Microsoft’s Metaverse Retrenchment Shows Pitfalls of Predicting Next Big Thing

While Meta takes a monthly billion-dollar haircut on its metaverse strategy, Microsoft is also struggling.

At least as it relates to the here-by-tomorrow potential of metaverse virtual world platforms, the use-case realities of which are increasingly running into real-world brick walls.

This, as the Washington-based tech behemoth has reportedly sunset the 4-month old team it formed just last October to build out the company’s industrial metaverse.

Microsoft’s surprise change of course on its industrial metaverse initiative reveals the pitfalls of investing in next-generation technologies that offer a preview of exciting progress but aren’t quite ready yet for enterprise adoption.

The industrial metaverse group’s 100 or so team members were all laid off as a part of the sweeping headcount reduction Microsoft undertook at the beginning of this year.

“First, as we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less,” Microsoft CEO Satya Nadella wrote in a message to employees as the company eliminated 10,000 positions, as reported earlier by PYMNTS.

The company is also pulling back on its generative artificial intelligence-powered chatbot after the future-fit AI solution made headlines for all the wrong reasons and was described by a New York Times (NYT) reporter as “a moody, manic-depressive teenager who has been trapped, against its will, inside a second-rate search engine.”

Read More: Advances in Metaverse Mapping Promise Trickle-Down Improvements IRL

The round of layoffs affected Microsoft’s HoloLens mixed reality (MR) hardware group and its Xbox division as well, causing industry observers to question just what the state of the tech giant’s virtual reality (VR) and metaverse aspirations might be.

Gaming engines, like those used across the Xbox platform, and VR/MR headsets, like the HoloLens, are widely considered two of the most critical foundational software and hardware elements of any metaverse-based experience.

On a blog post published after the layoffs, Microsoft stated that “HoloLens and Dynamics 365 are key components of Industrial Metaverse deployments, connecting the benefits of digital transformation to frontline workers in field service, factory operations, and many other use cases.”

The company’s blog post added that “We are also investing in richer and more immersive collaboration experiences in the metaverse with Microsoft Mesh … what we’ve learned has helped set a foundation for our shift to Microsoft Mesh, to become a platform that offers the widest opportunity to all involved, including creators, partners and customers.”

A representative for Microsoft did not immediately reply to PYMNTS’ request for comment.  

Microsoft’s HoloLens product has had a bumpy past few months. In January, Congress rejected a request by the US Army to purchase several thousand of the devices in a contract worth north of $400 million due to concerns over field tests of the VR/MR goggles, which reportedly left U.S. soldiers with nausea, headaches and other mission-affecting physical impairments.

Still, Microsoft is far from alone in its troubles attempting to push into a new, virtual-first industry. Tech rival Apple Inc. recently announced it would postpone the development of its lightweight augmented reality (AR) glasses due to unforeseen technical challenges.

Despite initial plans to roll out the AR device in 2023, Apple delayed the launch until 2025, and it has now been pushed back indefinitely.

An evolving world has evolving needs

Internally referred to as Project Bonsai, Microsoft’s now-disbanded industrial metaverse division was formed to build intelligent software interfaces for operating the control systems behind industrial robotics and transportation networks, as well as power plants.

PYMNTS has previously highlighted how “for industries like the manufacturing and automotive businesses, which have historically relied on tangibly physical prototypes and to-scale models, or the time-intensive and expensive wind-tunnel testing leveraged by aviation businesses and others, the industrial metaverse represents the dawn of a new era.”

Some industry observers believe the risk environment, which has seen Meta’s metaverse and VR division rack up a $14 billion loss in 2022 alone, may have convinced Microsoft to step back and allow other businesses to create underlying metaverse technology before muscling in and leveraging the strength of its Windows operating system.

In today’s challenging economic environment, it may make sense for businesses to prioritize shorter-term projects that can generate revenue right now than those requiring a longer runway to become profitable.