$600 Chromebooks are a dangerous development for Microsoft

Among the new hardware launched this week at IFA in Berlin are a couple of premium Chromebooks. Lenovo's $600 Yoga Chromebook brings high-end styling and materials to the Chromebook space, along with well-specced internals and a high quality screen. Dell's $600 Inspiron Chromebook 14 has slightly lower specs but is similarly offering better styling, bigger, better quality screens, and superior specs to the Chromebook space.

These systems join a few other premium Chromebooks already out there. HP's Chromebook x2 is a $600 convertible hybrid launched a few months ago, and Samsung has had its Chromebook Plus and Pro systems for more than a year now. And of course, Google's Pixelbook is an astronomically expensive Chrome OS machine.

These systems should cause ripples in Redmond.

Most Chrome OS systems are cheap: plastic instead of metal; TN displays instead of IPS; screen resolution that felt cramped and low a decade ago; inexpensive ARM processors rather than more powerful and pricier Intel ones. In a lot of regards, Chromebooks are hitting the same price points—with the same compromises—as netbooks did in the mid-2000s. This has given Chromebooks great appeal in the K12 education market, where the low price and almost disposable nature of the devices makes them a good match for careless student users.

But these $600 machines aren't aimed at those same students. Lenovo reps told us that its new Chromebook was developed because the company was seeing demand for Chromebooks from users with a bit more disposable income. For example, new college students that had used Chrome OS at high school and families who wanted the robustness Chrome OS offers are looking for machines that are more attractive, use better materials, and are a bit faster and more powerful. The $600 machines fit that role.

And that's why Microsoft should be concerned. This demand shows a few things. Perhaps most significantly of all, it shows that Chrome OS's mix of Web applications, possibly extended with Android applications, is good enough for a growing slice of home and education users. Windows still has the application advantage overall, but the relevance of these applications is diminishing as Web applications continue to improve. A browser and the Web are sufficient to handle the needs of a great many users. No Windows necessary, not even to run the browser.

Second, this demand makes clear that exposure to Chrome OS in school is creating sustained interest in, and even commitment to, the platform. High school students are wanting to retain that familiar environment as they move on. The ecosystem they're a part of isn't the Windows ecosystem.

Finally, it also shows that Chrome OS's relatively clean-slate approach (sure, it's Linux underneath, but it's not really being pushed as a way of running traditional Linux software) has advantages that are appealing even to home users. The locked down, highly secure Chrome OS machines require negligible maintenance while being largely immune to most extant malware. And the platform's cloud syncing means that even chores like backups can be largely avoided. Microsoft may be trying to offer the same with Windows, in particular Windows 10 S-Mode, but it's going to take a rather more radical change to Windows to really rival Chrome OS in this regard.

Not just bad for Windows

Again, this is bad news for Windows. Windows' position in the consumer space has already been vastly eroded by rise of the smartphone and the subsequent loss of the smartphone market to Android and iOS, but Chrome OS's expansion beyond K12 education into both college and home environments means that Windows' home turf—the PC—is coming under attack. Windows' traditional third party application advantages are in many situations irrelevant at best, and downright liabilities at worst. If Windows were still the place to run a browser, it could stick around in these consumer markets. But if all you want to do is run a browser, Chrome OS undoubtedly has advantages over Windows.

In time this will percolate into the corporate space, too. It won't be immediate, as the corporate world has a lot more inertia to overcome, but when these college students take the next step in their lives and get jobs, that preference for Chrome OS isn't going to disappear. It might take a while for these people to be in decision-making roles, but they'll get there in time, and they won't have the same default, almost reflexive preference for Windows that's currently the norm. Chrome OS will start making inroads on the corporate desktop.

The consumer space and enterprise are not cleanly separated discrete markets. One influences the other...

The naive response to this is to say that it doesn't matter; Microsoft understands, after all, that Windows is in a difficult position, and that's why the company is prioritizing the cloud and its enterprise offerings. But this ignores the interconnectedness both of Microsoft's offerings, and of Google's.

Those Chrome OS users likely aren't just using Chrome OS, after all. They're probably also using Google Apps. Mainstream productivity, one of Microsoft's major cash cows, is being handled by Google's online services—maybe not for every student, every time, but for a chunk of them. That preference, too, will only spread: no longer tied to the desktop Office apps, Office 365 becomes much less appealing or interesting, and Google's suite will be the one with the familiarity and experience edge. Key elements of Microsoft's cloud business will be undermined, so it's not just Windows that loses out. The contagion likely spreads beyond, too: Microsoft's reduced visibility can only make selling other cloud services such as Azure that bit harder.

The consumer space and enterprise are not cleanly separated discrete markets. One influences the other, and the loss of mindshare on one side can diminish reach on the other side.

Thus far Microsoft's main response appears to have been Windows 10 S Mode, running on netbook-priced PCs, and perhaps the Surface Go (though a Surface Go with a keyboard cover is much more expensive than the cheap Chromebooks, and starting to rival these more expensive ones). But Windows itself remains a liability in this regard. Windows 10 S machines simply aren't as tightly restricted as Chrome OS systems. They have more ways to go wrong.

For now, Chrome OS's success seems limited and fairly US-centric. If it remains that way, then the knock-on effects in both consumer and enterprise spaces should be reduced. Nonetheless, this kind of development isn't just bad news for Microsoft's position in the consumer market; it's bad news across Microsoft's entire business.

Listing image by Lenovo