Visionaries behind augmented-reality headsets have promised gee-whiz futures where wearers can zip holograms away with a flick of the wrist and battle digital baddies amassing around workplace cubicles.
Chief Executive Satya Nadella was in Barcelona at Mobile World Congress, the telecom industry’s biggest trade show, to unveil a new version of Microsoft’s HoloLens headset Sunday. By pitching its four-year-old HoloLens as a cutting-edge solution for mundane corporate tasks such as job training—rather than entertainment, videogames and other fun uses—Microsoft is trying to elbow its way atop a nascent industry analysts believe will explode in the next decade.
Tech giants including
Google Inc. and Facebook Inc., as well as startups such as Magic Leap Inc., are all racing to develop augmented reality, in which users see holographic elements overlaid on their view of the real world. They are betting on the innovation as the next major computing interface, and angling for market dominance in the post-smartphone era.
HoloLens has thrived because Microsoft hasn’t tried to blow consumers away with flashy apps, said Noah Eckhouse, who heads product delivery at Bentley Systems Inc., an Exton, Pa., maker of construction-industry software. Instead, Microsoft stuck to its corporate roots, selling to longtime business customers willing to pay for tech that can reduce their costs.
Bentley engineers worked with Microsoft on HoloLens 2 and provided feedback. “It’s a little more modest in its scope, but a lot more practical as a result,” Mr. Eckhouse said.
Companies are using HoloLens to overlay instructions and other visuals that can guide workers through machine repairs, among other tasks. HoloLens 2 tracks eye movements, so it can scroll through a product manual, stopping when users pause and backtracking as they move their eyes to reread a section. Bentley is developing software to help contractors visualize building plans at sites, and Microsoft has teamed with
to help it develop cockpit simulators for pilots.
“The next big tech breakthrough, the next advancement that will transform our lives will come not just from another technology company, but from a retailer or a health-care provider or an auto manufacturer,” Mr. Nadella said at Mobile World Congress.
The number of “smart glasses” used by U.S. businesses is still less than a million, according to
That includes eyewear with tiny screens such as Alphabet Inc.’s Google Glass, which is still in use. Forrester expects the number to climb to 14.4 million by 2025.
One of Microsoft’s biggest deals came last fall when it secured a $479 million contract to supply the U.S. Army with augmented-reality system prototypes. A group of Microsoft employees Friday circulated a letter demanding the company cancel the contract, saying they didn’t intend to develop what they said were weapons. Microsoft defended its work with the U.S. military, as it has before, and said it would remain engaged on ethical and policy issues relating to artificial intelligence and the military.
Mr. Nadella introduced HoloLens 2, which is lighter and more comfortable to wear than the first version, and gives users more than twice the field of view on which holograms can be seen, the company said.
He didn’t, though, unveil any games or apps people can use in their homes. Those might capture people’s imagination, but Microsoft doesn’t believe they will generate significant sales.
“I’m just not hearing that people desperately need another way to be entertained right now,” said Lorraine Bardeen, general manager of engineering for Microsoft’s augmented-reality applications. “We’re not investing in hype.”
Hype has followed these headsets from the early days. When Alphabet Inc.’s Google introduced Glass, co-founder Sergey Brin videoconferenced with skydivers wearing the device. In a few short years, the notion of Google Glass as a consumer product was all but dead. But the excitement around AR didn’t die with it. An early glimpse of Magic Leap’s potential came in a flashy video showing an office worker taking up virtual arms against an invasion of ne’er-do-wells. Apple has also touted the promise of augmented reality at its biggest product events.
A corporate focus wasn’t a foregone conclusion when Microsoft introduced HoloLens in 2015. The device emerged from its Xbox videogame group, with early demos including robot-battle games as well as a scenario in which users could watch videos anywhere in their house.
“They realized very quickly this was not going to be a big consumer win,” Forrester analyst J.P. Gownder said.
Microsoft manages expectations today by limiting consumer access to HoloLens. It isn’t available at any store—not even its own retail chain—though people can schedule a demo. Businesses and partners can preorder HoloLens 2 for $3,500, $1,500 less than the original.
Analysts, though, expect augmented reality will take off with consumers beyond simple games such as “Pokémon Go.” When that happens, headsets will need to be sleeker and more fashionable to widen their appeal beyond business users.
Microsoft has struggled before developing small mobile gadgets that appeal to the masses, said Matt Miesnieks, chief executive of 6D.ai, a computer-vision startup working with a variety of emerging augmented-reality technologies.
“I haven’t seen any evidence from Microsoft that they can navigate that,” Mr. Miesnieks said.
Microsoft declined to comment on competition in the consumer market.
Write to Jay Greene at Jay.Greene@wsj.com