Why it doesn’t matter if Microsoft Sells any Tablets (it’s all about Windows 8).
Microsoft launching their own tablet is big news. Lots of people talk about how this is a bad idea. The weirdness of a software company toying with selling hardware leads folks to usually bring up Zune as a rationale for why. The thought here that most are missing is that it doesn’t matter is Microsoft sells any Microsoft-branded tablets, but it does matter that Microsoft got to launch the first Windows 8 tablet.
Being first is very important. By taking the time to launch their product on the exact right hardware to show off all the features allows Microsoft to set the appropriate bar for where OEMs will need to start to make sure that Win8 becomes a viable tablet product at the onset, rather than playing a continuous game of catch-up like Android is having to do. Since the level has been set, it leaves OEMs no choice but to launch their Windows 8 tablets at the same bar or exceed it just to play in the market.
Thinking of Android tablets is a very good example. When Android tablets were first introduced, they were underpowered, over-priced and lacked a lot of the critical features that made the ipad great. A mess of short-sighted, noncompetitive products flooded the stores, and then glutted Woot. Second attempts at creating something competitive (aside from Samsung) have basically fallen flat. It is plainly obvious that most tablet OEMs have not understood where to be in terms of technology to be competitive. Microsoft could not take the chance for the same lackadaisical product work to happen with the launch of their tablet operating system. Vendors now can’t take the cheap route. They’ll have to create at least competitively spec’d products with the Surface.
The move is very sly and one that shows Microsoft learns from others’ mistakes. Coming out with the best possible spec machine forces OEMs to start competitively rather than to have the occasion to start at perhaps a less than optimum level—which is what had essentially doomed Vista (not to mention all of the Android tablets) when it was sold on under-powered machines to the masses, causing the OS to be sluggish, amongst other things.
Further, by putting out their ideal specs to the market before the OEMs , they’ll also get to set the price schedule for Win8 tablets. If pricing is done well, the Win8 tablets can price itself to be more than competitive with the ipad. For instance, if MS places the price of the Intel tablet within $100 dollars of the iPad, it will force the iPad to battle against something far more powerful (Intel-based full-version Windows), while the ARM tablet would have to price in lower, outside of competing against a more powerful and entrenched iPad. A pricing format like this would force Apple into competing with essentially a desktop-powered tablet and diving into a commodity market or watch its market share recede into the 5% niche it was in before the iPod. Not to mention, this creates the beginnings of the tiered pricing scenario seen in laptops and an entry point to essentially commodity tablet market that has gone nearly untouched.
Let’s not forget, Microsoft’s profitability is not based on one single product no matter how well this tablet sells and it may not make any difference if it never comes to market. Microsoft may even see it a shrewd move to sell it at a loss. A classic example of this is Amazon’s Kindle and even more indicative is Microsoft’s own Xbox platform. The hardware is sold for essentially a loss and it doesn’t matter as the profits come from the sales of the software. For the tablet, this may hold true as well. Proving that Win8 is a viable tablet operating system that can compete on an even footing with Apple’s is insurance in Microsoft’s viability for the future. Owning the tablet space with Win8 ensures Microsoft’s dominance in the OS world, and especially in enterprise, as a win for Win8 is a win for continuance of all of the other platforms MS has like Office, Outlook and so on. So watch out for the future, Microsoft is on the move and they may know exactly what they’re doing!