When Microsoft CEO Steve Ballmer unexpectedly announced that he would leave Microsoft within 12 months, he left more questions than answers. But Ballmer's resignation should have a profound impact on everyone who uses Microsoft's products. And it will be interesting to see how his departure affects the current product pipeline, including the recently finalized Windows 8.1.

Ballmer Is Out

After over 13 years as Microsoft's CEO, Steve Ballmer announced in late August that he would leave the company within 12 months, after helping the firm's board of directors find a suitable replacement. Ballmer's goodbye letter to employees explained the timing—he said Microsoft needed a leader who would be there long enough to see the company through its transition to a devices and services firm, and he had originally intended to leave earlier, in 2018. But it was short on details about why he was leaving his position as CEO.

Put simply, Ballmer's tenure as CEO is decidedly mixed.

On the one hand, he presided over a period of dramatic economic expansion for Microsoft. As he noted in his letter to employees, the firm grew from annual revenues of $7.5 billion in fiscal 2000 to nearly $78 billion in fiscal 2013. He was the 30th employee in a company that now employs almost 100,000 people. The firm claims more than one billion users worldwide, and Ballmer says that Microsoft has "delivered more profit and cash return to shareholders than virtually any other company in history." There is nothing small about Microsoft.

On the other hand, Microsoft has been dogged by a series of strategic missteps that in many ways define his era at the firm. Windows Millennium Edition, the aborted "Longhorn" project, Windows Vista, and now Windows 8/Windows RT all happened on his watch. Dogged in part by antitrust oversight, Microsoft missed key market shifts and became a follower rather than a leader in important markets such as digital music, smart phones, tablets, and cloud computing. It was always a day late and a dollar short.

What protected Microsoft from imploding and, I think, hid the ills for too long, was that the firm's dominant product lines—Windows, Office, and Windows Server—kept generating record profits and revenues long after its fastest-moving competitors had moved on to up-and-coming markets that Microsoft should have seamlessly side-stepped into as well. (You can read more about this theory in Assessing the Ballmer Years.)

Microsoft tried, of course, under Ballmer, but always under the auspices of protecting Windows (and Office and Server) at all costs. We saw me-too products such as Zune, Windows Mobile 6.5, and Windows Live Search/Bing. When users embraced Gmail, Microsoft retrofitted Hotmail as Outlook.com. When users embraced the web, Ballmer tried to buy Yahoo!, his one truly outrageous mistake. (And a barely avoided disaster.) When users embraced cloud storage, Microsoft gave us SkyDrive. When the Apple iPad took over, we got Surface. Again and again, Microsoft let others blaze trails, and then belatedly followed them after a market proved itself to be valuable.

But the product that best parallels the problem of the Ballmer years is Windows 8 (which includes the pointless Windows RT). Faced with an exodus of users, developers, and mindshare to mobile computing platforms such as iOS (iPhone/iPad) and Android, Microsoft had two courses it could take with Windows. It could simply continue to develop future iterations of the classic desktop OS while creating a purely mobile platform on the side, much as Apple did with Mac OS X and iOS, respectively. Or it could do what it's always done: Protect Windows at all costs and, in this case, simply build mobile platform features into Windows. Microsoft, after all, exults in the malleability of Windows.

Of course, it chose the latter path. Critics will point to this decision as a mistake and proof that Ballmer's long-time strategy was a mistake. But here's an inconvenient truth: Had Microsoft created a "Metro OS" or whatever, separately, for mobile devices, that system would have sunk in the market just as badly as has Windows 8, if not worse. As with Windows Phone before it, there just isn't much demand for yet another mobile platform, not when both Android and iOS have hundreds of thousands of apps and established ecosystems. Desktop Windows, meanwhile, would have continued its inevitable decline, racing to become the smallest of the three major mainstream computing markets.

But in melding the new Metro platform onto Windows, Microsoft has, in effect, forced all Windows customers to deal with this new mobile OS whether they want it or not. This has created an unprecedented backlash, triggering the development of a refined version of the OS, called Windows 8.1, discussed below, that softens the transition between the desktop and Metro and makes it possible for users to stick to the environment they prefer. Often described as a combination service pack/feature pack, Windows 8.1 is better seen as an apology, a mulligan aimed at easing friction in the user base. And as with the backlash that accompanied its release—it even sank the beautiful Surface hardware—this kind of retreat is itself unprecedented.

Give Ballmer some credit: Though the current quarter could indeed be abysmal by Microsoft standards, he never ran the company into the ground. It has the financial resources, if not the time, to make yet another comeback. The question is whether his successor will continue down the company's current path—it describes itself now as a maker of "devices and services," though it has precious few success stories in either category—or tread a new path.

The issue here is the Microsoft board of directors. Led by company cofounder Bill Gates, the board is unlikely to take the harsh and necessary steps of really remaking Microsoft. And in its public statements at the time of Ballmer's exit announcement, the board reiterated its support for the company's current strategy. So it's very likely that Microsoft will simply hire from within—or, intriguingly, bring back a previous executive such as Paul Maritz or Stephen Elop to right the ship.

But it's pretty clear that a company of Microsoft's size can coast for a long, long time without actually getting the strategy right. And perhaps the time to make real change is before that change is forced on the company. On that note, I'd like to see Microsoft hire an external candidate, as Ford did when it hired Boeing's Alan Mulally to rescue that company. Microsoft needs someone objective to rate its current path and determine whether further and drastic changes are required. And I suspect that they are.

Windows 8.1

Microsoft finalized Windows 8.1 on August 23, 2013 and will release it to customers online and via a new generation of PCs and devices (which I'll discuss soon) on October 17, 2013. This release is a bit of a cipher. It's an interim update for both Windows 8 and Windows RT, a sort of combination feature pack and service pack, as previously noted. But it's also, in effect, a new version of Windows, and Microsoft uses the terms Windows 8.1 and Windows RT 8.1 to differentiate this new version from the initial versions delivered last year.

That it would like to distance itself from Windows 8 is completely understandable. The slowest-selling version of Windows in modern times, Windows 8 had undone all of the good will that Microsoft engendered with Windows 7, and then some. That it arrived at a time during which consumers were embracing simpler alternate mobile platforms is, of course, not coincidental.

But while Microsoft likes to brag that Windows 8.1 shows what the Windows team can accomplish in just one year, I think the lesson here is quite different: The firm should have simply waited until this release to ship anything. Windows 8.1 is a much more complete and mature product than its predecessor, and it is much more respectful to the billion-plus users out there who use Windows with traditional, non-touch hardware.

So we see the much-ballyhooed return of the Start button in this release, which should smooth some ruffled feathers, though I never saw its absence as an issue at all. No, Microsoft won't let you go back to the old Start menu, but it has made other concessions to typical PC users that should be appreciated. You can, for example, boot right to the desktop, skipping the full-screen Start screen. And you can configure the system to display a desktop-oriented version of the All Apps screen instead of the Start screen when you use any of the usual methods to invoke that interface. All Apps works a bit more like the old Start menu.

There are deeply hidden controls to remove many other Metro interfaces, including the silly Switcher app switching bar, and a partial remedy for the much-loathed Charms. The point here is that desktop users should be able to stick with the Windows desktop most of the time, a huge improvement over the initial version of Windows 8.

Conversely, Microsoft is also making it easier for Windows tablet users to stick with the touch-friendly Metro world. In this release, for example, most of the common system settings that were previously only accessible from the desktop-based Control Panel can now be found in the Metro-centric PC Settings.

Those who wish to avoid the desktop entirely—and I'm told they exist—can mostly do so. (Mostly. Office, of course, is currently available only in desktop form, as are the world's most popular Windows applications, Google Chrome and Apple iTunes.)

For those who want to venture into this new Metro world, the capabilities of the built-in apps have gotten much better. The Mail app now supports drag-and-drop for both touch and mouse, turning it into a truly usable solution. The bundled Bing apps—with updated versions of News, Travel, Sports, Finance, and Maps, plus news apps such as Food & Drink and Health & Fitness—are surprisingly good and offer a peek at how Metro-based content solutions can really work well.

With this release, Microsoft is also embracing a bundling strategy that might seem superficially similar to the bundling activities that got it in antitrust trouble 15 years ago. But Microsoft's lack of success in mobile has created a different environment, and the firm is right to push its other brands in Windows. So you'll see a lot of Bing in this release, not just in the aforementioned apps, but also in the stunning new Search experience. And Skype is bundled with the OS, just as Messenger was back in the day. So, too, are Xbox-branded Music, Video, and Game experiences, each upgraded. SkyDrive is there, too.

Furthermore, Microsoft is starting to bundle Office with more Windows PCs. With the initial wave of Windows 8 releases, consumers could pick up a free copy of Office Home & Student 2013 RT with each Windows RT device, and in Windows 8.1, Outlook RT has been added to the mix. But now anyone who purchases a Windows 8–based mini-tablet will also get a free copy of Office Home & Student 2013 (albeit the non-RT versions sans Outlook), too. After spending the past decade patiently explaining to people that Windows and Office aren’t the same thing, I’m finding the lines are really starting to blur.

Ultimately, Windows 8.1 is exactly what you think it is: A better version of Windows 8. The question, however, is whether the evolutionary changes in this release warrant a reassessment of the platform. Will users embrace Windows 8.1 after ignoring its predecessor in droves?

Honestly, I don't think so, and while a coming generation of hardware—more about this later—will certainly help, it's not clear whether Microsoft's vision of the mobile computing future has yet aligned with what users expect of Windows. And that's a long term issue that Steve Ballmer's successor will need to address.