Windows is Microsoft’s most important product. The operating system, created three decades ago, has become synonymous with computing. While other products, like Mac OS X, are available, Windows has always enjoyed an almost complete dominance of the PC market.
This was fine for Microsoft in the old days when PCs were all that mattered, but it’s a different kind of computing that matters now: smartphones. Pocket-sized computers are owned by billions of people worldwide and are, for some companies like Apple, Google and Samsung, big money spinners.
The PC market remains bigs, but it is heavily diminished from its heyday in the mid-2000s. Gartner, a research firm, estimates that around 246 million desktop PCs will be shipped in 2016, down from over 310 million just a few years ago. In contrast, around 1.4 billion smartphones will be sold worldwide.
The shift has been significant, bringing Apple, which languished during the PC era, and Google to the forefront. The iPhone, originally introduced in 2007, has changed the way people view what a PC is and, more importantly for Microsoft, has shifted the world away from Windows while Android is now installed on billions of devices.
Apple and Google likely never set out to mess up Microsoft’s business model, but the dominance of iOS and Android has had the unintended consequence of causing a near-existential crisis within the company.
For a while, Microsoft refused to really acknowledge the shift that was happening and, as such, it missed the boat on smartphones and (nearly) tablets. The apps that Microsoft has made for iOS and Android have been popular—around 340 million people use Office on an iPhone or Android phone, for example—but the company failed to own the entire smartphone operating system.
Satya Nadella, a longtime Microsoft executive, was given the top job at Microsoft after Steve Ballmer stepped down in 2013 and the company has been looking very different ever since.
Take, for example, the recent news that Microsoft was moving to make SQL Server, one of the company’s most prominent and important enterprise products, available for Linux. Consumers (or anyone who doesn’t work inside the IT department of a big company) are unlikely to notice the change, but it has big implications for how Microsoft works and how the world sees the company.
Consider that Steve Ballmer once described Linux as a “cancer” on the software world, embodying the distrust Microsoft had for almost all other technology companies or software. Of course, Steve Ballmer was wrong about some things—smartphones, for instance (see video below)—and his views could be discounted to an extent, but the ramifications of this move on Microsoft are big.
For one, opening up SQL Server to Linux increases the potential market that can work with the software which, in turn, makes it more appealing to enterprise customers. Oracle’s systems, which compete with Microsoft’s, already work with Linux.
Another big takeaway from this decision is what it means for Windows in the “post-PC” era. In the past, Microsoft was very adept at leveraging its technologies into working together: Its server software worked exclusively with Windows, which was exclusive to Office, and so on. Anyone who was looking to buy Microsoft’s services was essentially ensnared into the Windows ecosystem.
Now, however, the enterprise world is far more focused on the cloud, which has removed Microsoft’s core advantage—Windows—and made it possible to mix-and-match various software and services. The rise of Amazon Web Services has, by and large, been at the detriment of Microsoft’s own offerings and this trend is only set to continue.
By opening up SQL Server, Microsoft has finally accepted that the world is “post-Windows,” insofar as many big companies use some software from elsewhere, like Amazon, and no longer want a full stack of Microsoft’s offerings. Under Ballmer, this would have been a big problem while Nadella seems to be taking it in his stride.
All of this change begs the question of where Microsoft stands: Wouldn’t it be a bad thing for the company to embrace a shift to another operating system? Arguably, the answer is no: Microsoft is now adapting and is making money elsewhere—see the Windows Store and Office 365—meaning that prioritizing Windows is no longer a big concern for the company.
Of course, the world—especially the enterprise world—doesn’t move too fast which gives Microsoft the time to embrace new, and different, technologies and figure out how it will make money in a “mobile first, cloud first” world, as Nadella likes to say.
Windows is still Microsoft’s most important product and will continue to be the foundation from which much of its business, software, and ideas grow but its other products, like Office 365, are growing in importance and could one day overtake the operating system. (Some would argue that they already should have.)
Microsoft’s holiday earnings quarter, which captured the three months leading up the January, were widely praised by analysts because Microsoft has—or, at least, is—figuring out how to get its customers to adopt its new software on top of any current deals. Office 365 is the perfect example of this campaign and represents a point of growth for Microsoft if big clients decide to swap to the subscription option.
The long-tail of enterprise—the idea that big companies take a long time to buy into new software—gives Microsoft time to adapt and change and it would appear that the company is doing exactly that. If this continues, and Microsoft moves past Windows, the company will truly be ready for a “mobile first, cloud first” world.
