There is an unquestionable trend emerging — tablets are evolving into notebooks. This does not mean all tablet/notebook combinations will replace PCs. However, it does validate the opinion that there is a segment for these devices and our conviction is that the segment is quite large.
In my view, what Apple has done with the iPad Pro has legitimized the Surface form factor. Our data and analysis of overall PC shipments continues to highlight that 2-in-1 tablet and notebook hybrid sales have remained relatively small as a percentage of the mix of pure notebook and desktops. But it does feel like this is about to change.
Our firm has long been predicting these worlds would converge and all notebooks — at least, the vast majority of them — would converge around this form factor. There is a place for the pure notebook form factor. Think of it as a portable desktop. But the issue remains that the market for a portable desktop is very small. The market for a 2-in-1 PC is actually quite large, especially when you lump in consumer market sales, which is nearly half of the ~300 million ~ desktops, notebooks, and 2-in-1 form factors shipped today.
The iPad Pro validates the 2-in-1 form factor, albeit with a very different philosophy which I will discuss shortly. It is likely to help fuel the sales of these products in the market and is likely to help Surface in its enterprise adoption specifically because these are markets where a “Desktop OS” is still necessary. For example, one thing the Surface can do the iPad Pro can’t is run two Excel documents side by side. There is a place for a desktop OS in enterprise environments and I still believe Windows based 2-in-1 PCs fill this space.
Certainly, the iPad Pro will have its enterprise deployments. However, its opportunity there as well as its opportunity with creative professionals is simply smaller than the broader opportunity for consumers.
Tim Cook said, in a very calculated statement, “The iPad is the clearest expression of our vision of the future of personal computing.” This statement has implications and needs some unpacking.
First, we must establish the point the iPad Pro contains desktop class capabilities but runs a mobile OS, not a desktop OS. Although we can argue the specific version of iOS built for iPad is maturing to be more desktop-like with the simplicity of a mobile first experience. Second, and not to take anything away from Macs as they have their place in Apple’s lineup, this statement means Apple believes the future of computing runs on ARM not x86 (perhaps a thought nugget for those who believe Apple will bring ARM-based chips to its Mac lineup).
The Future of Personal Computing Running on ARM
This statement makes quite a bit of sense. Platforms running on ARM dominate the mobile landscape today. These platforms are Android and iOS. All the mobile first, consumer-centric developers are already writing for ARM. But when it comes to the tablet’s ability to take on notebooks (not desktops), Apple’s philosophy of leveraging the developers of the mobile ecosystem is central. I’ll make the point this way. If you were betting on developers that could carry the future of computing forward, would you bet on Windows developers or iOS developers? Hopefully, this question is easy to answer. This is where the philosophical difference between Windows 2-in-1 devices diverge from that of the iPad Pro.
Microsoft has corporate developers, this is certain.
ARM/iOS/Android has consumer developers and much more global ones at that. One market and one developer ecosystem, is significantly larger than the other. This is why it makes sense for Apple to bet on iOS developers from the viewpoint that Apple is broadening computing hardware capabilities for their developers to start thinking about the future of computing beyond pocketable screens.
It is within this vein of thinking Tim’s article about Android on “PC like” form factors makes sense. As the founder of the Remix OS said to Christopher Mims of the Wall St Journal in this excellent article on tablets:
“If two-thirds of the population of the world has not gone online yet, and if they do go online using and Android-based cellphone, then when they want to move into the productivity space, chances are they will want to use a familiar operating system.”
This was essentially what I proposed in this report on tablets. As consumers graduate to and have a desire to move up in this mobile-only world, it makes sense they stay with a mobile-first OS. Hence, our strong recommendation of late-to-PC OEMs to look at Android for the 2-in-1 form factor as a variant OS for their hardware.
The iPad Pro helps to further my conviction that Windows will remain a niche operating system in the personal computing market.
Creativity vs. Productivity
One last point. I’m continually frustrated by the commentary that states “real work” is defined by productivity. In my mind, for consumers, tools that let us create are just as important as those which help us produce. Making a home movie is more fun than creating a budget. But both sets of tools are necessary. My point is the idea of proclivity is not exclusive to Word documents and Excel spreadsheets. It also consists of making films, art, and creating things worth sharing with friends and family. This is why I’ve often been stunned Windows has never come bundled with software like the iLife suite (iMovie, iPhoto, etc.). Steve Jobs may have said it best, “iLife would do for creativity what Office did for productivity.” Consumers value the ability to create at a deeper, more emotional level. This angle is another one I’m intrigued by the upside potential of the iPad Pro, not just in vertical markets, but for the broader consumer market as well. It is up to Apple’s developers to take it there.
I have to say I’m still very confused over your logic that Android will win over Windows in tablets and personal computing in the future.
If I understand correctly, the things that are in favour of Android are
1. It runs on ARM.
2. Android has consumer developers, which constitute a larger and more vibrant ecosystem.
The things in favour of Windows are
1. It has corporate developers.
2. It can run PC apps.
First, I’m not sure if ARM/x86 is the discussion to be making. From a general developer’s point of view, they will use a compiler that abstracts away the underlying CPU architecture. Also regarding performance and power consumption characteristics, it seems to me that these architectures are converging. I would completely understand if the issue was a mobile OS (with sandboxing and security built in) vs. a desktop OS (which was originally designed with openness in mind). Not so much however for CPU architectures.
Secondly, and much more importantly, I think you are giving the Android developer ecosystem too much credit for non-game software. If you take a look at App Annie app revenue data, you will find that the revenue that Android developers make is increasing in total (from the Google Play store, excluding China). However, the vast majority (> 90%) of that is from games and the percentage is growing. In fact, if you look at the revenue for non-games, it is essentially flat. Therefore, it appears that they Android ecosystem for non-games is stagnant. This is in contrast to iOS where the majority of revenue is also made in games, but the non-game segment is still strong and growing. Last time I looked, total revenue was iOS : Google Play = 1.6 : 1, but for non-games it was more like iOS : Google Play = 6 : 1.
Now the question is, when discussing the next platform for personal computing, is it going to be about games or is it going to be about the software that allows us to be more creative and productive? Of course, we know iOS dominates both kinds of developers so iOS taking first place is a given. For the second place however, we have one platform that is much weak in non-games and one that is weak in non-productivity. I think the race for second place is much closer than you make it out to be.
One other interesting thing to note is that a lot of the productivity and creativity software that I see on the iPad comes from desktop software developers. For the iPad, a lot of successful developers came from the Mac. Similarly, we can expect that the software that will pull tablets towards PCs will actually come from PC software developers like Microsoft and Adobe. Android lags behind in these kind of developers. I think it’s wrong to put “developers” into a single bucket. There are game developers, graphical design oriented developers, productivity developers, coding tool developers, music developers, education developers, etc. Counting just the total ecosystem size is misleading.
Two things. You mis-understood the Windows vs other OS comparisons. I’m simply making the point that I don’t see Windows expanding the market to new users, now that may not be very large and possibly not as large as the 200m unit Windows PC shipments which likely to continue. Only that Windows is not expanding the TAM for PCs in ways I think Android could and iOS in tablet form factor might.
To your point of Android developers, we have to remember Microsoft, Adobe, etc., are all also Android developers now. There is a significant shift happening for software across all fronts to be cross platform. There won’t be apps by mainstream publishing companies that are exclusive to Windows any longer.
If there is one thing that is clear from the slowdown in tablet sales that we experienced these last 3 years, it is that tablets in their present incarnation, be it iOS, Android and Windows, are not sufficient to address the needs of current desktop PC users. The very issue of whether tablets can expand the total addressable market is being questioned.
Some people think that the iPad Pro might be the answer but that is still far from certain. With the iPad Pro indirectly vindicating the Microsoft Surface, people might actually take another look at Windows devices for the answer.
As far as I know, we simply don’t know what it is going to take for tablets to grow the TAM. Hence I think it’s still very premature to say whether Android or Windows is better positioned. As I said and I think you are also pointing out, neither has a clear advantage.
One thing that I would like to know is the IT environment in corporations or small businesses in emerging markets. Do they use Google Docs, Libre Office, legitimate MS-Office copies, or pirated MS-Office? Do they use paid SaaS services? I’m sure that this will significantly affect the discussion of what tools will be used by new users, at least in the short to mid term.
In a recent interview with Buzzfeed, Tim Cook was asked about the future of the iPad / Mac and this was his answer;
“I think that some people will never buy a computer,” Cook says. “Because I think now we’re at the point where the iPad does what some people want to do with their PCs.” Cook is quick to point out, however, that this doesn’t foreshadow the end of the Mac. “I think there are other people — like myself — that will continue to buy a Mac and that it will continue to be a part of the digital solution for us,” he adds. “I see the Mac being a key part of Apple for the long term and I see growth in the Mac for the long term.””
http://www.buzzfeed.com/johnpaczkowski/twenty-minutes-with-tim-cook#.qdbVVXXY1
Is this in contradiction to this statement he made regarding iPad?;
“The iPad is the clearest expression of our vision of the future of personal computing.”
I think that is a very important question.
What does Apple mean by “the clearest expression of our vision of the future of personal computing”?
1.
We now know that it’s not about the absence of a keyboard or stylus. Apple is happy to have these input tools as part of their vision.
2.
If it’s not about the keyboard, then what is it about? Is it about the sandboxed OS with limited filesystem exposure and a significantly more stringent security model?
3.
Is it about making personal computing simple enough for 2-year olds and seniors (not only your tech-savvy grandpa, but also your grandma who still doesn’t own a mobile phone)?
4.
Is it about making computing possible for those occasions where we still fall back to a paper and pencil. Like jotting down notes at a construction site or scribbling ideas in a notebook.
5.
Is it about unleashing the creative potential of individuals? Remember the “Think Different” ads.
6.
Just for the sake of argument, I’ll add a less likely possibility. Is Apple’s vision of bringing computing to the masses, a Ford Model T approach? Is their vision to make things more affordable?
Understanding Apple’s vision at a high level will hopefully give us some idea of how they will try to revive iPad sales, and will probably help us understand the iPad Pro better.
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