Microsoft’s Panos Panay Explains Surface Balancing, Keeping OEMs Happy

Microsoft’s product manager, Panos Panay, fills two sometimes conflicting roles for the company.

On the one hand, he’s been promoting Microsoft’s Surface PCs since Microsoft introduced its first tablet in 2012. But he’s also responsible for the Windows user experience. That means he has to convince PC makers to ship and promote new versions of Windows, even though Microsoft is in direct competition with them.

That dual role is fully visible this week as Microsoft begins offering upgrades to Windows 11, its first new operating system since 2015, while also releasing its latest Surface computers.

“I spend as much time with OEMs as I do with Surface right now,” Panay told CNBC.

He declined to say whether Surface or Windows is more important to him than the other, but Windows licensing still generates a lot more revenue for Microsoft than Surface computers. Morgan Stanley has estimated that Microsoft will generate $ 13.3 billion in Windows OEM revenue and $ 6.5 billion in Surface revenue in fiscal 2021.

But partners who license Windows have not always supported Microsoft’s efforts to walk into their territory with its own tablets and laptops. The CEO of Acer told the Financial Times that Microsoft should “think twice” when it first introduced its Surface tablet in 2012. And Asus would have felt blinded when Panay unveiled the Surface Book – which looked like more to a traditional laptop – in 2015.

When Panay talks at Microsoft events about the latest Surface computers, he’s almost unusually enthusiastic and oddly specific to hardware components. Now, he said, he’s excited – he likes to use the word “pumped” – about the variety of options for consumers and organizations, no matter who builds the hardware.

“OEMs provide customers with choice,” Panos said of Microsoft’s partners. “Not just choice for choice. What do you want to accomplish? You can choose a device that’s right for you.”

In 2016, Microsoft announced a partnership with Lenovo, the world’s largest PC vendor, in an effort to avoid conflicts that could arise between the Surface company and Windows.

“We came up with a very simple approach … we call it a level playing field,” said Christian Eigen, global strategic alliances leader at Lenovo, who has known Panay for 15 years. “This means that Microsoft is not giving Surface functionality exclusively from an operating system perspective.”

Microsoft and Lenovo CEOs communicate four to six times a year, and teams lower in organizations speak 12 to 24 times a year, Eigen explained.

Microsoft has also improved its communications with its partners around Windows 11.

“It was definitely, by far, more transparent and open and a kind of cooperative development,” Eigen said. It joined Lenovo, the world’s leading PC maker by unit shipments, in 2011 and was present for the releases of Windows 8 in 2012 and Windows 10 in 2015.

Steven Sinofsky, who oversaw versions of Windows 7 and Windows 8, had advocated a different approach to communicating with partners in 2018 when he said in a blog post that any change in direction can make the company look bad. business and cause problems for partners and customers.

Panay emphasized communication, including with foreigners. As soon as he took the Windows job last year, he started meeting with employees from chipmakers like AMD and Intel, as well as Lenovo, Samsung, and other PC makers.

“My goal is, ‘Hey, what do your customers need? “It’s from an OEM brand perspective,” Panay said. “Ditto with Surface. “What do Surface customers need? “At the end of the day, they’re all Windows customers.” He said he’s had feedback on every Surface model, including the Surface Laptop Studio PC that went on sale this week.

Since Microsoft announced the details of Windows 11 in June, people have debated the minimum hardware requirements the company insists on, including a security chip.

Eigen said the barriers to upgrading aren’t too great.

“I think Microsoft made the right decision and said, ‘Look, at some point we need to make some progress with our operating system,” Eigen said. He said people buy new smartphones every two years, but get used to buying new PCs every six or seven years. The industry needs to do better to motivate people to buy new devices, he said.

Windows 11’s release on Tuesday comes as computer makers continue to struggle to get enough chips to meet demand. But there was never any talk of delaying PCs, Eigen said.

“For us, as you can imagine, the holiday season is an important season, and that’s why we asked from day one that we had to keep October 5th, and it was a close race, but luckily , thanks to a good collaboration, we were able to meet this date “, he declared.

The arrival of Windows 11 is now playing well at Dell as well, even as demand has outstripped the company’s supply, increasing its backlog.

“I think the timing is right because it comes before the holidays,” said Sam Burd, president of Dell’s Customer Solutions Group. “People can figure things out for next year, and we’re pretty confident in our ability to do the things we need to.” Still, Microsoft has waited six years to follow up on Windows 10, and Burd has said he’d like to see a shorter gap next time around.

Asus, HP, Lenovo and Microsoft introduced new Windows 11 PCs in September. Acer, Dell, Samsung and other partners will be launching new Windows 11 devices soon, Panay wrote in a blog post on Monday.

The big question is whether Windows 11 will do anything for PC sales, or whether the PC refresh cycle is primarily influenced by broader economic and social factors, regardless of what Microsoft does with its operating system. .

Windows 11 includes a redesigned Start menu, better trackpad and touchscreen controls, buttons for organizing multiple onscreen programs, and access to Android apps. That may not be enough to get people to ditch Windows 10 computers.

“I don’t think they’re going to sell particularly well right off the bat”, Michael Cherry, Senior Analyst at Directions on Microsoft, spoke about the new Windows 11 PCs. Early adopters might buy them early on, but not all people will suddenly have new PCs running Windows 10, due to the chip shortage. Cherry said.

The PC market saw a 13% year-over-year increase in unit shipments in 2020, the fastest growing in a decade, according to estimates by market research firm IDC. And many computers purchased last year can be upgraded to Windows 11 for free. The shopping spree might not last very long, although many people continue to work remotely. While IDC forecasts 14% growth for 2021, it sees shipments increase by less than 2% in 2022.

But Panos argued that some Surface features are now more appealing to customers.

“Why are you installing cameras and microphones on your Surface? “I would be asked that question,” said Panay. “Can you imagine trying to ask that question today? Now cameras and microphones allow people to meet virtually via their computers with colleagues, classmates. class and members of their family.

A new look for Windows also counts for something. New versions of Windows are making a difference in people’s willingness to spend their money, Burd said.

Eigen at Lenovo said he hopes Windows 11 will speed up the PC replacement cycle. Younger people might want to switch from just owning smartphones, while older people might want to upgrade because the PC is easier to use with Windows 11, he said.

Panay is optimistic. He said Windows 11 would end up being more popular than Windows 10, which exceeded 1.3 billion monthly active devices. He didn’t say when that would happen. Support for Windows 10 ends in October 2025.

“We have to see what customers think,” Panay said. “We’re super inspired to listen.”

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