3 Key Challenges for Microsoft’s Windows 9

Microsoft's (NASDAQ: MSFT  ) Windows 9, which will reportedly be released in April 2015, could be the make-or-break product that could define the future of the tech giant.

It will also make Windows 8 the shortest-lived operating system in Microsoft's history with a lifespan of just two and a half years. Its predecessor, Windows 7, lasted for three years before being succeeded. Even the much-maligned Vista lasted for two years and nine months before being replaced.

Source: Wikimedia Commons.

Confirmed details about Windows 9 are scarce, but a report from Neowin suggests that Windows 8 users will receive the Windows 8.1 Update 2 in August or September, followed by a possibly free upgrade to Windows 9 for Windows 8.1 users next year.

Although the notion of Microsoft completely abandoning its traditional Windows business model of paid upgrades seems extreme, CEO Satya Nadella has already made some unconventional decisions, such as launching Office for Apple's (NASDAQ: AAPL  ) iOS and Google (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) Android devices. However, Windows 9 will have to overcome three major challenges before it can win over new users.

1. Windows 7 is 'good enough'
Microsoft tried to boost Windows 8 sales in the past with a $39.99 upgrade offer for Windows XP, Vista, and 7 users last year. Customers who purchased Windows 7 after June 2, 2012, were eligible to upgrade to Windows 8 for $14.99. Those customers received the Pro version of Windows 8, which has a retail price of $199.99 per PC.

That effort wasn't as successful as Microsoft had hoped. Windows 8 and 8.1 still only control 12.6% of the OS market worldwide, according to Net Market Share. Its predecessors are far more popular -- Windows 7 controls 50%, while Windows XP still has 25%. Microsoft's Windows offer, along with similar upgrade offers for Office and deals to secure exclusive video games, contributed to $1.66 billion in deferred revenue last quarter and shaved $0.16 off the company's diluted earnings per share.

Microsoft's biggest problem is that Windows 7 is now considered the "new Windows XP." Windows 7 users who feel that the OS is simply "good enough" won't voluntarily upgrade unless they purchase a new PC with Windows 8 pre-installed. The chance of that happening has fallen dramatically due to sluggish PC sales. IDC forecasts that global PC sales will fall 6% year-over-year in 2014, then continue declining through 2018. However, IDC expects global tablet sales to rise 12% in 2014.

As a result, Windows 9 will have a tough time carving out a niche between Windows 7, XP, and Vista when it arrives next April. Even if Microsoft offers Windows 9 as a free upgrade for Windows 8/8.1, it could be as poorly received as its previous upgrade discounts for Windows XP, Vista, and 7 users.

2. The Surface design dilemma
A shrinking PC market and growing tablet market won't necessarily seal Microsoft's fate, but Microsoft has proven repeatedly that it simply doesn't understand the tablet market.

Its first mistake was Windows RT, its "tablet" operating system for ARM processors. RT's fatal flaw was that it was incompatible with Windows software from older versions like XP and Windows 7, rendering it nearly useless as a productivity device. It could also only install apps from the Windows Store.

That leads into Microsoft's second big mistake -- the Surface. Windows RT was launched as a way for Microsoft to sell a cheaper version of the Surface. Unfortunately, neither the Windows RT nor the Windows 8 version of the Surface was well received, resulting in $1.2 billion in losses for Microsoft.

Source: Microsoft.

The Surface represents the sharp rift in Microsoft's OS design philosophy. On one hand, it is optimized for touch screens with its Modern/Metro UI, but on the other hand, it wants to be a productivity machine.

Windows 9 could suffer this same identity crisis. ZDNet's Mary Jo Foley recently stated that there will be three versions of Windows 9: a traditional one, a touch based one, and an enterprise edition. The enterprise edition reportedly includes the ability to completely disable the Modern UI, while other reports claimed that the Start Button will finally return to the desktop UI.

3. 'One Windows' is a dangerous dream
Microsoft is a victim of its own legacy. Its operating system is built upon decades of aging software compatible with different versions of Windows. Entire businesses and countries depend on Microsoft to continue supporting this fragmented universe of operating systems with security updates.

Google has a key advantage in this department because it expanded into operating systems much later than Microsoft -- first with Android in 2008 and then with Chrome OS in 2011. There weren't decades of legacy features to fret about, so Google was able to easily unite its smartphone, tablet, and Chromebook ecosystems over the cloud.

That kind of unity is Microsoft's goal with its new "One Windows" philosophy. However, customers don't always need their home computers and mobile devices to access the exact same ecosystem of apps. Apple, for example, proved that two separate systems work fine on its Mac and iOS platforms.

In my opinion, Windows Phones, tablets, and hybrids belong in a single ecosystem, while productivity laptops and desktops belong in the other. Microsoft has blurred this distinction with Windows RT and the Surface, which actually do more harm than good by frustrating both mobile and PC users. Therefore, Windows 9 must clearly appeal equally to the demands of both groups with distinct OS versions, or risk getting crushed in the middle like Windows 8.

The Foolish takeaway
In conclusion, I think Microsoft should tread carefully with Windows 9. It could be an excellent opportunity to atone for the mistakes of Windows 8, but it could also be a fatal misstep if it tries to accomplish too many things at once.

Microsoft needs to temper its dream of unifying the desktop and mobile markets, focus on creating clearly defined operating systems for both markets, and stop letting the Surface dictate its OS design if it wants Windows 9 to succeed.

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Read/Post Comments (6) | Recommend This Article (2)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 23, 2014, at 1:47 PM, hagbard23 wrote:

    You seem confused. Allow me to explain:

    "Microsoft has proven repeatedly that it simply doesn't understand the tablet market.

    Its first mistake was Windows RT, its "tablet" operating system for ARM processors. RT's fatal flaw was that it was incompatible with Windows software from older versions like XP and Windows 7, rendering it nearly useless as a productivity device."

    Yes, because ARM processors are incapable of running full-blown desktop OSes. At the time of the first Surface release, Atom processors weren't ready for prime-time. If you want to fault MS for not releasing an Atom-based Surface 2 instead of the SurfaceRT 2, that would make sense. But as it is, it seems that you are the one who doesn't understand the tablet market.

    Microsoft's problem wasn't not understanding the market, it was getting in late, and not having the app ecosystem that the other ARM-based OSes had.

    "Apple, for example, proved that two separate systems work fine on its Mac and iOS platforms."

    Let's leave aside that this sentence completely undermines your previous point.

    What do you mean by "work fine"? Last year, it was widely trumpeted that MacOS finally broke 8% market share on the desktop/laptop market. 8%. So how is that "work[ing] fine", but Windows 8's 12.6% share a failure??

    What everyone, including, unfortunately, MS, is missing, is that at some point, Atom-based devices will allow the tablet form-factor to be a decent productivity machine, and that will be a compelling story.

    Android and Apple currently have no answer for that. Perhaps they both have something in the works, but they aren't telling anyone if they do.

  • Report this Comment On June 23, 2014, at 1:56 PM, Drichter wrote:

    Why bother writing an entire article when you clearly have no idea what you are talking about?

  • Report this Comment On June 23, 2014, at 2:26 PM, TMFSunLion wrote:

    You seem to miss the point that Microsoft foolishly released the Surface RT alongside the Surface Pro.

    Since both RT and 8 looked the same cosmetically, consumers (who don't care about ARM vs Atom processors) simply saw two products -- one that ran older programs and one that didn't.

    I never said Apple was gaining market share with the Mac, but it never was intended to. Apple doesn't need to release a touch-centric OS for its MacBooks like Microsoft did with Windows 8. iOS and Mac OS are separate and fine as is.

  • Report this Comment On June 23, 2014, at 2:26 PM, TMFSunLion wrote:

    You seem to miss the point that Microsoft foolishly released the Surface RT alongside the Surface Pro.

    Since both RT and 8 looked the same cosmetically, consumers (who don't care about ARM vs Atom processors) simply saw two products -- one that ran older programs and one that didn't.

    I never said Apple was gaining market share with the Mac, but it never was intended to. Apple doesn't need to release a touch-centric OS for its MacBooks like Microsoft did with Windows 8. iOS and Mac OS are separate and fine as is.

  • Report this Comment On June 24, 2014, at 7:30 AM, bluyster wrote:

    I have to agree with Hagbard23 and drichter, poor article and bad representation of facts. However, I did like the pictures, very nice.

  • Report this Comment On June 30, 2014, at 9:34 PM, RK007007 wrote:

    Microsoft's challenges are that it has failed to develop any decent products in recent years. What was the last Microsoft product that excited you? What is their most recent killer app? Is the PC experience stress free? Does Microsoft Widows improve productivity?

    Microsoft has failed to make the PC desktop experience better. When you use an Android or Apple tablet, you don't need to dig around in registry to fix a problem. When I was younger, I did n't mind messing around under the hood of Windows, but I have a life, I don't want to waste time. I just want stuff to work. When I turn my TV on, it just works. I don't need to figure, why my TV will not boot or why is it running slow....

    People have got used to the ease which Android and iOS tablets work. I am not a fan of touchscreen, since they are too sensitive and unforgiving, if you touch the wrong place.

    Look at all the hundreds of developers making new Apps for Android and iOS.

    When you buy a new device, it takes about 20minutes, to have all your favourite apps downloaded and up and running. If you PC was infected with a Virus, it would take a weeks worth of downtime, while you re-install from scratch and dig up those serials keys.

    The cost of Android software is dirt cheap. Microsoft is making people dump Windows XP, so they are forced to buy Windows 8, but in many cases, they are to buy brand new software. On Android, if I buy a piece of software, I am getting free updates and it only cost me 99cents!.

    Microsoft just leave people with a bad experience. My father bought a Nokia Lumia phone, but all his contacts were in Outlook and there was not way of transfering them to his Nokia phone. Both products are from the same company. In the end, we had to upload the Outlook contacts to gmail and then install Gmail onto the Nokia phone and download the contacts. It is not perfect, but this is the sort annoyances people have to deal with. They did not even supply a tool to sync Outlook to Nokia phone.

    The other day tried to install Microsoft Flight Simulator, only for it not to work. Another rotten experience.

    Now Microsoft customers to rent Microsoft Office. Seriously?. I use Office may be two or three times a month. Why should I rent Microsoft Office software?. If I loose my job, then how am I going to be able to pay for the rental?. How am I going to be able to update my Resume?. Some of the older editions of Microsoft office are just as good, except they don't run on newer editions of Windows, which seems quite unfair.

    With other software vendors, you can pick up older versions of software or cut down editions, especially if you are not a frequent users, but Microsoft is all about money money money.

    There are many areas Microsoft needs to improve.

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