Microsoft Build: All "Productivity" Is Now Part of Cloud Computing

The show was about the internet of things, augmented reality and artificial intelligence. The only piece left for consumers is Windows.

Build 2018, Microsoft's annual developer conference, has opened, and the CEO's customary keynote is over. Ever since Microsoft turned its products into services, Build has had less and less to say to ordinary consumers and more and more to say about new development tools. This year is no exception. Put simply, most of what Microsoft announced has to do with cloud computing.

The Windows 10 update and the voice assistant that do concern consumers

Last week Microsoft pushed Windows 10 Redstone 4, version 1803, to all users. At Build it laid out the main features of the next stage, Redstone 5, which should reach users in the fall.

Microsoft no longer has phone hardware or a phone operating system of its own, so everything it does with phones now runs through the PC. Redstone 5 will include a cross-platform tool called "Your Phone." A version of it is already built into Windows 10: you can add a phone running iOS, Android or Windows 10 Mobile and, through the Edge browser on that phone, send content — web pages, emails and the like — to your computer.

The new Your Phone does more. You will be able to reach text messages, photos and notifications straight from the PC, and move photos off the phone quickly. It still covers iOS, Android and Windows 10 Mobile, but platform rules mean Android gets the fuller version: the PC can show the phone's messages and photos in full, and the phone's notifications pop up on the PC.

The new features run the other way too, from PC to phone. Microsoft already sells Microsoft Launcher, an Android launcher built around office work. The new version will support Windows 10's Timeline, which makes this possible: a Word document you are editing on the PC shows up automatically on a phone with Launcher installed, and tapping the icon picks the document up in Word on the phone, right where you left off.

All of this works only inside Microsoft's own apps — the Office suite, Skype and so on. And because iOS is more closed and allows no third-party launcher, Microsoft put a similar feature into the Edge browser instead: a page you are reading on the PC can be handed to an iPhone to finish.

In the keynote Microsoft spent some time on another feature: Amazon's Alexa and Microsoft's Cortana running on each other's platforms.

Last August the two companies announced they would break down the barriers between their voice assistants, and then said nothing more through January 2018. This keynote finally showed what the partnership looks like.

Both Amazon's Echo speakers and Windows PCs will carry Alexa and Cortana. On an Echo you say "Alexa, open Cortana"; on a PC you say "Cortana, open Alexa." Either assistant, either platform.

Alexa is the stronger one for daily life — read me the news, buy me this. Cortana is better at office work: setting schedules, answering and tracking email. The two fill each other's gaps, and as a matter of business, neither company has a mobile platform, so joining forces makes the most of what each has.

Alexa still speaks no Chinese, though, and Cortana is one of the better Chinese-language assistants. So this particular piece of cooperation is probably of little use to users in China.

Every piece of IoT hardware is to connect to Azure

Last year Microsoft introduced a brand idea it calls Intelligent Edge: connect every kind of development platform to its cloud. At this keynote it announced two things on that front.

The first is a partnership with DJI. Microsoft will work with the Chinese drone maker on a development kit that lets enterprise users put a drone's industrial capabilities to work from a PC. It demonstrated one case: a Mavic Air, a consumer drone, patrolling above a factory, its camera feed streaming back to a PC in real time. An app on the PC ran image recognition, caught a damaged pipe and marked it in the window as the drone flew.

That means developers can write apps on a Windows PC that use the sensors a DJI drone carries — visible-light and infrared cameras, obstacle-avoidance sensors. They can also build image recognition on Microsoft's cloud: a drone patrolling high-voltage power lines on its own, checking whether debris has caught on them. This is exactly the industrial business DJI keeps pointing to.

Microsoft said the deal also covers cloud services: from now on, cloud services for DJI's products will run first on Azure.

The second is the "rebirth" of Kinect. Project Kinect for Azure shrinks the old sensor, once the size of a soda bottle, into a module the size of a finger, and moves the computing to the cloud.

The first Kinect was an accessory for the Xbox 360, sold on motion-controlled games. The second came with the Xbox One, again for motion games, but Microsoft also carried it into other industries as a PC accessory for building motion applications — touchless interactive screens, for instance, for surgeons who have to stay sterile in an operating room. Later Microsoft put Kinect's depth-camera technology inside HoloLens, its augmented-reality headset, where it became a core function.

Project Kinect for Azure is miniaturized outright. Earlier Kinect sensors needed their own power supply; this one runs on little power and a slow connection. Developers can use it to build cheaper artificial-intelligence applications that run on mobile platforms or on a system on a chip.

When the iPhone X came out, its new Face ID was in fact a 3D environmental sensor much like Kinect's — except Apple chose infrared structured light, while Kinect uses structured light based on lasers.

Microsoft announced plenty more around the internet of things: a new version of Custom Vision that runs machine-vision AI offline; a partnership with Qualcomm on AI applications built on the Qualcomm Vision Intelligence Platform; and the Speech Devices SDK, a kit for building voice assistants for cars and homes, with noise reduction, speech recognition and far-field audio capture included.

Augmented and virtual reality still aim at business customers

HoloLens has been out for several years, and this Build again stressed what it does for companies. Microsoft played two videos showing augmented reality at work.

They showed the German auto-parts maker ZF AG and the heavy-industry group ThyssenKrupp AG using HoloLens in their factories to help the people on the floor. When something goes wrong on a production line, a worker wearing HoloLens can "mark" what they are looking at — where a switch sits, how a pipe runs — while technical staff back at base see all of it and talk them through the fix. When workers are laying out a site, HoloLens drops the machinery they plan to install into the real scene at full size, so they can see at once whether it collides with anything, and measure the gaps with their hands.

The two products in the videos were the HoloLens mixed-reality headset and Microsoft Layout.

Layout is best understood as an upgrade to existing 3D design tools. A model that used to live only on a PC can be shown at full size in augmented or virtual reality, and designers can build inside virtual reality directly. With HoloLens, the finished model can be "mixed" into the real world and shared with colleagues.

In the consumer market that everyone knows, the virtual-reality boom did not last. Oculus and the HTC Vive cost too much to go mainstream, and immature technology and a thin creative scene left little to play. Genuinely good VR games are rare: the hardcore flight simulator Elite: Dangerous, the thoroughly immersive Resident Evil 7, and Beat Saber, a music game that shipped recently after long delays. Beyond those, few titles have been well received.

When HoloLens launched a few years ago it came with an augmented-reality version of Minecraft. Microsoft has not mentioned that since; it has put VR and AR squarely into enterprise work. And in fact, at the moment, companies suit virtual and augmented reality better than consumers do.

Microsoft moves further backstage

Build is called a developer conference, but it is also a decent piece of brand-building, and a few years ago it kept closer to consumers. From 2012 to 2015, Windows and Windows Mobile always came first.

Then the phone platform was shut down and Windows 10 turned into a service, and Build lost the pull that Apple's WWDC has on ordinary consumers. Apart from Windows, Microsoft barely makes software for them anymore.

Microsoft's earnings, released at the end of April, held a small surprise. Last quarter the divisions that grew fastest and earned most were still Productivity and Business Processes, which holds the Office services, and Intelligent Cloud. Both grew 17% and together brought in $17 billion.

But inside More Personal Computing, which grew 13% year on year, the Surface unit that sells personal computers took in $1.1 billion, up more than 32% — a growth rate second only to the newly folded-in LinkedIn. That hardware growth probably owes to sales of the new Surface Laptop and Surface Pro.

The reorganized Microsoft, in short, is folding all of its business processes into the cloud computing it is strong at, and moving further backstage.

Backstage is not itself a problem. Microsoft's revenue still looks handsome, and it has pushed the company's market value back past Google's, behind only Apple and Amazon. But Microsoft locked up the enterprise-services market on the strength of Windows, and it was Windows that built its relationships with large companies and its Office ecosystem. Now that Windows counts for less, the moat is shallower than it was. Consider: Nadella, who used to run the cloud business, has been CEO for several years now, and Amazon's first place in cloud computing has not moved at all.

Cover image: Microsoft