James Wang, DIGITIMES Research, Taipei [Tuesday 30 October 2012]
Microsoft's recently launched own-brand Surface tablets have raised the question of whether Surface will devour consumer demand for tablets or notebooks, or maybe even both. In terms of hardware, Surface is capable of satisfying consumer demand for notebooks, but to replace other tablets, it still requires a more complete app software ecosystem, according to Digitimes Research senior analyst James Wang.
Currently, the major difficulty Surface faces in gaining a competitive edge in the tablet market is the lack of a complete app software ecosystem, which means that if Surface can achieve growth in the short term, it will mainly be at the expense of demand for notebook products.
To let Surface to become a tablet killer instead of a notebook killer, Microsoft must expand shipments of Windows RT devices to attract application designers to join and establish an ecosystem. However, due to Android's existence in the market, most notebook vendors are hesitant about joining the Windows RT market.
Although IBM, Microsoft and Intel were able to defeat Apple previously with an open platform strategy, due to Android's existence, Microsoft will be unable to compete against Google in terms of business model and will be forced to head to the same business direction as Apple of having a closed platform with integrated software and hardware, making it even more difficult for Microsoft to build a complimentary ecosystem built on the Windows RT platform.
The most popular strategy for platform competition is to offer a free or low-price product or service to attract users and establish an ecosystem to strengthen consumer loyalty, and then seek methods to gain profit. Apple, Google and Amazon's strategies are all similar – by abandoning profit from some segments including hardware, operating system, software, digital content or advertising, they are able to increase their profits from the remaining segments; however, for Microsoft, since all the above segments belong to different business units, internal struggles and external industry fluctuations will all affect Microsoft's performance in the future.