Why Microsoft can afford to lose with Windows 8

The word on the street about Windows 8 is mixed at best. It’s Microsoft’s tablet PC play — so much so that the desktop is getting short shrift. This doesn’t seem wise, even if desktop sales are being displaced by tablets.

Can Microsoft really afford to alienate one of its biggest market segments for a whole product cycle?

In a word: Yes. In fact, doing something this risky might well be vital to Microsoft’s survival. Here’s why.

1. Windows 7 isn’t going anywhere Windows 7 was and is Microsoft’s biggest desktop success story to date. It knocked the bad taste of Vista out of everyone’s mouth and gave desktop and conventional notebook sales that much more of a bulwark against sagging sales, due both to a poor economy and conventional PC form factors being eaten into by tablets.

The latter, tablets, bothered Microsoft a good deal more than the former. To that end, Windows 8 has been first and foremost about putting a foot in the door of the tablet market. It doesn’t matter if few people upgrade to Windows 8 and Windows 8 sales are confined to new tablet machines. The bet for Windows 8 will be hedged by the continued presence of Windows 7.

Microsoft — and its attendant hardware partners — hedged its bets back when Windows Vista was released as well. The company saw that XP was, even after all those years, a strong seller, so many PC makers shipped with the option of either XP or Vista as a pre-load. Today, you simply have a choice of Windows 7 flavors. Even the die-hard XP user base is slowly eroding as older XP machines are retired.

When Windows 8 comes out, odds are the Vista-era strategy will be dusted off and reused. Expect to see Windows 8 machines pushed side-by-side with Windows 7 systems. Windows 8 will make some sales inroads — as long as Microsoft has some presence in the tablet space, it’ll happen — but it won’t be nearly enough to justify reducing Windows 7 to an endangered legacy offering. The fact that Windows 7’s full support timeframe has been extended to 2020 is further evidence of that.

2. Microsoft can afford to lose a product cycle The desktop is not the only source of income for Microsoft. According to the company’s FY12 Q2 filing, a little less than 25 percent of the company is about Windows on the desktop. The business, server, and entertainment/devices division all make up chunks of the pie that are at least as big, if not significantly bigger.

Even if Windows 8 stiffs horribly, the company is so diversified now, the effect will not be huge. Plus, many innovations from Windows 8 (virtualization, a more compact kernel, and so on) are being rolled into the next iteration of Windows Server products. These are things that, again, the poor performance of Windows 8 by itself will not affect; those innovations are already being put to use elsewhere. What I’d really like to see is for many of those same things to be rolled back into Windows 7 via SP2 or SP3, but I won’t hold my breath.

3. Better for Microsoft to fail when it has the luxury — and learn from it Microsoft needs to figure out what Windows is going to be from now on, especially with the PC space mutating and fragmenting. The only way to do that may be to gamble with the next release of Windows and see what happens.

If Microsoft has safety nets in place, with both Windows 7 as a fallback and the diversity of the company generally, it can afford to use Windows 8 as an experiment. It’s a wide-ranging attempt for Redmond to get a piece of the tablet market, which took on a life of its own entirely without Microsoft.

Microsoft has a bad track record for letting new markets get away. Windows Phone 7 is only the most recent example — don’t forget Bing, Zune, or the Kin “social phone” project.

People forget, though, that a company the size of Microsoft has the luxury of failing, as long as it doesn’t overcommit itself. Sometimes those failures pay off; the Xbox was considered a joke when it was first introduced and now it’s outrageously successful.

Microsoft’s game to lose? The Windows 8 experiment may not give Microsoft a success anywhere near the scale of Windows 7, but I honestly don’t think that’s what the company is shooting for. Microsoft did this to shake up its own complacency about the desktop, to see what is possible outside of the usual keyboard-and-mouse metaphor.

Microsoft also did this to get software developers along for the ride, so they won’t abandon Windows in favor of touch-centric environments. Metro is going to be a long road, much as .Net has been. It’s an attempt to apply what Microsoft learned from its phone interfaces to the desktop. There’s no guarantee that experiment will be successful. If it fails, it’s best that failure occurs while Windows users still have the option to stay with what they know and trust. Yes, I think Metro is a poor fit for big screens, but Microsoft is gambling that the next wave of major computer purchases won’t be devices that have big displays anyway.

In short, Microsoft needs to gamble, and right now might well be the best time for the company to do it. The company needs to learn from its mistakes as quickly and nimbly as they can — and then turn around and make Windows 9 exceed all of our expectations. Because if Microsoft doesn’t … well, then there might well be a Mac in my future after all.

This story, “Why Microsoft can afford to lose with Windows 8,” was originally published at InfoWorld.com. Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow InfoWorld.com on Twitter.