Microsoft Corporation (MSFT) is bringing its ubiquitous operating system to the cloud. The company announced Windows 365, as the service is known, in a press release on Wednesday.

Microsoft is framing Windows 365 as a new way of working in distributed environments where office employees have the freedom to work from anywhere. The company refers to the new category as a "Cloud PC" – one that enables users to access their work environment through a browser. Users of such systems can also customize their cloud experience by choosing their own hardware and software configuration. Windows 365 will be launched along with Cloud PCs on Aug. 2.

"Just like applications were brought to the cloud with SaaS (Software-as-a-Service), we are now bringing the operating system to the cloud, providing organizations with greater flexibility and a secure way to empower their workforce to be more productive and connected, regardless of location," stated Satya Nadella, Microsoft CEO, in the press release.

Key Takeaways

  • Microsoft is launching Windows 365, a cloud-based version of its operating system, on Aug. 2.
  • The operating system is part of a category of devices called Cloud PC, which enables users to customize their PC experience in the cloud.
  • The company has not revealed pricing for the product.

Microsoft has not divulged pricing for Windows 365 or Cloud PC, but a report in online publication The Verge states that one of the options is for a monthly charge of $31 for 2 CPUs, 4 GB RAM, and 128 GB storage. The virtual PC will have additional charges for compute power and bandwidth.

"The idea behind [Windows 365] is that you are running that PC in the cloud. It streams down that PC experience but no bits are left. Literally, no information is left on the PC," Jared Spato, corporate vice president of Modern Work at Microsoft, explained in an appearance on CNBC.

A Logical Next Step 

The launch of an operating system in the cloud is a logical next step for the software giant after the success of its cloud productivity suite. The global cloud computing market is expected to more than double from $371.4 billion in 2020 to $832.1 billion in 2025. Microsoft is gearing up to capitalize on this trend.

Enforced remote work policies during the pandemic shutdown hastened the shift toward the cloud, and sales for Microsoft's products – including its cloud, gaming, and remote working software – benefited from this trend. In a January earnings call, CEO Nadella said the pandemic was "the dawn of a second wave of digital transformation."

The transformation has served Microsoft well. The Redmond, Washington-based giant's stock has surged by roughly 38.5%, as of this writing, in the past year on the back of sterling revenues and profits.

A cloud-based Windows operating system could also help the company claw back share in the operating system market. For a long time, Windows was synonymous with operating systems and dominated the arena up until the onslaught of mobile devices. In 2010, a few years after the launch of smartphones, it accounted for roughly 90% of the overall market.

But Windows' share has crashed to 30% after the emergence of Alphabet Inc.'s (GOOG) Android and swelling popularity of Apple Inc.'s (AAPL) iOS. The latter are mostly mobile operating systems accessible via smartphones and tablets.

According to Microsoft, its cloud services will help businesses deal with temporary and contractor staff, who may not have access to company systems or use products with operating systems from other companies like Apple or Google. Ostensibly, cloud operating systems will help bring such workers in line with corporate IT standards.

While Microsoft has labeled its latest announcement as a new category, online publications have pointed out that the company has already walked down this path before with its Azure Virtual Desktop and Windows Virtual Desktop services. Besides, Citrix Systems, Inc. (CTXS) and Amazon.com, Inc. (AMZN) also offer similar services on their platforms.