Wednesday, June 20, 2012

Do long-term business-model shifts lie below the Surface? As Microsoft bypasses PC manufacturers for tablets, should Windows Phone makers be worried?

Should Nokia expect the Xbox model for the Windows Phone market?

With friends like this, who needs competitors?

Back in the year 1995, Apple began a short-lived Macintosh clone program by licensing the required ROMs, Macintosh operating system and other software to a series of ambitious hardware makers. These included Motorola, Tatung, APS, and Power Computing. When Steve Jobs rejoined Apple in 1997, he quickly ramped down this cloning program in order to pull hardware profits back in-house and maintain tight software-hardware integration.

Microsoft's unveiling of the Surface tablet earlier this week was certainly not significant from a technology point of view. However, it does have the potential to make some significant ripples across the tablet, laptop, and PC markets, and very likely, the smartphone market as well.

Microsoft's Surface is the tangent point between tablet and laptop. And between mobile platforms and PC operating systems. And between hardware and software. It is not a technology shift. It is a business model shift.

It appears that Microsoft's tablet announcement truly caught many PC makers unaware. As the once profitable laptop market is shifting towards tablets, phablets, and smartphones, companies such as Dell, HP and ASUS must feel slighted. Microsoft is playing Windows 8 close to the chest. If the company discovers advantages of tighter software-hardware integration, they can be expected to follow Apple's 40-year lead in taking control of hardware across the board.

Given the modest installed user base of Windows Phone devices, Microsoft might decide they don't have much to lose and pull a similar stunt with smartphones, taking control of hardware design at some point, using their own sales channels to push the products. This would cause a significant shock to Nokia, the vendor that went all in with Windows Phone. While the details of the agreement between Microsoft and Nokia aren't known, it can be assumed there is some sort of expiration date written in. Anyway, history has taught us that partnerships are made to be broken.

Apple continues to make life miserable for so many companies in so many ways.

Do bigger business-model shifts lie below the Surface?

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