Profit Angle

I have read that Android's success is a direct result of Apple's iOS being a walled garden. Let's look at this statement now from two different angles. First, is the walled garden really bad? Second, is this the real reason that Google and Microsoft are actively developing their own hardware?

Is the walled garden really bad?

Apple curates the apps that are allowed into the App Store. This has demonstrably reduced malware compared with Android. Recently, a form of malware, called Gooligan, was found to be present in about 100 apps. It is present in about one million phones in the wild, and increasing at a staggering rate of about 13,000 smartphones per day. I would actually say curation is a plus. So, what is it that people prefer about the Android operating system?

Let's look at what makes Google's Android shine over Apple's iOS.

This article points to three main reasons: Android...

1. can be rooted
2. uses non-proprietary software formats
3. interface can be customized

Rooting

Talk about dubious value. Being able to root Android means (in hacker parlance) the phone can be rootkit'd. In plain English, it means that apps can enter superuser mode and obtain administrative privileges on your smartphone. Once that happens, they can reconfigure your device, redirect its output, and install their own choice of apps. In other words, you are exposed to malware that can steal your passwords, the money in your bank accounts, access your email, snapchat photos, microphone, track your location, keep logs of your text messages, listen in on your phone calls, and essentially every bad thing you can imagine. Malware on Android is a critical problem right now.

Your average consumer should never, ever root their phone. It's only for hackers, spies, and criminals to take advantage of you. What this represents is Google not looking out for you.

Now let's look at how pleasant rooting is on Android. Why should you root your phone? This article spells it out perfectly (while detailing how complicated, dangerous, and potentially undesirable the rooting process can be). The main reason that people want to root their phones is to get rid of the bloatware that's typically installed by the manufacturer (Samsung, for instance). Welcome to the same problem we had in the last millennium with PCs: shovelware. This is how they differentiate their phones from each other in the Android ecosystem -- the same way vendors used to differentiate their PCs in the Wintel ecosystem. But, in comparison, it's a fact that Apple now allows you do delete the pre-installed apps you don't want on iOS 10, without rooting your phone.

Many users want to bypass the complexity of using Terminal to obtain superuser mode on the phone's Linux kernel to change various privileges. Hey: what consumer would want to do that? So they buy rooting software to do it. Can you trust that software? No. In July 2016, rooting software was reported to have installed malware on 10 million Android handsets.

And, by the way, each manufacturer's phone has a different rooting process due to the security bloatware they've installed. Joy.

Non-proprietary software formats

This means that, unlike iOS apps, which are available only through Apple's own App Store, Android apps are available from several sources. The Google Play Store is not the only place you can buy and install Android apps. There are many alternatives, including Amazon Appstore for Android, SlideME, 1Mobile Market, Samsung Galaxy Apps, Mobile9, Opera Mobile Store, etc.

Is this a good thing? It does open up multiple sources for Android apps that run on various smartphones.

But what are the downsides of multiple app stores?

The first problem is fragmentation. Each Android smartphone has a different hardware configuration, which turns out to make the app developer's life hell. Each smartphone has a different screen configuration, for instance. Before buying an app with a specialized purpose, like using the GPS, or a game app with high demands, it's important to decide if that app will run properly on your phone. This is precisely why smartphone manufacturers have been building their own app stores -- not all apps in the Android ecosystem run on every phone.

The second problem is trust. Can you trust the app you download to be free of malware? You would like to know that the App Store you are using is checking for malware. Fundamentally, if they do not have access to the app's code, app stores cannot protect you from malware. What happens is this: you download an app, as it runs, it loads and install malware from some server somewhere. This installs Gooligan.

Nowyou find new apps simply appearing on your phone. This happens because ratings are actually steered by app companies through the use of the Gooligan software. Gooligan installs itself, initially, for the purpose of buying apps it wants you to buy, forging your approval to buy them (and possibly spend money on them) and then rating them highly. These apps can be installed because Gooligan can obtain system privileges. Usually this happens because you enter the admin password for your machine. Perhaps it's to give the app privileges to install some fontware or customization feature. These new apps it installs potentially contain the real malware, because you do not have a choice nor can you control where they come from.

Customizable interface

Really? Can't you customize the interface of an iPhone? You can customize the wallpaper and the lock screen photo. If you want to go further, you can use customization apps like Pimp Your Screen, Call Screen Maker, iCandy Shelves & Skins, Pimp Your Keyboard, and so forth.

On Android, you should ask yourself how much you want customization. After all, it might come with malware.

Oh, cost!

One of the main reasons that people prefer Android is the cost of the phone. Which really has nothing to do with Android. Actually, cost is normalizing because deals with carriers are being made that pay for the phone up front, in exchange for locking you into the carrier for two years (usually). But this applies to all phones now. So, cost is not as much a reason as it used to be. But the plain fact is that, without a carrier deal, Apple's iPhones do cost more.

Why Google and Microsoft are developing their own hardware

Second, is that even the reason that Google and Microsoft are developing their own hardware? No, it isn't. The real reason is profit envy. The price of software has been dropping quickly since the App Store was created. This means it's harder for software-only companies to keep operating margins high. Think Microsoft, who has gone to subscription software to guarantee upgrade revenues, amidst unpopular OS upgrades, like Vista. The profitable niche, mobile devices, must look pretty good to them. Should they merely license OS to hardware manufacturers, like Windows? Will that work? No. Google gives Android away for free: upgrades don't cost anything. So nobody will buy Windows Phone if it costs money. Also, hardware and software both need to be upgraded.

The real reason is that, given that software is becoming essentially free, to make the profit you must make your own hardware. Also to make the hardware work best, you must develop custom software. In fact, the best features require both hardware and software to make them work.

This tight vertical integration is why Apple reaps well over 90% of the profits in the smartphone industry year after year. They sell their own hardware. That, and their profit margin is about 40%.

Value proposition

So, why are people willing to pay a premium price for iPhones?

As always, the price is paid based on the value perceived. The value of better user experience on iOS, easier installs, significantly better privacy and security, and great design is huge. It leads to unprecedented user satisfaction ratings and loyalty. People pay for this, and enjoy the rewards.

Apple devices, on the whole, are more up to date than Android devices. Here is a chart of Android OS versions as of September 13, 2016 and their share on smartphones. It clearly shows the latest version, Marshmallow, at 18.7% installs. And on iOS? As of November 27, 2016, 63% of iOS devices have upgraded to iOS10, 29% are running iOS 9, and 8% are running earlier versions. Get the latest stats on Apple's App Store page.

Clearly Apple's customer base upgrades significantly faster.

General comparison

Consider this article on iPhone vs. Android as a near-complete analysis of the subject.

Observing Microsoft, Part 3

When a company chooses a strategy, it is usually important that the strategy must make sense given its existing business model. A strategy of changing the business model, however, is a much harder one to implement and takes years. And that's one of the reasons why I'm observing Microsoft.

OMG there's so much to catch up on! But it's clear the trends I was referring to in my previous installments are being realized. To start with, I looked at their Surface and Windows 8 strategy, and then I looked at their management of the Windows brand, and its subsequent performance in the crucial holiday season.

Converting themselves into a hardware company, in the Apple model, is sheer madness for a software company like Microsoft. It will kill off their business model very quickly, I think. And yet they continue to do it, company culture be damned.

Ballmer is a coach personality, and clearly business looks like a football game to him. I can imagine him saying "if a strategy is not working against our opponent, then we must change it up". But it's clear that it's much easier to do this with a football team than it is to do the same with a company of 100K employees.

So I wonder why Microsoft doesn't just focus on making business simpler? Instead, they have been making it more and more complex by the ever-expanding features of Office, their business suite.

Software, hardware, nowhere

As one of Steve Jobs' favorite artists, Bob Dylan, once said "the times they are a changin'". And Steve knew it, too. At TED in 2010, Steve said that the transition away from PCs in the post-PC era had begun and that it would be uncomfortable for a few of its players. I took this to mean Microsoft, particularly. But how has it played out so far?

Microsoft is a software company that dabbles in hardware. Most of its revenues come from software, but remember that they make keyboards and mice and also a gaming console. These are only dabbling though, because the real innovation and money is to be made in gadgets like phones, tablets, and laptops. But their OEMs make gadgets, which requires a significantly greater level of expertise and design sense. So Microsoft's entry into gadgets can only represent their desire to sell devices, not licenses. They want to be like Apple, but specifically they want to own the mobile ecosystem and sit on top of a pile of cash that comes from device revenues. And the OEMs like HP, Lenovo, Dell, Acer, and Asus are a bit left out; they must compete with their licensor. That can't be good.

So Microsoft is clearly changing its business model to sell hardware and to build custom software that lives on it. Hence Surface RT and Surface Pro. But their first quandary must be a hard one: what can they possibly do with Windows? Windows 8 is their first answer. The live tiles "Metro" style interface is unfortunately like greek to existing Windows users. The user experience, with no start menu, must seem like an alien language to them.

This entire process is beginning to look like a debacle. If it all continues to go horribly wrong, the post-PC era could happen a lot sooner than Steve thought.

Microsoft ignores their core competence as they blithely convert themselves to a hardware company. Specifically, I think that's why they are doing it badly.

They could end up nowhere fast.

Microsoft's numbers

Microsoft is a veritable revenue juggernaut and has done a fairly good job of diversifying their business.  An analysis of Q4 2012 reveals the following breakdown of their business units in revenue out of an $18.05B pie:

23% Windows and Windows Live
28% Server and Tools
35% Business
4% Online Services
10% Entertainment and Devices

This reveals that business is their strongest suit. Servers also speak to the business market. Online services also largely serve businesses. Each division, year over year, had the following increase or decrease as well:

-12.4% Windows and Windows Live
+9.7% Server and Tools
+7.3% Business
+8.1% Online Services
+19.5% Entertainment and Devices

This reveals that Xbox is their fastest-growing area. It is believed that Xbox is leaving the PowerPC and moving to AMD cores and their Radeon GPUs. This could be a bit disruptive, since old games won't work. But most games are developed on the x86/GPU environment these days.

It also shows that their Windows division revenue was down 12.4% during the quarter year over year. This involved a deferral of revenue related to Windows 8 upgrades. Umm, revenue which most likely hasn't materialized, and so you can take the 12.4% as a market contraction.

Why is the market contracting? Disruption is occurring. The tablet and phone market is moving the user experience away from the desktop. That's what the post-PC era really is: the mobile revolution. Tablet purchases are offsetting desktop and laptop PC purchases. And most of those are iPads. It gets down to this: people really like their iPads. It is a job well done. People could live without them, but they would rather not, and that is amazing given that it has only been three years since the iPad was released.

The consequence of this disruption is that PC sales are tumbling. If you dig a little deeper, you can find this IDC report that seems to be the most damning. Their analysis is that Windows 8 is actually so bad that people are avoiding upgrades and thus it is accelerating the PC market contraction. On top of the economic downturn that has people waiting an extra year or two to upgrade their PC.

Microsoft CEO Steve Ballmer stated in September 2012 that in one year, 400 million people would be running Windows 8. To date, it appears that only 80 million have upgraded (or been forced to use it because unfortunately it came installed on their new PC). That's why I said we need to ignore that deferred revenue, by the way.

If you look at OS platforms, Microsoft's future is clearly going to be on mobile devices. Yet they are not doing so well in mobile. In fact, they are becoming increasingly irrelevant, with about 80% of their Windows Phone models on only one manufacturer, Nokia. Soon, I think they may simply have to buy Nokia to prevent them from going to Android.

In the end, you can't argue with the numbers. The PC market is contracting, as evidenced by Windows revenue declining year-over-year. Tablets are not a fad. As the PC market contracts there are several companies that stand to lose a lot.

Reorganization

What is the Microsoft reorganization about? There are three things that I single out.

The first and most noticeable is the that the organization puts each division across devices so the software development is not device-compartmentalized, and so that Windows for the desktop is written by the same people who write Windows for the devices. At least in principle.

And, of course, games are now running on mobile devices, dominating the console market. And undercutting the prices.

This closely mirrors what Apple has been doing for years. And this clearly points out that Microsoft is envious of the Apple model and its huge profitability.

Second, in reorganizing, Microsoft is able to adjust the reporting of their financial data, to temporarily obfuscate the otherwise embarrassing results of market contraction. This is because if each division reports across devices then the success of a new device will hide the contraction of the old ones. At least, in theory.

But Microsoft made a huge bet in the Surface with Windows RT. And it's not panning out. They have just reported that they had to write off $900M of Surface RT inventory in the channel. The translation is this: it's not selling. They have instituted a price drop for Surface RT. I bet they won't be able to give them away. But when they finally are forced to, they will be the laughing stock of the mobile market.

Today, Microsoft is down 11%. That's represents a correction. A re-realization of the capitalization of Microsoft. This represents a widely-help perception that the consumer market is lost to them.

Third, Ballmer wants the culture of Microsoft to change. They have been having problems between competing divisions. Coach, get your team on the same page! Wait: they should have been on the same page all along. After all, the iPhone came out in 2007, right? Ballmer didn't think too much of it at the time. That's why coaches hire strategy consultants.

A reorg can be even more traumatic than a merger. It's all about culture, which is the life blood of a company. It's what keeps people around in a job market that includes Google and Apple.

Monkey business

I have to give it to Microsoft: they really want to give their tablet market a chance. But they are doing it at the expense of their business market. They are reportedly holding off on their Office for Mac and iOS until 2014. A deeper analysis is here.

This is a big mistake. They need to build that revenue now because BYOD (bring your own device) is on the rise and they need to be firmly in the workplace, not made irrelevant by other technology. If they lag, then other software developers that are a lot more nimble will supplant them in the mobile space. Apple, for instance, offers Pages and Numbers as part of their iWork suite. And those applications read Word and Excel files. And they can also be used for editing and general work.

Microsoft should be focusing on making business simpler. Cut down on the complexity and teach it to the young people. Reinvent business. This entails making business work in the meeting room with tablets and phones. Making business work in virtual meetings.

They certainly had better make their software simpler and easier to use. They must concentrate on honing their main area of expertise: software.

If they don't do it, then somebody else will. Microsoft should stop all this monkey business, trim the fat, and concentrate on what adds the most value. They simply have to stop boiling the ocean to come up with the gold.

The moral

There are some morals to this story. First, don't ever let "coach" run a technology company. Second, focus on your core competence. Third, and most important, create the disruption rather than react to it.

Observing Microsoft, Part 2

Some of the most important assets a company has are its brands. A brand distinguishes a product from its competitors and can spread out like an umbrella to encompass several related products. But it must be coherent, meaningful, and inspire trust and signify value. You don't want a brand to become unclear. Brand management is a vital aspect of business.

Microsoft's main brand is Windows, an operating system. It is an umbrella brand, covering Windows 8 and Windows Server, though many people still are running Windows XP and Windows 7. The company also has the Office brand, which is an umbrella brand covering various pieces of software, like Word, Excel, PowerPoint, and Outlook. The brands specifically spell out what Microsoft is known for, and by inference what it is good at: operating systems and software.

It is abundantly clear that Microsoft is stepping out of its circle of expertise by creating hardware. It seeks to add another brand, Surface. But the Surface product is actually Microsoft Surface with Windows RT.

Let's look at the Windows brand. The billion or so Windows users are all familiar with Windows user interface. This includes such items as the taskbar, the start menu, and the desktop, with the plethora of blue-topped rectangular windows, from which the brand gets its moniker. Icons on the desktop, really just aliases to actual files, are called shortcuts.

But by creating a touch-based interface for Windows 8, really just a start-up screen veneer on desktop systems, those one billion users are led into into unfamiliar territory by the new user interface. There are reports of users being uncomfortable with the user interface and putting off the upgrade to Windows 8. Perhaps the main problem is that there are now two user interfaces, and they are quite different.

In some sense, this splits the brand, fracturing what Windows actually means. And that's not good. Furthermore, using the Windows brand on their hardware products actually stretches the Windows umbrella brand to include hardware, which has dire consequences for their OEMs like Sony, Toshiba, Acer, Asus, Dell, and HP. Reports are emerging that Dell urged Microsoft not to use the Windows brand for their Surface product. This causes confusion as to what Windows itself actually is: is it an operating system or a computer? Oh, man.

Some even claim that Microsoft is abusing the Windows brand.

All this, combined with the apparent lack of Surface sales, has investors in the same boat as the Windows user base: should they invest in Microsoft now?

Many users seem content to wait for Windows 9. There are some indications that Windows 8 could be like Windows Vista, which was met with whole-hearted scorn from users, who hung onto their prized Windows XP systems. Only with Windows 7, captained by recently-fired Steven Sinofsky, did the users finally resume their upgrades.

Arguments in favor of Microsoft's current Windows 8/Surface strategy center around three concepts. The first is, because they covet the Apple revenue model, that by integrating their software with their own hardware, they can do the same. The second is that they can't abandon the Windows brand and simultaneously they must make a move into the mobile space with it. And the third is that they are bridging the gap between tablets and laptops.

Perhaps, if they can do any one of these things right, they will survive. But right now, analysts have been noticing that PC sales have been dropping off. This is because the mobile market is disrupting it. Notice I didn't say that the tablet market is disrupting the PC market. More and more users are using mobile devices. By making their tablet more like a laptop, Microsoft doesn't really get what's happening.

The Holiday Season

The holiday season accounts for a large amount of retailers' sales annually. Indications are that online sales have surged 16% this season over last year. However, retail sales in brick-and-mortar have only risen by about 2.5%. But, to me, there is no doubt that the malls are crowded. Yesterday, it took me about 40 minutes to find a parking spot at the ValleyFair mall in Silicon Valley! This could mean that retailers are selling, but just not the big ticket items. This testifies to economic troubles or perhaps the widespread purchase of discounted items after hurricane Sandy.

The sales of Windows 8 depends partly upon the purchase of new computers. This is because those who purchase the new, exciting computers are essentially a captive audience. And if consumers (and possibly businesses) aren't buying the big-ticket items, then that could be a reason.

Let's analyze that for a moment. If computers are more expensive than tablets, then the consumers will buy tablets. Businesses will rush to construct low-cost business solutions using tablets as well because they can save on expenses - and the apps are there. And even if they aren't, the cost of developing corporation-local apps will make the conversion worth it. Nitro Mobile is one such company that specializes in creating corporation-local solutions on mobile platforms, like iOS.

Another sign that sales for Windows 8 aren't quite up to snuff is this article about Microsoft stores in the metropolitan New York Area, which states again that Microsoft stores were sparsely populated when the aisles at the mall were practically impossible to get through. In Silicon Valley, I noticed the same thing: Microsoft stores were just not filling up or selling their wares as fast as Apple stores. Perhaps Ballmer's idea of putting Microsoft stores right next to Apple stores wasn't so good after all: it invites unfavorable comparison. For PC sales to be lackluster in the holiday season is more than just a slow start. It's a definite problem. The market is changing fast.

Observing Microsoft

Microsoft doesn't hang quite as straight as it used to. What has happened to Microsoft? If the question is even being asked, things can't be going well.

The media are definitely asking the question. For instance, an interesting article in businessinsider asks whether Steve Ballmer's nightmare is coming true.

I don't know if it's poor execution or just the fact that Microsoft has been classically a software company (its name literally means microcomputer software) but I wonder at the missteps in their Surface strategy. We'll get to that in a moment.

I pointed to Microsoft's corporate culture in my blog post The Nail That Sticks Out. I am positive that they are fabulous about research in the ranks but at the top levels I believe their management is grimly despotic and unimaginative. In that case, what they need is a great leader. A few days ago, Microsoft CEO Steve Ballmer said, "We see nothing but a sea of upside". But they need a leader that doesn't need to boil the ocean to come up with the gold. One that has a vision for what can work. And, more importantly, what people will buy.

They need two things: focus and simplicity.

It is sad that, today, there are more than a few trends that point to the beginnings of a death spiral for Microsoft. To name a few: tablets start to eat the PC market, mobile computing succeeds for others but not for them, gigantic software bloat like Excel and Word are being replaced in the industry by small, mobile apps that cost a only a few of bucks, and companies are starting to use a Bring Your Own Device (BYOD) policy for their IT connectivity.

Individually, any of these trends would be quite bad for Microsoft. Taken together, these things are terrible.

Getting Into the Hardware Game

Microsoft's CEO Steve Ballmer laughed at, then roundly criticized the iPhone in September 2007 after it was introduced by Steve Jobs. It is clear that he simply didn't understand what was going to happen to the mobile space in a short five years.

Microsoft should have been working on Surface from that moment onwards. But clearly that didn't happen, since they only introduced Surface one month ago. To build mobile devices, Microsoft has to undergo a major transformation.

Microsoft claims that they are a hardware company. Mice and keyboards do not count. Comparing Microsoft to Apple, Dell, or HP in hardware prowess would be like comparing someone who dipped their toe into the pool with an olympic swimming champion. So that leaves the Xbox, which plugs into the wall. This doesn't exactly point to expertise miniaturizing hardware or really building any mobile computing technology. And their Xbox gaming platform is also under siege by mobile. They should never have let this happen. A whopping 61% of mobile phone owners use them for games. It is noted that iOS is the world's leading gaming platform.

So, why is Microsoft, a software company, also becoming a hardware company? Simple: both Apple and Google have the ability to craft their software and hardware together. In Apple's case, this core competence specifically led to the disruptive, record-breaking products such as the iPod, iPhone, and iPad that consumers just can't get enough of. In the process, these products and the ability to execute has led to a profit model that is unparalleled in the business and now the envy of Microsoft.

And this is exactly where Microsoft wants to be: back on top.

Which means they must build hardware so they can create the whole product. Microsoft knows from experience that their OEMs willfully do what they want. And lag behind Microsoft's wishes and suggestions. Furthermore, the developers will have a larger set of hardware configurations to support. This has always been a problem with Windows: its generality. And it is the current problem with Android. If Microsoft wants to take a page from Apple, it must control the hardware configuration as well.

Microsoft's act of angering the OEMs by creating its own home-grown hardware is dangerous and can backfire on its revenue stream. For one thing, this doesn't build on its core competence. In retrospect it might have been better to take the Google approach and simply buy one of the OEMs, perhaps Sony or HP. Still, Microsoft clearly knows that mergers are not an easy process so it foolishly started building hardware.

Windows 8

Microsoft says they sold some 40 million licenses (hologram stickers). So Windows 8 is going great, right? Well, no. Firstly, this only represents Windows 8 PCs that have been shipped to retailers or distribution points, not end-user licenses (I can't believe they don't report end-user licenses!). Secondly, StatCounter reports that the Windows 8 usage share is falling behind Windows 7 in a comparable period from the launch. At only about 33% of Windows 7 usage, Windows 8 usage is in a serious lag. The firm NetApplications is telling the same story. Perhaps this is the effect of hurricane Sandy, as they said. But it's already one full month since the October 26th launch (and the hurricane). Things should have equalized by now.

On Black Friday, the busiest shopping day of the year, I would have expected the new, exciting Microsoft Surface RT to be a top seller, fulfilling several weeks of pent-up demand. Indications are just the opposite. When I have thrice visited the Microsoft and Apple stores in the Santa Clara Valley Fair mall since, I have consistently seen that customers in the Apple store outnumber those in the Microsoft store at least two-to-one. Though I did see my first Microsoft bag yesterday, being carried by a woman in Nordstrom.

Another force limiting Microsoft sales of Windows 8 has been the OEMs such as Toshiba, Sony, and Dell. The situation is this: both Windows 8 and appropriate OEM hardware must be in sync to produce the large numbers Microsoft is really expecting. My suspicion is that the enthusiasm of the OEMs has been dampened by Microsoft's entry into the hardware market. It has essentially become their competitor. I doubt that is going to help the relationship between Microsoft and the OEM. And they need to co-operate closely to get the numbers going. The OEMs, because there are several and they work to outdo each other in price, already operate on small margins and so it has become a dog-eat-dog world.

So PC sales are sluggish, and reportedly sales of Windows laptop and desktop devices have dropped 21% year-over-year since the Windows 8 launch, led by a 24% drop-off in laptop sales.

Nonetheless, it's must be fortunate that Microsoft's strategy is moving towards the mobile space, right? I would say that it's an absolute necessity. Let's look at that.

Windows 8 features a new modern user interface (UI) that features live tiles and supports touch. At first glance this new UI looks like the first real competitor to the elegance and clarity of iOS. Yet, I have two questions:

How Well Does It Work?

A friend brought in his Microsoft Surface RT this last week and I spent some more time playing with it and comparing it to my gen 3 iPad. Microsoft claims the text is sharper and better. The displaymate.com shootout shows that it really isn't. To me, the Surface is certainly not clearer. It seems designed to look good to PC users who have been using Microsoft fonts for years. Come on! In a side-by-side comparison there was no comparison: the iPad looked way better. Hell, even an iPad Mini text looked better. I compared the nytimes.com site directly.

I played around with it some more and found that browsing was an almost completely keyboard-centric experience. I had to have the keyboard attached. And type in the URLs (there was auto-complete). Which meant that I had to use it in the landscape format pretty much all the time because that's the way the keyboard works.

With that keyboard on it resembles a laptop in form factor. I found that, with its built-in kickstand, it really has to sit on a desk to be used. On your lap, it just doesn't work in this form factor. It's just not stable enough. So, it's a laptop that doesn't work on your lap. Hmm.

I am used to holding my iPad on my lap while I am at the couch, with the magnetic cover folded into its triangular shape and the screen therefore at an ergonomic angle to type on. Or using the iPad to read to my son at night with the lights off when he goes to bed. I use landscape for browsing, portrait for reading.

There were some interesting features that I was able to find and use, since I had read a few articles on Surface usability (that mostly came to the conclusion that it was very bad indeed). But it would have been difficult to figure them out if I had to discover them. I actually wondered is there was a user's manual available.

On Surface, swiping from the side and back brings up a task manager of sorts. Then you have to swipe down to change the app you are reading. On the iPad I can double-click the home button for that purpose or, even easier, use a four fingered swipe from side-to-side to get to the next app.

In fairness, on both devices, the gestures and actions need to be discovered. So it is really about how easy these actions are to accomplish.

Won't It Be Confusing For Desktop Users?

Windows 8 becomes the default mode for the desktop systems as well. But doesn't that mean there are two UIs being used and that the users have to switch their brains between them?

Yes, and yes.

In a recent article, venerable PCWorld talked to some usability experts on Windows 8 (before Surface had come out) and so it only deals with the bipolar design of the desktop version.

The overall tone is grim. Users are confused as to what to do. Commands aren't where they used to be. Mouse actions (replacing touch and swipe actions) are unobvious and hard to discover.

In InfoWorld, they call it bad. "Guaranteed to disappoint nearly everyone".

Jakob Nielsen reports that it the disparity between the two UIs is bad for many classes of users, both power and novice.

Live Tiles

This seems like a pretty good feature. And my experiences with Surface indicated that they are useful. Yet Microsoft doesn't really exercise enough control in their usability guidelines. Or they exercise the wrong control, which would be worse.

In an excellent summary article, Jakob Nielsen reports that unfortunately live tiles' implicit call to action creates "an incessantly blinking, unruly environment that feels like dozens of carnival barkers yelling at you simultaneously". That's not a good thing.

So let's just say that understated is not a term I would use with the Windows 8 user interface.

Perhaps this is one good reason why Apple curates the apps that can be run on their devices.

What's Going On With Surface Pro?

You can't use current Intel-based Windows apps on Surface RT because it uses an ARM processor, like the iPhone, iPad, and nearly all other mobile devices. This is generally because of the economical power consumption of the ARM. So you have to wait for the Surface Pro, which supports Intel-based applications, arriving in 2013.

The latest on the Surface Pro is, since Microsoft states it will use an Intel "Ivy Bridge" Core i5 processor, it will get about half the battery life of an iPad. Microsoft could have used an Atom "Clover Trail" processor or even one of the newer-generation Core "Haswell" processors. Either one would have required significantly less power.

It is becoming increasingly clear that power management becomes the main issue with designing a new gadget. After all, you can't just keep adding cores.

Hey, it hasn't shipped yet. They could still change it, right?

I think they really need their first full-featured Intel tablet to be a winner. But that battery life issue could be a real deal killer. Brian X. Chen from the New York Times, tweeted RIP in advance.

Surface Pro comes out at $899 for the 64GB model and $999 for the 128 MB model. And I believe you will need a keyboard for it. My experience trying out the two keyboards is that you will want to $120 Type Cover.

So, why not buy a MacBook Air, which actually costs less than the Surface Pro/Type Cover combination?

You can certainly use a MacBook Air in your lap.

Going Mobile

The claim is that by 2014, mobile internet usage will overtake desktop internet usage. So Microsoft needs a mobile solution as soon as possible. Like yesterday. Some argue that Microsoft may simply be too late.

Star power testimonials, like that of Oprah, were rendered famously laughable because they were tweeted on an iPad. Maybe they should have gotten Ashton Kutcher, or somebody like him with much more social media cred. And knowledge.

And BTW Oprah, you can tweet from the browser in Surface. Be careful how you (or your flotilla of social media minions) make testimonials. Sometimes it's the little things that matter!

What's Keeping It Propped Up?

Microsoft is being kept afloat because its revenue stream, with Windows, Office, Xbox, Server, and support, is not going to fall through the floor any time soon. There are plenty of loyal users. Who have iPhones and iPads and use them day in and day out. Even at work now that they started this BYOD stuff. Hmm.

Microsoft makes about 30% of their revenue from Office products and 55% of their revenue from Windows, Windows Server and Tools. The other odd 15% comes from their Entertainment division (Xbox) and their online services (support).

So if Windows begins to tail off, they can still exist merely by keeping Office relevant in the mobile environment. I hear an iOS version of Office is in the works.

The Nail That Sticks Out

There is a rule in conformist societies (and companies) that implicitly limits their evolution: the nail that sticks out gets hammered down. This rule almost single-handedly leads to stagnation.

Why Hammer It Down?

When a civilization is structured, the nature of specialization helps to build an intricate machine of the society, where individuals must do their specific part to keep society going.

And when various winnowing forces such as feudal warfare, disease, or sequestering on an island keep a society's population constant, or force it to grapple with a shrinking base, the structure of society must be tested and tempered. The machine that society has become must operate in lockstep to survive. The pressure on an individual to carry on his parents' trade and role models becomes very strong indeed. An individual with new thoughts, swerving from traditional roles and creating disruption, cannot be tolerated. And such rules are born.

Culture thus evolves to accommodate and sustain this pressure on the individual.

However, this doesn't happen quite as easily when a civilization's population is sufficiently large during its structure-formation stages. When services can be performed by a small fraction of the population base, there is actually pressure to move away or to do something different. Progress is rewarded, not squelched.

For the same reasons, competition also leads to progress.

On an island there is practically nowhere to go, since the barrier to moving away is essentially life in exile. But consider for a minute the case study of San Francisco, where the population has held nearly constant since the 1950s. There it is possible to move away but sweeping changes are still difficult to accomplish. Yet culture continues to evolve. Mass transit was developed. Even urban renovation continues.

Cultural forces can also promote or prevent stagnation. San Francisco's culture has changed over the last few decades significantly, and this has prevented stagnation. Pockets of culture remain and provide alternatives to what could have been a regimented, conformist society. Particularly after the 1906 earthquake and two world wars acted as winnowing forces.

Culture and Its Influence

Culture can also be a force that leads to societal stagnation because culture provides us with laws, through morality, and peer pressure, and thus imposes its will on individual behavior. When culture is too regimented and strict, this can lead to suppression of new ideas. In the middle ages, Copernicus' views of a solar-centric astronomical neighborhood were suppressed in favor of an established view. Even Galileo, whose views were provable in ten minutes with common everyday objects, had his views suppressed.

Culture can come from religion, this is true. But it can also be influenced by war and other external forces. After a war, for instance, a local culture's survival can be threatened and so the pressure of sticking around to keep the culture alive can become paramount.

The conformist society also promotes a rigid class structure with despotic rulers. The fear of being hammered down is constantly reinforced by this.

Copying

So, what does a structured, conformist society do when it is presented with external forces that threaten to overcome it?

It evolves.

But it does so by examining the advantages of its external threat and duplicating them. In this process the society applies its machine-like efficiency to survival. The society is already efficiently shaped for the purpose of retooling and adapting. Feudal warfare and the constant advances of weapon-making have shaped the society to this task.

What a society must never do is to kill off its talent, and thus its greatest advantage. It is this capability that keeps it alive during times of adversity. It is the talent that keeps a society mobile and adaptable.

Disruption Then

But there are inherent adversarial forces that even the talented cannot surmount: disruptive forces.

Technology can provide disruption like no other force.

I have talked about disruptive technology before and its effects on brick-and-mortar, the dissemination of information, the replacement of old gadgets by new ones (cameras, televisions, games, and music media).

I have also talked about the disruption of fossil fuels and their eventual replacement by battery energy storage.

Disruption Now

Right now there is a disruption in mobile technologies that is challenging the old guard of desktop systems. This is a serious problem for the old guard. Either they must embrace the change or they must use disinformation to fight it. And the second option only really postpones their inevitable death. Adapt or die. Never was this more at issue than at Microsoft.

Their core talents were in the desktop Wintel paradigm, which is quickly fading. Megalithic applications like Office and Word are quickly being replaced by the lighter mobile applications, which can be sold over the air. The advantages of an adaptable, mobile enterprise are obvious.

Now Microsoft is being criticized for implementing two different interfaces in Windows 8, provoking some usability researchers to declare that users should just wait for Windows 9.

As for the advantages of the mobile enterprise, consider for a moment the Apple store and the Microsoft store.

Here's a YouTube video contrasting the traffic of the two stores on Black Friday, the massive shopping day after the American holiday, Thanksgiving.

Microsoft copied the spartan wood tables and lighter ambience of the Apple store, yet their inability to embrace mobile point-of-sale systems seems to be costing them.

At Apple stores, the salespeople help you one-on-one, and use an iPhone with an integrated credit-card reader to complete your transaction. You even sign for the credit card transaction on the iPhone. The first time I visited an Apple store, I got the sense that it was the future of the in-store buying experience.

Let's contrast that with the Microsoft store experience. A friend of mine went to a Microsoft store to buy a Surface tablet. He was directed to a single place where the sales took place (sounds a bit like a cash register doesn't it?). The point-of-sale system crashed, complicating the transaction significantly.

While Microsoft stores might start using iPhones with integrated credit card readers, it seems improbable that a Microsoft employee would actually suggest that. Perhaps there is a Windows 8 Phone alternative? Well, if so, why aren't they using it?

My point is this: Microsoft has almost 100,000 employees. They should have some fraction of those employees building apps for their Windows 8 Phone ecosystem. They can't afford to catch up by attracting developers at this point! That would take precious time. They should already have such a point-of-sale system in their bag of tricks. Don't these guys think ahead?

My suspicion is that somebody probably wanted to do just that, but he got hammered down.

New ideas and new concepts replace old ones. Many of the trends that shaped the progress on the desktop simply do not work in the mobile computing space. Even Moore's law seems outdated, as I mention in one of my more recent posts Keep Adding Cores? It's clear that computers are simply built differently as a result of this disruption. When you consider that batteries are the power source, then power management becomes central. Efficient and targeted computation becomes highly desirable, rather than general processor computing.

What Disruption Comes From

Disruption comes from people.

People with new ideas.

New ideas whose value can easily be demonstrated to a large number of people.

If everybody sees the value then they want it.

When everybody gets it, this results in significant change.

Change in how people spend their time. Change in what people buy. Change in how people think.

So disruption comes from that nail that didn't get hammered down: an individual with radical new ideas and a conviction that his or her ideas can succeed like nothing else.