Windows 7 has landed. After months of hype, Microsoft has finally delivered its newest PC operating system. Reviewers are raving about it, and it looks set to sell well. But its release marks the end of an era.
Microsoft’s launch of Windows 7 at Nelson Mandela Square in Sandton last Thursday evening was interrupted by a powerful Highveld thunderstorm. Torrential rains flooded the marquee, tripping the electricity.
The storm provided an easy metaphor for the way “cloud computing” threatens to disrupt Microsoft’s business model.
The era of large operating systems, delivered once every few years at great cost, is drawing to a close. Windows 7 could be the last time Microsoft delivers an operating system on shiny discs sold in retail stores. The world is moving online — into the “cloud”.
What does this mean? Well, for the computer industry, it’s a big deal. The shift online is changing the way people think about monetising software.
Don’t get me wrong: I think Windows 7 is going to sell like cold beer on a hot summer’s day. It’s a very good operating system and, unlike Vista, will finally persuade the very many companies still running Windows XP to upgrade. Companies will still be running this software 20 years from now. I don’t think the same thing can be said about Windows Vista, 7’s much-maligned forerunner.
Windows 7 will give Microsoft’s income statement a real fillip in the short term. Longer term, however, there are real threats emerging to the company’s business model.
The principal among these is cloud computing. People are increasingly turning to the Web for their applications, be it e-mail or accounting or calendar scheduling. Microsoft arch-rival Google is building a powerful set of tools delivered almost entirely through a Web browser.
The problem for Microsoft is that computing in the cloud makes the operating system less relevant. The more people turn to the Web for their productivity tools, the less they come to rely on the operating system — and the easier it becomes for them to switch platforms.
Google, which is already making quick inroads in mobile phone software with its Linux-based Android operating system, has begun working on a Windows replacement that will facilitate easy access to its online services.
The software will be distributed free online, allowing anyone to tinker with it. Google’s giving the software away, hoping to monetise its online services through advertising. Where Linux failed, Google may succeed.
Also based on Android, the software is slated for a 2010 release, and will initially be targeted at low-cost netbook PCs. But if it proves successful on netbooks, expect Google to make it available on other hardware in no time at all.
It’s not clear what Windows 8 — assuming Microsoft calls it that — will offer that Windows 7 doesn’t. There may not even be a Windows 8. It’s entirely possible that Microsoft will deliver new functionality incrementally to consumers online, through its Windows Update service.
You’ll continue to pay for it, of course — at least for now. Consumers might be expected to subscribe (an annual fee, maybe) to receive updates. The subscription model appeals to software makers like Microsoft: it provides a recurring source of income and helps smooth the revenue and profit lines.
Of course, Microsoft is very aware of the dangers ahead. It’s experimenting with a free, advertising-supported version of its popular Office suite.
And it’s working on a cloud-based operating system called Windows Azure. Business customers, wanting guaranteed interoperability with their Microsoft-based corporate systems, may be more drawn towards a Microsoft cloud-based solution.
However, consumers are likely to be drawn to whichever service works best for them, and that may mean them turning to Google, or another company altogether. And whoever wins the consumer market eventually wins the corporate market, too — as Microsoft knows only too well.
- This column is also published in the Financial Mail
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