In August you probably became aware that Microsoft was offering you the chance of a free upgrade
to the new Windows 10 from previous versions. This marks a watershed in the history of the
development of computer operating systems as Microsoft was the only company left which was still
charging money for a home-operating system upgrade. This freebie is really significant as
Microsoft is giving domestic consumers something it once considered its crown jewels. Of course
the company still charges for a Windows software licence for businesses, as well as computer
manufacturers who ship computers with Windows installed. Microsoft still reserves the right, after
one year, to charge domestic customers, but I think this is probably unlikely as that would only
increase the speed at which the company becomes even less relevant to many people.
By finally adopting the “give it away for free” strategy, Microsoft has made price comparisons
between Windows more competitive with the operating systems already available for free from
Apple, Google and Amazon. It is also a sign that cloud computing is rapidly becoming the norm,
where part or all of your data is stored in a remote data centre instead of on your own computer.
And it’s storing your data where Microsoft are planning to make their money. Microsoft Windows
used to be all about storing files on your own disk or on a company server. But during the last few
years Windows software has been re-designed to work well with Internet storage, just like Apple's
laptop/desktop operating system and iCloud. Google's Chrome and Android operating systems
have been designed from the outset to accommodate cloud storage as they started development
comparatively recently. If you want to really compare cloud with local storage the best example of
a free application that works seamlessly on the desktop is the cleverly coded office product Quip.
Windows has been Microsoft’s cash-cow for years so the move to free has been forced on it. The
Power Point chart above demonstrates why. People in the U.K. are now spending more time than
ever before on computing devices where Microsoft doesn't have a near monopoly on the operating
system. The data for the chart is from Ofcom's annual report on the U.K. Communications Market.
Ofcom is the government body that has oversight and regulatory powers for this whole area.
Incidentally this is once again longitudinal data similar to that which I used back in June. This data
must send shivers down Microsoft’s collective spine. It shows that a remarkable change has taken
place in the last three years - anyone accessing the Internet in the U.K. is now more likely to be
using a smartphone than a laptop or desktop computer.
Back in August 2012 I wrote about the huge error Steve Ballmer, the then CEO of Microsoft, had
made in not responding quickly to the first iPhone launch back in 2007. Ballmer made many
mistakes in his long tenure at Microsoft, primarily because he was first and foremost a salesman
and not a technologist. He simply didn’t recognise that with the advent of smartphones technology
had entered the fashion business. He was way behind Apple, which by 2014 had recruited Angela
Ahrendts, the ex-head of Burberry, to bring the necessary stylish vision and expertise to its senior
management. Ballmer's desperate knee-jerk response to this revelation was to buy Nokia for $7.2
billion. It was already far too late. Twelve months later, in July this year, after Ballmer had finally
been replaced, Microsoft had to write off $7.6 billion (including redundancy costs) for that ill-timed
Nokia purchase. Ballmer's successor saw the apparent seven billion asset as such a dangerous
liability it had to be instantly eliminated. Only a crazily cash-rich company like Microsoft could have
survived that kind of hit and still continued in business.
Fashionable technology? Oh yes. Technology products now have the same volatility that the
garment industry has contended with for centuries. This is because smartphones are seen and felt
as extremely “personal” computing devices. They are feasibly the first crude example of “wearable”
computing. You may have noticed how young people, squeezed into the tightest possible jeans,
always have room in a back pocket for the tell-tale bulge of their smartphone, ideally showing a
sliver of its identifying top. And it’s not just the young. Being seen to own the latest high-end
smartphone is as much a fashion as a status symbol for males and females of almost any age.
Perhaps, rather than wearable computing, a more appropriate term to describe the smartphone
would be “attached” or even “prosthetic” computing as, especially for the young, the smartphone
appears to have become an extension of their bodies.
It may also have become an extension of their minds: According to U.K. Ofcom data, three in ten
adults (29%) say they check their phones within five minutes of waking up. This ratio increases to
about half (48%) of all 18-24 year olds. And these stats don’t include all those individuals who use
their smartphones as an alarm clock to wake themselves up. Ofcom data also shows how addictive
using a smartphone is. About half (48%) of smartphone users score themselves at seven or above
out of 10 when asked to describe how hooked they are on their mobile phone. But 61% of young
people, aged 16-24, admitted to being addicted. This dependent behaviour is entirely predictable
as we all inhabit an ever faster communications feedback loop as so presciently defined by Norbert
Weiner in 1948 as “cybernetics.” I wrote about this in May last year in an article called “Caught in
I, too, have finally been caught in the smartphone loop as I recently succumbed to buying the new
Motorola G. As a show of solidarity I decided, at the same time as Microsoft wrote down $7.6
billion from its purchase of Nokia, I would write-off the princely sum of £15 that I had spent on a
tough and serviceable Nokia phone a decade ago. You may wonder why I didn't give in and
purchase a smartphone before now, but with two laptops and a Google Nexus tablet I thought I
already spent quite enough time “connected”. What really prompted my purchase was the
emergence of the third generation of smartphones, some of which are relatively powerful
computing devices. I had had a smartphone shopping list for some time: I wanted a plain Android
operating system, at least four cores on an ARM microprocessor, a reasonable camera, and a low
price so it’s not a catastrophe if I drop or break the device. The launch of the 3
generation Moto G
also coincided with the advent of an affordable PAYG tariff of £10 a month for 2,500 minutes and
one gigabyte of data transfer, so it was all systems go.
Much of the communication crossing mobile phone networks today is texting and emailing, and
this is forcing the networks to be more generous with their voice allowances, while jacking up the
cost of data transfer. It’s the people gobbling up Internet data by watching cat videos on YouTube
or playing games on their mobiles who are making lots of money for the mobile networks. It’s a
totally ludicrous business model, if you stop and think about it, and I’m quite sure it’s a welcome
but unexpected outcome rather than clever planning. The reason there is less voice traffic now is
that people have discovered that asynchronous text communication is far more convenient than
having to establish a synchronous time when both parties are available for a verbal conversation,
hence the outstanding success of WhatsApp and WeChat.
With the emergence of low cost but powerful smartphones, and cheaper network tariffs, more and
more people are buying these pocket computers. In the U.K. 66% of the adult population own a
smartphone and similar figures will be found in any developed country. It is the universal
popularity of smartphones that has forced Microsoft to give Windows 10 away for free, something
it wouldn’t have considered three years ago. In the U.K. during the month of March this year,
people were measured by Ofcom as spending an average of 58 hours 39 minutes browsing or using
apps on smartphones, compared to an average of 31 hours 19 minutes on laptops and desktop
computers. Hardly any of that use involved using a Microsoft operating system.
Across Britain, as in nearly every developed country, many of the laptop and desktop computers
which run Microsoft Windows aren't being used as they would have been even a couple of years
ago. The biggest application in modern computing is accessing the Internet, and smartphones and
tablets allow this to happen conveniently, and on the move, instead of being tied to a desk. This
goes a long way to explaining why, (according to industry analysts at IDC), global personal
computer sales declined a staggering minus 11.8% in the second quarter of 2015. Only Apple's
global sales held up at a comparatively amazing 16.1%, although it hasn't been all good news for
Apple as, according to analysts at Gartner, in Apple's home market of America, sales declined
minus 2.5% from the same quarter in 2014. America is often a leading indicator of what will
eventually happen in other countries.
Analysts have rationalised the global decline in computer sales as due to a strong dollar making
laptop and desktop computers more expensive. They also thought would-be computer purchasers
were holding off until Windows 10 was launched. But looking at the chart I reckon that because
laptop and desktop computers are not being used so much, people aren't going to buy them.
Today’s preferred device to use to connect to the Internet is mostly a smartphone and, to a lesser
degree, a tablet. If I'm right about this the launch of Windows 10 won’t significantly lift global sales
of laptop or desktop computers, and companies like Microsoft and Intel, plus computer
manufacturers like HP, Dell and Acer, will permanently struggle. They’ve lost the battle to connect.
...with analysis & insight...
The battle to connect