When 2015 started, I didn’t think about Microsoft much, if at all.
I used Microsoft’s Skype on my Mac maybe once a month, sure, and I still got a lot of use out of my ageing Xbox 360 video game console, with plans to eventually upgrade to a Sony PlayStation 4.
Now, at the tail end of 2015, I’m the proud owner of an Xbox One video game console, a subscriber to the Office 365 cloud productivity suite, and a convert to Windows 10 and the Surface Pro 4 tablet.
In other words, not only did 2015 see me start to use Microsoft products for the first time in many years — I’m actually excited about what Microsoft will come up with next.
I’m not alone in my excitement either: Just in the past week, our friends at Mashable wrote that “In 2015, Microsoft got its groove back,” while the stock market wizards at Barron’s reported that Microsoft shares could go up 30% to as high as $70 per share by mid-2017. Even Goldman Sachs recently upped their estimation of Microsoft’s outlook.
The reason for all this holiday cheer is pretty straightforward. Microsoft got over itself, its lousy sense of pride, and its own history, and actually started making things that people like and want to use, from Windows to the Xbox to its Microsoft Azure cloud.
But at the risk of raining on Microsoft’s parade, there’s still a lot that needs to get done.
The good stuff
Microsoft did a lot of good stuff in 2015.
On the consumer side, Windows 10 combines the best of Windows 7 and 8. It’s not perfect, but it has major updates coming, and over 120 million computers already have it installed. In essence, Microsoft called for a do-over on the poorly-received Windows 8. And it worked.
The Xbox One video game console got some important updates that make it way more competitive with the reigning Sony PlayStation 4. The tone was set in 2014 when Microsoft dropped the Kinect sensor requirement for the Xbox One console, but bringing the Xbox One in closer to Windows 10 was the icing on the cake.
And the Office 365 subscription service just got more useful on Macs, PCs, iPhone, and Android this year: In January, Microsoft’s new Outlook app for iPhone turned a lot of heads, and the company has been releasing a steady stream of cool, sometimes quirky, little apps and tools across platforms ever since. It’s a big shift from traditional software sales, but it’s working, as a growing number of businesses and consumers appear to be signing up.
On the enterprise side, Microsoft continued to open up its successful Microsoft Azure cloud to a wider base of software developers than ever before, mainly by getting over its long-time insistence on making coders use Microsoft tools and languages, and broadening out to support the actual tools that they want to use, like Linux or Docker containers.
Microsoft finally figured out that nobody really cares about the company’s vision or its control over the platform. Customers and consumers just want to do cool stuff, on the devices they like.
All of this good stuff, and the hype that goes with it, doesn’t change the fact that Microsoft is still lagging in many critical markets.
Windows 10’s numbers look good so far, but user adoption of the software still lags behind Windows 7, the most-used PC operating system in the world.
The bigger problem is that Google’s Android is now the most popular operating system in the world. And thanks to the success of the iPhone and Android, sales of the PC are dipping, with scant chance of recovery.
That would be less concerning if Microsoft had a credible play in smartphones, and some momentum to ding away at Android’s dominance. But despite the success of the Microsoft Surface Pro 4 this year, Microsoft lags behind Apple iOS and Android in both phones and tablets, by a wide margin.
Compounding the issue is that Microsoft gave Windows 10 away for free to consumers upgrading from Windows 7 or Windows 8, meaning that it’s probably not going to see a significant revenue spike from the new operating system — at least, not until enterprises, slowpokes that they are, take the Windows 10 plunge. And even then, it’s a business in overall decline.
And while Office 365 is a success by any measure, it’s cannibalising sales of the Microsoft boxed Office software. With Office 365 billed monthly or annually, it means Microsoft has the opportunity to generate a lot more revenue per customer. The challenge is that it’s going to take a while for that revenue to be anything other than theoretical, as the subscription cash starts to roll in.
The Microsoft Azure cloud is successful, too, but it’s still second fiddle to Amazon Web Services in many respects, including revenue.
Even the Xbox One is still losing badly to the Sony PlayStation 4, with Microsoft’s chances for winning this generation of console hardware getting grimmer by the day.
So while Microsoft is making all the right moves, and righting many of its past wrongs, just remember that there’s a lot that needs to happen, and a lot of money to be counted, before the company can rule the world once again.