How Microsoft will change forever and thrive again

Microsoft has been in business, in one form or another, for 37 years. In the tech world, that’s an eternity.

Which isn’t to say Microsoft has remained static over that time. Regulatory pressures, strategic shifts in software and hardware, the rise of new breeds of competitors such as Google and Amazon have ensured that Microsoft isn’t remotely the same company it was just 10 years ago. Give it another five years, and Microsoft could be doubly unrecognizable — especially considering its current crossroads.

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It’s tempting to say the past five years has seen Microsoft’s desktop-centric strategy slowly give way to a pell-mell free-for-all made up of equal parts desktop, server, mobile hardware and software, cloud services, and auxiliary systems like the Xbox. Truth is, intention has always been present. It’s only now, thanks to major upheavals in consumer tech and the cloud, that Microsoft’s broad-spectrum plays are becoming more evident and critical.

Make no mistake: Redmond has always had a foot in multiple territories. This time around, cohering its strategy in these disparate areas could mean a major transfiguration of one of the few technology companies that can never be counted out.

Here’s a look at the sweeping challenges Microsoft will face and how the company will need to respond to maintain its relevance in the years ahead.

Microsoft Windows: The future is hybrid

Any bellwether of Microsoft’s long-term evolution would have to be found in its flagship product: desktop Windows. If the latest iteration of Windows surfaces anything about a latent strategy coming to the fore, it can be summed up in one word: hybridize.

In the time since Microsoft released Windows 7, the personal-computing market has been upended. PC sales are down, phone and tablet sales are up, and it has never been more evident that a full-blown desktop tower — or even a clamshell notebook — is no longer necessary to stay connected.

Microsoft’s response has been twofold. First, create a new version of Windows in the short run (Windows 8), and power it with a new set of programming APIs (Windows Runtime, or WinRT) aimed at the long run. Second, equip the OS with an interface suited for low-power, touchscreen devices, the hottest-selling form factor for personal computing.

Andrew Brust, founder and CEO of analyst firm Blue Badge Insights, puts it this way: “In terms of spanning the desktop and touch-first worlds, it’s clearly the only logical choice Microsoft had. They have an existing (and huge) customer base and an existing (and huge) ecosystem of software. They need to service those customers and be compatible with that software, and they also need to forge into tablet territory. They’re doing what they must. The question is whether it will work.”

So far, the payoff has been mixed at best. Sales of Windows 8 have been slow, with adoption projected to resemble Windows Vista more than Windows 7 — although Windows 8 is making a better show than Vista did in its first months of release. Enterprises don’t have much interest in Windows 8 either — they’re only now catching up with Windows 7 anyway, while Windows XP’s support window is nearing its close for good. And complaints about the Modern UI side of Windows 8 are legion, since it takes away about as much as it adds in.

Granted, it’s still early, but all signs point to Windows 8 not having the kind of momentum needed. The larger question: Does Microsoft need Windows 7-level momentum to justify the changes to Windows 8? Especially given that what’s under the hood in Windows 8 is what stands to make the most difference.

It’s a mistake to assume any one Microsoft product constitutes a long-term strategy. Together they are incarnations of the bigger picture, one in which Microsoft gradually — if painfully — shrugs off its legacy Win32 shackles.

It’s the platform(s), stupid

Put into context, Windows 8 matters most in relation to Microsoft’s new software foundation strategy: WinRT. At least that’s the take of Forrester analysts John R. Rymer and Jeffrey S. Hammond in their report, “The Future Of Microsoft .Net: New Options, New Choices, New Risks.”

Windows 8 users know WinRT as the foundation that powers the Modern UI side of Windows 8. It was designed to create software that runs efficiently across all the platforms Microsoft knows it needs to make a showing on now: desktops, notebooks, tablets, smartphones, even the server back end.

Preview by Thumbshots.comMicrosoft knows that ditching its existing investment in Win32 is unwise, but it would be no less unwise to ignore a market that is only getting bigger. To that end, WinRT flanks the old-school Win32 APIs without replacing them — at first anyway.

Moving Windows to ARM by itself hasn’t been the big obstacle; the grandfather of the current version of Windows, Windows NT, has a history of running on non-Intel hardware (MIPS, PowerPC). The hard part is creating a software ecosystem to run in that environment. Modern UI apps found in the Windows 8 app store are the first wave of this tide.

In other words, Windows 8 has been less about making a smash hit and more about introducing users and developers to the first iteration of a software platform designed to span multiple domains.

Microsoft on mobile: Phoning it in

If this long-term strategy is to succeed, Microsoft must improve its presence in the mobile phone market, via Windows Phone 8 and its attendant devices.

Microsoft’s hurdles in mobile go beyond competition from Google (and its hardware partners), Apple, and even BlackBerry. They also include the stigma of having failed to capture any major mind share with any previous attempt at mobile. Most of Microsoft’s success in the mobile realm has come from providing the back ends — Exchange Server, for instance — accessed by devices that have run anything but a Microsoft OS. Few and far between are the corporations that view Microsoft as a major force in mobile, Forrester’s Rymer and Hammond contend.

Some of that is certainly the bad taste left by Microsoft’s previous forays into mobile. Windows Phone 7 debuted to poor reviews and minimal sales in 2010, and those who committed to it were given short shrift by Microsoft’s delaying upgrades for the platform until 2013. Worse, Microsoft has more to lose now than ever, with other mobile players capitalizing on the rising BYOD trend. (When IDC surveyed information workers for a 2011 Unisys-sponsored survey about the mobile devices they brought into the workplace as part of their company’s BYOD practices, Windows Phone wasn’t even on the list.)

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