Windows 8: Make-or-break moment for Microsoft

Microsoft's chief executive Steve Ballmer has set himself up for a difficult task.

He intends to capture user attention towards Windows-rooted computing led by a new operating system Windows 8.

Ballmer has confessed that Windows 8 will be the catalyst for a new era at Microsoft and sees the operating system playing an integral role on all important screens in people's lives -- PCs, smartphones, tablets and televisions.

Why is Microsoft keen on becoming the master of all screens? Consider this: for fiscal 2012, 53 per cent of Microsoft's operating income came from the Windows division.

On the other hand, Gartner estimates that worldwide PC shipments totalling 87.5 million units in the third quarter of 2012, fell by 8.3 per cent compared with the third quarter of 2011.

With desktop PC sales slowing across the globe and attention shifting towards touch-screen based computing devices like smartphones and tablet PCs, Microsoft cannot ignore the market any longer.

Emerging markets like India will be crucial for Microsoft, given the investment it has made in the Windows 8 platform.

"As the PC market struggles, Windows 8 can work as a big boost for consumer device manufacturers. We believe novice and intermediate technology users will find this product easy to use whereas experts and power users will take time to adopt," says Kanwar Rahul, Research Manager, IDC India.

Globally while the PC market is falling, a recent study from MAIT highlights that total PC sales between April 2011 and March 2012 was 10.8 million units in India, marking a growth of 16 per cent over that in the last fiscal.

Sales of desktops went up 11 per cent and notebooks by 26 per cent over the last year.

This should give Microsoft some hope.

"We believe that in order to become a success, the first step is to be able to easily connect with the consumers.

Through its intuitive UI, well-designed hardware and a fully stocked up app store, we believe that Windows 8 would be able to reach out to a wider base. Unfortunately, a major segment of consumers remain price sensitive in India," says Kiran Kumar, Senior Market Analyst, IDC India.

Price, however, is not the only concern when it comes to India. What will matter is how the enterprise and consumer segment adopt.

Microsoft's previous version of the operating system, Windows 7, came three years ago and many domestic organisations have either recently moved to the Win 7 platform or are still using the Win XP platform.

Research firm Forrester's David Johnson writes in an official blog, "Windows 7 will be installed on 83 per cent of new corporate PCs deployed by the end of 2012, and with the added understanding that most firms have spent up to 11 years on Windows XP, we conclude that Windows 8 is at risk of being skipped by IT organisations, already strained by the costly and recent upgrade to Windows 7."

Nearly half of Indian organisations use Win XP platform today, according to industry estimates, and as the OS reaches end of life in a year-and-a-half, analysts believe it should spur demand for Win 8.

A Microsoft enterprise partner admitted that technical underpinnings of Windows 8 have much in common with Windows 7 which means better application compatibility between Windows 7 and Windows 8 than that of XP and Windows 7.

"That means businesses should find it less costly and easier to support mixed Windows 7 and 8

environments," he says.

In order to accelerate the changeover, Ballmer has made Microsoft's Office software suite even more compelling, with the help of two major acquisitions.

It bought the video chat service Skype for $8.5 billion last year and in June agreed to pay $1.2 billion for Yammer, a service the builds social networking services within companies.

Both are expected to become key features within Office to make it easier for workers to connect and collaborate with their peers and customers.

Yet research outfit, Canalys does not expect the launch of Windows 8 to arrest Microsoft's market share decline until Q3 2013 at the earliest. However, Canalys recommends that Microsoft helps its OEMs hit mainstream price points for Windows 8 touch-screen products, for example by subsidizing touch panel production costs by $50 to $100 per unit, to kick-start its adoption.

On the consumer front, it is being widely believed that Microsoft has a fair chance to compete with Win 8 devices and its Windows Phone 8 OS too. Abhishek Chauhan, senior consultant (ICT Practice), Frost & Sullivan, South Asia & Middle East says, "India is a price sensitive market and as long as Microsoft can convince its vendor partners and OEMs to adopt an affordable price approach, it can push adoption of Win 8 in India."

Chauhan estimates that it would be a minimum two quarters before cheaper Win 8 PC devices and Win Phone 8 smartphones will make their way into markets.

In India, industry watchers believe that Windows 8 adoption rates will not accelerate before 2013.

"In their subconscious minds, the users will obviously compare this avatar of Windows with Apple and Android.

"In this competitive landscape, the consumer will not accept anything which is not significantly superior. If this dream comes true, Windows 8 would surely be a great success, particularly in a country like ours where Microsoft is an undisputed leader in personal computing," says Sandip Biswas, Director, Deloitte India.

The important question is will Windows 8 save the day for Microsoft? The answer is not a simple one. Experts agree that Windows 8 is the most logical move to arrest the profit bleed on Microsoft's balance sheets. By launching its own tablet, Surface, plans for the smartphone market and Windows 8 OS to grow its market across devices like Apple and Google, Microsoft will have to make an 'affordable' bid to woo consumers.

With inputs from Shivani Shinde