There have been various arguments that the PC is dead, but a more accurate description comes from 41-year IBM veteran Irving Wladawsky-Berger, who says the PC is the new mainframe: still profitable, but no longer the center of innovation.
Innovation is happening in cloud computing, and smartphones, and tablets. With Microsoft struggling to gain any foothold in mobile devices, the biggest immediate danger to the Windows franchise is that smartphone and tablet buyers will delay the purchases of their next PCs.
It's hard to imagine large segments of the population doing without PCs entirely, but someone who spends hours each day with a smartphone or tablet might wait five to seven years to buy a new desktop or laptop. The 10-year-old Windows XP is still the most widely used version of Windows, after all. And as more people buy Androids, iPhones and iPads, Microsoft's share of all Internet-connected devices will erode.
"All the competitors would like to have you think that next year Microsoft hits the wall and the PC business is cut in half," Gillen says. "That is not what's going to happen. What is happening is we have a proliferation of other devices that are competing with Windows for mindshare. But at the end of the day, users, especially business users, need PCs."
Microsoft should position the PC as the hub for all other devices to connect to, from phones to television sets. The company should also consider building more software for non-Microsoft platforms, if it wants users to interact with Microsoft software no matter which device they are using. One key change Microsoft is embracing is the ARM chip architecture, popular in mobile devices and which Windows will now support in addition to Intel x86 processors.
One rumor is that Microsoft and hardware partners will build an ARM-powered laptop with a removable screen that becomes a tablet when separated from the keyboard. One Microsoft advantage is that all the rich applications running on Windows will be available to tablets. But Microsoft will need a user interface that is a compelling alternative to the simplicity of the iPad, and provide strong battery life and quick if not instant startup time.
"Beyond the user interface the other question is what does battery life look like with this, whether you're talking about ARM or Intel," Miller says. "If they're not really efficient, this could bring out the worst of the ARM system and show you why nobody's been able to make a kick-butt x86 tablet to date."
On start times, Miller says, "Windows needs to get to the point where boot time isn't something people think about." Unfortunately for Microsoft, the monthly security patches are an effective deterrent to hackers yet force users into long restarts. "I don't expect that to change in Windows 8," Miller says.
Microsoft's challenge was underscored by HP's decision to try to sell its PC business. HP is the No. 1 seller of Windows PCs, but Miller says "the tablet effect is real," driving down PC sales even though there is really only one successful tablet, namely the iPad. If Android tablets ever take off, Microsoft could be in a lot of trouble.
Microsoft's response: Microsoft declined to answer Network World's questions about Windows 8, but we expect to learn more at BUILD, and we'll learn a lot more next year when Windows 8-powered devices start shipping. For now, Microsoft has set up a blog called "Building Windows 8" to discuss progress.