Webinar Microsoft Windows Evolves From Dominance To Contender Frank E. Gillett, Vice President, Principal Analyst October 19, 2012. Call in at 10:55 a.m. Eastern time Please tweet us your questions: #ForrWin8

Agenda How is client computing being transformed? How is Microsoft evolving Windows in response? What are the challenges for Windows stakeholders? How will Microsoft’s Windows migration play out? How will we measure platform success in future? How will the future of Windows unfold?

Personal computing market forces TWO BIG TRANSFORMATIONS OF PERSONAL COMPUTING ARE UNDERWAY From PC-only to multiple personal device types From device-centric to service- centric

To understand how the market is evolving, Forrester sized and forecasted global personal device sales Device segmentation Form factor: PCs, smartphones, tablets OS Vendor Purchase and usage segmentation Pure consumer BYOD Enterprise Purchaser and user demographics Vertical Region Country: 62-country Forrester taxonomy All demographic capabilities of Forrsights and Global Consumer Technographics® For more information on our Forrsights Workforce Employee Survey, Q4 2011 and Forrsights Hardware Survey, Q3 2011, check out Forrester’s Forrsights home page: http://www.forrester.com/home#/data/business

Microsoft holds dominant share of PCs *Forrester forecast Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

But a small share of smartphones, now the largest segment of personal devices *Forrester forecast Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

Effectively no share, so far, in tablets, the fastest-growing segment of personal devices *Forrester forecast Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

Microsoft Windows’ units will continue to grow, but so will the rest of the market *Forrester forecast Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

Microsoft Windows’ share of all personal devices has shrunk to 30% and stabilizes through 2016 *Forrester forecast Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

Agenda How is client computing being transformed? How is Microsoft evolving Windows in response? What are the challenges for Windows stakeholders? How will Microsoft’s Windows migration play out? How will we measure platform success in future? How will the future of Windows unfold?

Microsoft is boldly transforming the Windows ecosystem Creating a cohesive touch-native Windows 8 UX across PCs, tablets, and smartphones Building a new programming mode for client-side apps Rolling out a new app store software distribution model that upends existing distribution Adding support for mobile capable ARM CPUs in addition to x86 Designing and selling two Microsoft-branded tablets that compete with partner OEMs Using Microsoft account to create a consistent Microsoft personal cloud-service experience

Microsoft’s Windows transformation correctly addresses many market developments New mobile device types beyond the PC New user interactions in touch, voice, and gesture Broadening use cases — quick, casual, and in context Stagnant PC sales yet growing Mac sales New app distribution and deployment models New SaaS ISVs and apps supplanting traditional ISVs and software suites New programming languages and mobile development approaches

Agenda How is client computing being transformed? How is Microsoft evolving Windows in response? What are the challenges for Windows stakeholders? How will Microsoft’s Windows migration play out? How will we measure platform success in future? How will the future of Windows unfold?

It will take time for Microsoft to work through the Windows 8 transition The choice of four CPU architectures will confuse and slow tablet and laptop uptake. Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

It will take time for Microsoft to work through the Windows 8 transition (cont.) The choice of four CPU architectures will confuse and slow tablet and laptop uptake. Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

It will take time for Microsoft to work through the Windows 8 transition (cont.) The choice of four CPU architectures will confuse and slow tablet and laptop uptake. Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

It will take time for Microsoft to work through the Windows 8 transition (cont.) The choice of four CPU architectures will confuse and slow tablet and laptop uptake. Tablet and touch buyers will like the Windows 8 UX, but many buyers will be put off by it. Customers will be confused by an inconsistent input experience across different hardware. It will take a year for ISVs to fully stock the Windows Store with a range of apps. Microsoft will struggle to communicate the richness and complexity of Windows 8 at launch.

Agenda How is client computing being transformed? How is Microsoft evolving Windows in response? What are the challenges for Windows stakeholders? How will Microsoft’s Windows migration play out? How will we measure platform success in future? How will the future of Windows unfold?

After a slow launch year, Windows 8 will take hold in 2014 ISVs take a year to work through the new UX and Windows Store models. Windows hardware makers prepare a new round of hardware for fall of 2013. Consumers initially jump for tablets and then slow up adoption to digest all the changes. Enterprises will simply wait on Windows 8 other than trials with tablets.

No platform vendor will dominate across personal device categories in 2016 Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

Agenda How is client computing being transformed? How is Microsoft evolving Windows in response? What are the challenges for Windows stakeholders? How will Microsoft’s Windows migration play out? How will we measure platform success in future? How will the future of Windows unfold?

In a heterogeneous device market, success metrics shift to services We’ll be tracking new metrics, including: Engagement with online accounts. Stored-payment methods. Revenue and profit per user for the platform vendor and for the ecosystem overall.

Microsoft has a large number of user accounts, which could help it preserve OS share Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

Amazon and Apple have a huge lead on US credit cards on file over Microsoft and others Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

Amazon’s and Apple’s US customers are less likely to have cards on file with others Source: October 22, 2012, “Windows: The Next Five Years,” Forrester report

Agenda How is client computing being transformed? How is Microsoft evolving Windows in response? What are the challenges for Windows stakeholders? How will Microsoft’s Windows migration play out? How will we measure platform success in future? How will the future of Windows unfold?

Windows 8 is simply the first step in an ongoing transformation Microsoft will move to update Windows annually with Windows 9 arriving by 2014. Fork Windows into a desktop-only version and a pure new Windows version. Expand Microsoft brand hardware offerings while partnering with a handful of premium OEMs. Struggle to win emerging market consumers. Fully untether Office from Windows.

Frank E. Gillett +1 617.613.6017 fgillett@forrester.com Twitter: @frankgillett http://www.linkedin.com/in/frankgillett