September saw our first real experience of the upcoming Windows 10 operating system from industry giant Microsoft. There was fanfare and pomp, raised expectations for the ubiquitous software producers, and the rumor that Windows 10 might be offered as a free upgrade for Windows users. They finally seem to have rediscovered their form through innovation, productivity and integration along with a smattering of style.
However, Microsoft isn’t the behemoth it once was and consumer options are vastly superior to the halcyon days of Mr. Gates et al. Google, Apple, numerous Linux distros and even a SteamOS have altered the landscape.
Consumers have choice. Consumers have wallets. Consumers will go elsewhere if their wallets are being unnecessarily ravaged by a single company.
Windows Needs to Monetise Services
Monetise is a word we have all become accustomed to, but something we haven’t really associated with Microsoft services. The payment model at Microsoft has always been ‘pay-to-play’ i.e. give us the money and we’ll send you the software. A safe model, for sure.
Times are set to change. Microsoft Chief Operating Officer, Kevin Turner, is aware that:
“We’ve got to monetise it differently. And there are services involved…through the course of the summer and spring we’ll be announcing what that business model looks like.”
A new, monetised business model focusing on Software as a Service (SaaS) would have to be significantly different to continue meeting current Microsoft expectations. Considering the extremely wide-range of their current user base, the age of some machines and the already confirmed switch to a rapid update model, the number of potential pitfalls are vast. The latter point alone has many business, technical and ICT managers worried about Windows 10, update frequency and security issues contained in updates.
Windows May Need to Consider Different Models
Back in the day (I sound old!) Windows was the gravy-train. The tried and tested model of make software, release software, license software around globe…profit followed a 100% purchase decision by individuals and business owners alike.
In order to compete with Android, Windows gives its mobile OEM away. The Bing SKU brings in some money via a number of devices, but Windows simply cannot compete with Google in a meaningful ad-driven environment, plus many of its business licensees would be incensed to encounter advertising within applications once money was handed over.
So the biggest opportunity for Microsoft to regain a foothold in the OS market whilst keeping receipts rolling in is almost exactly what they are doing: building a digital eco-system that hooks into their own services.
Wait, Microsoft Does Services?
I know, right?
Office 365 has so far been a relative hit. For $6.99 per month, or $69.99 per year, a user can install the most up-to-date versions of the entire Office suite, including Publisher and Access. This also grants you a massive 1TB on their OneDrive cloud storage plus 60 Skype minutes per month.
Even better, add $10 to each of those subscription levels and you can install Office 365 across 5 separate devices, as well as 5 mobile devices.
Microsoft, through this model alone, is not a stranger to subscription based revenue. As operating systems increasingly become fully integrated web access portals, Microsoft, under Satya Nadella, is realising the gravy-train is no more.
But even with this extremely well priced offering, there are both free online Office services (Google Docs) and free Office software services (Open/Libre Office) that offer a very similar product for free.
Does Microsoft Have An Upcoming Problem?
It is difficult to know exactly what is awaiting Microsoft and the Windows operating system.
On one hand we have a new product entering the market next year that has received considerable plaudits from the extremely critical enterprise software world media.
On the other, it is revamping a tried and tested product for a new era, a new set of digital individuals at a time where so much is in flux – and Microsoft simply aren’t the biggest boys in the playground anymore.
The game perhaps becomes more about what Microsoft can offer subscriptions for, rather than how much the entity costs. If Office 365, Xbox Live, Xbox Music, Skype, Delve, Sway and more can bundled into tiered subscription packages the commercial arm of Microsoft may be secure, albeit at a reduced operating income.
If the more lucrative enterprise arm of Microsoft has to follow suit, stormy weather could soon be approaching. That said, with enterprise product sales revenue rising by around 7% to some $9.5bn, and increased sales of hardware products such as the Surface Pro series putting Windows products into users homes, Microsoft have cause for optimism. And when a user has their hands on the hardware, Microsoft can sell the subscription.
What Do We Think?
It is relatively unlikely that Microsoft will suddenly begin distributing their flagship operating system for free – at least not yet, anyway.
But a revitalised Microsoft must realise that offering their operating system at a reduced price would return many transient users back to the fold whilst potentially securing the long-ish term future of the PC/Laptop market. A generation of users are entering their digital lives in a world where Microsoft isn’t always the go-to OS – something they will be taking great strides to remedy.
The most likely scenario is a gradual transition into the new Microsoft model. A basic access model for a relatively low price that can be topped up with individual services, or bundled services, or a number of premium tier unlockable services similar to the Office for iOS rollout seems logical, but honestly, it is difficult to accurately estimate their approach.
It is an untried, somewhat untested path for Microsoft and we probably won’t understand much more until annual Microsoft Build Conference 2015. And with so much change in the air, even more hinges on the adoption of Windows 10 throughout homes and businesses to reinforce a resurgent Microsoft.
Will you be upgrading to Windows 10? How would you like them to approach their new business model? Or, do you like it just how it is? Let us know your thoughts below…