Orr: Google and Microsoft challenge partners and the tablet world

Jeff Orr ABI

Jeff Orr

We have all heard about the pre-release mobile devices found in bars. You may have even heard about leaked company roadmaps that detail a vendor's product or service plans for the next couple of years. Typically, putting one's plans down in advance of public announcement has two intended audiences: for the company's key customers (such as mobile network operators) who rely on roadmaps to demonstrate that a vendor has "staying power", and for the company's strategic suppliers to communicate commitment to the supply chain and relay future technical requirements. 

These forward-looking plans are generally well-guarded secrets and those getting to view them often have to sign a non-disclosure agreement saying they will not share the information with other parties. But what happens when a company's suppliers decide to enter the market and compete head-on with those vendors that have confided their futures?

Two very visible examples of this behavior occurred in the media tablet market in June. Microsoft announced it will be launching a pair of tablets dubbed "Surface" sporting flavors of the forthcoming Windows 8 and Windows RT operating systems. The next week Google used its I/O conference to bring the Nexus brand to a 7" Android tablet with prices starting at $199.

Each top line brand--Google and Microsoft--seeks to replicate the closed ecosystem that Apple enjoys with its market-leading iPad device and iTunes mobile app storefront. Operating system fragmentation in the case of Google's Android has hindered it from achieving its full potential; app developers are frustrated from having to support numerous permutations of code that behave differently on multiple devices.  Microsoft doesn't yet have traction in the tablet market, but is certainly grappling with the Apple challenge in the smartphone segment where its Windows Phone OS is looking for a loyal end-user following.

The unfortunate and inevitable side-effect that these "coming soon" product introductions have on the market is how it will stall some portion of the buying audience from investing today. If you're Microsoft with no tablet share today, causing potential buyers to wait for Surface availability is a good outcome. But if you're Google, a rapid response is necessary to fulfill market demand and exceed customers' expectations. Asking end-market audiences to wait for yet another Android device is a tall order to fill for any vendor. Google's tablet device partners have taken the Android OS from nil to 30 percent marketshare in about 18 months' time. Google appears ready to overlook that momentum in favor of market leadership.

Apple must love all the distractions and in-fighting while its iPad products continue to build installed base and share of the market. Whether the Cupertino company is prepared to offer the rumored smaller version of the iOS tablet in the coming months or not, price has not played a critical factor in tablet adoption as demonstrated by Apple's relatively high prices. Regardless if the buyer is in the United States, France, China or India, what might make today's tablet buyers wait for the two new vendors?

Microsoft: Continuity for business users with its venerable Windows OS is the leading reason some will wait to buy a tablet. The vague pricing statements (similar to Windows 8 ultrabooks for Surface with Windows 8; similar to existing ARM-based tablets for Surface with Windows RT) are a cause for concern, but not so much in the enterprise business where a good ROI story can overcome sticker shock. With Windows 8 starting commercial availability in 4Q'2012, we expect buyers interested in qualifying Microsoft Surface likely to begin the process in early 2013.

Google: Let's not forget that Google already competes in the smartphone market with Nexus-branded Android handsets. Arguably, it joined the OEM ranks much later in the market segment's growth and hasn't catapulted itself to the leaderboard while competing with other Android smartphone OEMs. Price is Google's biggest weapon and the $199 price is interesting, though price hasn't shown to be the cause for crossing the chasm from early adopters to early majority of technology buyers. Amazon and ASUS each introduced $249 products about 7 months ago and have yet to yield their desired results.

In what seems like an act of desperation, two of the largest suppliers in the mobile and computing industry have decided to take control of their vendor ecosystems and offer competing tablet products. ABI Research believes each company is looking for a way to accelerate adoption of their respective operating system-powered devices alongside the leadership of Apple. Left to partner companies, these goals could never be achieved fast enough. If either or both are successful at this strategy, the OS vendors will find it increasingly difficult to rebuild the former trust with the device ecosystem.  If the OS vendors fail at attracting audiences to their brands, they risk causing irreparable harm to the mobile device markets.

Jeff Orr is Sr. Practice Director of Devices, Applications & Content for ABI. Orr manages the analyst resources for mobile devices, applications and content research at ABI Research. As an individual contributor to ABI Research's mobile devices team, he focuses on media tablets, ultrabooks, netbooks, and eReader devices. He also leads research into markets for 3G/4G modems and mobile hotspot routers.