Microsoft Launches Windows 365 as a Simpler Option for Cloud-Based PCs

Amit Madheshiya | Bloomberg | Getty Images
  • Microsoft's Azure Virtual Desktop service grew more popular with the arrival of the Covid pandemic last year.
  • Windows 365 is a new alternative that requires fewer technical skills and comes with greater controls for administrators. Pricing is also more predictable.
  • The service falls under Microsoft's Windows segment, which can be volatile because of the timing of Windows support cycles.

Microsoft on Wednesday introduced Windows 365, a new way for organizations to give employees access to virtual cloud-based PCs running Microsoft's Windows operating system. For instance, users could use this service to access a virtual PC configured with work applications from their home PC, or from a non-Windows device like an Apple Mac, iPad or Android tablet.

Windows 365 comes as the market for access to enterprise applications on any device is expanding, with some employees still out of their offices because of the Covid pandemic. If the service takes off, it could help Microsoft make Windows revenue more predictable, rather than coming in spurts as people upgrade from older versions.

Microsoft already has a product that companies use to dole out access to cloud-based Windows computers. Once called Windows Virtual Desktop, the service, which grew sharply last year, was renamed Azure Virtual Desktop last month.

But setting up and managing multiple virtual desktops through the service can be challenging, and costs aren't always predictable.

Windows 365, which relies on Azure Virtual Desktop, was designed to reduce that complexity.

The experience of using Windows 10 or Windows 11 on Windows 365 will be the same as it's been on Azure Virtual Desktop, said Jared Spataro, a Microsoft corporate vice president, in an interview with CNBC on Monday. But the new service will offer more powerful controls for administrators. They will be able to see so-called Cloud PCs alongside physical PCs in Microsoft Endpoint Manager software, Spataro said.

The company wants to work toward enhancing Windows 365 with offline access, so that if people lose connections to their PCs in the cloud, when the connections are reestablished, any changes will sync back to the cloud, Spataro said. There are no plans to bring similar capabilities to Azure Virtual Desktop, he said.

Organizations will be able to pay per user per month for the number of desktops they use, and choose specific configurations with computing, storage and memory footprints for different desktops. Administrators can receive recommendations and then upgrade desktops with a click, according to a blog post. Microsoft will reveal Windows 365 pricing on Aug. 2, when the service becomes generally available.

Fiscal implications

Microsoft considers Windows 365 as part of a new category. "We don't think we'll be the only entry in the category," Spataro said.

Microsoft's public cloud competitor, Amazon Web Services, offers cloud-based desktops through its WorkSpaces service, while Google has a virtual desktop service for employees only.

"I believe both of those companies will make a strong play," said Shannon Kalvar, a research director at technology industry analysis company IDC.

The virtual client computing market grew 19% to about $4.5 billion in 2020, compared with 11% growth in 2019, Kalvar said. Nearly all the growth is in public clouds, because organizations will want to put the virtual desktops close to where their workloads are to reduce latency, Kalvar said. That growth had the effect of giving administrators much more to administer.

"Any effort to bring intelligence and tools to the operations of these new resources is a relief to IT organizations," Kalvar said.

Although Windows 365 relies on Microsoft's Azure cloud infrastructure, for financial reporting purposes it will fall under Microsoft's Windows Commercial category, which includes volume Windows licensing for enterprises. In turn, Windows Commercial falls under the mature Windows product area, rather than the fast-growing Azure segment, Spataro said.

If many organizations adopt Windows 365, revenue from the service could make overall Windows revenue less volatile and responsive to the cycles of Windows releases. As Microsoft stops supporting older versions, organizations upgrade their computers in bulk, and that can mean certain periods see faster Windows growth than others. Companies could pay Microsoft for Windows 365 each month, rather than buying new PCs with the latest version of Windows, which results in Windows license revenue flowing to Microsoft all at once.

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