One of the more telling aspects of Microsoft’s upper management is their lack of support for 7-8” tablets. Although Windows 8 was mostly baked by the time 7” tablets started gaining momentum, they didn’t see their potential early enough.
Had Microsoft acted more aggressive while Windows 8 was still in development they would have had a chance to see and play with this smaller form factor. But no.
So where are we today? Last quarter sub 8-inch tablets made up 47.5% of sales. In 2013 we expect these mini tablets to make up well more than half of all tablet sales. The market response to sub 8” tablets highlights the fact that they may very well be the tablet sweet spot. Microsoft needs to answer soon or the risk falling even farther behind.
What do Microsoft’s partners want?
Hardware OEMs commitments to tablets is increasing rapidly. Many PC OEMs are telling us their resource focus is shifting heavily from notebooks to tablets. Microsoft is a core partner for many of these OEMs and it is their job to give them the software tools to meet the market needs.
Right now that is not happening and it is presenting a massive challenge to all of Microsoft’s partners. Windows 8 is not selling amazing, but it’s also not selling poorly as far as notebooks go. Our estimation is that traditional PC sales will be off as much as 10% this year.
But beyond notebooks Windows 8 tablets are not selling all that well and this is the problem.
Windows 8 needs to be more compelling and more a viable solution for tablets than it is today. Note here that I am not talking about hybrids or convertible solutions but pure slate tablet solutions.
I believe Microsoft can do this if they put more of an emphasis on bringing their Windows solution to the sub 8-inch form factor. This is where the market momentum is headed and if they can release a viable software solution for this form factor it will prove to the market and to their partners that they can meet market needs with their software.
Microsoft risks irrelevancy
The biggest challenge I see in Microsoft falling behind in these areas is the risk of irrelevancy. If they should delay, or not develop the right software solution for sub 8-inch, then their partners will be forced to look elsewhere.
Right now if you are a hardware OEM your choice is to support Google or Microsoft. If said hardware OEM does not believe a Windows solution can help them be competitive in a certain segment they will go with Android. HP just did this with their Slate 7 Android solution and it gives them an entry point, at a decent price point, for the 7” form factor.
Now suppose this product does well and HP is pleased with its sales, why would they go back to Microsoft and support its sub 8” solution – assuming they ever deliver one? This is what I mean by the risk of irrelevancy.
Could Microsoft even lose IT’s attention?
The other area of concern on this topic is with IT managers.
Samsung has done quite a bit of work, and marketing for its SAFE, Samsung for Enterprise solutions. As Samsung devices continue to enter the walls of the enterprise and if IT managers become comfortable supporting vendor versions of Android which have been secured, then Microsoft loses its claim that IT prefers Microsoft.
The BYOD trend already calls this into question, but the point remains that as hardware OEMs do the hard work to secure Android themselves (since Google doesn’t seem to care to do it) then these vendors will have much invested in Android and have less interested in a Windows OS.
I see the potential that key partners of Microsoft could do the same thing as Samsung and deploy Android on tablets, with their own secret security sauce. This gives each vendor a differentiation and value-add strategy, but it also makes Windows less important to them.
Microsoft needs to think smaller
The bottom line is that Microsoft cannot ignore the sub 8” tablet market. Mobile workers particularly will prefer to travel with the smallest tablet solution they can get away with.
We already see huge interest in sub 8” from the medical, education, sales force, and other market segments. The longer Microsoft is absent from this growth segments, the harder it will be to climb out of the hole.