Microsoft, the software giant from Redmond, Washington, sure raised a lot of eyebrows recently when it announced that it would be releasing its first hardware product, the tablet dubbed Surface. This raised many eyebrows on so many levels. First, Microsoft is a software giant, and it is not a hardware manufacturer. Questions regarding core competencies, design prowess, hand wringing about any potential hardware bugs to complement the often complained of software rough spots. This is quite an understandable level of concern, but most of these issues can actually be smoothened out fairly easily. Microsoft is focusing on the design. Its competency in software helps to inform its hardware design to create a very smooth fit. It obviously wants a lot of control that is why it took the extra step of designing the hardware. In terms of manufacturing and bug issues, a lot of that are being outsourced by Microsoft to its hardware partner that will be handling manufacturing. That partner presumably would be selected based on the fact that it has a long track record in manufacturing so it should have quite a bit of bug hunting experience under its belt.
The real eyebrow raiser for many industry observers is the effect this move would have on Microsoft’s partners. Microsoft, by focusing on software, allowed a huge ecosystem of hardware manufacturers to grow around it. Giants like Hewlett-Packard, Dell, Acer, Asus and Lenovo focused on the hardware side of things. It is quite a mutually profitable partnership. However, Microsoft making the software and hardware manufacturers focusing on the hardware looks easy enough. Recently, this arrangement has been going through some tough times lately. PC sales are down, margins are shrinking and costs are going up. Microsoft exacts a large cost to its partners because the price of the OS is slapped on to the price of the hardware. This probably causes some friction behind the scenes.
That is why it is quite puzzling that given the tension between the added cost of software and Microsoft’s flexibility regarding that cost factor and the fact that Microsoft now is rolling out its own hardware. In essence, some observers are saying that this is a slap in the face to its partners. Microsoft is suiting up as a competitor. Red flags, right? With all that said, there are some very compelling reasons why Microsoft’s Surface tablet move is a great move. First, Microsoft needs as much control as it can to make sure that it is not completely swept out of the mobile device market.
So far, Microsoft’s track record has been quite sad. It did not go anywhere with the Zune iPod killer. It is floundering in its smart phone efforts with Windows Phone. Given these two trends, it is no wonder that Microsoft is resolved through its bold Surface move to not be shut out of the fast growing tablet market. The tablet market is growing faster than the PC market and this is one lucrative niche that Microsoft cannot afford to become irrelevant in. That is why it needs a hardware product that will help Windows 8 put its best foot forward by exercising so much control over the hardware design.
The hope is that the hardware would truly highlight what makes Windows 8 worth buying. In essence, Microsoft is designing and holding out its showcase platform for Windows 8. It has put a lot of its eggs in the Windows 8 basket and Microsoft will be damned if it would just outsource all hardware implementation and see Windows 8 crash and burn. The thinking is better for Microsoft to step on a few toes by rolling out hardware that it is fully confident that Windows 8 will shine in rather than lose the tablet market all together There are huge potential revenues involved. This appears to be a gamble worth taking. Microsoft can really take pride in the craftsmanship of the Surface and hopefully for them, it translates into solid showing for Windows 8. Windows 8 is a massive leap forward for Microsoft. In many respects, it is a leap of faith. Also in many respects, it may be its last best chance to hold off what appears to be the trend in computing which is towards mobile devices and towards the cloud. What is missing in this picture? You got it, no Microsoft. That is why Windows 8 embodies the Microsoft paradigm which is all devices going through Microsoft to access whatever application or internet tool or content the user is looking to access. It needs Windows 8 to come out swinging for the fences for this vision to fly. No wonder Surface, despite all its gambles, was announced and from a purely strategic perspective, it makes a lot of sense.