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Microsoft Corporation Windows 10 Is Beating Windows 7 in This Key Market

By Leo Sun - Jul 1, 2015 at 2:05PM

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A recent survey indicates that Windows 10 could be a huge hit with enterprise customers.

Microsoft (MSFT -0.40%) Windows 10 could be a big hit among enterprise customers, according to a recent survey by IT industry network, Spiceworks. An impressive 73% of respondents stated that they planned to install Windows 10 within two years, which would make it the most rapidly deployed Microsoft operating system for businesses ever.

By comparison, 60% of IT professionals installed Windows 7, currently the most popular version of Windows, within the first two years. Only 18% of enterprise users have deployed Windows 8 since 2012.

Source: Microsoft

What does the enterprise market mean to Microsoft, and why are IT professionals such fans of Windows 10?

Why the enterprise market matters
The enterprise market represents a core stronghold for Microsoft, one that cannot easily be assailed by Google and its free operating systems or productivity software.

The older and larger a business is, the more dependent it will likely be on Microsoft Windows or Office. Employees are trained to use Windows, documents are saved in Office formats, and emails and schedules are sent through Outlook. For those businesses, migrating to Chrome OS or Drive simply is not practical. Microsoft needs to retain those large enterprise customers, since small to medium-sized businesses, along with mainstream consumers, might be lured away by Google.

Enterprise customers also generate a stable stream of subscription-based revenue. Unlike consumers, businesses subscribe to volume licensing plans for Windows. With Windows 10, Microsoft will bundle per-user licenses of Windows 10 in its Enterprise Cloud Suite (ECS), which includes Office 365 Enterprise E3 and the Enterprise Mobility Suite for managing employee devices. That bundle is expected to cost between $7 to $12 per user per month.

Why businesses want to upgrade to Windows 10
In the past, many enterprise customers stuck with older versions of Windows for as long as possible, due to the time and money needed to upgrade to a new OS, migrate the data, and retrain employees. The U.S. Navy, for example, has been paying Microsoft $9 million annually to keep supporting Windows XP, although mainstream support ended last April.

Microsoft aims to solve that problem in three ways. First, by offering Windows 10 as a free one-year upgrade to mainstream Windows 7 and Windows 8 consumers, Microsoft can hopefully consolidate a large part of the fragmented Windows market. Today, 58% of PCs worldwide still run on Windows 7 and 16% run on Windows 8/8.1. If more consumers use Windows 10 at home, the less training IT pros must do for individual employees.

Second, Windows 10 offers deeper mobile device management (MDM) capabilities than its predecessors, which suits businesses with relaxed BYOD (bring your own device) rules. It also has beefier security features, like the biometric scanning "Windows Hello" feature, which could reduce data breaches.

Lastly, Windows 10 is an ideal OS for companies looking to upgrade aging PCs with 2-in-1 devices like the Surface, which offer a balance between mobility and productivity. Since Windows 10 can be scaled across phones, tablets, and PCs with Continuum, transitions between tablet and laptop modes should be smoother than the jarring jumps between the Metro UI and the desktop in Windows 8.

Source: Microsoft

The road to one billion
Back in April, Microsoft boldly declared that it would put Windows 10 on a billion devices within the next three years. About 1.5 billion PCs run Windows worldwide, with enterprise customers accounting for over half of that market, so the enthusiasm among IT professionals is a welcome vote of confidence for the company.

Hitting one billion devices is not as hard as it seems. Gartner estimates that between 2015 and 2017, 951 million new PCs will be shipped worldwide. Since Windows controls about 90% of the PC market, we can assume that about 856 million new PCs will run on Windows 10 by 2017, since new PCs always ship with the latest OS. If just 10% of the current base of 1.5 billion Windows PCs upgrades to Windows 10, total PC users should successfully top that one billion milestone.

If Windows 10 still falls short of a billion PCs, Microsoft can rely on smartphones and tablets. IDC expects annual shipments of Windows 10 Phones and Windows 10 tablets/2-in-1 devices to hit 105 million and 38 million units by 2018, respectively.

The road ahead
If Windows 10 can reach over a billion devices, Microsoft can finally break its cycle of hit-and-miss upgrades and get Windows users -- both consumers and enterprise customers -- back on the same page. Once they have returned to the same ecosystem, Microsoft can tether more users to cloud-based tools like Office 365 and Cortana to beef up its high-growth cloud business.

Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Gartner, Google (A shares), and Google (C shares). The Motley Fool owns shares of Google (A shares) and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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