The pile of tablet computers that have abjectly failed to match the delights of the iPad has been growing steadily over the past two years. It includes defunct devices like Hewlett-Packard?s TouchPad and Cisco System?s Cius, as well as struggling pretenders such as Motorola?s Xoom and Samsung?s Galaxy Tab.
Whether the Surface ? the tablet unveiled by Microsoft this week ? will one day be cast on to the scrapheap of failed electronic dreams is a question set to assume outsized importance in the war being waged over the future of personal computing.
Due to go on sale later this year, the Surface is Microsoft?s first attempt at making its own personal computing device, and the biggest gamble so far in its attempt to avoid a future of technological irrelevance. It is also a mark of how deeply Apple?s success, first with the iPhone and now with the iPad, is transforming the tech world. A once-feared monopolist whose grip on computing seemed unshakeable has been forced to change course. In the world of personal computing, nothing will be the same again.
Its slick magnesium body and thin cover that also acts as a touch-sensitive keyboard have already won the Surface rare plaudits in a market spoilt by the design genius of Apple. But there is far more at stake here than the fate of a single gadget might suggest. Thanks to Apple, personal computing has broken free of the stolid desktops and ?clamshell? laptops of the past and migrated to the touch-sensitive screens of tablets and smartphones.
Microsoft has finally adapted to the business practices of its nemesis as it tries to follow. ?This is critical for [Microsoft] in the long term,? says Rick Sherlund, software analyst at Nomura. ?It?s time they got in the game, this is where all the growth is.? The alternative: to be consigned to a quiet backwater of computing where PCs become simply the unloved workhorses of corporate life.
The Surface represents a fundamental change in the methods that Microsoft has deployed up to now to rule the PC World. Most strikingly, the world?s biggest software company has entered the business of making personal computing devices ? though given the realities of the modern, globalised electronics supply chain, that means contracting out assembly of its tablet design to a manufacturer in Asia rather than operating its own factories.
While it has not previously attempted to sell its own personal computers, Microsoft has at least ventured into hardware before through devices such as the Xbox gaming console and the Zune music player. These businesses have had mixed success, but they have left Microsoft with a deeper understanding of hardware than might be expected of a company that has dominated the software industry, including 3,200 patents on hardware inventions.
By also taking a leaf out of Apple?s book of savvy publicity and stoking anticipation ahead of this week?s announcement, Microsoft was able to secure a stronger reception for the Surface in the tech world than might normally be expected for a company that seldom arouses strong consumer sentiment. Some commentators even suggested that this is the closest any rival has come to matching Apple?s tablet thanks to the Surface?s innovative cover, a built-in kickstand that lets it stand more easily than the iPad, and a widescreen format that makes it more appealing to scroll horizontally through content.
Playing second fiddle to the iPad, however, is not a comfortable place for any hardware maker to be. With about two-thirds of the booming
tablet market this year, according to research company IDC, Apple?s tablet has seen off pretenders and left its rivals fighting over the scraps.
In its pursuit of Apple, Microsoft has also trodden on the toes of its closest allies ? PC makers like Hewlett-Packard, Dell, Acer and Lenovo. With growth in PC sales sluggish at best, these companies have looked to Microsoft?s forthcoming Windows 8 operating system, which is designed for touchscreen computing, to open new markets such as tablets for them. Now they will find some of their toughest competition coming from Microsoft itself.
Steve Ballmer, Microsoft chief executive, sought this week to play down the change, claiming that the company had habitually stepped into hardware when it needed to demonstrate the potential of its software ?in ways the makers of hardware themselves had yet to envision?. Microsoft and its allies, he added, were always ?pushing each other and pulling each other forward?.
Yet there is more to the Surface than this suggests. The new tablet market is simply too important for Microsoft to entrust entirely to others. With other hardware makers having failed so far to come up with an effective rival to the iPad, it has had to take matters into its own hands. ?They needed to take out some insurance,? says Mr Sherlund.
Microsoft?s readiness to move beyond the approach that has underpinned its prosperity also hints at another powerful new consideration: that the financial model for success in personal computing is changing.
The software company was once happy to sit back and skim the cream from the PC business, earning high profits from software as its partners struggled to make a living in the cut-throat PC hardware world. This way may no longer be the most effective.
In the latest quarter, Apple?s profit margins topped those of Microsoft for the first time in the companies? three-decade rivalry, giving the lie to the industry?s conventional wisdom that hardware makers will always be less profitable. It is now Apple that is in a position to suck the profits out of personal computing ? and on a scale that even the mighty Microsoft would once barely have dreamt of.
This is producing a transfer of industry leadership that is happening with dizzying speed ? even by the standards of the tech world. As little as three years ago Microsoft boasted sales that were 60 per cent higher than those of Apple and operating income that was more than 160 per cent greater. By the first quarter of this year that position had flipped. Thanks to soaring sales of the iPhone and iPad, Apple?s revenues are now 125 per cent greater than those of Microsoft, while its operating income is 140 per cent higher.
The distinction of owning the world?s most pervasive computing platform is also under threat. As Mr Ballmer boasted this week, there are some 1bn PCs in use running versions of his company?s Windows operating system. That compares with more than 350m of the iPhones, iPads and iPod touches that run Apple?s iOS operating system, which was launched five years ago. But with sales of Apple?s devices doubling in the first quarter of this year, that position is shifting quickly.
This has already started to starve Microsoft of something critical to its success: the attention of the most creative software developers, whose applications ultimately account for the appeal of general-purpose computers such as PCs and tablets. Among the latest generation of developers, attention has already passed to the fast-growing world of mobile apps ushered in by Apple?s App Store.
The Windows world is populated by developers who are generally older and do not have experience writing applications for the mobile devices that are taking over, says Marten Mickos, an open source software entrepreneur.
?The PC is pass? ? it?s not where the fancy stuff is happening,? adds Doc Searls, an American technology writer and academic.
That helps to explain Microsoft?s attempt this week to whip up excitement for the Surface long before it is ready to go on sale, and even before important technical and pricing details have been revealed. The competition for the hearts and minds of developers is only set to get fiercer: next week it is Google?s turn to hold its annual conference for developers and rumours are rife that it will also announce plans to enter the tablet hardware business for the first time.
For the Surface to have any chance in this battle, Microsoft must pull off two feats. One will be to come up with enough original content and services for its tablet to persuade customers that it is more than just a pale imitation of the iPad. As the discontinued Zune showed, having well-regarded hardware is not enough on its own to break into a market against an entrenched leader.
The other feat will be to find a new niche for the Surface between the current PC and tablet worlds ? one where users can type and run full-scale business applications, as they are used to doing on their PCs, while also leaning back and reading books or watching videos, as they may prefer to do on an iPad. With its touch-sensitive keyboard cover and kickstand, the Surface can quickly be turned into a device that resembles a laptop ? though whether users will take to a machine that tries to span two different approaches to computing is another matter.
Apple and other Microsoft enemies have been claiming for some time that the ?post-PC? era is at hand. The fate of the Surface may well show whether they are right.
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