In last Friday’s main column on Tech.pinions, I wrote about Microsoft getting into hardware. The important takeaway is the idea that, as the PC industry consolidates, Microsoft has fewer customers who could ship PCs with Windows on them. If that happens, it is problematic for them so they are learning about making hardware as a defensive move so they can eventually guarantee they could become a strong hardware vendor to make and sell PCs in volumes, especially for the consumer market.
However, this move is a double-edged sword for them and their partners. For most of Microsoft’s life, they have been a software company and, once they did get into hardware, it was via mice, keyboards, and accessories. Their only other move into hardware until they launched the Surface was the Xbox.
Even when they first got into hardware with the Surface it was not much of a threat to vendors since this first version used an ARM processor and had very little software that would work with on it beyond what was available with the Windows OS on these systems. However, once Microsoft launched an X86 version of the Surface, it became clear to their customers Microsoft was now a competitor as well as a software provider to the OEMs.
At the time of the x86 Windows launch of the Surface, Microsoft was basically doing a 2-in-1 prototype. Its initial goal was to get their partners to do similar models. They and Intel both believed the concept of a 2-in-1 was powerful and, since Microsoft missed the tablet boom, this was their way to differentiate and marry the tablet and laptop concept into one. Of course, they positioned this a productivity tool and hoped their PC partners would help them champion this design. While a few created some 2-in-1s, they were really not behind the idea and most OEMs opted to stay with the laptop format, adding touch screens and displays that could fold and be used as a tablet similar to Lenovo’s Yoga.
While the OEM partners were not thrilled Microsoft had created mobile hardware that could compete with them in some areas, they were relatively forgiving until Microsoft introduced the Surface Pro 3. This version was much more powerful and started to gain some traction in the enterprise. And the Surface Pro 4 is even better. To date, Microsoft has now sold between 8-10 million Surface devices and, with the Surface Book, they are now really treading on the hallowed ground of their OEM customers, taking their laptop businesses on head-to-head. To say Microsoft’s partners are not enthusiastic about this would be an understatement.
Hours after Microsoft released the Surface Book, I got calls from some of the PC OEMs who were caught off guard by the announcement. They were also perturbed at Microsoft for not showing them this in advance and perhaps rightfully upset that Microsoft is now creating a convertible or full laptop that now competes with them for premium laptops in the enterprise. The irony is not lost on them that, as Microsoft introduces a new Surface Pro 4 advertised as the tablet that could replace your laptop, they are now creating their own full blown laptop too.
I realize Microsoft has priced this at the upper end of the premium market for laptops at $1499 and is hoping their partners will get off their butts and create laptops even more innovative and sleeker than their Surface Book. However, what they actually did was piss off their partners who now feel more and more that Microsoft will become a serious competitor in hardware and steal business from them, especially in the enterprise.
With the introduction of the Surface Book, I sense a real wedge has been driven between Microsoft and their important partners who they must rely on to help keep the Microsoft Windows franchise alive and moving forward. While I don’t believe any of them will abandon Windows, I think Microsoft’s move into laptops pushes the OEMs loyalty to the limit and could make them less likely to be a Windows-only shop in the future. As I have written here a couple of times, I believe Apple is going to make iOS their main OS for consumers and enterprise and the iPad Pro is their first major hardware to be targeted aggressively at business users highlighting the huge range of iOS software available for use in just about all settings. I have also suggested that, if iOS is pushed to a broader business audience, I could see Android being used in the same way. I am aware of at least two Android ultra-thin laptops that will come to market by early 2016 and I sense the big OEMs would be more open to adding them to their product mix now that this loyalty link to Microsoft has been breached.