Research firm IDC reports that smart connected devices -- which include PCs, tablets and smartphones -- grew 27 percent year-over-year in the third quarter of 2012, but PCs are representing a smaller and smaller portion of these devices overall.
In 2011, according to IDC, PC's accounted for 39.1 percent of the smart connected device market. By 2016 it is expected to drop to 19.9 percent. On the other hand, smartphone share will grow from 53.1 percent in 2011 to 66.7 percent in 2016. Tablets will also grow significantly, from 7.7 percent in 2011 to 13.4 percent in 2016.
News of declining PC sales is not surprising and we know the challenges this presents to Windows 8 as it, along with Windows RT, tries to be the one OS for all form factors. But what does this mean for Microsoft's real cash cow, Office?
I used to think Microsoft should just make the full Office suite available for iOS and Android devices and be done with it. There are rumors that this could happen in the coming year. Such a move would still generate Office revenue for the company even though the software will be running on non-Windows devices.
But would this be a case of throwing out the baby with the bathwater? Office 2013 could be the one feature that gives Windows 8 and Windows RT an advantage over other platforms. Despite the troubles so far with the Windows 8 UI, sluggish sales and conflicts with hardware partners, at least Windows 8 tablets run the full-featured version of Office. If you also make Office available on the iPad, the choice for someone considering an iPad -- who may also want to use it for work -- gets a lot easier. Microsoft must latch on to whatever leverage it can in the competitive tablet market.
Fortunately (for Microsoft) millions of us do need Office for work and we're accustomed to using it on Windows. There are cheaper Office alternatives such as OpenOffice.org and Google Docs, but they don't hold up to the rich features of the full Microsoft Office. As I write this I have three Word docs, an Excel spreadsheet and Outlook email open, and they are all vital to my job. I'm certainly not alone here.
But to take a step back: Is Office enough to lure the mainstream tablet consumers that Microsoft needs to build a critical mass? Hardly. Outside of work mode, Microsoft Office is not important to a consumer interested in a tablet as a Web browsing and media consumption device. We haven't yet decided if tablets are for work or play -- a bit of both perhaps. But for the majority of tablet buyers raised on iPads and Kindles, their decision is not hinging on Excel and Word. So it's a question worth asking: If you don't need Office do you really need Microsoft anymore?
On Bloomberg Television's "Bloomberg Surveillance" program (video above), Richard Sherlund, an analyst at Nomura Holdings, asks that very question and does an excellent job of explaining Microsoft's "awkward tablet transition" despite being interrupted repeatedly by the show's over-caffeinated hosts. It's worth a look.
What do you think? Can Windows 8 devices survive if Office is available on competing platforms?