In a new post on The Verge, writer Tom Warren hits the nail right on the head when discussing some of the challenges Microsoft will face when dealing with OEMS as they set prices for Windows 8.
In the post titled Microsoft’s ‘riskiest’ Windows 8 bet: hardware manufacturers, Mr. Warren says the following:
Microsoft is clearly positioning Windows RT as the choice for iPad competitors.
What we’ve seen so far suggests that neither OEMs nor Microsoft have anything that can compete with the iPad on wow factor or affordability just yet. Instead, there may be a mix of tablets, ultrabooks, and hybrids (a throwback to 2002) running Microsoft’s new operating system — offering what OEMs and Microsoft would call an alternative to the iPad.
Apple’s scale affords discount prices on bulk components, while its deft management of its largely Chinese supply chain keeps operational costs to a minimum. Lacking these advantages, Microsoft’s partners seem unable to match Apple in terms of price and quality — foregoing one fundamental for the other. In this way, Microsoft’s breadth of OEMs are a disadvantage, as they compete against each other for razor-thin profit margins.
If OEMs flood the market with cheap x86 Windows 8 tablets, then, like netbooks, this may increase market share — but at what cost to the end user experience of Windows 8? Ballmer was right that Windows 8 is risky, in more ways than one.
I have written about OEM’s and the problems that potentially lie ahead for Microsoft before.
Last November in a post titled Microsoft will need to police OEM’s when Windows 8 is released, I wrote the following:
….I think for Windows 8, Microsoft needs to go a step further.
Since they don’t make all the hardware that will be released during the initial rollout of Windows 8, they need to influence vendors to make Windows 8 really shine on their debut hardware.
In order to make this rollout super successful, I believe that Microsoft should be firmer with OEM’s than they have been in the past. Large OEM’s should be encouraged to make sure that Windows 8 runs on superior hardware at least for the first 6 months of the rollout.
I know that Microsoft are doing their best to make sure that Windows 8 is able to run onWindows 7 requirements and I’m sure that give or take that will be true. However, there will be a lot of pressure on Windows 8 devices to be slick and glitch free for the first few months.
We need OEM’s to make sure they don’t screw up perception.
To me this is really simple.
In order to make sure that the public have a good impression about Windows 8 and Windows RT upon release, Microsoft need to address both performance and pricing.
In 2013, as they are prone to do, Apple may release an upgraded iteration of their iPad or a smaller version of the device. This will drive pricing for those devices (older versions) to the $250 to $299 range.
Let’s get serious – that will be the standard.
Very few people in a tough economy will walk into a store (or look on Craigslist) and bypass an Apple Tablet at $300 for a Windows 8 Tablet at $500. It-Wont-Happen.
Likewise, these savvy consumers expect devices to be at least as fast as iPads and as cheap. This is the ultimate unfair dilemma for OEM’s who are dealing with razor thin margins already.
What should Microsoft do? Think outside the box.
They should do the following:
- Take a 1 year licensing loss on all Windows RT tablets for the first year. Yeah, do the Xbox dance and make it a loss leader.
- Make the Windows RT performance requirements higher for OEM’s. Yeah they’ll bitch and moan about how much money they’re losing so Microsoft should
- Subsidize premium Windows RT partners for 6 months. Walk the walk and give them money. Show them how important this is.
It’s not rocket science.
You can’t claim on one hand to be changing the industry and changing the face of computing with this radically new OS and then play by the same old myopic simple P&L rules.
Windows RT needs to blow the iPad away at the $250 to $500 range. It needs to be stunningly fast and affordable.
There is simply no compelling reason to buy this tablet (as a consumer) otherwise.
My gut tells me with Windows 8, Microsoft won’t get a second chance to make a first impression.
What do you think?