Microsoft's legacy liabilities

Microsoft's new operating system, codenamed ‘Threshold', had been one of the industry's worst kept secrets but it was the new product name - Windows 10 – that had people talking. After getting its knickers in a twist with Windows 8, Microsoft's decision to skip Windows 9 altogether is a clear illustration of the challenges facing the once invincible software giant.

The market place has changed significantly and Microsoft has a struggle on its hand to maintain its once dominant position

Skipping numbers

Having said that, skipping version numbers is nothing new for Microsoft; Windows itself has gone from 3.0, 3.1, 3.11, 95, 98 to ME, XP, Vista, 7 and 8— that's without mentioning the Windows NT family — and computer industry greybeards will remember Microsoft Word's jump from version 2 to 6.0 in 1993 just to overtake the then office productivity incumbent WordPerfect.

In this instance, the most feasible reason for Microsoft skipping a product number is to avoid compatibility problems with older software that may refer to ‘Windows 9x' in their code. References to Windows 9 would have confused the software and caused problems for both developers and users.

Back to the future

Despite skipping a version, much of what's been announced in new system harks back to the past. Particularly humiliating for Microsoft is the return of the Start button that the company decreed was redundant in today's multiscreen computing environment at the launch of Windows 8.

The lack of a Start button became one of the key touchpoints for the market's hostility to the Windows 8 system and the hastily renamed Metro interface won few fans. The multitude accustomed to working on more familiar screens weren't enamoured by a system that was designed more for smartphones than for personal computers.

Presented with a product they didn't like, customers voted with their wallets as most users opted for the older Windows 7 system on their new systems or stuck with their decade old Windows XP computers. In a report earlier this year, industry analysts Netmarketshare claimed the newest system runs on just over ten per cent of devices running Microsoft's software.

Making matters worse for Microsoft is the decline in personal computer sales in general with IDC estimating global shipments of both portable and desktop systems will drop 3.8 per cent in 2014. That shift is already hurting the company's bottom line with the company's Windows division showing an accelerating decline in profit margins in recent years.

The bright spot for the PC industry is the business sector where consulting firm Gartner sees companies upgrading their computer fleets as shoring up an industry they forecast as being stagnant after two years of falling sales.

“We expect to see slow, but consistent, PC growth. While the end of support for Windows XP drove some of the sales in developed markets, it's the underlying business replacement cycle that will stabilise the market,” says Mikako Kitagawa, a principal analyst at Gartner.

Microsoft are hoping Gartner's predictions are right, with the Windows 10 launch being aimed specifically at the enterprise market. “This will be our most comprehensive operating system and the best release Microsoft has ever done for our business customers,” says Microsoft's Terry Myerson who heads the company's struggling Windows Division.

Courting the business market

Attractions for businesses touted by Microsoft in the new operating system are improved collaboration features, tighter security, easier deployment and simplified licensing rules. Microsoft's arcane and opaque enterprise licensing has been the bane of a generation of IT managers and its attempts to tie consumers into similar spider webs of expensive and difficult to understand contracts have also hurt adoption of new systems.

Courting of the business community with Windows 10 is an attempt to undo some of the damage done by complex but profitable licensing agreements and the media releases around the new product hint that Microsoft may be beginning to see the consumer IT market as a lost cause.

Its attempts to impose enterprise like restrictions on the consumer market late last decade were stymied by the rise of cloud computing systems that simplified the pricing models, the arrival of smartphones and useable tablet computers exacerbated the company's problems.

Microsoft's mobility problem

Windows 8 was intended to address Microsoft's mobility problem – long after Apple's iOS and Google's Android had released useable mobile devices that quickly dominated the market – but instead alienated PC users who found the touch screen friendly Metro interface less than useful.

Making matters worse for Microsoft is that Windows 8 has failed dismally in the mobile device marketplace with IDC estimating the operating system's share of the global smartphone industry as being 2.5 per cent in 2014, nearly a ten per cent fall from the previous year.

That's despite the fact that Microsoft made the operating system free for manufacturers of smaller devices. If Microsoft can't even give away Windows 8 to the smartphone industry the perhaps future lies along a different path.

Listening to the market

What will be encouraging for Microsoft's customers is the long lead time for Windows 10 with the new system not expected until this time next year. Instead the company will be running a ‘Windows Insider' program for early adopters of the trial edition to collaborate with the product development team.

The Windows Insider program itself harks back to Microsoft's glory days when a privileged few were admitted to the company's Beta trials to identify and knock the rough edges off new products before they were released to the market.

For Microsoft though the glory days of the 1990s and early 2000s are over; today the company's best prospects lie in their cloud and server products however, the company doesn't lead in any of these marketplaces and faces ferocious, deep pocketed competitors who are a world away from the WordPerfects and IBMs of a generation ago.

It's understandable for Microsoft to want to look back to the future with Windows 10, however, the new operating system will need to offer massive benefits to its users if it's going to have an impact on a radically changed PC marketplace.

Even if the company is successful with Windows 10, the era where the desktop operating system controls the computer industry is over.

Microsoft's challenge is to adapt to a new era.