Should Microsoft be in the hardware business? I’m sure there have been raging debates on the pros and cons of this important strategy conversation within the hallowed halls of Redmond for decades. But today, this question is more urgent and strategic than it’s ever been.
Clearly, Microsoft is already in the hardware business with KINECT and their wide range of keyboards, mice, and web cams. They’ve also dabbled with specialized devices like the Surface tabletop display in the past (though it’s still a part of the product line today, being built by another hardware OEM). And, the intensity with which they have managed product integration, pricing and packaging with their hardware OEMs is great evidence of the fact that they want to control the availability of Windows PCs, but not manufacture them themselves.
But, with the surprising announcement of their new Surface tablet, they’ve given their hardware partners reason to pause. The way I view it, Microsoft is caught between a rock and a hard place. The mobile device and service market is evolving at hyper speed, with Apple racing ahead to continue its smart phone and tablet innovation and with Google buying Motorola Mobility and planning its own Nexus tablet launch. So, they’re compelled to respond, if for no other reason than to be able to demonstrate a device optimized to bring the power of Azure and Windows 8 to business applications…. and fast. On the other hand, they’ve invested huge amounts of time and money to enable their hardware OEMs over the years, driving them to develop a broad set of devices supporting Windows. So, why are they willing to risk that investment now? Haven’t Samsung, Dell, Acer, Asus and all the other hardware manufacturers rapidly launching new tablets, netbooks and smart phones? And, didn’t Oracle have to buy Sun Microsystems to achieve this same sort of software to hardware market cross-over?
In my mind, Microsoft’s strategy about hardware in the next 2-3 years should be very simple – stay focused on the core applications. Deepak Chopra said it so well at Wednesday morning’s keynote presentation –“Stay present, focused and connected.” VMware, SAP, Google, Salesforce.com, Oracle, VMware, Cognos and Netsuite (among many others) are all worthy software competitors at which Microsoft should be pointing its big guns. They need to continue to post significant share gains and customer wins as the applications leader for the cloud age. Stealing a significant portion of any one of those companies’ marketshare would not only be easier for them, but would also play directly to the strength and breadth of their application portfolio. They’ve also got the biggest O/S upgrade in their history to make successful, across many platforms and applications — 20 months to migrate 200 million PCs from XP to Windows 7, 8 or Office 365 alone.
Once Gates’ organization dips its toe in the tablet business (or smart phones, if they so dare) they have a whole different set of profitability, operational and product lifecycle management issues to deal with. It would make infinitely more sense to continue to build deep alliances with innovative hardware companies like Perceptive Pixels, driving new devices on which to deploy their new cloud-enabled apps. And, as it relates to selling hardware through channels (or not, as in the case of Surface), Microsoft would be better served focusing its competitive attention on building up the applications community around Windows 8, WindowsRT and WindowsPhone to address the gap of half a million applications which exists between themselves and Apple.
Kevin Turner, Microsoft COO, said it best in his keynote to the partner community. “Our collective execution will determine our future, together” he evangelized. Mr. Turner, you and your huge base of partners have a lot to do to move the entire IT industry to a modern applications environment. As you say, “let’s get after it!”