Microsoft Metaverse – End of life

Microsoft goes back to square one.

• Microsoft has shut down its enterprise Metaverse strategy in a move that can only mean that what it had was going nowhere and that it needs to stop everything and start again.
• In October 2022 Microsoft announced the formation of a new team called Industrial Metaverse Core that aimed to deliver software for companies looking to use the Metaverse within their businesses.
• It clearly has not gone well as, just four months later, Microsoft has closed down this team and laid its members off rather than deployed them elsewhere in the organisation.
• This is part of Microsoft’s cost optimisation plan that is currently ongoing which will see a headcount reduction of 10,000.
• I am pretty sure that there are plenty of places within Microsoft where headcount could be trimmed meaning that its decision to shut this team down implies that something else isn’t working.
• This is especially the case as the enterprise is where the Metaverse is seeing some traction right now meaning that there is business to be done even if it is still pretty small.
• Consequently, I think that something has gone badly wrong with Microsoft’s Metaverse strategy which has hit a dead end and now will have to be rebuilt from the ground up.
  • First, Hololens: The current hardware that Microsoft has is HoloLens 2 which is now woefully out of date.
  • This device was launched in February 2019 meaning that it has now been surpassed by rivals like nReal or Magic Leap.
  • nReal has a better device that is smaller, lighter and cheaper to buy while the Magic Leap 2 provides a better user experience.
  • This is why Microsoft needed to launch HoloLens 3 to keep up but all indications are that this was cancelled some time ago.
  • This means that customers will not be buying HoloLens for their enterprise Metaverse strategy which then directly impacts the rest of the offering.
  • Second, Software: The Industrial Metaverse Core team was tasked with creating software that clients would use in the metaverses that they create to help them run their businesses.
  • This goes from training simulations to digital twins and each customer is pretty much doing their own thing with no need to interoperate with anyone else.
  • Hence, as these clients will not be using HoloLens, there may well be no natural fit for Microsoft’s software as most hard vendors also offer software solutions to go with their offerings.
  • The one exception is Nvidia, but Nvidia is more related to the creative process for Metaverse content and the cloud as opposed to tools that are used to run it on the device.
  • Hence, as a result of the lack of traction for the hardware product, it is quite likely that this has greatly impacted the level of interest in any software products that Microsoft has been offering to go with it.
• The main question is why Microsoft abandoned the HoloLens and I suspect that the answer is that the technology choices that were made when the device has created have turned out not to be the right ones.
• The technology in optics, waveguides and lenses is moving quite quickly and I suspect that the HoloLens platform has been unable to adopt these advances due to legacy issues with its original design.
• This is the only rational reason that I can see for Microsoft to abandon what was a leading product in a field where there is real interest and some revenues being earned today.
• Consequently, this leaves the field open for other competitors and this strikes me as a significant own goal for Microsoft.
• If Microsoft wants to have an offering for the enterprise Metaverse, it will need to go back to the drawing board and start again from scratch putting it several years behind its rivals.
• The Metaverse opportunity will remain very small for quite some time to come but if it really takes off and becomes the next generation of the internet, then Microsoft will be facing yet another moment just like when it messed up its smartphone and digital ecosystem.