Microsoft's Windows 11 targets hybrid work, learning for post-pandemic world

Microsoft Corp. is leaning into hybrid work and learning for a post-pandemic world with its upcoming Windows 11 release, as the company looks to defend the market position of its signature operating system against smaller but fast-growing competitors.

Set to launch this holiday season, Windows 11 is the first new version of Microsoft's enduring operating system in about six years. While Windows 11's visual design is much the same as its predecessor, the new operating system includes a host of new productivity features, many of which were influenced by evolving user needs amid the COVID-19 pandemic.

Windows 11's desktop featuring a new, redesigned taskbar. Source: Microsoft

In an early preview launched June 28 for invited users and viewed by S&P Global Market Intelligence, Windows 11 included a revamped Start menu that looks and functions more like an app launcher, snap controls aimed at improving multitasking across a variety of screens and Widgets, and an AI-powered personalized feed that displays information such as news, weather and previews of the user's calendar and to-do list.

Ishan Dutt, a senior analyst at Canalys' global PC and tablet service, said Windows 11 improves the user experience around productivity, multitasking and switching between work- and leisure-focused tasks easily.

The updates "are squarely aimed at new usage behavior that we have seen arise over the last year or so, where more people are using their PC at home to cover a wider base of computing needs," Dutt said.

Android integration

Microsoft is also widening the base of apps that are compatible with Windows 11 to include those designed for Google LLC's Android mobile operating system. The Android apps will be downloadable through Amazon.com Inc.'s Appstore, which is being added to the new Microsoft Store app marketplace. Microsoft is partnering with Intel Corp. to use its Intel Bridge technology to allow the mobile apps to natively run in a Windows environment. The Android apps are not available in the current Windows 11 preview build, but a Microsoft spokesperson told S&P Global Market Intelligence that they are being tested and will appear in later preview builds of the OS.

Analysts said it remains unclear how much of a financial or competitive advantage adding the apps will be for Microsoft. Android apps are already available on Google's Chromebooks.

"Better Android app integration is also a good goal for Microsoft to have, but the reliance on the Amazon Appstore and lack of clarity around how easy and smooth sideloading apps will be a limitation," Dutt said.

Still, Wedbush analyst Dan Ives, who recently raised his price target on Microsoft's stock to $325 on an "outperform" rating, applauded the company's decision to open up Windows to its rival platform's software.

"We view this as a very open platform with enhanced portability for apps across the board," Ives told S&P Global Market Intelligence. "We believe this will be a catalyst for developers with the mobile features standout and long overdue."

Chirag Upadhyay, an industry analyst within the Intelligent Home team at Strategy Analytics, noted potential hiccups in the technical aspects of making the apps compatible that could limit the upside for Microsoft's bottom line.

"We're still not sure how many Android apps on Windows 11 will have the same capabilities they do on Google's devices or Chrome OS," Upadhyay said. "Microsoft may have to work with developers to bypass certain barriers or make modifications on an app by app basis. So, at this stage I don't think this will be much of a selling or marketing point for Windows 11."

Upadhyay also pointed out that Android apps are more entertainment-focused and may not appeal as much to enterprise users who are already reliant on Microsoft's own Windows-native apps.

"In the long-term, however, this is a move in the right direction and an interesting tactic by Microsoft to attract new developers to its ecosystem," Upadhyay said.

Development changes

In addition to integrating Android apps, Microsoft is also making its new Microsoft Store open to a wider range of developers by lifting most restrictions and allowing them to publish any kind of app, regardless of the underlying technology. Moreover, developers will not be required to use Microsoft's own payment system and can choose to use their own or a third-party commerce platform instead. The move is in stark contrast to Apple Inc. and Google's mobile app stores, which require developers to use their respective payment systems while taking a 15% to 30% cut on sales.

"These new Microsoft Store terms will not only put more pressure on the competition — which has already been facing scrutiny over their app store rates — but also make a very convincing case for developers to make more applications for Windows, which Microsoft desperately needs," Upadhyay said.

Recent data from Canalys found that Google's Chrome OS was the fastest growing platform in the first quarter, with year-over-year growth of 267%. Apple's macOS followed with 114% growth, and Windows trailed with 35%. Notably, however, Microsoft's platform had the largest installed base by far at the end of 2020, with about 989 million active PCs, followed by macOS with 94 million devices and Chrome OS with 67 million devices. By the end of 2021, Canalys estimates Windows PCs will reach an install base of about 1.04 billion, macOS devices to reach 101 million and Chrome OS to reach 95 million.

"Windows is still shipping the largest volumes by some distance, but the gains that Chrome OS and macOS have made over the last 18 months will be a cause for concern for Microsoft," Dutt said. "If Windows 11 can deliver on an improved user experience and address the questions around app integration and access to the update, it will be in a strong position to convince users to stay with Windows or even entice those that have made the switch to return."

Hardware requirements

Windows 11 will require more recent hardware to run than its predecessors. According to Microsoft's updated list of minimum system requirements, the OS will not function on Intel processors launched prior to October 2017 or AMD processors released before April 2018.

"Windows 11 raises security and performance baselines with new hardware specifications that will give our customers the confidence that they are even more protected from the chip to the cloud on certified devices with strong performance and more secure user experiences," a Microsoft spokesperson said in an emailed statement.

Prior to the release of the Windows 11 preview version, Microsoft launched a Windows PC Health Check app that users could run to determine whether their systems are compatible with the new OS. However, the company decided to remove the app as it was not providing a real explanation as to why Windows 11 might not run, and in some cases reported incompatibility issues on computers that actually did meet all of the minimum requirements. Microsoft said it would get the app back online at a later date prior to Windows 11's full launch in the holiday season.