On Monday, Microsoft announced a new home-made tablet that is clearly targeted at the lucrative market currently dominated by Apple’s iPad.
Unlike several previous tablet launches, this time there doesn’t seem to be a mad rush in the media to call these new devices, branded Surface, the next iPad killer. This is understandable. The iPad has shown a remarkable tendency to stay alive in the face of waves of competing devices, most of which have faded into obscurity almost immediately.
However, Microsoft’s decision to enter the market with in-house devices has interesting implications not just for the tablet market but for the broader technology business.
For years Microsoft has preferred to make money by creating software and selling it to end-users, or licensing it out to companies that made computers and mobile phones. This is not because Microsoft can’t make hardware. It can. And as the Xbox gaming consoles and Kinect peripherals show, it can make very good hardware indeed. But this is the exception.
Even when the company recently launched the very well received Windows Phone 7 (WP7) operating system it preferred to work with phone makers rather than make a device outright. WP7 was reviewed well but continues to sell very poorly. Perhaps it is this experience with the WP7 OS and troublesome hardware makers that has convinced Microsoft of the need make the Surface itself.
If the strategy works for Microsoft, it could make things very awkward for the company’s partners. Especially those who pay Microsoft a licence fee to make tablets with the same software that powers the Surface device—thus automatically putting them at a price disadvantage. Success will embolden Microsoft further. If they can make a tablet that sells, why not a proper phone that does justice to WP7 OS?
The Surface could well be the signs of a new hardware strategy for Microsoft in what Steve Jobs famously called the post-PC world.
However, in-house is not an automatic recipe for success. For evidence to the contrary Microsoft need only look at that once-great Canadian company that makes phones and tablets in-house and is now rapidly running itself into the ground.
Can a software manufacturer successfully transform into a hardware company?
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