Last week I received an email from our IT team to ensure I am not running Windows XP and if yes then to remind that I must update to Windows 7 ASAP. After 12 years of supporting Windows XP, Microsoft decided to stop supporting the OS after April 8, 2014.
On a positive note it is admirable to support what you created for 12 years straight. What we have seen all these years is the pressure on Microsoft to maintain the support. So as much it is about Microsoft caring for customer more it is about their customer detecting terms for them. It is no secret that in spite of some successful consumer products like Xbox, Microsoft paying users are Big Enterprises. Microsoft’s financial results for 2013 reiterates which segments are bringing revenue and profit. See below chart for Revenue and Gross margin per segments. Note: Total Revenue was ($77.85 billions) and Gross Margin was ($57.60 billions)
Source: Microsoft Investor Dataset
Clearly 75% of the revenue and 93% of the gross margin is from “Commercial Licensing” and “D&C Licensing” segments which includes basically Windows OS and MS Office, see following definitions from Microsoft segment information.
Commercial Licensing: server products, including Windows Server, Microsoft SQL Server, Visual Studio, and System Center; Windows Embedded; volume licensing of the Windows operating system, excluding academic (“Commercial Windows”); Microsoft Office for business, including Office, Exchange, SharePoint, and Lync (“Commercial Office”); Client Access Licenses, which provide access rights to certain server products (“CAL”); Microsoft Dynamics business solutions, excluding Dynamics CRM Online; and Skype;
D&C Licensing: Windows, including all OEM licensing (“Windows OEM”) and other non-volume licensing and academic volume licensing of the Windows operating system and related software (collectively, “Consumer Windows”); non-volume licensing of Microsoft Office, comprising the core Office product set, for consumers (“Consumer Office”); Windows Phone, including related patent licensing; and certain other patent licensing revenue;
It is interesting to see Microsoft trying hard in last few years to woo CONSUMERS like you and I. Of course big enterprises are becoming more demanding in terms of price and support but they are here and are the reason why Microsoft is still making money and will make money for foreseeable future. If Windows OS revenue and profits are declining what is replacing that is server business. Again Enterprise customer not consumer. See below chart for revenue from these two segments from 2009 to 2013 explaining this trend.
All sales in $ millions
I think any initiative to be a cool consumer company is not in the DNA of Microsoft, they have not done that in years and their existing user base won’t let them. That’s why Microsoft continued supporting windows XP for 12 years. Can Microsoft turn in to a consumer company even at the cost of annoying their enterprise customers? May be for Microsoft to win they don’t have to be Consumer and Enterprise company at the same time. We will see, hope to see some changes from new CEO Satya Nadella soon.
PS: As “Windows 8.1 Update 1” is almost here, there are reports that “Metro” UI takes a backseat allowing desktop to boot as traditional Windows desktop. Even though Metro had some issues but it was step forward in right direction for touch UI and now back to classic seems step backward under pressure from “Existing” customers.