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Microsoft's Surface May Annoy Hardware Firms, But They'll Live

This article is more than 10 years old.

The company first tantalized journalists and analysts by inviting them to an event at an unknown location in Los Angeles for an announcement late Monday afternoon.  Everyone read tea leaves and tried to figure out why LA and why that time of day.  Turns out, both were red herrings and not relevant at all.  Just part of the stagecraft.  The announcement was that Microsoft would be making its own tablet hardware — called Surface — to showcase Windows 8.

Wednesday, at a smaller event in San Francisco, Microsoft unveiled its next generation smartphone OS, Windows Phone 8.  Aside from a more flexible version of the company’s new signature “Metro” interface, the significant aspect of Windows Phone 8 is that it shares its essential inner workings or kernel with Windows 8.  This unification could have an impact over time.

It should be noted that Apple has already unified its kernel.  Mac OS and iOS share basic elements.

The main implication is that applications may be able to move more or less freely among form factors — phones, tablets, notebooks, desktops, maybe even TVs, cars, and refrigerators — as developers are able to write once and recompile many times for different target hardware.

So, it’s been a big week for Microsoft.  The stock got a distinct pop late Monday on the general enthusiasm for the Microsoft tablet hardware.  It reacted less to the phone news.

Not wanting to buy a full-boat cross-country ticket on Father’s Day to an event the next day at a location yet to be named, I watched the action on several live blogs and Twitter all at the same time.  There was a distinct point during the pitch when the feeling swung over from skeptical to positive, somewhere between the revelation of the cool stand that popped in and out with a manly thunk and the unveiling of the 3mm thick keyboard that doubles as a screen cover.

Microsoft has always had a hardware group, which mostly services the software developers with experimental platforms and is in charge of the venerable line of house brand mice and keyboards.  But it has also brought out real products from time to time, including, notably, the successful XBox 360 gaming console and the not-so-successful Zune media player.

That’s all well and good for Microsoft, but a lot of eyebrows went up over the fate of Microsoft’s customers, the PC hardware OEMs — Hewlett-Packard, Dell, Acer, Lenovo, and others — that distribute most of Microsoft’s software and deliver to the company most of its revenues.  How were they taking this?

No one in current employ would go on the record saying anything, but Stan Shih, the retired founder of Acer, felt sufficiently distant from the action to say that Surface was just a straw man, a bar-setter, a reference design, an example that would spur the OEMs on to more vigorous innovation.

During the keynote, Microsoft CEO Steve Ballmer wasn’t that reassuring.  He indicated that the company might sell a whole lot of Surfaces.

We can quickly dispose of most of the issues here.  Microsoft itself has extremely limited distribution.  If it sells Surface only in company stores and online, not many will move.  In addition, Microsoft has scant history of supporting end users.  It doesn’t have the infrastructure to handle service calls, returns, help desk, and so on.  Distribution and service is what the OEMs do.

I chatted on background with most of the major OEMs this week, and from these conversations, a picture of Microsoft’s playbook emerged.

Although the tablet that became Surface was rumored for a year, they got notice of the real product only at the last minute.  Ballmer did make courtesy calls, but that was it.  The OEMs were annoyed.  Microsoft is hard to trust on a good day, and when it pulls something like this, it’s all the more difficult.

Arguably, Surface is a poke in the eye.  The OEMs are wondering whether their customers will buy Windows 8 at all, and the new OS has been positioned as being optimized for tablets.  Consumers will buy whatever is in the store and so will inflate adoption figures, but business customers have to volunteer for an upgrade, and most of them are still getting used to the idea of Windows 7.  Tablets were supposed to be the new accretive market.

Microsoft’s stepping in front of its customers and helping itself to the crème de la crème is just impolite.  If Surface were a real reference design, Microsoft would have made it available to the OEMs as it has done in the past with other products.  No, the company really wants to sell some of these itself.  It may not follow on with a full line and subsequent generations, as Shih forecast, but Surface is a real product.

So, here is a flavor of my communications with the OEMs:

One said he was “not thrilled about it,” “The hardware is not that nice,” and suggested that too much disruption to the ecosystem could lead to unintended consequences.  But even if they hate it, where can the OEMs go?  Apple won’t license.  Google is an unreliable partner.  Linux on the client is dead on arrival.  Likely, Microsoft bet that it could anger its customers without alienating them completely.

Another said Microsoft has no experience managing channels, was not good at it, and hasn’t announced a new organization to support Surface.  He mentioned something about wanting to throw a chair, but having to bite his tongue.

Yet another confirmed that the announcement was abrupt and unsettling.

My own view is that Microsoft will play it as it lays.  If Surface takes off, the company will support the product and build it out in a new business designed to go after Apple directly with a product that Microsoft controls from top to bottom — just the way Apple does.  If it fails to gain traction, Microsoft will call it a reference design and market stimulus and fall back on its old model of supporting its OEM customers.

Either way, it’s a shot in the arm for Microsoft and Windows 8.  The company has to be bold.  Nokia’s recent experience shows how quickly a company can drop from number one to the bottom of the tank, and Microsoft doesn’t want to be next.

Disclosure: Endpoint has a consulting relationship with several of the large OEMs.

© 2012 Endpoint Technologies Associates, Inc.  All rights reserved.

Twitter: RogerKay