Report: Microsoft Tablet Is The Result of Partner Failures

The New York Times has an interesting article about why Microsoft chose to tackle the tablet market with its own branded hardware.

The article opens with a scene described by a unnamed Microsoft employee who said the company was shocked at how far Apple would go to gain an edge for its products. Microsoft reportedly learned from sources that Apple bought large quantities of high-quality aluminum from a mine in Australia specifically for the iPad's case.

Thus, Apple not only created a new market using those supplies, branching away from the thicker, bulkier "slate" sector, but cornered this new market. That led to worries within Microsoft that its own PC partners would not make the same kind of bets.

This incident, according to the source, is one of many that pushed Microsoft into creating the Surface tablet. The move is also seen as "the most striking evidence yet" of the friction between Microsoft and its hardware partners, and will reportedly be the first time in Microsoft's near forty-year reign that it will actually compete directly with those partners -- those who are also Microsoft's biggest customers. But perhaps Microsoft is the reason why they aren't making the same kinds of bets as Apple.

"You’ve got this sclerotic partnership structure where the partners don’t have any oxygen to be innovative," said Lou Mazzucchelli, an entrepreneur in residence for a venture capital fund backed by the state of Rhode Island and a former technology analyst. "I believe Microsoft was painted into a corner. If they didn’t move soon, Apple would have so much of a lead, it would be almost impossible to catch them."

Along with Intel, Microsoft extracts its hefty licensing fees from PC manufacturers, thus leaving leaving slim profits and very little room to experiment. That's one of the reasons why Android is so popular -- it's open source and served up free by Google, allowing companies to be a little more innovative. Yet Apple has also shown the fruits of developing hardware and software together -- having separate hardware and software companies leads to a less unified product.

One lesson Microsoft learned was by way of its collaboration with HP. Prior to the iPad, Bill Gates introduced the Tablet PC a decade earlier, but it was too clunky and didn't catch on with consumers. When Microsoft learned of Apple's upcoming device, it turned to HP to create a prototype later called the PC Slate 500. Initially the designed impressed execs at both companies, but eventually the product was "completely ruined" by hardware changes made by HP, leaving the OS sluggish and unusable.

"It would be like driving a car, and the car not turning when you turn the wheel," a former HP executive told The New York Times.

HP lashed out at Microsoft for not adding better touch-based capabilities in Windows 7. Microsoft instead moved on to work with other manufacturers but eventually hit a brick wall regarding designs and prices. Thus, Microsoft went back to the drawing board and began to create the touch-based Windows 8 slated to arrive this fall. Meanwhile, HP purchased Palm and released its own touch-based webOS tablet with disastrous results.

Last week Microsoft finally revealed its Surface tablet. As if nodding to Apple's initial bold move in securing aluminum from Australia specifically for the one-of-a-kind iPad, the company focused most of the big Surface reveal on the tablet's magnesium case.

"The case is one-of-a-kind," said Steven Sinofsky, president of Microsoft’s Windows division.