Foley on Microsoft

When Will Microsoft Have To Stop Milking Its Windows Cow?

Microsoft's shift in focus on strengthening its offered services and providing compatible software across multiple platforms is a good indication that the company has plans to stay relevant in a post-Windows OS world.

• By Mary Jo Foley
• 10/27/2014

One of the questions I get from Microsoft watchers, customers and partners most often these days is: What is Microsoft's "Plan B" if the company fails to gain traction in the mobile market?

I definitely think Microsoft has a Plan B. And that Plan B is to make Microsoft software and services attractive to those not running Windows on their devices. That's why the new Microsoft is putting so much money, time, and energy into developing products like Office for iPad and OneDrive for Android.

But at least for right now, maintaining and growing the Windows share is still Plan A, in spite of any corporate rhetoric to the contrary. If it weren't, Microsoft management wouldn't have cut only half of the 25,000 Nokia employees the company acquired earlier this year. Fixing Windows 8 wouldn't be the high priority it currently is. And crafting Microsoft software and services for Windows Phone devices and tablets might not even figure into the company's priority list.

Windows is no longer the cash cow it was with an unlimited supply of milk. Yes, it's still a multi-billion dollar business for Microsoft. But Office, Microsoft cloud wares and its enterprise software already have risen to the top.

Because of market dynamics, Microsoft is giving away a lot of Windows licenses -- for all phones and other computing devices with screens of less than 9 inches -- for free. And the company is subsidizing sales of an additional number of Windows licenses with a bundle called "Windows + Bing" that it provides to OEMs for what's believed to be a fairly small licensing fee. There are credible rumors that Microsoft is planning to provide Windows 10 for free to Windows 8.x customers when it's completed next year. And there's even some evidence that Microsoft might make Windows 10 available for free, or at least very cheaply, to Windows 7 customers, as well.

In short, Plan A is almost played out. Even if Microsoft does find a way to grow the Windows mobile platform share, the Windows hand-over-fist-money-making prospects are on the wane.

Plan B revolves around remaining relevant by building software and services that are best-in-class on the dominant OS platforms of the future. Subscriptions don't have the same kinds of margins as software has in the past. But unlike software, services require users to pay on an ongoing basis to ensure functionality and data access. If customers stop paying for Office 365, they better have a file migration plan in place. Yes, Software Assurance has also provided the company with a recurring revenue stream. But a number of corporate customers were questioning the wisdom of signing up for the three-year plan, in spite of Microsoft's carrots and sticks.

The key to Redmond's Plan B, in my view, are enterprise-specific services like the Enterprise Mobility Suite (EMS), which includes Microsoft Azure Active Directory Premium, Azure Rights Management Services and Intune. It's the linchpin of the Microsoft mobility story. Even if the company is unsuccessful in getting Windows onto more mobile devices, Microsoft still could build a nice business around managing whatever devices are out there at $7.50 per user per month. That's the pitch for EMS: Manage devices, files, and data, whether they're on iOS, Android, Windows, and Windows Phone. If you can't beat `em, out-manage `em.

Azure RemoteApp is also core to Plan B. Convincing users on all mobile platforms that many of their users can be well-served by accessing remotely their core Windows Server-based apps like Office, rather than installing those apps on their devices, could also yield big bucks for Microsoft. Given all the rumors about Microsoft making Android apps available on Windows and Windows Phone devices, I could foresee some kind of Android hosting/streaming service being another Plan B fixture, too.

Microsoft COO Kevin Turner infamously told partners this year that Windows now has a mere 14 percent of the mobile device OS share. If that number doesn't start climbing soon, I'd say Redmond's Plan B truly will become the new Plan A.