If OEMs aren't committed to Windows, where are they to go?

Microsoft understands that building its own line of Surface tablets is going to upset the OEMs, but it's doing it anyway because there's not much the OEMs can do about it.
Written by Adrian Kingsley-Hughes, Senior Contributing Editor

Microsoft's 10-K annual report filing with the SEC suggests that the company is worried that building its own Surface tablet will affect their OEM partners commitment to the Windows platform.

ZDNet's Zack Whittaker digs out the meatiest part of the filing (emphasis added):

We derive substantial revenue from licenses of Windows operating systems on personal computers. The proliferation of alternative devices and form factors, in particular mobile devices such as smartphones and tablet computers, creates challenges from competing software platforms. These devices compete on multiple bases including price and the perceived utility of the device and its platform. [...]

Even if many users view these devices as complementary to a personal computer, the prevalence of these devices may make it more difficult to attract applications developers to our platforms. In addition, our Surface devices will compete with products made by our OEM partners, which may affect their commitment to our platform.

It’s clear that by taking the step of developing its own tablet Microsoft doesn't trust the fate of Windows 8 to the OEMs.

While Microsoft would like us all to feel that tablets are a slam-dunk guaranteed success, plenty of OEMs have already been dealt a bloody nose by thinking they could take on the iPad with Android tablets.

Losing money is one way to make OEMs and ODMs nervous, and my contacts within some of the world's largest OEMs are telling me that they're far from convinced that Windows 8, or Windows RT -- otherwise known as Windows 8 on ARM -- will be any more successful against the iPad than Android was.


Nervous hardware makers mean that they are less likely to take chances with Windows 8 and Windows RT tablets. While Microsoft would like to see a whole slew of tablets hitting the market, incorporating fancy high-end features and fittings, the OEMs are more likely to come out with conservative designs that err on the side of caution and put price above premium features.

The success of Windows 8 and Windows RT is tied to the success of tablets because of the heavy emphasis on touch. Unless touch gets significant traction quickly, there's a significant possibility that the new Metro user interface found in Windows 8, along with other trappings such as the Windows application store, could be in danger of being axed from the next incarnation of Windows.

This is why Microsoft -- in conjunction with an unnamed OEM -- has taken it upon itself to build its own line of tablets.

Another thing that Microsoft is doing with will no doubt annoy the OEMs is that the Redmond giant is working hard to decouple Windows 8 sales from flatlined PC sales by pushing Windows 8 upgrades hard to existing PCs. The power that the OEMs once had seems to be dwindling, and that leaves Microsoft in a position where is has to pick up the slack and start selling.

First, it plans to offer cheap $39.99 upgrades to Windows 8 Pro to pretty much everyone from launch through to January 31st, 2013. It doesn't matter whether your PC is running Windows XP, Windows Vista, or Windows 7, you can take advantage of this deal. While the deal isn't as good as Apple's $20 upgrade, it's still a very good one indeed.

Rumors are also circulating that Microsoft is getting ready to drop the retail versions of Windows 8 and offer only OEM "system builder" and upgrade versions that would dramatically simplify the buying options available. It's also been rumored that this switch will be accompanied by a price reduction. Considering that a full version of Windows 7 Home Premium has a $199 price tag and the upgrade alone costing $119, this price drop is long overdue.

The way that Microsoft has taken a scalpel to Windows prices suggests that the company is less concerned about the effect that this will have on its bottom line and more concerned about the long-term effect that Windows 8 failing, similar to the way Vista did, would have on the company. Microsoft's priority, it seems, is to get Windows 8 installed on as many machines as quickly as possible, even if this means cutting the OEMs out of the loop.

But so what if the OEMs are upset? Where exactly are they going to go to find an operating system to replace Windows?

Dell is once again dabbling with Linux, having just released two new high-end mobile workstations with Red Hat Enterprise along with an Ubuntu-powered developer notebook later this year. Beyond this, there's not an awful lot of love for Linux as far as the OEMs are concerned, and no real plan to take the free and open source platform mainstream.

There's also no real demand for Linux on desktop or portable systems from either enterprise users or consumers. While Gabe Newell, co-founder and managing director of the video game development and online distribution company Valve, has plans to make Linux more attractive to gamers by releasing a few games for the platform, but it's hard to see that having any real, long-term effect.

Microsoft understands that it may upset its OEM hardware partners, and while the steps the company is taking may indeed affect OEM commitment to the platform, there's not an awful lot the OEMs can do about it. It seems that they are more reliant on Microsoft than Microsoft is on them.

Image Gallery: Microsoft Surface tablet

Image source: Microsoft.

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