In an iPad World, How Long Before Microsoft's Post-PC Collapse?

Microsoft is backing into the abyss. It has yet to accept the danger of losing a large part of the home market, of education, and of businesses and divisions of businesses that use images to sell to and communicate with customers.

A World of Choices

In today's economy, traditional IT departments too are at risk, and every time a senior executive is sold on using an iPad or a smartphone, the question inevitably rises: How can we use these to build our business? And no business can afford to wait for Microsoft if its competitors can sell more effectively.

Crying Windows everywhere, as if it were ten years ago, doesn't help. Windows Phone 7 was a step in the right direction to reestablish Microsoft in mobile, and the partnership with Nokia may still rescue it, but it looks as though the Windows bureaucracy has won. With the emphasis on Windows rather than Phone, Microsoft risks pricing itself out of the market in the way that Apple did with the Mac, before Steve Jobs returned.

The MS-DOS and Windows monopolies were established with low prices, and mobile computing needs to be treated the same way. In mobile, laptops are not growing at anything like the rates of smartphones and tablets, but traditional PCs is the only part where Windows has a real foothold, and that means desktop pricing won't work while Android, the established alternative, remains free.

Microsoft's Shrinking Share of the PC Market

PC sales were down again in the last quarter according to IDC and Gartner, although Mac sales were up (as usual), outgrowing the PC market as it has every quarter for the last five years. The worrying trend for Microsoft is falling PC sales in wealthier markets like the US and Europe, markets where many have the money to buy the consumer electronics they want - and for a growing number of users, PCs are already good enough. When they want a new computer, Macs and iPads are increasingly part of the choice.

Of course, when iPad and Mac sales are counted in with PCs, the sales trend is still up - it's just that Microsoft is not benefiting, and if it doesn't make Office readily available on tablets, it will cut itself off from one of the fastest growing markets.

According to Canalys, Apple already has 9.5% of the PC market when tablets are included. If the iPad manufacturing ramp up lets it sell 10 million iPads this quarter and the same 25% increase in Year on Year Mac sales as last quarter, Apple will be challenging HP for the top spot in the market.

Changing Platforms Means Changed Expectations

Many people are used to Windows and think that changing will be too much of an upheaval, but few are power users, and tablets are different, so iPad users don't expect them to work in the same way as a PC. People look for similarity with something else they use, for how something new should work. As touch is the main tablet interface, iPhone and iPod touch and Android phones are the obvious starting points, not Windows. Any survey suggesting that people would like or want to wait for Windows on a tablet overlooks this wish for something familiar to reduce the time it takes for the tablet to become useful - the more people that use smartphones, the more people will be used to driving their apps by touch, and the less Windows will be the starting point.

Microsoft missed its chance to dominate phones and tablets in the same way it did the PC. It has already lost its largest Windows customer, HP, to WebOS, and Dell is trying to be an Android player. Motorola has moved completely from Windows Mobile to Android, and HTC went from being the company making most of the Windows Mobile cellphones to being one of the largest Android manufacturers.

Samsung, HTC, and others have tried shipping Phone 7 handsets but to lackluster sales, which haven't been helped by Microsoft's failure to update the OS at anything like the speed of Apple and Google. Now the best Microsoft can hope for in phones is sufficient success with Nokia to show that it can still be a player. Nokia has already lost first place in revenue and profitability to iPhone 4, and its first Phone 7 handset will be competing with iPhone 5.

Microsoft has never managed to establish the Windows home server as an essential. Now that opportunity has likely passed with the inclusion of OS X Server as part of Lion, the 10.7 release due this summer - unless Microsoft is willing to bundle its server as part of most versions of Windows 8 on PCs. Even then, the problem will be making it usable by and for the family. Apple spends a lot of time making software look simple so that new users can do something with it, but Microsoft, with its strong hold on the technical user and the IT departments, has never had to make that effort.

The Gaming Market

PCs used to dominate games. Then much of the market shifted to consoles, where developers could give players a consistent experience. It was no longer down to designing around the hardware, trying to find a large enough market for a game to make a profit without it playing poorly for the highly vocal enthusiasts with high-end graphics cards. Then the Wii picked up casual players in their millions but, judging from Nintendo's figures, many of them don't often buy new games.

It is these casual players who will migrate to tablets. Many of them are used to playing for a few minutes here and there on iPhones, iPods, and smartphones. Similarly, iPad games are much cheaper than console or PC games, and players can pick them up when they want to and don't need to take over the family TV or go to another room. In the same way that the iPhone/iPod touch games market is already larger than the Nintendo DS and Sony PSP markets, so tablet games will be larger than console or PC games in a few years, and Microsoft's Xbox too will be struggling.

Microsoft Marginalized

Internet Explorer has ruled web access for over a decade. This year its share should drop below 50%. It's not as if people are using the Internet less, but that more people are choosing alternatives like Firefox, Chrome, and Safari, and this will accelerate as more of that access is on iPhones, tablets, and smartphones, where Internet Explorer is not a contender.

Also, when IE's share drops below 50%, it will be less of a standard and so taken less into account in website design decisions. If, as looks as likely, the new standard is WebKit, then another part of the Web will be open.

To the extent that Windows survives outside of the office, it will be one OS among several - and it will no longer the most important in many sectors, certainly not worth the money that Microsoft currently charges.

However, the business sector will keep Microsoft highly profitable for the foreseeable future. There are too many entrenched systems that work, for change to be other than glacial in the workplace. But monopolies don't last forever - it only seems like that when you have to deal with them.