Does Microsoft Have an Exit Strategy for Surface?

Microsoft recently made a potentially game-changing announcement. The Redmond, WA company has launched Surface, its own tablet computer developed and built in-house. What does this mean for Microsoft, its hardware brand partners, and the Windows 8 platform? Does Microsoft plan to stay in the tablet business long-term? Some analysts don’t think so.

Microsoft CEO Steve Ballmer reveals Surface, a new family of PCs, for Windows, Monday, June 18, 2012, in Los Angeles. (Rene Macura/AP Images for Microsoft)

Microsoft’s entry into the touch-computing market isn’t exactly a new one, since the software company previously introduced the Surface as a table-top computing initiative. But with the popularity of tablet computers like the iPad and Android tablets, the Surface tablet might just jumpstart the upcoming Windows 8 operating system as a tablet platform.

Hardware partners and industry observers think this is just what Microsoft is doing. There is talk that Microsoft is in it just for the short term. After all, Microsoft is largely a software company, and its core business is in its Windows operating system and Office suite of applications. The company also has a considerable enterprise software business, mostly focused on cloud computing.

In an interview with All Things D, Microsoft CEO Steve Ballmer said the company was simply paving the way for its hardware partners in building Windows 8 devices. Ballmer says that Surface “gives people a full range of things to think about, sort of primes the pump for more innovation around Windows 8, (and) brings new technology to the Windows PC platform.”

Ballmer continued that Surface is only part of the company’s Windows 8 efforts. “It’s an important companion to the whole Windows 8 story,” he said. “It’s an important piece. It’s not the only piece.”

As such, there is a chance that Microsoft may just use the Surface as a launchpad for Windows 8 and turn over the reins to whichever manufacturer would be able to successfully market their own device henceforth. Would it be Asus? Samsung? Acer?

Acer founder Stan Shih has commented that Microsoft does not have any real intention to sell its own-brand tablet computers, but is only boosting interest in the Windows 8 platform. He thinks Microsoft would still want to focus on software, as it profits better from licensing than it will from selling hardware.

Google employs the same strategy by launching smartphone products with hardware partners like the Nexus One, Nexus S and Galaxy Nexus as flagship Android smartphones to encourage manufacturers to build similar products. See how popular Android is today. Google is continuing with this tradition with the upcoming Nexus 7.

However, Apple’s approach in marrying hardware with software does have its advantages, particularly with how seamless the user experience is in the iPhone and iPad.

Either way, Acer’s Shih considers Microsoft’s intentions in a positive light, as hardware partners will greatly benefit from Microsoft’s marketing.

Microsoft has historically succeeded in the hardware market, particularly with the Xbox, Microsoft’s home-grown console gaming system. The first Xbox iteration could  be considered a dud in terms of market share. However, the Xbox paved the way for better game console development, and its successor, the Xbox 360, was a success in the market, as well as with the developer ecosystem. As such, Microsoft did not exactly succeed in the short term, but the original Xbox paved the way for the longer-term success of the Xbox 360, as well as related online servies like Xbox LIVE. There is also Xbox LIVE integration in Windows Phone 7, and Windows 8 is likely to feature this, as well.

And so, what could be Microsoft’s strategy for Surface? Will it improve on Apple’s strategy of marrying software and hardware (as with the iPad, iPhone, and Mac computers)? Or will Surface simply be a means to pump prime Windows 8 for tablet computing?