For the peripheral device manufacturers, the compatibility issues are far less complex. They only have to be able to perform a small number of functions, and they have to be compatible with the Windows and iOS operating systems. PCs, on the other hand, have very open ended functionality, and they have to be able to work well with all mainstream peripheral devices.

With the arrival of the mobile era, however, this situation began to change. Now more and more devices are being used to accomplish tasks that were formerly in the domain of the PC. For instance, users can surf the Internet, watch movies, and view and edit documents with more portable smart phones and tablets. The fact that PCs are not as central to basic applications as they were in the past has enabled other open source competitors to put a dent in PC sales with alternative operating systems to Windows and iOs. For example, at this year’s COMPUTEX a number of vendors displayed soft keyboard cases, which enable users to easily type on their Android devices. In addition more and more consumers are opting to buy Chromebooks as their portable computers rather than laptops preinstalled with Windows.

So far the main competitors, such as Android and Google, have used an open source business model, whereby the source code of their operating systems and applications are available for other companies, organizations, or individuals to freely use and modify. The condition is that the companies which make use of the open source code must then make any modifications or improvements publicly available to any other interested parties.

Instead of relying on proprietary software sales as their main source of revenue, companies such as Google and Facebook thrive by offering free services and making money through data collection and advertising. Devices with operating systems, such as Android and Chrome OS, function as vehicles to get a larger and larger population of people to use the Internet, and these users are subsequently subjects of data collection for big data-based research as well as targets for advertisers.

Although Android and iOS are the most well-known operating systems for smartphones and tablets in developed countries, other companies, such as Mozilla and CyanogenMOD are using their own open source operating systems on economically-priced devices in developing markets, such as India, Mainland China, and Brazil.

Open source software has the advantage of enabling companies to cut costs on research and development; however, by making some alterations to the source code and creating new combinations of software, hardware, and services, competitors can ride on the back of already-established companies and potentially become formidable rivals. For example, CyanogenMOD is essentially a slightly modified variant of Android that comes pre-loaded with alternative application stores to Google Play, alternative email to Gmail, and alternative search engines to Google. Furthermore, in recent months CyanogenMOD is being mentioned increasingly often in the press as a potential rival to Google’s Android in the North American and European markets.

In fact, CyanogenMOD’s relationship to Google’s Android serves as a cautionary example of how the use of open source software can be a double-edged sword. Although they both make use of the same open source Linux-based Android source code, the two companies are increasingly directly facing off in the market, with CyanogenMOD making open announcements that it plans to directly challenge Google's dominance in the market and serve as a catalyst to severing Android's close ties to Google.

The shift from the mobile era to the IoT era is likely to further exacerbate this trend as creators of more specialized devices with narrower functionality make further use of open source software to modify and tailor to the operation of new devices. However, even though open source devices have eaten into the profits of desktop and notebook PCs, the PC still retains its role as a significant device for most technology users.

Analysts have posited two visions of IoT development. In the first model, many smart devices will interact with one another over the Internet and in localized home or office networks. The other model is that many “dumber” devices will interact with one another via very “smart” PCs, and PCs will retain their role as central devices for most users. For the foreseeable future, IoT technology will most likely develop according to models based around the second vision. Consequently, Microsoft is likely to maintain its position as the leading operating system of choice for PCs for the time being. Furthermore, consumers will still continue to buy PCs, albeit probably not at the same rate as they did during the past two decades.

Nevertheless, Microsoft is evolving its business models in response to the current challenges from open source-based mobile and IoT devices. For instance, last year, Microsoft elected to follow an open source framework for the development of its .NET servers and made information about its hardware setup freely available to the public. In addition, Microsoft in April announced its intention to collaboratively develop software for CyanogenMOD smart phones, so that CyanogenMOD mobile devices will come preloaded with Microsoft-owned proprietary software, such as Office suite and Skype. Similarly, Microsoft on June 25 announced the release of versions of its Word, Excel, and PowerPoint Office suite software for Android devices.

Perhaps the most telling sign that Microsoft is striving to reinvent itself, was a statement in April from the high-ranking Microsoft Technical Fellow, Mark Russinovich, at the open source developers' conference, ChefConf, that at some point the Windows operating system itself may become open source. While the degree to which Microsoft's Windows 10 and the PC will remain dominant is debatable, there is no doubt that as mobile and IoT devices become increasingly ubiquitous, new open source-based rivals will be forces to be reckoned with and will prompt dominant companies, such as Microsoft and Apple to make further modifications to their business strategies.