Reference Design

Ever since Microsoft introduced its line of Surface tablets, there has always been a lingering question as to why. Why is Microsoft risking alienating OEM partners just to go into a business that is both costly and relatively low margin when compared to software? One answer I’ve been thinking about for a while now is that Microsoft’s move is at least partly about giving commoditized PC manufacturers a high-end design to reference that isn’t Apple’s.

The PC industry as a whole, and therefore Microsoft, benefits whenever one or more manufacturers succeed by offering high-end quality computers, because doing so sets the bar for everyone else to measure up against. The best example of this that I can think of is the IBM ThinkPad. If you worked in an office in the late 90s, chances are you hoped for a ThinkPad, but ended up with some cheaper Dell or Compaq. This often worked out fine because whatever laptop you were given was still trying to be a ThinkPad, just cheaper. But therein lies the problem – with the vast majority of PC buyers being IT departments of variously sized organizations with limited budgets, PC’s success wasn’t driven by quality as much as it was price. IBM 1 would be undercut by Compaq who would be undercut by Dell who would be undercut by HP, and so on and so forth. Now everyone is provisioned the same sub-$500 5lb brick with build quality standards based on what was already second rate in 2005.

As bad as PC’s race to the bottom has gotten for the business market, I would argue it’s even worse for the consumers. Because as much as IT may not give a damn about the hardware quality of your brick, they care deeply about the software and service that comes with it. You only get the software that’s perceived to be needed and if your brick dies, it will be fixed or replaced. Consumers on the other hand don’t have such luxuries. That lack of profitability on hardware means most consumer PCs are sold with minimal support and buyers can’t even count on a clean user experience thanks to preinstalled trial software (lovingly called crapware) that relentlessly advertises paid upgrades.

The only company to avoid this fate has been Apple. Thanks to some sort of alchemy where gross incompetence was followed by expert leadership, Apple has remained a consumer driven company where it continues to compete primarily on quality. As a result, Apple now singularly owns the high-end computing market. Because of this and the fact that there is no one else to follow, PC makers have increasingly and more obviously emulated Apple.

The has led to the current PC market, which I think can be described in four categories:

  1. Old style business bricks.
  2. Old style consumer bricks that are filled with crapware.
  3. Higher end MacBook knock-offs that are filled with crapware.
  4. Wacky laptop/tablet all-in-ones that are filled with crapware.

With old style laptops looking increasingly dated and all-in-ones feeling a little under baked, I would wager number 3 is the most compelling category for most consumers right now. From there, the choice becomes either buy what is known to be a crapware-filled knock-off or just spend the extra money and get the real McCoy2. Whether or not the PC or Mac gets purchased at this point becomes somewhat irrelevant because the decision process itself concedes that Apple makes the better computer. This looks bad for the PC industry and, because Apple is the one major computer maker that doesn’t include Windows, looks bad for Microsoft too3.

Apparently I am not alone in this thinking. Joanna Stern succinctly made a similar observation on a recent episode of John Gruber’s The Talk Show:

Apple makes the best Windows computer. And I said it when I was working at Engadget. I said it when I was working at The Verge. And I’ve said when I’ve been working here at the [Wall Street] Journal. When you install Windows on a MacBook Air or a MacBook Pro, Windows runs better there than it does on pretty much any other laptop I’ve ever tested in the last 10 years. And that is a problem for Microsoft.

As a long time Mac user, I have no qualms saying that Windows has gotten leaps and bounds better in the last 5 years, but those significant improvements have been largely erased by mediocre hardware, penny pinching IT departments, and the continued horrible practice of crapware. I am sure no one is more frustrated by this fact than Microsoft, who I believe has been desperately trying to elevate the PC back to respectability. I think the Surface exists as part of that strategy to help4 the rest of PC industry with a unique5 reference model not entirely owned by PC’s oldest and now biggest competitor.

  1. “Who exited the business by selling off ThinkPad with the rest of its PC division to Lenovo 2005.” 

  2. In another example of computer industry symmetry, an increasingly irrelevant mid-90s Apple faced the opposite side of this same problem when it struggled to produce compelling hardware, leaving buyers asking why they should pay more for what seemed to be the same beige box as the competitors’. 

  3. Would Microsoft even bother with Surface in a world where Apple was somehow a high-end Windows OEM? 

  4. Or perhaps to threaten. 

  5. Aside from uniqueness, I think the laptop/tablet form factor is ideal for Microsoft for two reasons.

    1. Apple’s stated disinterest in the market leaves an open opportunity for Microsoft to pursue and gain competence while minimizing comparison to arguably the best hardware maker in the world.

    2. Microsoft makes Windows and actually has a proven history integrating hardware and software with Xbox, which in my book gives them a shot at the legitimizing a heretofore wacky form factor.