Open... and Shut Microsoft had better hope departing board member Reed Hastings is wrong about Windows.
In some parting comments to a group of Dow Jones reporters, Hastings called Microsoft's Surface tablet a "tactic to spur people on, to get Windows 8 really successful." In other words, according to Hastings, Surface is just a means to get people to forget the future and instead throw money into Microsoft's successful business model of the past.
It's not going to happen.
With Surface, Microsoft broke new ground, assuming the risk of antagonising its hardware partners to demonstrate an Apple-esque, end-to-end mobile experience. Now Microsoft needs to continue down this road, given that its two biggest competitors - Google Android and Apple iOS - continue to struggle through their innate weaknesses.
It's absolutely true, as my former colleague Tom Dale argues, that Apple remains weak in web services and Google continues to stumble in user experience. The problem, as he articulates, is that "Google is getting better at design faster than Apple is getting better at web services," but both are making progress. If Microsoft steps back to focus solely on Windows 8, rather than seamlessly weaving into it web services and winning hardware design, then Microsoft stands to be the jack of all trades, and master of none. That's not a winning strategy in mobile. Not yet, anyway.
The challenge for [Microsoft] is: okay, what’s the profit stream, if the marketshare is different than it has been in the past? The big profit streams are from very high-share products — Office and Windows. So to the degree that the eventual revenue is not the same split as in the past, then there’s a threat to the profit stream.
Exactly... and guess what? Microsoft's primary revenue streams absolutely will be different from those it enjoyed in the past. As I've argued recently, Microsoft's Office suite is no longer the primary means of creating valuable business data/content. That's revenue stream number one in jeopardy. It's also the case that in mobile, the big market going forward, no one buys operating systems. Apple makes it part of the iPhone/iPad experience for free, and Android, of course, is open source. That's Microsoft's second big revenue stream eviscerated.
Which leaves us with Hastings' hope that somehow Surface will get users to take a look at Windows 8 and then go buy it elsewhere, like a Lenovo tablet (with a licence fee being paid by Lenovo to pre-install Windows 8). I'm sure Microsoft will make some money doing this, but it would be completely against the grain of where the industry is heading, and where money is being made today and for the foreseeable future in mobile.
Microsoft has the disparate elements - hardware design, operating system, web services - to put together a strong mobile strategy. But using Surface as a bait-and-switch of sorts feels like capitulating to the ghosts of Microsoft's past success. It may feel familiar, but "familiar" isn't going to win in today's market.
Microsoft's Windows 8 already faces fierce headwinds, as IT executives continue to favour Windows 7. Microsoft may want to do an end-run around IT executives to tap into the Bring Your Own Device (BYOD) trend, but this is less likely to happen if Microsoft reverts to handing off hardware design and the integration of hardware, software, and web services to third parties. If Microsoft truly wants to tap into BYOD, it needs to stick with Surface as more than a tactic.
Windows 8 sales are said to be slow. They're certainly not going to pick up if Microsoft follows Hastings' advice. No one wants to buy an operating system anymore. They buy an ecosystem, and the gateway drug to that ecosystem is a tightly integrated user experience. The Surface is a great start on this for Microsoft. Focusing on Windows 8 in isolation of hardware is not. ®
Matt Asay is vice president of corporate strategy at 10gen, the MongoDB company. Previously he was SVP of business development at Nodeable, which was acquired in October 2012. He was formerly SVP of biz dev at HTML5 start-up Strobe (now part of Facebook) and chief operating officer of Ubuntu commercial operation Canonical. With more than a decade spent in open source, Asay served as Alfresco's general manager for the Americas and vice president of business development, and he helped put Novell on its open source track. Asay is an emeritus board member of the Open Source Initiative (OSI). His column, Open...and Shut, appears three times a week on The Register. You can follow him on Twitter @mjasay.