GigaOM Pro

Source: DieselDemon

Microsoft may be able to finally make a dent in the tablet market with Surface, the 10.6-inch tablet aimed directly at the type of users who continue to buy Apple’s iPad. But if Surface is a hit among consumers and business users, Microsoft’s manufacturing partners will be hard-pressed to compete given the developer’s licensing terms. Which means the prospects for Windows in the tablet market may hinge entirely on the success of Microsoft’s new flagship product.

We still don’t know how much the two Surface models will cost, so any predictions of its success are sheer guesses. And plenty of other questions remain unanswered: Will Surface support 3G or 4G connectivity? Can its battery life compete with the 10 hours iPad owners enjoy? How well does that keyboard case really work? Do tablet owners have any use for a stylus? And exactly when will it come to market?

Nonetheless, there seems to be a lot to like about Surface. Both models will run a form of Windows, and at least one version will include Office — a huge differentiator from the iPad, particularly for business types. And the detachable keyboard should make it easier to efficiently write emails and create documents than is possible with the iPad’s touchscreen. So Surface could be the first tablet that could legitimately replace PCs for some users, unlike the iPad which – for most of us – remains a complementary device.

But Surface is a major gamble on several levels. If it truly provides enough functionality to be a replacement for PCs, Microsoft’s traditional manufacturing partners like HP, Tobisha and Dell are bound to suffer as consumers opt for Windows tablets instead of Windows PCs. Meanwhile, Best Buy and Microsoft’s other retail partners can’t be pleased that the Surface will be sold only through Microsoft directly.

Microsoft’s riskiest move, though, is that Surface could essentially eliminate the chances of any other Windows tablet gaining traction. VR-Zone reported last week that Redmond charges its manufacturing partners a hefty $85 for licensing Windows RT. So unless the Surface comes to market at a surprisingly high price — say, starting at $750 or more — other manufacturers will find it extremely difficult to draw attention to their Windows tablets. And unlike manufacturers whose businesses thrive solely on hardware margins, Microsoft has the luxury of tolerating razor-thin margins — or even taking a slight hit — on the Surface as a way to boost its software and content businesses. That’s a strategy Amazon has employed with some success with its Kindle Fire.

Other manufacturers may find ways to differentiate their offerings from both the iPad and the Surface models, of course. But that would require some substantial innovation in hardware or software, or both. Regardless, the most valuable thing about Windows-based tablets is in their appeal to the business types who have used Microsoft’s software for years. And the Surface could begin locking up that audience very quickly.

Microsoft felt compelled to produce its own tablet because its manufacturing partners simply were unwilling or unable to build a solid tablet at a competitive price. Now that the wraps are off the Surface, I expect some would-be Windows tablet makers are taking another look at Android as a way to bring a true iPad competitor to market. If the Surface comes to market at an attractive price, it will be virtually impossible for other Windows tablets to compete. We’ll be covering sales of the Surface very closely, because the tablet could be crucial in determining the overall success of Windows in the booming tablet space.

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