Microsoft's 2017 could be bigger than 2016

What happens when you stop being afraid? Ask Microsoft, a company that seemed to spend the better part of a decade tiptoeing around customer concerns and competitive land mines to create a string of perfectly acceptable products with very little heat.

Fast forward to the last couple of years where Microsoft has consistently surprised customers and even outshone competitors. 

“Microsoft is focused on building market-leading, category-changing products. They seemed to have seized that mantel from Apple,” said Forrester Research analyst J.P. Gownder.

It’s something the results of my anecdotal Twitter poll mostly agree with.

The Redmond-based company that built its fortune on Windows seems willing to break more than a few digital eggs to build truly special products and services. And if 2016 is any measure, 2017 could be the company’s breakout year.

Microsoft’s rise coincides almost perfectly with Satya Nadella’s installation as CEO. Nadella, who previously operated in relative anonymity while in key positions (most notably head of Microsoft Cloud and Enterprise Group) has used his cipher-like persona to his advantage. No one knew what to expect of Nadella or which parts of Microsoft he prized and which he might quickly shed. His Microsoft has been quick to drop old rivalries (Windows versus macOS and Windows Mobile versus iOS) and instead build bridges that might push Microsoft’s vision of human/digital interaction.

In an early 2014 interview, Nadella told Vanity Fair:

What is scarce in all of this abundance is human attention. And whoever does the best job of building the right software experiences to give both organizations and individuals time back so that they can get more out of their time, that’s the core of this company—that’s the soul.

The idea of attention is an interesting one because Microsoft has, more than anything in 2016, managed to turn human attention back to Microsoft and its products. 

Buzzworthy introductions like a shipping HoloLens, Microsoft Pix app, Paint 3D, A Slack competitor called Teams and the stunning Surface Studio and Surface Dial got everyone’s attention this year and also helped soften the dual blows of a failed wearables and mobile device programs. That may be the most interesting thing of all about Microsoft in the second decade of the 21st Century, that it’s building momentum without two key oars in the water — mobile phones and wearable technology. 

In 2017, don’t expect Microsoft to change course, though it will need a least a pair of splashy introductions to maintain the excitement that’s still building around the company.

Here’s what you can expect from Microsoft in 2017.

Expanding the Surface Brand

After years of relying on the Windows and Office brands to propel every new idea, Microsoft has finally found a winning hardware platform in Surface. It’s a remarkable turn for the brand, which used to be reserved for the vertical-market touchscreen tabletop the company debuted several years ago. Now Surface is the flagship brand for a growing line of smartly designed devices that invariably serve to guide a pack of OEMs to design more innovative products that will, in turn, run Microsoft software.

It started a few years ago with the Surface Pro (more precisely with the Pro 3, which got the all the elements right) and has continued with the unusual Surface Book and its dynamic fulcrum hinge and now the Surface Studio, an all-in-one system that’s put Apple on notice.

In 2017, Microsoft will expand the Surface brand on both the high and low end. 

On the high side, we’ll see the arrival in market of the pricey Surface Studio. On the low end, analyst and Creative Strategies President Tim Bajarin told me Microsoft currently has no answer for the super-affordable Chromebooks of the world, but that could change next year.

Microsoft currently has no answer for the super-affordable Chromebooks of the world.

Imagine a device that matches Chromebooks on price ($300), but runs Windows 10 and maybe even looks a lot more like the Surface Pro. It would naturally be thicker, offer two USB 3 ports and keyboard that doesn’t detach, but can still flip around all the way to the back.

2017 will also be the year of the Surface Pro 5. This will be Microsoft’s leading-edge, ultraportable device. Gownder suspects the next Surface Pro will be lighter, while Analyst Patrick Moorhead of Moor Insights and Strategy thinks it’s time to upgrade a bunch of key components and ports. He said we should look for updated processors, including Intel’s 7th Generation Core i CPU (a.k.a. Kaby lake). They may also follow Apple’s lead and add USB-C, with Thunderbolt 3 support on the back end. 

While swapping USB 3.0 for USB-C would save space and allow Microsoft to make the Surface Pro even slimmer, I wonder if Microsoft will seek to avoid Apple’s apparent misstep and keep at least one full-size USB port on the next Surface Pro.

Cortana on the move

Microsoft is just as invested in artificial intelligence as Apple, Google and Amazon and struggles with the fact that Cortana, the company’s digital voice assistant, remains largely unseen unless you use it on the desktop, and even then most of us aren’t talking to it. Microsoft already migrated Cortana to iOS (yup, I’m guessing you didn’t know that), but in 2017, Cortana will break even further out of its PC shell.

Moorhead wants to see Microsoft do more work with PC manufacturers to improve Cortana’s performance on the desktop. “The PC has one thousand times the performance of an intelligent agent. Shouldn’t it work faster than a separate hardware product?” said Moorhead.

On the other hand, “I’ll be very surprised if the Surface group doesn’t bring out a device,” Moorhead told me. Project Evo, which imitates the Amazon Alexa approach of building assistant-specific devices, seems like a step in that direction. A collaboration with Intel, Project Evo promises to bring AI, security, mixed reality, gaming and Cortana to a wide variety of devices. While it’s possible Microsoft may just sit back and wait for the integration to happen, this new Microsoft likes to lead the way, so I expect a standalone reference Cortana device by the fall.

“I think Microsoft needs to do some sort of Cortana outside the PC to achieve their goals,” agreed Forrester’s Gownder.

Gownder also believes Microsoft will expand Cortana’s horizon’s through the Cortana Intelligence Suite, which will bring the digital assistant to third-party products.

“Cortana will turn AI into a service that can be deployed inside other people’s applications,” Gownder told me. “Consumers may experience Microsoft AI as a turbo boost to other things they already do.”

My reality is your reality

It’s no accident that Project Evo also includes mixed reality. Microsoft has, with HoloLens, taken the augmented-reality lead. Like Apple, Microsoft appears to think it has a bigger and brighter future than virtual reality, which may ultimately become a strong gaming platform, but never leave the playroom. Mixed reality has the potential to thrive at home, at work, in the classroom and even in the workroom. One of my first experiences with HoloLens was letting it guide me on repairing a light switch. 

In 2017, Microsoft will work with more third-parties to bring more affordable and consumer-focused mixed-reality headsets to market. Most experts I spoke to do not expect a consumer version of HoloLens in 2017.

Mobile no

Microsoft will build more mobile experiences for iOS and Android, but don’t expect a Surface Phone. The company knows how tough it is to break back into the market with a new platform. Its Windows Phones have a single-digit slice of the mobile pie and a new Surface handset, no matter how much cutting-edge design Microsoft puts into it, is unlikely to grow that share. Most I spoke to share this belief… most.

“There is an outside chance they get back into phones, somehow, but I am skeptical… I imagine it’s probably not the right time for that,” said Gownder.

Windows more

The jury’s split on whether or not Microsoft will still do major Windows releases. Nadella wants the market to see Windows as a constantly updating service, not something that goes through a major overhaul once a year. That could mean no major Windows events or released in 2017, just a steady stream of updates, with the occasional call-out for a significant feature advance.

Moorhead, for one, believes Microsoft will stick to the script and do a release with a unique identifier and launch date.

One thing that Microsoft may be able to count on in 2017 is a surge in upgrades. Experts believe 2017 will be the year Windows 7 users put the OS or the systems running it out to pasture. That could be good news for Microsoft’s bottom line, which still relies heavily on Windows revenues for upgrades and from OEMs, and for PC manufacturers who have seen steady stales declines.

Some, like Gownder, don’t believe that Microsoft will reach the 1 billion Windows 10 devices Nadella predicted (he’s since revised that figure), but he still sees a lot of life in the PC market. It’s something, he told me, you can’t judge on a financial basis. “The PC market may not have mojo of volume, but quality of margins on sales that do happen will be higher,” he said.

Business time

Microsoft will upgrade Office in 2017, but all eyes with be on the business tool trio of Skype for business, LinkedIn and the new Teams.

Expect Microsoft to integrate the real-time contact and networking info found in LinkedIn into Office and Outlook and for Skype for Business to show up as an option/feature on LinkedIn.com. As for the Slack-killer Teams, the integration with Office can only help it and, if it does a solid job of integrating Trello-like workflow features, it could, in 2017, slow down the Slack juggernaut. 

2017 will also be the year of Project Scorpio, Microsoft’s brand new gaming console. What we know is that it will be super-powerful, but you’ll still have to buy your VR headset separately. Considering that Microsoft already released a 4K- and HDR-ready console this year (the Xbox One S), enthusiasm for yet another box might be a bit muted until 2018.

Whatever Microsoft does in 2017, it must not lose sight of what’s made it so strong in the last two years: a fearless approach to product and innovation where the passion of development is evident in the finished product and the fear of failure is somebody else’s problem.