Microsoft Corp.’s decision to scale back the consumer-facing functionality of its Cortana virtual assistant will see the company doubling down on the more profitable enterprise side of its business instead of trying to compete with Amazon.com Inc. and Google LLC in the smart-home category.

Cortana, which is available on Microsoft’s Windows 10 operating system for PCs and laptops, will receive an update this spring that will emphasize productivity features, including task and schedule management, search commands and email connectivity. These features will be accessible via a new chat-based user interface that allows interaction with Cortana through voice or text commands.

“There is a need for an assistant that can go beyond answering questions or setting alarms. One that can also help you manage all the tedious tasks in your day, like your calendar and email; stay on top of your to-dos; and so much more,” a Microsoft spokesperson told S&P Global Market Intelligence.

SNL ImageMicrosoft’s Cortana virtual assistant will get a new interface this spring.
Source: Microsoft

The update will also remove consumer skills such as smart-home management and music control, as well as support for third-party skills, which will effectively take Cortana out of direct competition with more general-purpose virtual assistants, such as Amazon’s Alexa, Google Assistant and Apple Inc.’s Siri.

“With this new focus on what we deliver to our end users, naturally we need to shift our engineering focus and resources, as well,” said the Microsoft spokesperson.

But Jack Narcotta, a senior industry analyst at research firm Strategy Analytics, noted that Microsoft never really had much of a presence in the consumer virtual assistant space. Smart speakers, such as Amazon’s Echo and Google Home, were the gateway to popularizing voice-controlled virtual assistants in consumers’ homes, while Apple’s Siri did the same for smartphones. Microsoft did not develop a dedicated smart speaker for Cortana and instead relegated the virtual assistant to Windows 10 computers as well as a now-defunct range of apps and Windows phones.

“Consumers were not as engaged with Cortana because they would rather use their computers with a mouse, keyboard or trackpad, not their voice,” Narcotta said. “So while the competition’s virtual assistants continued to expand across multiple platforms devices and services, Cortana was unable to keep up pace on computers and was left behind very quickly.”

Amazon operates a pay-as-you-go virtual assistant service called Alexa for Business, which offers enterprise-focused services similar to what Cortana will soon be focusing on. Google Assistant, meanwhile, also functions within the G Suite, Google’s range of productivity and collaboration apps such as Gmail, Calendar and Docs.

Nevertheless, Raul Castanon-Martinez, a senior analyst at S&P Global Market Intelligence’s 451 Research unit, thinks that Cortana will fare much better against the competition in the enterprise space than it did in the consumer space.

“While Cortana has not really had a significant presence in the consumer segment, it is very well positioned as a digital assistant to support the enterprise segment because Microsoft has such a dominant market share with its productivity products,” Castanon-Martinez said, referring to the Office suite of apps, such as Word, Excel and PowerPoint.

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According to data from a survey conducted by 451 Research, 42.8% of smart-speaker owners in the third quarter of 2019 owned an Amazon Echo, while 32.8% owned an Amazon Echo Dot. Google’s Google Home and Google Home Mini followed with 15.3% and 14.1%, respectively. Meanwhile, Harmon Kardon’s Invoke, the only smart speaker with Cortana integration mentioned in the survey results, represented just 1.5%.

In the long run, Castanon-Martinez thinks the virtual assistant market will continue to evolve and expand until people using multiple offerings becomes the norm.

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“I don’t think this is a winner takes all scenario,” he said. “In the coming years, an average home is likely to have various devices running on different digital assistants.”

Still, there are several obstacles, including privacy concerns, that companies will need to overcome before digital assistants become even more mainstream.

A study conducted by Parks Associates, a market research and consulting company, found that 44% of U.S. broadband households surveyed are “very concerned” that someone might gain access and control to their smart-home products without their permission, while 21% said they were “concerned.”

“All it takes is one news story about a smart-home device getting hacked or a social network’s data getting leaked to scare potential users away from adopting this technology,” Narcotta said.