Microsoft predicted the 2013 product release cycle (Surface Pro, Windows 8, Office 365, etc.) would trigger a boom like Windows 95/Office 95 of 1995. But it hasn't.

The VAR Guy

March 13, 2013

4 Min Read
Surface Pro, Windows 8 Sales: Why It's Not 1995 All Over Again

Back around July 2012, Microsoft (NASDAQ: MSFT) predicted big things from a new round of products — Windows 8, tablets, Phone 8, Office 365, Office 2013. In fact, Microsoft compared its current product refresh cycle to 1995, when Windows 95 and Office 95 triggered a sales boom. Soon after Windows NT 4.0 took enterprise servers and workstations by storm. But all along, The VAR Guy told readers that it was unfair to compare Microsoft’s current product refresh to the 1995 sales boom. Here’s why.

Let’s take a look at each product segment — then and now.

1. Operating Systems: 

  • Then (1995): The installed base of PCs was fairly small, Apple was imploding, Novell missed the mark with DR-DOS, and IBM’s OS/2 had a range of limitations. PC makers still made decent margins on hardware, so they bowed to Microsoft for continued innovations. Windows 95 arrived with built-in networking, a vastly improved GUI, pre-emptive multitasking (at least in most cases), and a boatload of other features that greatly leapfrogged Windows 3.x. It was a no-brainer upgrade — for PC makers and customers alike.

  • Now (2013): The PC market is contracting, and PC makers now face slim margins. Two major rivals (Android and iOS) have a serious installed base lead over Windows on tablets and smartphones. The Windows 8 release is NOT and automatic upgrade choice for legacy PC owners. Instead, many of those upgrade dollars involve consumers buying iOS and Android alternatives.

2. Office Suites:

  • Then (1995): Novell’s buyout of WordPerfect (plus the Quattro Pro spreadsheet from Borland) was a disaster. Novell was late delivering a 32-bit PerfectOffice suite for Windows 95. IBM completed its buyout of Lotus in July 1995, but that deal was far more about Notes (groupware) than SmartSuite (including Lotus 1-2-3). Microsoft was well-positioned to dominate the upgrade cycle as the Windows 95-Office 95 combo provided a killer 1-2 punch.

  • Now (2013): Office remains a lucrative franchise for Microsoft, but the threat of cloud-based productivity applications (Google Apps, Zoho, etc.) continues to grow. Google Apps is estimated to be a $1 billion business, and Google just named its channel partners of the year. Microsoft, meanwhile, is pushing subscription pricing very aggressively for the various on-premise and cloud versions of Office. It sounds like Office 365 is catching on quite nicely. But this is a real war with Google.

3. OEM Agreements

  • Then (1995): Every PC maker lined up to pre-install Windows 95. A few that tried to change desktop icons here and there felt Microsoft’s wrath. Also, PC vendors didn’t risk licensing or pre-installing other operating systems. Part of the reason involved Microsoft’s muscle. The other part of the reason: There were no viable PC software alternatives.

  • Now (2013): Within weeks of Windows 8’s launch, major companies like HP and Lenovo announced Chromebooks running Google’s Chrome OS. Canonical’s Ubuntu (a Linux distribution) also has a market niche with some PC makers. And new Android tablets seem to arrive weekly.

Bottom Line

Microsoft has done quite a lot right in the past year. Office 365 is particularly impressive. Server application upgrades like SQL Server, Exchange Server, SharePoint and Lync have been well-received. Windows Server 2013 with Hyper-V is a true VMware alternative in many cases. And Surface Pro — despite mixed reviews — is a very promising tablet design.

Still, Microsoft’s grand ambition — partying like it’s 1995 — has involved flawed reasoning from the start. Microsoft enjoyed the perfect storm of success in 1995 — the right products at the right time in growing markets that had lame competition. Today, Microsoft faces the perfect storm of competitors — high-cost innovations from Apple, low-cost disruptions from Google, and PC makers that welcome Windows alternatives.

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