Microsoft's focus on Windows 10 upgrades is a mistake

The most important customers to Windows 10's success are those who buy new PCs, analyst argues

Microsoft made a mistake at its recent developers conference when it didn't use the opportunity to push customers to buy new hardware, an analyst said today.

"On behalf of the Windows 10 team, we're happy to welcome all of these customers to Windows 10, whether they have a new PC, a five-year-old PC, or a Mac [emphasis added]," said Terry Myerson, the executive who leads the company's devices and operating systems group, after touting a new number of active Windows 10 users.

Carolina Milanesi, principal analyst at Creative Strategies, picked up on Myerson's "five-year-old PC," and didn't like what she heard.

"While Microsoft stated it is fine with some of those users having five-year-old PCs, a clear response to Phil Schiller's recent comment on the topic during Apple's last launch event, we strongly believe Microsoft should actually be concerned about the issue," Milanesi wrote in an analysis published on Creative Strategies' website.

Milanesi referred to Schiller -- Apple's head of marketing -- because during the unveiling of the 9.7-in. iPad Pro two weeks ago he trumpeted the device as "the ultimate PC replacement."

"There are over 600 million PCs in use today that are over five years old. This is really sad. These people could really benefit from an iPad Pro," Schiller said, taking one of Apple's trademark shots at the competition.

Microsoft, not surprisingly, saw things differently, as Myerson welcomed older systems to Windows 10. But he also heralded the new. "Our hardware partners ... have launched more than 500 new devices designed for Windows 10," Myerson said.

Milanesi thought talk of "old" illustrated Microsoft's fixation on getting current users to upgrade to Windows 10 and signaled that the company is not focused enough on convincing customers that they should purchase a new PC.

Her premise is simple: Those with newer machinesaere more likely to actually use the PC, and thus the OS, than people who had let their system age without replacement. In other words, by fixating on upgrades rather than new machine purchases, Microsoft has acknowledged that it's attracting a less-valuable audience.

According to Creative Strategies' research, consumers with a PC less than a year old were much more likely to use it for tasks like social networking -- Facebook, Pinterest and the like -- playing video games, and running productivity software, than were people who had hung onto the same system for five or six years.

That makes sense: Those with older PCs haven't upgraded because they've transferred many tasks, and the time they spend on devices overall, to smartphones, tablets or a mix of the two. Likewise, new owners bought because they wanted to use their PCs for more chores.

But since Windows 10 is essentially PC-only -- Milanesi said Windows tablet sales were flat, and the state of Windows on phones was dismal -- if users aren't engaged with a personal computer, they're not engaged with Windows 10.

And Microsoft should be paying more attention to that engagement.

"While [customers] might upgrade to Windows 10 -- the upgrade is free, after all, if they have kept their software up to date -- they might not be curious enough to experiment and discover," Milanesi said. "This is especially true when it comes to Universal Windows apps. In return, this will create less stickiness to the OS and lower even more the need to upgrade to new form factors like 2-in-1s."

Microsoft is counting on Windows 10 usage to bolster its bottom line through app purchases, ad sales on Bing and service revenue. But sans engagement, that goal may be unattainable.

"The mix still skews heavily to software upgrades. If [Microsoft] had good numbers for new machines they would have certainly mentioned those," Milanesi said in an email reply to questions today. "My point is that looking at how many software downloads there are does not paint the full picture. Microsoft cannot risk to be blinded by software upgrades. If people do not have new machines in their hands, Windows 10 will not make a huge difference long term when it comes to consumers loving Windows, not just using it."

About a quarter of the PC users surveyed by Creative Strategies used a system five or six years old. Of those respondents, 61% said that they had no plans to upgrade their machine in the next 12 months, reinforcing the engagement decline.

But even those with newer PCs lose interest in over time. "There is an increase in managing files and content, but a decrease in social [networking] and editing photos," said Milanesi of consumers with PCs aged two to four years. "You see users doing more at the start but then keeping [to the more] traditional PC tasks [on] the PC, diverting the rest mostly to the phone. This makes engagement even more important for Windows 10."

Microsoft has talked about Windows 10 engagement and cited some statistics on the subject, but not with enough consistency for outsiders to analyze and interpret. At Build, for example, Myerson claimed, "Customers are more engaged than ever before," and touted the statistic of 75 billion total hours of activity logged by Windows 10 users since launch.

While Microsoft has called out hours of activity previously -- in early January it said the OS had logged 11 billion hours during December -- as part of an effort to cast Windows 10 as a service, it had not issued a total number before. That makes it impossible to get a sense of whether usage has been increasing, decreasing or flat when compared with the number of devices.

Clearly, the pool of the most engaged users -- those who recently purchased a PC -- has shrunk. Research firm IDC recently forecast that the industry will ship 261 million personal computers in 2016, representing a 100 million device decline from "Peak PC" in 2011, with annual shipments through the rest of the decade of about 250 million units annually.

But it's unclear what Microsoft could do to boost sales of new PCs, which, especially on the consumer side, have plummeted over the last several years. The Redmond, Wash. firm has already beaten the drum about technologies coming to Windows 10, including pen support in the mid-summer anniversary upgrade, that require new hardware.

Milanesi's suggestion?

"Microsoft needs to find a way to make these users reconnect with their PC so they [realize] the limitations their old hardware has on their desire to take full advantage of what Windows 10 has to offer," she said.

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Gregg Keizer

Computerworld (US)
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