adapted for new devices and scenarios, but it’s not the core of Microsoft’s business anymore and hasn’t been for years. Nadella says “the future of Windows is bright,” but in the same sentence he says Microsoft will “more deeply” connect Windows to its Microsoft 365 offering. Microsoft 365 lets companies purchase Office and Windows together in a single subscription.
Consumers don’t care about Windows anymore, and I’ve long argued Microsoft should drop its insistence of branding everything with it. Consumers are no longer interested in purchasing devices for the familiarity or compatibility of Windows, and it’s hard to even list 10 desktop apps I really need on a daily basis. A big exception to this is gaming, but Microsoft hasn’t innovated enough on gaming PCs to really foster that. Gaming PCs simply run Windows because it’s the platform to deliver those games, and we’re starting to see how mobile operating systems are rapidly catching up. Thanks to the web and Chrome, it’s easy to imagine a future where services matter far more than the operating system they run on.
Now that Microsoft has moved the fundamental core of Windows over to the cloud team, it’s easy to see the long-term future of Windows being a cloud subscription service for the people who really need to use it, rather than love using it. Bill Gates figured out how to put a computer on every desk and in every home, and now the company is ready to grow and tackle the future. It’s not the old and trusted Windows operating system that will get Microsoft there.