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With Windows 8, Microsoft stikes back

posted Aug 11, 2012, 2:54 AM by Julien Pillot   [ updated Aug 11, 2012, 3:12 AM ]

Microsoft’s recent moves on hardware markets made most of sector-specialists particularly dubious. Indeed, Redmond’s business model is long time based on a “win-win” partnership with manufacturers in which Microsoft takes advantage of constructors’ specific know-how to spread its products at a very large scale, while OEMs benefit from sound (and consumer-attractive) interoperability provided by Microsoft’s solutions. Then, Microsoft’s latest announcements relative to hardware sectors are somewhat fuzzy, especially when – with the exception of Xbox – Redmond’s previous fiascos trying to develop its own facilities are still in everyone’s mind (do we have to mention Zune, Kin, or even Courier?). However, a closer look on Microsoft’s global strategy is particularly revealing of Redmond’s motivations. Overlook.

 

  • ·         Strategic Products

It will have surely escaped no one’s attention that Redmond’s recent moves involve industrial sectors seen as particularly valuable in the mid-run. Microsoft’s strategy on the phone market has already been discussed here. Even if Nokia’s acquisition is still pure conjecture, homemade phones have never been closer while OEMs aiming at offering Windows 8 as their phone’s OS have to ensure more and more precise and restrictive quality standards (4 OEMs have been selected: Nokia, Samsung, HTC and Huawei). With Surface, Microsoft literally tackles its partners in developing its own tablet PC… whereas Windows 8 licenses have long been distributed among selected manufacturers (Asus, Lenovo, Samsung et Toshiba). Unsurprisingly, such an unusual and unexpected strategy tends to annoy Microsoft’s partners, irritation reflected by numerous public announcements (see, for instance, ACER CEO’s JT Wang interview in the Financial Times). Many reasons mushroomed on the Internet trying to explain such moves (disciplining OEMs, diminishing PixelSense costs, …), but only one plainly holds our interest: benefits from Microsoft’s marketing power in order to install Windows 8 (and its brand new user interface Metro) as wide and quick as possible. While digital convergence inevitably downsizes traditional PC market (regarding smartphones and tablet PC market opportunities), Microsoft cannot continue to base its growth on the sole two homemade cash-cows (Windows and Office for PC). Then, Windows 8 is not just another iteration of Microsoft’s dominant OS, it is the heart of an multi-sided ecosystem.

 

  • ·         Global Strategy around Windows 8

Many elements recently disclosed by businesses tend to give credence to this scenario. First of all, Microsoft gradually harmonizes the names of its different online retail stores. Windows/Xbox/Windows Phone/Office Marketplaces are no more (or about to be), say hello to Windows Store. Such a change, I agree, might sound somewhat trivial but expert observers will easily relate this designation to the appellation of new Microsoft physical stores (simply called Microsoft Store) currently deployed all over the world. Microsoft’s will is, by its own admission, to realign its communication strategy around the Windows brand. Second, Redmond aims at creating a true social experience based on Windows 8. Most of recent acquisitions and exclusive partnerships are leading this way: Yammer (freshly purchased $1.2 billion) will offer its famous microblogging services to Office (and Office 365) users, Skype – the world leader of VoIP solutions – is already and will be natively integrated to all Microsoft softwares and devices, So.cl (pronounces “social”) is on the launch pad, as for LinkedIn whose internet portal and exclusive functionalities will be implemented in the next update for Outlook. Note that all these apps and services will eventually be available on Windows Azure – Microsoft’s cloud computing platform – in order to complete the IT environment Redmond aims at attracting consumers in. As the third and last step of that strategy, following somewhat the same path than Apple, Microsoft plans to keep control on the entire environment in locking homemade and third products on Windows. As a first advantage, Redmond wishes to overlook and manage the quality of every Windows licensed products. As a second (and major) one, keeping exclusivities on such consumer-friendly products is likely to incite users to quickly adopt Windows 8… and then entering the new (and valuable) ecosystem designed around Microsoft’s OS (see the scheme below). For instance, iPad users will have to wait for months before enjoying a compatible version of Office, Games for Windows will be directly available for download through Metro (pulling the rug out under independent platforms’ –  like Valve/Steam – feet), and in-app purchases will be dedicated to the sole Windows Phone 8 users. Finally, the following scheme presents what would the Windows 8 ecosystem look like in few months.


  • ·         Towards a closed ecosystem?

Introduced that way, the Windows 8 ecosystem seems very close of the one of iOS. Then, many observers and businesses fear Microsoft to adopt the same strategy than Apple in closing both its ecosystem and Windows 8 sources. Such worries do not seem justified in the short-run while Redmond needs sound and effective partnerships to develop apps for Windows Store, contents for Zune, games and softwares for Windows … and especially consumer-friendly devices likely to incite people to adopt Windows 8 as quick as possible. Eventually, Microsoft’s recent moves in the hardware industry have not to be seen as a clear-cut attempt to enter this market on the long-run, but as a signal send to OEMs encouraging them to be more innovative and to design better Windows-compatible devices. Microsoft does know that most of the success of such strategy – e.g. the capacity of Redmond to compete vigorously on these emerging markets – lies on the quality of third-parties products designed for Windows 8


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