Microsoft just spanked its partners

Imagine a group of squabbling children, clamoring for the teacher to pay attention to them. The teacher gives them a project: "Draw me a picture of a desert.

Imagine a group of squabbling children, clamoring for the teacher to pay attention to them. The teacher gives them a project: "Draw me a picture of a desert." Each kid thinks they have drawn the best one, "Look at my trees!" "Here's a camel!" "Mine is a cupcake!" Tired of dishing out false praise, the teacher declares he will draw it himself and everyone can learn from him.

That's basically what Microsoft just did to all its hardware partners. After years of relying on Acer, Toshiba, Dell, etc, to create Windows tablets and computers, Microsoft has decided to create one itself, thus competing with its own partners.

The risks for Microsoft are that it alienates its existing partners and also incurs investment costs for starting up a new hardware line (though the actual manufacturing will be done by another company, Microsoft hasn't disclosed which one).

By creating its own tablet, Microsoft has done the following:

  • There is now a "showcase" tablet for Windows 8
  • It spurs the hardware partners to match Microsoft's device or improve upon it to differentiate, so this makes for better quality Windows 8 hardware for the consumers
  • Microsoft fully controls everything about this product--similar to Apple's control over the iPad design and development process
  • I'm sure the hardware partners are annoyed at Microsoft's move to create its own hardware, but what can they do? They can't make tablets for Apple and they're already making a mess of Android tablets. So essentially they can't do anything retaliatory that doesn't hurt their own interests.

    Ah Microsoft, It's good to be king.

    Reminds me of a shopping mall situation in Singapore between the landlord and tenants. The landlord spent time to woo tenants to open stores within the mall; each of these tenants signed lease agreements, invested money on renovation, manpower, etc.

    Let's say they're a small sandwich shop. Now they're open and the mall landlord notices that the sandwich shop is doing good business. The landlord goes out, franchises an international sandwich chain, and then opens it in a prime location in the mall. All of a sudden the little sandwich shop is competing against its own landlord while paying them for the "privilege" of being in the mall to do business.

    The hardware partners are the tenants, they've been paying "rent money" to Microsoft, and Redmond has all the numbers and data to understand the market. They've learned from the partners (mainly on what not to do) and now they're ready to go in there and win.

    Which I gotta say...makes me look forward to seeing how the Surface will perform.


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