Microsoft: Apostasy Or Head Fake?
My appetite whetted by three days of rumors, I went online last Monday and watched Microsoft introduce its Surface tablets. After the previous false starts — the moribund Tablet PC and the still-born Courier — Microsoft finally took matters into its own hands.
Context & Ripple Effects
Surface is the third act in a long tablet story for Microsoft. The original Tablet PC never escaped the stylus-and-Windows mold, and Courier, the secret two-screen project leaked in 2009, was killed before it shipped — so this week's announcement is the first time Microsoft has taken tablet hardware fully into its own hands rather than delegating it to PC makers.
The move did not come out of nowhere: an insider report on June 15 said Microsoft was manufacturing a tablet to rival the iPad, Business Week argued days later that such a device should shame a complacent PC industry, and by June 21 Gizmodo was calling Microsoft the most exciting company in tech. The unveiling drew unusually broad same-week pickup — ZDNet, Ars Technica, CNET, Slashdot, even FT blogs — signaling that the industry read it as a strategic rupture, not a product launch.
First-order effects
- Microsoft's longtime OEM partners are now its direct competitors: any HP, Dell, or Lenovo Windows tablet must be sold against a machine built by the company that controls the operating system and can price and design around it.
- Microsoft absorbs hardware manufacturing risk, margins, and inventory for the first time in this category — a structural cost commitment that succeeds or fails on Surface's own sales rather than on Windows license volume.
Second-order effects
- PC makers facing channel conflict have a fresh incentive to hedge toward Android or Chrome-based devices, weakening the exclusivity of the Windows ecosystem that Microsoft's licensing business depends on.
- Rivals in the tablet market face a competitor that can integrate hardware, OS, and services without negotiating with anyone — pressuring the pricing and feature cadence of every iPad alternative.
Third-order effects
- If the pattern holds, the PC industry's division of labor — Microsoft writes software, partners build machines — gives way to vertically integrated competition, forcing every licensee to justify why it exists between Microsoft and the customer.
- A successful Surface would make integrated hardware-plus-services the template for how legacy platform companies respond to Apple's model, with regulators and antitrust watchers likely to revisit whether controlling both layers is exclusionary.
The trend: Platform companies are abandoning pure licensing for Apple-style vertical integration, and Microsoft's Surface is the moment the world's largest software vendor decided its hardware partners were no longer enough.