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Tuesday, December 25, 2012

Observing Microsoft, Part 2

Some of the most important assets a company has are its brands. A brand distinguishes a product from its competitors and can spread out like an umbrella to encompass several related products. But it must be coherent, meaningful, and inspire trust and signify value. You don't want a brand to become unclear. Brand management is a vital aspect of business.

Microsoft's main brand is Windows, an operating system. It is an umbrella brand, covering Windows 8 and Windows Server, though many people still are running Windows XP and Windows 7. The company also has the Office brand, which is an umbrella brand covering various pieces of software, like Word, Excel, PowerPoint, and Outlook. The brands specifically spell out what Microsoft is known for, and by inference what it is good at: operating systems and software.

It is abundantly clear that Microsoft is stepping out of its circle of expertise by creating hardware. It seeks to add another brand, Surface. But the Surface product is actually Microsoft Surface with Windows RT.

Let's look at the Windows brand. The billion or so Windows users are all familiar with Windows user interface. This includes such items as the taskbar, the start menu, and the desktop, with the plethora of blue-topped rectangular windows, from which the brand gets its moniker. Icons on the desktop, really just aliases to actual files, are called shortcuts.

But by creating a touch-based interface for Windows 8, really just a start-up screen veneer on desktop systems, those one billion users are led into into unfamiliar territory by the new user interface. There are reports of users being uncomfortable with the user interface and putting off the upgrade to Windows 8. Perhaps the main problem is that there are now two user interfaces, and they are quite different.

In some sense, this splits the brand, fracturing what Windows actually means. And that's not good. Furthermore, using the Windows brand on their hardware products actually stretches the Windows umbrella brand to include hardware, which has dire consequences for their OEMs like Sony, Toshiba, Acer, Asus, Dell, and HP. Reports are emerging that Dell urged Microsoft not to use the Windows brand for their Surface product. This causes confusion as to what Windows itself actually is: is it an operating system or a computer? Oh, man.

Some even claim that Microsoft is abusing the Windows brand.

All this, combined with the apparent lack of Surface sales, has investors in the same boat as the Windows user base: should they invest in Microsoft now?

Many users seem content to wait for Windows 9. There are some indications that Windows 8 could be like Windows Vista, which was met with whole-hearted scorn from users, who hung onto their prized Windows XP systems. Only with Windows 7, captained by recently-fired Steven Sinofsky, did the users finally resume their upgrades.

Arguments in favor of Microsoft's current Windows 8/Surface strategy center around three concepts. The first is, because they covet the Apple revenue model, that by integrating their software with their own hardware, they can do the same. The second is that they can't abandon the Windows brand and simultaneously they must make a move into the mobile space with it. And the third is that they are bridging the gap between tablets and laptops.

Perhaps, if they can do any one of these things right, they will survive. But right now, analysts have been noticing that PC sales have been dropping off. This is because the mobile market is disrupting it. Notice I didn't say that the tablet market is disrupting the PC market. More and more users are using mobile devices. By making their tablet more like a laptop, Microsoft doesn't really get what's happening.

The Holiday Season

The holiday season accounts for a large amount of retailers' sales annually. Indications are that online sales have surged 16% this season over last year. However, retail sales in brick-and-mortar have only risen by about 2.5%. But, to me, there is no doubt that the malls are crowded. Yesterday, it took me about 40 minutes to find a parking spot at the ValleyFair mall in Silicon Valley! This could mean that retailers are selling, but just not the big ticket items. This testifies to economic troubles or perhaps the widespread purchase of discounted items after hurricane Sandy.

The sales of Windows 8 depends partly upon the purchase of new computers. This is because those who purchase the new, exciting computers are essentially a captive audience. And if consumers (and possibly businesses) aren't buying the big-ticket items, then that could be a reason.

Let's analyze that for a moment. If computers are more expensive than tablets, then the consumers will buy tablets. Businesses will rush to construct low-cost business solutions using tablets as well because they can save on expenses - and the apps are there. And even if they aren't, the cost of developing corporation-local apps will make the conversion worth it. Nitro Mobile is one such company that specializes in creating corporation-local solutions on mobile platforms, like iOS.

Another sign that sales for Windows 8 aren't quite up to snuff is this article about Microsoft stores in the metropolitan New York Area, which states again that Microsoft stores were sparsely populated when the aisles at the mall were practically impossible to get through. In Silicon Valley, I noticed the same thing: Microsoft stores were just not filling up or selling their wares as fast as Apple stores. Perhaps Ballmer's idea of putting Microsoft stores right next to Apple stores wasn't so good after all: it invites unfavorable comparison. For PC sales to be lackluster in the holiday season is more than just a slow start. It's a definite problem. The market is changing fast.


  1. Not sure you watch the video games industry, but you may find this an interesting data point:

    1. I have never been sure about Microsoft's planning. It's like their concept of focus is not the same as mine.

      Let's face it: Windows is a money train that is coasting, albeit slowly, into the Post-PC station. And things haven't really improved since I wrote this post. It's agonizing to see the PC OEMs start to deliver Android devices and Chromebooks while their PC offerings seem to be such poorly-conceived Frankensteins of touch and mouse. In contrast, the xBox was, for Microsoft, the poster-child of growth: it has done well, besting its competition readily. I feel the stage could easily be set for Microsoft to take over the living room.

      But there's a rub. As the mentioned blogpost so aptly put it "there's no App Store". There needs to be the ecosystem for development. As it says, there's a whole new generation of developers out there. But be aware that Microsoft's veto power is just another way of saying curation. And curation hasn't really done too badly for the iOS App Store. It's kept a considerable number of viruses off the iPhone. In fact, the two most popular virus delivery systems are Flash and Java and, while they are great technologies, neither is featured natively on iOS.

      I suspect that living room development will be a second wave of popularity with developers as that market matures. Look how quickly developers moved into the mobile space? So Microsoft just has to make that work, and also be attractive.

      Which means they have to apply the rule of focus and simplicity to the xBox. The mentioned blogpost shows an incredible array of difficult choices that the user has to make when installing, updating, and even while playing games. I love the icon that shows that the game is saving and warns not to pull the plug. It seems like there are so many messages that say that very thing! Too bad it doesn't have a backup battery to take care of that critical case.

      Yet mobile devices, when you update (even over-the-air) do provide you with that message. Theirs says "this could take a few minutes. You might want to plug me in".

      The wondrous thing is, as the blogpost indicates, that Microsoft hasn't made a system service of this. When every app needs it!

      And as far as I know, every game console puts out the message "now exiting session. you may lose any unsaved progress".

      The right thing is for exit to be a system service with a callback into the game to save state. Then it just becomes something you take for granted. I could never understand why the console developers didn't do it right. Each and every console is plagued with this scary message.

      The idea that Microsoft is pursuing original TV content, like some Showtime or HBO seems to indicate that they have lost their focus and, in fact, are pursuing some wet dream of being hotshot movie producers. So their executives can rub elbows with the stars.

      And I'm glad the blogpost mention that iDevices are taking over the game console market. While there are some attractive features to mobile devices (like you can take them with you in the car, and you can do more than just play games), there is still place for consoles: the living room. The impossibly sleek iPhone and iPad do make nice gaming devices because Apple has done their homework with their MEMS devices. Like accelerometers, gyrometers, proximity sensors, cameras, GPS, and ever-faster GPUs. And they are perpetually connected. So it's no wonder the gaming market is changing so fast.

      It's really too bad that xBox, the growth area of Microsoft, couldn't continue to be infused with fresh inspiration.

      Instead they seem to be flogging a dead horse (Windows). And the reason they do this is simply that it isn't even remotely dead yet, and it will continue to survive for a long while as they do their best to prop it up. While others hold the future of technology and human-computer interaction in the palm of their hands.

  2. The day someone codes a significant iphone app on their iPhone I will buy into the post-pc moniker. Until then we are in the 'post-pc for media consumption and simple computing' era. Even typing this comment on my phone was tedious and would have been more efficient on a PC.

    1. Hey I use PCs to program as well. But I'm also a consumer. And the value of touchscreen appliances are obvious to me, even though I am a serious developer. I use my iPad to write blog entries, to build documentation, to paint. But desktop workstations are always going to be needed for the serious projects. Still, I use a laptop because I need the mobility. The value of being able to reply to a comment while in my car is where the iPhone comes in handy. The value of the mobile revolution is in ubiquity and convenience. Social media has exponentially increased because of the mobile revolution. First it was laptops in the coffee shop and pub, and soon it was smartphones in Tahrir square. There's no going back.