Microsoft Market Share Slips: Pressure’s On for Windows 7 and IE8

The month of December has already been unkind to Microsoft. The software giant’s Windows operating system and its Internet Explorer browser saw significant market share drops reported on back-to-back days.

Not only was the November percentage drop for Windows the biggest in two years, but Windows market share dipped below a number where it has historically held tight: 90 percent. According to Web metrics company, Net Applications, Windows market share as of Dec. 1 is 89.6 percent.

Meanwhile, Mac OS X posted its largest gain in two years, with 8.9 percent market share at the end of November.

On the browser side, Internet Explorer’s market share dropped below 70 percent to 69.8 percent for the first time in more than a decade. IE slid 1.5 percentage points in November, totaling a 5.8 percent market share loss for 2008, according to Net Applications.

New challengers continue chasing IE, with the introduction of Google’s Chrome browser into the market. And rival browsers Mozilla Firefox and Apple Safari saw gains in November of 0.8 percent and 0.6 percent, respectively.

Industry experts say these market share decreases for Microsoft will likely continue, so the pressure is on the software giant to compete more effectively next year with the expected releases of and Windows 7 and Internet Explorer 8.

Mac OS Keeps Gaining on Windows

A note of caution: Though the data from the Net Applications report was reported by many media outlets, Rob Enderle, Principal Analyst of consulting firm the Enderle Group, does not put a lot of stock in the report. “Since surveys like this typically have a confidence range of 3 percent, movements of a fraction of a percent aren’t very meaningful.”

Nevertheless, Enderle emphasized that Mac OS X has been gaining steadily on Windows for the past two years because of Vista’s platform problems and Apple’s strong marketing.

Enderle also has seen that Macs are sneaking into the enterprise, as more buying decisions have recently moved away from IT to the line-of-business organizations that fund the upgrades. These organizations are finding that Macs, despite their high premium price, actually provide a lower total cost for enterprises than PCs, Enderle says.

According to Enderle, overall cost in an Apple shop is less because the employees pick up much of the support burden themselves rather than relying on an overburdened IT department. Often, the employees are even encouraged to buy their own Mac machines, dropping the annual cost below $1,000 per employee per year, he says.

Enderle notes that the average cost for a notebook computer in a large enterprise, including support, runs about $1,800 per year per employee, excluding only non-OS software licenses.

Vista Makes Some Progress

The Mac OS may be making incremental gains on Windows every day, but the Net Applications market share report showed that Vista is finally gaining on its predecessor, Windows XP. In November, Vista grew its market share by 1.16 percentage points, cracking the 20 percent mark for the first time. XP market share fell by 1.81 percent in November, according to Net Applications.

Roger Kay, president of research and consulting firm Endpoint Technologies, says that Vista’s market share bump proves the OS is at last winning over people’s trust.

“Vista is finally stable after two years, and more people are adopting it willingly,” he says. “Commercial entities are aware that XP support is going away and are making their peace with Vista.”

Enderle, on the other hand, sees Vista’s gains as negligible, and believes that Windows XP will only be eclipsed by the next version of Windows.

“Windows 7 may help Microsoft recover, but Windows remains at risk until Windows 7 ships,” he says.

Will Windows 7 and IE8 Stop the Bleeding?

Internet Explorer is feeling the heat of a more crowded marketplace, and is suffering from compatibility issues with IE7 that have driven users to Firefox, which grew to 20.8 percent market share in November. On top of that, the browser was vulnerable in November to more weekend days and holidays and the increasing unemployment rate, analysts say.

“The more home users who are online using Firefox and Safari at home rather than IE, the more those browsers’ shares go up,” says Vince Vizzaccarro, Net Applications’ executive VP of marketing.

“You have to factor for the unemployment rate, too,” he added. “That’s put a lot more users at home as well, which means more users using Firefox and Safari, not IE.”

Just as Enderle thinks the arrival of Windows 7 will come to the rescue on the OS side, he feels the same about IE8 on the browser side.

“IE8, which is due early next year, addresses many of the issues in IE7 that have been driving folks to Firefox,” Enderle says. “IE8 should slow the erosion there substantially if it meets expectations.”

Kay agrees that 2009 is a vitally important year for Microsoft and that the Windows 7/IE8 package has the potential to save face.

“IE now faces more viable competitors than ever before,” he says. “However, Microsoft may regain some ground with Windows 7, which may drag IE along with it.”