Microsoft 365 for Consumers Could Fix Our Windows 10 Woes (Premium)

It used to be so easy: Microsoft built its empire around Windows, the software that never stopped giving. Thanks to regular PC upgrades, an ever-growing PC market, and a family of codependent products like Office that swelled its coffers for decades, Windows fulfilled Bill Gates’ vision of “the magic of software” and made the company both rich and dominant.

And then it all came crashing down.

Thanks in part to the rise of mobile, the PC market peaked in 2011, just before the release of Windows 8, and it’s been in a tailspin ever since: In 2018, PC sales were lower than at any time in the previous decade, with the market shrinking by 30 percent over that timeframe. Added to this, PCs are more reliable than they’ve ever been, and customers are holding on to them longer. And sensing the weakness, PC competitors both real (Chromebooks) and erstwhile (iPad Pro) have made major pushes to convert dissatisfied Windows users to simpler platforms.

Microsoft hasn’t helped matters by botching its response to these trends.

In addition to its years-long attempts to fix the touch-first disasters in Windows 8, the firm decided to make Windows 10 upgrades free in an attempt at keeping Windows users with Windows. It moved Windows 10 to the “Windows as a Service” forced updating scheme in which our PCs get two major version upgrades a year, and at least one hefty, reboot-triggering cumulative update every month. And it has sought ever-more insidious ways to monetize a Windows 10 user base that won’t be paying for Window every three years with a new PC purchase: It has added advertising, crapware games and apps, and privacy-invading data collection to this once-proud platform.

These efforts have all been unsuccessful. Aside from the sheer terribleness of forced upgrades—“Windows as a disservice” is perhaps the better name—Microsoft’s efforts to further monetize Windows users can’t possibly have turned into a financial windfall. Worse, they simply piss off customers and make them more interested in examining the Chromebook and iPad Pro alternatives. Put simply, this whole plan has backfired.

We’ll see what, if anything, Microsoft does to correct these issues in 2019. But remember that Microsoft serves two core audiences, businesses and consumers. And while both have very different needs in some keys ways, both are likewise similar as well. It may be interesting and instructive to see how Microsoft handles its business customers differently than it does consumers.

For example, WaaS is a disaster for businesses too: They need to manage the rollout of new Windows 10 versions to multiple PCs and support those users and their unique, often in-house, custom applications. To meet this need, the WaaS treadmill isn’t as onerous for businesses as it is for consumers. And Microsoft has now extended the Windows 10 version support timeline for business customers at least twice.

Why treat businesses better? Because Microsoft’s business customers don’t buy Windows once and then use it on a PC for several years and they keep paying year after year. That license allows them to use whatever supported Windows version they want, and to mix and match if need be.

For this reason, the much-discussed Windows 10 “upgrade wave” won’t help Microsoft very much if its business customers just switch from Windows 7 to Windows 10 this year. They’re already paying for a Windows license that grants them access to either version. Them switching won’t generate more revenues for Microsoft.

Microsoft’s solution to this is a classic win-win and a direct evolution of Office 365, the software giant’s original win-win. It’s called the Modern Desktop, and it makes the Windows 10 upgrade just a component part of a broader upgrade that also includes cloud-connected Office 365 Pro Plus and Intune-based management capabilities. Microsoft markets this effort as Microsoft 365, and as Brad notes this morning in an editorial on Petri, migrating business customers from Windows 10 volume licensing to the Modern Desktop could result in massive revenue improvements.

That Office 365 is successful is obvious: It’s not just that hundreds of millions of customers are paying for this offering, it’s that they do so every year. That’s why Microsoft 365 makes sense, too: They’re paying more every year.

But these offerings make sense for customers, too. Where one might previously buy a specific version of Microsoft Office that was never functionally updated for use on a single PC, an Office 365 subscription comes with usage across any number of PCs and devices. And it is functionally updated every single month, so it keeps getting better, too.

And go figure, this system resonates with consumers, too. So it is only natural than many industry observers—including Mary Jo Foley and me—believe that Microsoft will offer a Microsoft 365 subscription for consumers as soon as this year. There are questions about what, exactly, would be included in this offering. But I think that Microsoft’s “Modern Desktop” concept holds the key. It’s not just a way to keep customers up-to-date—not just with Windows, but with Office and system management—it’s also a way to keep customers in the Microsoft ecosystem while offering them a set of solutions that offer great value. Again, a win-win.

Microsoft’s communication this week about the Modern Desktop is very much targeted at businesses. But when I think about how this might be modified for consumers and other individuals, I see a future in which Windows 10 users are monetized in a way that is both direct and proper. And I have to hope and believe that this system will see an end to those other terrible monetization attempts—especially ads and crapware—that still dog Windows 10 today.

This won’t make everyone happy. But a system in which the free users are monetized through ads (and crapware) and the paying users are not at least maps cleanly to other common usage scenarios, like the web, with which we’re all familiar. And it maps just as cleanly to how Microsoft monetizes its business users. Under this system, Windows 10 upgrades will remain free for everyone. What you can opt to pay for are all these other benefits—whatever they might be—and for a bit less ugliness. I could see paying customers getting more of a say over how many feature updates (versions upgrades) they have to install, for example.

Is the Modern Desktop the future of Windows 10 for individuals? I think it makes sense. The only questions now are whether Microsoft makes it happen, and how.