22 June 2012

Microsoft Surface Tablet - A Weak Defence

Do you think Microsoft Surface can surface? It is a bit late and yet without any killer attraction. Surface RT is a catching up game and Surface Pro is a competitor to itself Ultrabook. What do you think?
Will Microsoft be successful in its tablet war against Android and Apple ? It is fun and a good learning experience to predict the future. It tests our thinking framework. If our thinking framework is right, we should be able to predict the success or failure of the new offering. Even if our prediction turns out to be wrong, we can go back to our framework and make the necessary adjustments and updates so that we can be better the next time.

When in April 2010, HP bought over Palm WebOS for US$1.2B to enter into the smartphone and tablet market, I wrote a post in 3 May 2010 Smartphone Wars' New Force: Hewlett-Packard & Palm - Is that so? saying that it was not likely to be successful. In the post, I have a paragraph titled "When has putting two losers together makes a winner? ". HP surrendered one year later in Aug 2011. Last time, the two losers were Palm and HP. This time, will the two losers be Microsoft and Nokia? At present indications, it seems to be on the track of to be so.

Microsoft Surface Tablet
Firstly, the name 'Surface'. Do you like it? Is it signifying that they are coming to the surface to catch a breath of air after struggling against sinking for sometime? Many people think that this Window-8 OS is Nokia and Microsoft, at least for Nokia, last chance/bet, for survival.

MS Surface has two models, Surface-RT is to address the war against iPad and Android tablets, running on the same class of ARM processors using the Window-8 OS. Surface-Pro is the tablet version of the Intel-based processor and will run the PC based software. It is not new. It was the failed window PC tablet announced by Bill Gates about 10 years ago in new form factor.

So, Microsoft is trying to address or to protect two markets,
  1. Surface RT: the iPad and Android tablet market.
    In this market, PC based tablets have not been successful at all. So, Microsoft needs to have a new one to address this.
    The market reactions for the Metro interface and Consumer Review of the Window-8 have been mixed. Some like it and some hate it. This is not a good sign. We bought a window-7 HTC phone when it first comes out. We did not find anything great to keep it. In fact, we found then that it was released too early. Many software and character sets were not supported. We gave it away. Went back to buy iPhone and Galaxy Tab.  So, this defensive move by Microsoft and of Nokia, is not working well.
  2. Surface Pro: the PC users wanting a tablet form factor to replace their PC laptops. Users who felt the iPad and Android are not able to replace their PCs.

    In this market, Surface Pro is competing against itself, the Ultrabooks and the Apple Mac-Air. The war of Window OS vs iOS is clear. The market share of Mac is increasing, and Window PC is decreasing. Taking a look at the access statistics on this mind-value blog, you can see such a trend:


In the [All time] Pageviews, Windows has 75% vs Mac 11%.
In the latest [Month] Pageviews, Windows falls to 67% vs Mac 10%. If you just compare Window vs Mac, the share of the Mac has actually increased over Window.

A key and interesting trend is to the rise of Linux, iPhone, Android and iPad. This is clearly telling us that more and more people are using their phone and iPad/Tablets to access the internet.

Predictions
I personally felt that the Cloud devices of phones, tablets and laptops and desktops will be polarize into two main categories:
  1. The Consumers and Light Business Users
    e.g. Business applications are delivered as an app on the phone or tablet. In this market, MS is definitely very behind and is playing catch-up with the Surface-RT. But I find no killer features for it either in the rational (cheaper, faster, better, safer, easier, robust), or emotional and social (cools, fashionable, status symbols), or significance (meaningful, pro-life, pro-environment) in the Surface-RT.

    We can sub-divide this into:
    1. Pure Consumers.
      Besides the basic internet access, email, facebook, etc. It is the availability of apps that drive this market. In this case, Apple and Android have a big lead over Microsoft.  
    2. Business Apps.
      There are many business applications running on Ms Servers and Desktops and if there be easy porting of applications to Surface-RT vs iPad or Android, then Surface-RT does stand a chance. But, the industry will come out with easy ports to iPad and Android as well.

      Look at this IDC worldwide Mobile Phone Tracker Chart

      If you are a developer, which platform will you choose?
      Definitely not Symbian or BlackBerry since they are declining. While window-phone is growing at 26.9%, the base is relatively small at about 3.3M units. Android is growing at 145% on a base of 90M units and Apple is growing at 89% on a base of 35M units. Do you see hope in Window-7/8 and of Nokia?
  2. The Professional Heavy Users:
    e.g. Developers, Financial Traders, Accountants, Engineers and Scientists whose work require multiple large monitors and heavy and extensive computation and visualization tasks.

    Is there a market for the Surface-Pro here? Will not an ultra-book be a better option. If I want something light and convenient, I will by the iPad/Android or even the Surface-RT. 
Clay-Christensen's Disruptive Innovation Theory warns incumbent enterprises to watch out for over-shotting customers needs and open up an opportunity for new disruptive entrants. Microsoft may have taken the advice to defend this low-end market. But it may be too late and too little (no killer value-vector proposition). Even for Intel, which has taken Clay's advice seriously to introduce the celerion chips to protect its low end processors market against AMD and other clones 10 years back, its future is of concern as well with the rise of the smartphone and tablets using its competitors' ARM based chip sets. The ARM chips produced by different chip makers like Samsung, TI etc are the dominate players here. With ARM 64 bit coming into the market, Intel own turf is under attack.

Not that Microsoft or Intel will not go away very soon but their influence will be greatly reduced and will not be like before. They may be pushed to the higher end business of the servers and infrastructure of the clouds which are nonetheless big markets.

Please share your valuable insights and opinions with us.

Lim Liat (C) 22 June 2012

Update:
On 18 July, Microsoft took $900 million charge to write off Surface tablets. See for example:
Microsoft writes off nearly $1B to account for Surface RT bomb ...


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