Microsoft Surface and the OEM Dilemma

on June 21, 2012

On Tuesday Patrick pointed out that the dynamic between OEMs and Microsoft may be forever changed. The primary reason for this being that Microsoft has signaled intent to compete directly with their partners in the tablet PC arena. What I want to examine in this article are the major points of concern from an OEM (Microsoft partner and original equipment manufacturer) perspective.

The Microsoft partner dynamic is one that has historically been based on trust. The company providing the main software layer, in this case Microsoft with Windows, needs to be closely working with the company making the hardware which will run said software, in order to assure some level of quality assurance and user experience. Of course this has not always been done well but it is none the less the goal. Because of this reality both Microsoft and hardware partners need to be in communication very early in the hardware process.

In many cases OEMs share specific details of their hardware roadmap with Microsoft. If Microsoft intends to be a competitor then any hardware OEM will have to think twice about how much roadmap and hardware detail around tablets they share with Microsoft. In this scenario there is a significant risk that the software and hardware are not tightly integrated (and it should now be obvious how important that is) thus resulting in poor user experience and a poor reflection in the market for all companies involved.

Tablets are the Future
Many of the authors in our forum here at Tech.pinions are proponents of the critical role that tablets play in the future of computing. This is an incredibly important category and arguably more important to the future of computing than the notebook category. With that in mind, and depending on your opinion on the matter, Microsoft is getting into the game in one of the most important segments going forward.

I can entirely see Microsoft’s reasoning for this move and honestly, based on my convictions on where this industry is going, if I worked at Microsoft I would heavily advocate this direction . They simply can not afford to sit back and watch the iPad completely destroy any competing tablet. Microsoft is a platform company and is responsible for an ecosystem. Every customer that enters Apple’s ecosystem, whether that entry point is an iPad, iPhone, Mac, etc., is potentially a customer who will not be leaving Apple’s ecosystem any time soon–if ever.

In reality, Microsoft partners are likely to be more focused on notebooks in the short term than tablets. Which means there is a possibility that Windows 8 would have lost more time in the tablet space. So it makes sense that Microsoft felt the need to make sure a compelling product was available at launch. However, the tablet segment is one that OEM’s need to focus more on, perhaps more than notebooks, and can not afford to not have a compelling play themselves. My concern if I am an OEM is that Microsoft intends to compete with me in one of the most important categories going forward.

The challenge will whether or not Microsoft can walk a line that few have tried. In this case be vertical in a segment but also be open in the same segment and others.

Lastly, and this point could prove the most costly for the Windows ecosystem. Microsoft will have Surface, other brands will have what? Slates? Tablets? or perhaps some other new name they come up. So if I am a customer shopping for a Windows 8 based tablet, I need to learn, study, then decide between Surface, Slates, Tablets, or any other number of names and tablet brands. All with different looks, feels, ports, CPUs, versions of an OS, keyboard accessories, general accessories, capabilities, etc.

Contrast that with Apple. If I want a tablet in Apple’s ecosystem, right now my options are the iPad (2 or current). Yes with minor different configurations but my point is the brand. The iPad is Apple’s tablet, now choose which iPad you want. The environment around Windows 8 tablets is going to be much more confusing.

The tablet sector is one that is maturing. Consumers, who have not yet owned a tablet, are interested in what a tablet means to them and how it fits in their life. I would argue that right now consumers don’t know what they want in a tablet. Therefore if they are presented with too many choices which confuse and frustrate them how can they feel comfortable making an informed opinion. Take USB for example. A consumer looks at this option and says I have USB in my notebook. Why do I need it in my tablet. Maybe they do and maybe they don’t but having not owned a tablet yet how do they know? This is one small observation of the overall consumer adoption cycle and how it works. This is also generally why a market like this favors the market leader and in this case the iPad. Once a market segments the door opens for specific feature differentiation. The market for tablets has not yet segmented.

I firmly believe that any platform or ecosystem that offers confusing choice to consumers around tablets is going to have an uphill battle.

Of course one possible way Microsoft can maneuver in light of everything I have pointed out is to let Surface be a general brand and product strategy that others OEMs can participate in. I suggested this on Tuesday when I stated that Microsoft should let other OEMs participate in the Surface program. Time will tell what path they take.

Regardless one last point on hardware needs to made with respect to open platforms like Windows, Android, etc. Hardware only exists as a gateway to a software and service ecosystem. Thus a platform like Windows creates platform loyalty but it does not create hardware loyalty. Therefore, those who compete only in hardware will have to do so with every upgrade cycle. This means for Microsoft its a win-win for their platform either with their hardware or others. If this plays out how I think it might, I can’t say it’s a win-win for OEMs.