Should Microsoft Become A Hardware Company?

I.LOVE.THIS.COMPANY!

No, it’s not me preaching that. It’s their former President and CEO, Steve Ballmer.

To start with, I never loved Microsoft. And I don’t think I will, ever. But I respect them as one of the largest and most dominant company in the world, shaped our past to become where we are right now in term of technology and now trying to regain their mojo after few years being eclipsed by the likes of Apple, Google and Facebook (there’s no M in FAANG in case you wonder). Yes, Microsoft did make mistakes like did not concentrate on the next wave of technology like search engine and smartphones until it’s too late and they became a follower instead (which for me still better than becoming a laughing stock).

But I don’t blame them. None. Any people, company or organisation will make mistake from time to time. Apple made mistakes in 80s and 90s by not concentrating on products that really sell. Facebook made mistakes with their smartphone effort and Beacon (anyone still remember that?). And one of the Google’s mistake is their effort to compete in social networking site (never seem to be able to nail it, from Google Wave to the now-defunct Google+).

As for Microsoft? Their effort on hardware. Although not really filled with failure, their results seemed to be more like hit-or-miss.

But first, let’s walk down the memory lane.

 

Microsoft And Its Hardware History

 

(Microsoft first mouse in 1983. Image from Vintage Computing)

One of Microsoft’s first foray into hardware business was with the release of mouse in 1983, primarily to augment or assist users on word processing program Microsoft Word and Notepad. Not much in design compared to the modern version that we have right now, but with Microsoft increasing dominance in PC industry, it has made mice (and other PC peripherals) as important as PC itself. But the fact remains that the mouse (hardware) Microsoft developed is to help users on using its applications (software), not for it to become a money-making machine by itself. So as other peripherals like Microsoft Natural Keyboard (and other successive keyboards) and webcams (LifeCam).

For Microsoft, the hardware is the path on how users interact better with their core products, primarily MS Windows, Office and their web browsers (Internet Explorer and Edge). And they never looked at PC peripherals’ manufacturer like Logitech or Creative Technology as their competitors, therefore left them to manufacturer on their own a better version of mice and keyboards while Microsoft concentrates more and more on developing next version of Windows and Office suite, competing with the likes of Apple, Corel, Novell and Lotus Development Corporation.

(Microsoft Natural Keyboard Gen1/V1. Image from DeanW77/Wikipedia)

The gamble paid off. By 1997, Microsoft has dominate around 90% of worldwide PC software industries, mainly thanks to their operating system and office application suite. And the hardware business? I’m sure the revenue from it was more like rounding error for MSFT. After all, Microsoft was (and) still a software company, and regardless how bland and boring the mice, keyboard or webcam could be, it’s not a major driver in pushing Microsoft bottom line.

For Microsoft, more and more people using their software is more important than the number of mice sold. If Logitech can build a better mice, so be it. Microsoft’s only concern? How many MS Windows and Office sold during the year. After all, when was the last time people camped outside a PC stores to buy the latest optical mouse from IntelliMouse?

And moving forward, Microsoft has not only tried to sell its hardware as an afterthought, but tried to be a dominant force in the area. Of course some with clear success (i.e. Xbox) and some with spectacular failure (i.e Zune). Microsoft no longer wants its software to be on every desks worldwide. It wants its hardware to be sitting on users’ desk (or pocket) too.

For me, Xbox is the real attempt by Microsoft to be a real hardware company. I remember the time when I crushed into my ex-colleague house in 2004 and saw his relatively brand new (1st generation) of Xbox. Envy sets in and I bought one (Xbox 360, albeit two years later). My verdict? I couldn’t understand why a software company like Microsoft jumped into the gaming console bandwagon, but the graphics were outstanding and the games available for it were growing (not like I bought every games available for Xbox anyway). I played with it like any gamers did for like 2 years before I grew tired of it and the console decided to wave goodbye by displaying its popular “Ring of Death”.

I didn’t buy any gaming console after that. Xbox 360 and 2 years of playing it was more than enough for me. So I returned to my original hobby which is reading books. Gaming took a lot of productive time from me and I can’t play it everywhere like on a plane (no problem with reading as I can always carry it with me and I need no electrical source/power for that).

But I admit that Xbox was (and still) a great gaming console. Furthermore, it wasn’t actually developed by a gaming company, but rather a software company.

(Zune 80 and Zune 4. Image from Bkwparadox/Wikipedia)

A different story with other hardware from Redmond. The ever popular (albeit for a wrong reasons) Zune portable media player, which supposedly to crush Apple’s iPod.

I bought neither. I only used iPod for few days from my friend back in 2006, and no one within my circle of friends bought Zune. I guess nobody wants to be seemed as weird or less-cool by listening their favourite songs from a device heavily-promoted by the least-liked CEO in Microsoft history which tried to destroy iPod.

The only thing destroyed (or at least negatively-affected) was his reputation.

Obviously Zune was a failure. It failed to get traction. It failed to be the cool device that people lined up to buy. And definitely it failed dethrone iPod as the must-have device for portable media player.

Microsoft may be an expert in technical, but it seemed they were always hindered by less-than-cool design and less-effective marketing campaigns. Bashing your competitor’s product was hardly marketing strategy.

Jumping and screaming on stage? Well, Steve Jobs never did that and with almost every successive iterations, Apple products got sold-out . So I can safely say jumping and screaming won’t be a great marketing gimmick either.

HoloLens and Surface could be the consolation prize for Microsoft. It’s not a runaway success (at least not yet) for them, but at least it’s not a total failure either. HoloLens just got a significant updates for its virtual-and-augmented reality feature. Toyota is using it to build their cars faster. So as the surgeons at St Mary’s hospital which uses HoloLens in the operating theatre.  

 

Software vs Hardware

 

Why hardware is hard for Microsoft?

(02 XDA. I used this circa 2010-2012 before switched to iPhone)

Microsoft wasn’t a hardware company to start with, and even the word “Microsoft” is a portmanteau of “microcomputer” and “software”. Bill Gates started Microsoft so that he (and the late Paul Allen) can take advantage (or ride the wave) of a growing PC industry during 1970s. Never in their early iteration talked about how to make a great and cool PC. Microsoft licensed their software to any hardware manufacturers willing pay the fee, and they let those manufacturers tinkered with how the PC would looked like. This has spawned a new PC companies like Dell, Compaq (later acquired by HP) and Acer to sell their sometimes sleek PCs and peripherals. And regardless who sells what, as long as Windows is pre-installed inside it, Microsoft was happy to take the money.

What Microsoft care about (according to Bill Gates in his book “The Road Ahead”) was to make sure their software was easy to learn, easy to use and sell the license lower than their competitors, so as to encourage more and more manufacturers and users to buy and use their products, whether OS like MS Windows or office suite like MS Office. In essence, Microsoft created an ecosystem centred towards Windows OS, and crushed other competing OS like Macintosh and BeOS.

A great hardware design was not high in their list. Great GUI design maybe up there though, although the end results were questionable in some cases.

(Windows Mobile 5.1, similar to the one I used before I switched to IOS. Image from Wikipedia)

So even though Microsoft was very strong and early in their lead in (relatively smart) phone with Windows Mobile, Apple has quickly dethroned them since releasing their iPhone in 2007. A great product is no longer dictated solely whether it has a good software inside the hardware. A great (or sexy) hardware becomes a door opener for Apple to sell their software to the masses, and sell it at a premium price.

So what makes Apple succeeded in releasing a device that some are willing to sell their kidney just to own them? By making their products appealing to the eyes of their potential customers.

Apple was and always known as a company that likes to control their design and rarely allows a clone version of their products to be officially-licensed to be manufactured by a third party. Yes, they did allow a “Macintosh clone” to be manufactured during early to mid-90s (Umax would be a good example), but after Steve Jobs returned to Cupertino, he decided to end the practice and from then, the only way for us to enjoy using Macintosh OS or iOS is to buy it from Apple itself.

Apple has decided to become a hardware company first. And this is what contrasted them with Microsoft. Having a brilliant designer like Jony Ivy and operating guy like Tim Cook (now Apple’s current CEO) allows Apple to develop a device that’s appealing to look at and touch, great GUI for the users and by outsourcing its production to China with great efficiency, Apple can barely keep up with the demand for their products.

A good problem that any company would kill for!

And it’s not that Microsoft had a poor taste with regards to design (I like the design of their Xbox). It’s more that they just don’t have the vision and combination of people that can deliver such products that at least at par with Apple. Microsoft was really good in developing and deploying software (OS or application programs), but they never had a leader that can catch users’ attention (at least in a good way) and imagination like Steve Jobs, who can persuade users to use Apple’s products beyond their imagination.  And by concentrating on great design, Apple managed to get our attention to their products, year in and year out and locking their users into their ecosystem.

So what seems was just an innocent purchase of a first iPhone has converted millions to buy other things like iPad and Macbook. And by ensuring a seamless interaction between one device with another, not only Apple has developed millions of loyal customers but also a hardcore defenders and followers.

(A screenshot of Apple App Store)

With the launch of App Store, Apple teaches Microsoft and others a new chapter in developing and maintaining ecosystem. By hooking millions of customers into their hardwares and let others develop the software (apps), Apple becomes the next dominant player that almost make Microsoft irrelevant not only in the retail customer market but also enterprise. How many corporate employees are dying for their companies to provide them an iPad rather than Samsung? And how many people were actually queueing when Microsoft released their Lumia?

Software is no longer the only game in town. Hardware, especially the one that has great and compelling design has become a crucial factor whether a product can be considered as must-have or also-ran.

David or Goliath

With Satya Nadella becomes the new CEO, I’m not sure how further deep Microsoft will go into a hardware business, let alone becoming a full-fledged hardware company like Apple. Yes, Microsoft bought Nokia under Steve Ballmer reign, but remember that Mr Nadella opposed his move, thinking that it was a mistake. And you don’t need to be a genius or rocket scientist that one of the first thing he did once he becomes the boss, he unwind Microsoft’s smartphone business and laid off more than 7000 jobs.

(Not to mention an impairment charges close to $1 billion. Yes, $1 billion is hardly a huge amount of money for Microsoft, but by laying off those people, not only Microsoft lost a talented people, but they possibly lost it to their competitors. But it seems Satya is OK with it, so I have no complain here. A leader should do what’s best and necessary for a company as a whole, not what’s best for individual employees)

So will Microsoft concentrates its effort in hardware again, especially since they have a relatively cool devices like Surface and HoloLens?

Again, I doubt so. Satya already realised that it’s too late to catch Apple and Google in smartphone market, and competing in smart display/smart assistant device will only creates another player where there’s no guarantee that Microsoft would be a clear winner. And Satya is not a hardware guy anyway. Just look at his past experience, he’s more of software and cloud computing area. And look at some of Microsoft’s acquisition under his leadership. GitHub, LinkedIn and Xamarin. OK Mojang as well (I still can’t figure that one out why Satya interested in it, as mentioned in previous article). The only Microsoft hardwares still gets some decent attention are HoloLens and Surface, albeit because it’s closer to Black Friday.

Satya and Microsoft will need to decide whether they should be a David in hardware business or Goliath in software and cloud business. Probably it’s true that the hardware train has left the station for Microsoft, and it’s best if they concentrate their effort on things that they really excel at. I don’t think Satya wants to position Microsoft as a competitor to Samsung or Xiaomi, but rather he eyes the prize of beating the likes of Amazon and Google (OK maybe Alibaba Cloud as well). Microsoft’s strength is still in software, and pursuing an ambition as hardware company without proper plan, products and people is either downright stupid or crazy. Satya would be smart not to pick either one of it.

With Satya at the helm, Microsoft should be the Goliath in the industry that they are already best and have experience with. By concentrating on software, Microsoft will go back to its root as a  company that provides an ecosystem and infrastructure for other app developer and hardware manufacturer to flourish. And by offering a cloud infrastructure to them, Microsoft could kill two birds with one stone. Creating a new ecosystem and new players and host them inside Microsoft cloud.

Trying too much to become a David would make Microsoft just another follower in the already-crowded arena. Yes, it’s nice to read a story of how David beats Goliath, but David needs to win first before he can tell the story. And if Microsoft really wants to be David in hardware business for all this while, then clearly Goliath is still winning the battle.

By far.

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