Windows 8 and the PC Industry Both Fail To Impress

By Mike Anderson

News from the PC industry has been bleak, with reports that sales volumes not only declined but that they have fallen by more than 10%. Microsoft has felt its share of the pain, and Windows 8 has taken some of the blame for the decline. Windows 8 didn’t cause or even significantly accentuate the decline in the PC market; it merely failed to save it.

Tablet Era Expands as Enterprises Go Apps

The big news is that the Tablet Era is expanding. PCs are no longer the only game in town for users to perform all manner of computing, as tablets have become the preferred approach to a growing set of use cases. This trend is not a fluke; the PC industry now faces a new reality and is on a different trajectory. In addition, in 2013 we’re seeing a significant shift in the enterprise focus on mobility as it moves beyond MDM to enterprise apps.

Shifting to mobile apps in the enterprise will accelerate the tablet era, with enterprises segmenting users by their needs and providing alternatives to the singular PC option. Although the market for tablets has been predominantly defined and driven by consumers and their needs, the resulting dominance of tablets by iOS and Android leaves little choice for enterprises in developing mobile apps.

Windows 8 Needs Consumers

Microsoft set out with a bold strategy to unify operating systems around multiple mobile and PC form factors. Its aim was to establish a compelling approach for enterprise IT by fueling a consumer-driven tablet success story with large numbers of Surface tablets running Windows RT or Windows 8 Pro. Successfully taking on iOS and Android in tablets with an overhauled Windows experience and the promise of Office and Microsoft apps was hoped to create masses of Surface users putting demand on IT organizations to connect them.

Windows 8 and Surface Slow Uptake

Only the masses have not been attracted to Surface and Windows. At least not in the game-changing numbers needed by Microsoft. In addition, Windows 8 as the new OS aimed at the 90% of PCs controlled by Windows has not provided compelling enough new capabilities to stimulate migration and start a Windows 8 wave. There remains a large Windows XP installed base, but more of them are expected to migrate to Windows 7 rather than the new Windows 8. Those already running Windows 7 are often opting to stay there, as Windows 8 does not offer enough new value, and being able to take advantage of touch on Windows 8 requires new – more expensive – PCs.

Tablets Cost Less to Own

That factor has proven doubly tough for the PC industry. Tablets provide a compelling model in that their ownership costs are also lower than PCs, by a significant margin. The need to have a touch screen on new PCs to take advantage of Windows 8 add to the costs that were already well above those for tablets. See our research note “The Business Case for Tablets: Too Compelling to Wait” that’s available for a free download here.

Windows 8 Has Version 1.0 Character

Additionally, Windows 8 is the first generation of this overhauled OS by Microsoft. Initial releases of software are typically taken on in a controlled testing way, leaving more broad scale deployment to the first service pack update or major update. Especially with the multi-year lead Microsoft allowed iOS and Android in tablets, expecting much more than what Surface and Windows 8 have achieved so far could be considered over exuberance.

PC Industry is Transformed

Don’t expect for the PC industry to come back to the top compared to tablets, but expect improvement as touch becomes predominant and convertible form factors that can function without compromise as both a PC and as a tablet become prevalent. For Microsoft, it continues to take on its challenges.

Windows 8 and Surface Need 7 Inch Form Factor

Windows 8 only supported 10 inch tablets, and the iPad Mini has proven just how much demand exists for the 7 inch form factor instead. We expect Microsoft’s anticipated update to Windows 8, codenamed Blue, is aimed at that shortcoming as one priority. In addition, Microsoft must also retool itself from its historical 3 year software release cycle to one that is annual, or more often, to compete with tablet era agility.

Declining PC Business: Tablet Era, Not Windows 8, To Blame

Don’t blame Microsoft and Windows 8 for the declining PC business. The tablet has opened a new range of use cases and a new model for the user experience that is not matched by the current PC. There is no turning back. The tablet era, and coming waves of new form factors from glasses to watches to other wearables, has transformed the industry. PCs will continue to have a significant role, just one with smaller percentage impact and applicability to segments of the total user opportunity.