How Hardware Missteps Led to the Microsoft Surface (and Why The Tech Needs to be Licensed)

An article from The New York Times describes the “hardware missteps” that led to Microsoft taking control of their tablet hardware with the new Surface. It’s an interesting read that reinforces my previous claim that Microsoft should license their Surface technology.

The NYT tells the tale of Microsoft, after “losing faith” with their hardware partners, striking out to show them how it’s done right. One reason given is the frustration they felt as the HP Slate 500 was “completely ruined” by the procurement process. This contrasts against how “stunned” Microsoft was at how far Apple was willing to go to obtain materials for the iPad. Also mentioned is how the “hefty” fees from Microsoft and Intel have restricted manufacturers’ ability to match those and other innovations.

Overall, it seems there’s more than enough frustration and blame to go around for the failures of Windows tablets to date. One passage in particular caught my eye though as it ties into an idea I promoted last week.

A second former H.P. employee said the company and other computer makers needed more innovation from Microsoft than it was delivering. He said computer makers viewed the licensing fee they paid for Windows as a subsidy for Microsoft’s research and development, an investment that would enable them to have competitive products.

Incentive vs. Reward

I first promoted the idea of licensing the Surface innovations, such as the Touch Cover and peripheral venting, as incentive to offer tablet manufacturers as part of a “win it all” strategy. I again mentioned it as tool to mend relationships after throwing their hardware partners under the bus. Now, the New York Times is reporting that their hardware partners might view that innovation as a reward for the money they’ve already invested in it.


Makes sense to me. I previously claimed that Microsoft’s licensees “basically paid for the research and development that went into making Surface” and that they’ll be questioning the wisdom of continuing to fund that research if they’re not going to benefit from it. As the NYT now reports, sharing that technology may not simply a goodwill gesture from Microsoft to vendors, but expected compensation for the billions they’ve already paid to the company.

Incentive or reward, how one views the prospect of licensing the Surface designs is irrelevant. What matters is that it should be licensed, just as the Windows software is. Licensing fees paid for the research that led to the new Surface. Licensing technology is Microsoft’s proven path to success, earning them billions of dollars every year. If Microsoft’s intent for Surface is to “jump-start” the Windows tablet industry, as a management professor at MIT, Michael A. Cusumano, claims, then it is incumbent on them to give their partners every possible advantage. It makes little strategic sense to do anything less.