An eerie silence is present just before Windows 8 launch. The big stories of the day are the battle between Apple and Samsung, iPhone versus Android, and Google versus Apple. The trending topics on Mashable are in order: Twitter, Google, Apple, iPhone, Social Networking, Google+, Social Media, YouTube, Business, Android, iPad, Google Chrome, and… down the ladder somewhere is lurching Microsoft. No trace of Windows 8.
GigaOm, proudly promoting its own brand of research has almost no trace of Microsoft or Windows 8. Today on its navigation bar there is a prominent Apple menu item and a long list of articles on the home page, only one of which mentions Microsoft related story, although even that is about Xbox music service to launch on Android and iOS. Top articles menu bar has iPhone 5 on a prominent position.
Others are more preoccupied with the imminent invasion. ZDnet and C/Net have tons of articles on Windows 8, but they also have articles criticising the new operating system and predict failure (see below prediction for Win 8 RT certain failure). However, if you browse these two sites, it strikes you how many announcements of new Win 8 products are rushed by a large number of vendors even before the official launch of the platform software. The latest one is from Samsung, the Korean electronics powerhouse who unveils an ultrabook and tablets.
None of the media outlets dares to look into the significance of the new operating system. Sure, it’s risky and judging by the success of Windows Phone 7.5, Microsoft has had an aura of outdated technology. I may be wrong, but I don’t understand why they fail to see the magnitude of Microsoft’s transformation. I can see how they would want to avoid publishing risky prediction, but at least they should take a look at what is going on deep under the surface and forget for a moment the buzzwords of the day. The online journals have columnist who cultivate a loyal relationship with its biased readers. This is always a gold mine for ratings. Whenever and article is published about Apple or Google, an army of loyal fans work hard to make their presence felt. The ratings go up and everyone is happy. Postings about Windows phone 7 have a far smaller ‘stir’ factor.
I don’t have that kind of problem, so I am at an advantage. I can write what I want. To me, Microsoft has achieved an incredible turn around and it has become the innovator, while the others have acquired the status of the conservative incumbents. The tiles introduce a very novel and powerful concept. Because they are designed to be dynamic displaying real-time information pushed by various digital services, the combinations across the massive array of technical services starting from cloud computing platforms, to music, emails, weather, and anything in between, Microsoft is building a super-ecosystem using a quasi-seamless operating system . An example of what kind of services is possible in this super-ecosystem is Xbox Music. This is very difficult to replicate. Google has an excellent search and social network platform, but its operating system is fragmented to say the least. Apple is mono-cultural and built around one service: the AppStore/iTunes.
The signs of adoption of innovation are there: first, all vendors have announced a myriad of products, many of them quite innovative. Secondly, the new products are creating new categories which promise to fill the gap between tablets and laptops. Microsoft Surface is leading this trend. For Microsoft the innovation cycle starts anew.
Thirdly, the IT managers show a great deal of interest in Windows 8. It is interesting that in a survey published on InfoWorld Google Android is loosing share, while iOS is gaining. This is pointing to a problem that Android has in the enterprise space: fragmentation. This makes it difficult to support. Windows 8 will not have that problem and because of its strong compatibility with the legacy Windows platform it will have a faster adoption than the other two. And finally, Windows Phone 8 and Windows 8 RT have a strong support from all vendors. This is where Apples win against Samsung might prove to be a very costly mistake, a Pyrrhic victory. I should also mention Nokia, which released Nokia Lumia 920. For the first time, Nokia looks better on paper than its main competitors, Samsung and Apple.
Windows 8 may have an impact on the education market. iPads are great looking devices, but they are difficult to integrate and use as effective learning tools. The new detachable and convertible ultrabooks may prove to be more practical and for the same reasons IT managers are ready to adopt Windows 8, education systems may have a strong interest in the new devices.
18 months have passed since Apple launched iPad creating in one single swoop an entire new market. Several hardware manufacturers were selling a class of devices referred to as tablets, but they were based on Windows, the same operating system that powered the PC in general. The iPad tablet used an operating system that was designed entirely for user interaction based on gestures and touch, a proposition that was instantly embraced by the public.
For more than a year Apple has enjoyed almost an absolute supremacy in this market. Samsung, one of the most notable competitors, barely made a dent into that dominance. Late of 2011 Amazon issued a challenge that was considered by some pundits as serious, launching a new tablet, the Kindle Fire. This ménage a trois relationship is still evolving with no apparent forgone conclusion. Who is going to win?
Deloitte predicted in its annual Technology, Media and Telecommunications Predictions that in 2012 almost five percent of tablets will be sold to individuals that already own a tablet. This represents about five million tablets worth between $1.5 and $2 billion spent by people who buy their second tablet. This is quite remarkable, a historic record for any device. But the most interesting part of this prediction is that Deloitte anticipates that tablets will come in a broad range of size factors, not just the iPad’s 10-inch size.
In the quest for satisfying the huge demand for tablets and for carving up the largest stake possible out of this market, hardware manufacturers will try to fill in this space using different strategies. Some will make cheaper tablets, smaller in size or less powerful, but good enough to do most tasks, or larger tablets for more demanding applications, better graphics.
The business model will change. Currently Apple has a huge gross margin of 24%, but this may be about to shrink to more earthy levels. Currently 85% of overall gross margins come from iPad and iPhone. Deloitte predicts that hardware manufacturers will be willing to forgo gross margin on the device now and recuperate that later through profits made on subsequent service revenues: content purchases, subscription and rentals.
This just highlights the real game in the tablet wars. It is not about the hardware, it is about the ecosystem. The tablet is only the sweetener designed to tempt the buyers to enter the theatre and stay captive to content attractions. This is where the real action is. This is where Samsung is at a great disadvantage because it doesn’t have anything that comes close to iTunes. And again, this is not about what you see, the iTunes software, but about the market place behind it where major media houses agreed to sell their wares. The core of the ecosystem is to have this multi-layered engagement that binds the content creators, distributors, networkers, software operating system and device manufacturers together to the level at which the choice is too good to resist and too easy to effect for most of the potential customers.
Amazon is probably the best better prepared to fight that battle. Google is a formidable player, but it has spread too thin and over the years had a few tensed episodes with some of the key participants in the Android ecosystem. The Google market place is at times chaotic, some would say.
What about Microsoft? This is a big unknown. Its marketplace hasn’t competed nearly well with Apple’s iTunes and AppStore. Zune looks OK, but it is not as good as iTunes. The range of offerings makes Microsoft’s global marketplace look like a lemon stand versus Wal-Mart when compared with iTunes.
Apple forged great relationships with major content providers much better than anyone else. Until this situation changes, the other tablet manufacturers will face an uphill battle because they cannot recuperate the manufacturing costs which will prevent them from competing successfully in this market.
In the end, it is all about content, simplicity of delivery, user friendliness and the positive vibe of the marketplace. This is where the likes of HTC will have a really hard time to compete. Even Nokia will find it difficult to survive if Microsoft doesn’t build a more consumer friendly and richer ecosystem. This is something that I expect Microsoft will improve this year in preparation for an innovation-reboot with Windows 8.
Tomorrow, Apple will launch the new iPad 3. Things will get pretty interesting this year.