Microsoft finally feels the pain of OEMs

Credit: Sandy Chase via Flickr

Experiences with the Surface family, and particularly the Surface Mini, let Microsoft see what it's like to be an OEM.

Microsoft’s aborted plan to announce a Surface Mini last May, confirmed by the presence of references to a Mini in the Surface Pro 3 documentation, shows how difficult life can be for an OEM in the Windows ecosystem.  The rumor mill was quick to provide an explanation for the missing Mini: It had been pulled due to lack of differentiation.

While no acknowledgment of the Surface Mini’s existence, let alone an explanation for pulling it from the announcement, was forthcoming from Microsoft, the problem is obvious: Microsoft the OEM built a device expecting Microsoft the software company to deliver a compelling experience for it.  Microsoft the software company failed to deliver, forcing Microsoft the OEM to postpone or cancel a product it knew couldn’t be successful in the market. 

CEO Satya Nadella just experienced first-hand what OEM CEOs have been experiencing for much of the last two decades.

Microsoft lobbies OEMs to build devices in support of its vision, but often fails to deliver software that justifies the limb they asked the OEM to go out on. Innovative hardware stagnates on the shelf while relatively boring traditional PCs, often running older versions of Windows, continue to represent the vast bulk of the OEMs’ revenue stream. This has lead OEMs to be very reluctant to commit completely to Microsoft initiatives.

Until now, Microsoft would look at the problem and put it squarely at the feet of the OEMs. It believed in the risk-aversion thesis so strongly that it entered the devices business itself. But its Surface family hardware has generally been praised while the corresponding software is unloved, thus sales have been tepid.  And however debatable this point might have been before, what happened with the Surface Mini settles the matter.

The Surface team has been creating devices that live at the intersection of productivity, work, and entertainment.  The Surface Pro 3 is generating a very positive response because its 12-inch screen, trackpad and keyboard cover, active pen, and Intel Core processor put it pretty much at the design center for Microsoft Office 2013.  And while productivity work goes well beyond Microsoft Office, a great Microsoft Office experience is usually where it starts.

So what of the Surface Mini?  Targeting a 7 to 8-inch device at the intersection of productivity, work, and entertainment means having an excellent touch experience for Microsoft Office and achieving a breakthrough in Pen usability. Office 2013 has only token support for touch and is largely unusable on a device that size, leaving the version of Office now available for the Apple iPad as a superior offering for devices in this class.

A Surface Mini only makes sense when Microsoft delivers its “Gemini” Windows Store version of Office, which in addition to being touch-centric is also likely to focus on the Pen as a first class input experience.

So Microsoft the OEM designed a device, and reportedly even put it into production, based on promised releases from Microsoft the software company...but those promised releases appear to have slipped by six to nine months or more from original expectations. Microsoft is at best going to be paying inventory carrying charges until the necessary software is available, and at worst will have to scrap existing inventory and update the device's design to meet the competitive landscape expected when the software does become available.

Microsoft is learning important lessons by being in the devices business. Hopefully it will use these lessons to improve delivery of compelling software experiences, and to repair their relationships with OEMs by really grasping what they need from Microsoft in order to succeed.

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