Microsoft has a come-from-behind strategy that's working in search and could eventually pay off in smartphones. But it might not be able to use the same strategy for tablets when it finally releases Windows 8 for tablets in late 2012.
With search and mobile, the chain of events went more or less like this:
- Notice a new business that's generating a lot of money for a competitor, and that might help that competitor threaten Microsoft's core software businesses -- Windows, Office, and/or server software.
- Throw significant resources into building a competitor -- including infrastructure, up-staffing, aggressive talent recruitment at all levels, and acquisitions for both features and personnel.
- Pick a key partner that can increase distribution dramatically. Pursue that partner relentlessly.
For search, Microsoft started the process in 2002 and completed it with the Yahoo partnership in 2009. Since then, Bing has been gaining market share and mind share -- it's losing money, but it's also putting a lot of pressure on Google.
For mobile, Microsoft started the process in 2007 and completed it with the Nokia deal announced earlier this year. The success or failure of the strategy won't be known until the Nokia-Windows Phone handsets are on the market for a year or so.
With tablets, Microsoft is currently well into in phase 2 -- the company knew the iPad was coming when it started work on Windows 8 in late 2009, and now has more than 1,000 people working on critical initiatives like porting Windows to ARM processors.
The only problem is part three. Where's the key partner that can dramatically increase distribution?
Microsoft already has dozens of big partners that sell Windows. One of them, HP, has already voted "no confidence" in Microsoft's tablet strategy by buying its own OS from Palm and building its own tablet. The others -- Dell, Toshiba, Lenovo, and so on -- already ship Windows in mass numbers.
Microsoft will probably be able to convince these partners to shift at least some their resources to create Windows tablets. After all, the tablet is just another kind of PC, right?
But if Microsoft is wrong and Steve Jobs is right, and the tablet really is a "post-PC," then this strategy won't work. The PC makers will release their new Windows tablets...and a number of consumers who already have an iPad or Xoom or TouchPad or PlayBook will look and say "thanks, got mine already." The PC makers will go back to what they do best -- making inexpensive commodity boxes for businesses and (in some cases) high-end laptops for power users.
The only answers then will be for Microsoft to get into the hardware business itself, or to accept that it's lost a percentage -- 10%, maybe 20% -- of the consumer PC market and adjust expectations and strategy accordingly.
