Rebates and Sales Bonuses -
Unfortunately for Microsoft they decided to compete with their own partners and release hardware that they will market directly to the consumer. Some people have claimed that Microsoft did this to show OEMs “how it should be done”, but Microsoft’s patterns and history would seem to counter that claim. For starters Microsoft required all OEMs to submit their product designs to Microsoft for approval and certification (this is a common practice for Microsoft). There is evidence that they took these submissions and created their own product with them as a baseline. Interestingly this is the item that some are using as the bases for the “how it should be done” argument. What most of those people do not know is that Microsoft has been working very hard to push their products directly to the consumer for some time and that the development of the Surface is just another step.
In the early days of the concept of hosted services, Microsoft came up with a licensing model for their products that allows a service reseller to purchase licensing for their server side products under their Open License agreement (also known as Volume Licensing) and to purchase the client access licenses for significantly less as long as they were part of the service reseller program. One caveat to this program was a requirement to provide a listing of any corporate customers to Microsoft. Microsoft then used this contact list to sell their own Office 360 services directly to those clients.
They saw the revenue stream that could be generated with hosted services and then found a way to get where they wanted on the backs of their own resellers. Microsoft has done the same thing with the Surface and will probably do something similar in the future with other devices (Like Phones). They want to control all of the pieces of the puzzle in this game and that includes your data.
Still they know that they still need to rely on their partners for a few more years. In an attempt to get them to stick with Microsoft (and also to resell Microsoft’s products for them) Microsoft has increased its payments to their resellers along with rebates intended to entice them to continue pushing Microsoft’s products. Now, correct me if I am wrong, but isn’t this exactly what Intel got in trouble for in the 90’s with AMD? Microsoft will pay up to 23% in rebates if resellers push more than 2,500 seats… If incentives like this were not right for Intel to push, how can they be for Microsoft? We would consider this type of behavior to be very much anti-consumer, but Microsoft wants this to get around in the hopes that they can increase their penetration of Office 365 in the market.
Office 365 and Microsoft cloud services are very important to the success of Windows 8. Microsoft has tied the future of both products so closely that failure of one will have a pretty big impact on the other.
It all on the Surface (2) -
In other news Microsoft has been hard at work to calm hardware partners claiming that the Surface was only a design point and not intended to compete directly with the rest of the market. Steve Ballmer has even tried to down play it by saying they do not expect to sell many. This counters some of his earlier statements about Windows RT and Surface which seemed to indicate that Microsoft expected to sell quite a few of these. Microsoft has also kept up the denials about a full-fledged attempt to enter the hardware market with their own branded line of products.
Again their actions would seem to counter their claims. Microsoft has a few “wanted” ads up that are looking to hire people to help with the “Next Generation” of Surface. If this was a design point or something intended to show OEMs how it is done you would not be hiring to develop the next version. Make no mistake, Microsoft is going to try and penetrate into the market further with Surface and other products that they design and have built by someone like Pegatron. This will erode at the ecosystem that has been primarily responsible for their dominance. Microsoft simply cannot become a one-stop shop like Apple is no matter how much Ballmer wants to.
They will kill off their market penetration and fall behind very quickly simply because they lack any real vision of what the market wants. They could possibly maintain a dominant position in the enterprise market with their server products, but we have a feeling that the desktop penetration will start to falter simply because there are too many products that can work with a Microsoft back end. We can attach Linux, OSX and other operating systems into Active Directory so Windows on the desktop might not be a requirement for much longer. What Microsoft might have done here with their push into the hardware market and the push to the cloud is to push themselves out of the very market they covet.
The competition from VMware and Citrix is going to increase and will allow many IT shops to virtualize their Windows 7 desktops in the background and make them available to more operating systems without the need to buy Windows 8 on new systems. Microsoft’s insistence on locking out the UEFI boot sequence to prevent installing other operating systems shows that they know this is a possibility.
The Xbox 720, or maybe not -
The last item of interest is the flub made by a Microsoft staffer that seemed to let information about the Xbox 720 slip. The person in question was General Manager Brian Hall who said “We just decided it was time to do something new and bring the best from each of those and put them together and release it right in time for the new wave of products that we could have coming out with Windows 8, with the new version of Office with the new Windows phone and the new Xbox”.
Microsoft is now trying to claim that the statement was taken out of context (we are not sure how) and was intended to be about new customer experiences with Windows 8. You can take that how you want, but we feel that it was pretty clear.
New is not always good -
We have talked about this before and will say it again here. Microsoft wants to force Metro (or whatever they will eventually call it) on the market. They desperately need it to work so they can push the Microsoft Store for apps and also push their cloud services. To show how far they are willing to go they have even blocked methods to allow you to boot to desktop or hide the start screen. There is no other reason to do this than to push their vision on the market. Microsoft is no longer in the position to try the “build it our way or else” tactic. There are too many options for resellers and consumers. They have to realize that Windows has reached its position by being flexible and open. If you look at why people use Windows it is due to flexibility and compatibility. To lock it down is only going to force a shift in the market to more open systems. We already know of multiple gaming developers that are looking into development for Linux and hardware makers are also putting more effort into working drivers for their product to support this. To those that claim that games cannot sift to Linux because of DirectX you might want to remember that the Xbox is not a Windows based system and yet it supports DirectX. Direct3D (a component of Direct X) is already supported in many Linux distros and there is a project to port Direct X 11 to Linux and it has met with success as far back as 2010.
Microsoft and in particular Steve Ballmer needs to take a very hard look at where they are going with Windows 8, Office 365 and the company as a whole. They cannot sustain the direction they are going without losing customers; these are the same customers that will not buy Apple products because they are so closed. Microsoft is also going to lose partner support and market penetration with their moves simply because their partners are not going to want to compete with Microsoft directly, there is simply no profit in it and if their partners are not making money, neither will Microsoft.
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