It's easy to look at Microsoft’s past and its financials and say that the company always has been and always should be a software company. But when Steve Ballmer wrote last year that it was time his company started focusing on devices and services, he was right.
With Google breathing down Microsoft’s neck, Android dominating mobile, and vendors becoming increasingly tired paying Microsoft’s licensing fees, the tide is turning against Redmond. And the only way to change that in the key mobile market is to go after hardware.
1. The Surface is a good start
There’s no doubt about it: the Microsoft Surface tablet is an important hardware device for Microsoft. The Surface is a high-end device with a high-end spec list that deserves to be treated as one of the better slates on the market. More importantly, the tablet proves that Microsoft can deliver a device that hardware buyers would want.
The issue with Microsoft’s tablet position is not that the company can’t attract customers to its hardware; it’s that its software has been panned by reviewers and users alike. Customers around the globe have heard horror stories about Windows 8, and Microsoft has faced an uphill struggle to change their thinking.
The trick for Microsoft, therefore, is to double down on hardware, not back away from it.
Surface tablet sales are starting to show signs of life and reports suggest that Windows 9, expected next year, will solve many of the issues users's have with Windows 8. In other words, Windows 9 will be the Windows 7 to Windows 8’s Windows Vista.
If it plays out like that and Microsoft keeps improving its hardware offerings, customers won’t have such a hard time buying its tablets.
2. Hardware success breeds ecosystem success
It’s important to remember what Steve Ballmer said about his company’s future – that it’s all about devices and services. In the eyes of Ballmer, and presumably others at Microsoft, the company wants to get customers around the world completely invested in the “ecosystem” the company has built.
Whether it’s Office 365, Microsoft’s SkyDrive, or even Bing, Microsoft wants to get customers to its services to generate revenue that goes beyond Windows. Hardware presents an opportunity for that.
When customers buy a Surface, they can get going on Outlook, sign up for Office 365, and share files on SkyDrive. They can even search the Web on Bing and maybe – just maybe – find out that they like what they see.
Amazon and Apple are perhaps the best examples yet of companies that have realized that hardware ultimately creates the so-called “Halo Effect” that builds software and services revenue. Both companies practically stuff their services, like iTunes and Prime Instant Video, down our throats. And customers, ever willing to play their game, blindly oblige.
Although Windows has been used as a window (pardon the pun) into the Microsoft ecosystem, today’s buyers are slapping down their plastic for hardware and deciding after that what software and services they want to use.
In the old days, it was unfathomable for those outside of the geek community to buy anything other than a Windows box. After all, Windows was what the average person knew and understood. But that’s no longer the case. And now, everyone’s a “geek.” That’s bad news for Microsoft.
3. Use it to attract vendors
Here's where I contradict the premise of this column's headline and say there is an area Microsoft would be wise to emulate something that Google is doing – and to extent already has by selling its own branded hardware.
Google’s Nexus program hasn’t been a bang-up success by any means. However, it’s been a way for Google to promote its latest software, and it’s been an opportunity for the company to attract vendors to its software that might otherwise be ignored.
Perhaps the Surface line can present that opportunity for Microsoft. The “Surface” brand at least has some cache in the eyes of consumers, and there are plenty of PC makers that are dying to get in on the growing tablet market. Maybe Microsoft can attract more vendors through such a program.
Beyond that, Microsoft can use its Surface to prove that getting into the space with Windows can be a successful endeavor.
Unfortunately for Microsoft, there’s no simple answer to the question of how it can be successful in tablets. The company must continue to trudge on in an uncertain market in the hopes that its efforts eventually pay off. And while it's critical Microsoft continue to push to get more apps in the Windows Store, it's real road to success in tablets right now is to develop great hardware users will be proud to carry.
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