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2015 to test Microsoft's resolve and execution

2015 to test Microsoft's resolve and execution

Microsoft faces not only its 40th anniversary in 2015, but a host of challenges that will define it for years to come.

Microsoft faces not only its 40th anniversary in 2015, but a host of challenges that will define it for years to come, analysts said today.

The company, which is in the midst of a strategic do-over after switching CEOs and admitting that its earlier approach to the explosion of mobile wasn't working, has a hard row to hoe, experts said.

"Next year is also the 20th anniversary of Windows 95," noted Wes Miller of Directions on Microsoft. "Remember that? People stood in line to get Windows 95. Everyone was excited. That's the big deal for 2015, whether Microsoft can reinvigorate the consumer ecosystem."

Mobile matters

Because "consumer" is now synonymous with mobile, and because Microsoft has thus far failed to make meaningful inroads into the mobile device market -- its Windows Phone powered an estimated 3% of the smartphones shipped this year, while Windows tablets accounted for 5% of 2014's total, said IDC -- Microsoft's reinvigoration will be difficult.

"They're the canary in the coal mine," said Miller of Windows smartphones and tablets. Without a play in mobile devices, Microsoft's Windows operating system risks, if not irrelevance, then at least diminished importance for consumers. "Windows as an end-point [OS] then gets shoved into the background," Miller added.

And that's not good.

Microsoft has touted the next iteration, Windows 10, which is slated to ship in the fall of 2015, as the answer to its mobile problems. More than anything else, it's stressing what it calls "Universal" apps, which thanks to a continued merging of the code base, will let developers recycle an application's core, wrapping it with the user interface (UI) appropriate to each device.

Universal apps, Microsoft has argued, will boost the number of apps available to Windows on mobile, including phones and tablets, energize the developer community and put Windows back on firmer footing to take on the two mobile monsters, Android and iOS.

"I'm not sure that's the answer [to Microsoft's problems], but it is their answer," said Miller. "I'm just not sure it will work out."

Windows 10, front and center

To Jan Dawson, principal analyst at Jackdaw Research, Windows 10 is the biggest challenge Microsoft faces for 2015. "The single greatest test [in 2015] may be whether Microsoft can successfully charge large amounts of money for a new operating system to consumers and still see significant uptake," said Dawson in a piece published Monday on Tech.pinions (subscription required).

In an interview, Dawson expanded on his thinking.

"Microsoft has a huge installed base on Windows," Dawson said, "and the test will be upgrading this installed base to Windows 10." At least on the consumer side; nothing will dislodge Windows specifically, and Microsoft generally, from the enterprise. "Microsoft's enterprise business is harder to disrupt in the long term. They're ultimately going to upgrade, so Microsoft will retain those customers."

Microsoft's ability to keep consumers in its fold will be iffier, Dawson said, agreeing with Miller that mobile will be a crucial challenge for the Redmond, Wash. company in 2015. "The reality is that consumers are not choosing Microsoft for mobile. They're not choosing what Microsoft is making or its OEMs are making," Dawson said. And that has had, and will continue to have, a knock-on effect for consumers and Windows PCs, as it makes moot going all-in on Microsoft.

"Why would I choose an all-Microsoft portfolio?" Dawson asked rhetorically.

But Dawson returned to Windows 10 as a touchstone for 2015, calling it and Microsoft's pricing and upgrade decisions "symbolic of all the challenges facing Microsoft."

Microsoft is the one major operating system maker that continues to charge for its OS. While it has discarded fees for all smartphones, many tablets and some notebooks, there's no intention to expand that across the board, the firm's chief operating officer said earlier this month.

Perhaps. But Dawson said Microsoft faces a decision this year. "Can they maintain Windows as a source of profit and revenue?" Dawson wondered. He didn't think so, not for consumers, and expected Microsoft to take additional steps in 2015 to lower or eliminate the price of the OS to OEMs and users alike.

Patrick Moorhead, principal analyst with Moor Insights & Strategy, went a different direction than Miller or Dawson when asked to tap Microsoft's biggest challenge in 2015.

Enterprise, enterprise, enterprise

Rather than worry about consumers, Microsoft should instead focus on the enterprise, where it's more or less guaranteed revenue, said Moorhead. "What's their play in the public-private cloud?" asked Moorhead. "They've made good strides to move Microsoft code from on-premises to the public cloud, but they haven't made much progress on Open Stack."

Open Stack is an open-source cloud computing platform that many enterprises have adopted to create private cloud services or run hybrid implementations blending both public and private. Microsoft's answer to Open Stack is its Azure platform.

Next year will be important, the analysts agreed. How important, though, remains unclear. This won't be the first time outsiders have called the coming months critical for the company: In 2011 and 2012, much of the same commentary focused on Windows 8. And even though that OS failed to meet Microsoft's expectations, the firm survived, even thrived.

"These companies are far more resilient than most people give them credit for," said Dawson. "In a devices-based business, it's possible to have a rapid implosion of a company, as happened to Nokia, Motorola, and now maybe Samsung. But this is not the devices business."

Still, Microsoft will be on the spot in 2015. "This year, [Satya] Nadella laid out in words Microsoft's strategy," Dawson said. "But those words were very general words. What do they actually mean? Next year must be much more about execution from Nadella."

Miller had high hopes for that execution, in large part because Microsoft will upgrade not only Windows and another of its big money makers, Office, but will refresh most of the rest of its on-premises portfolio.

"Look at how many products they're going to ship in 2015," Miller pointed out. "That will pique people's interest."

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