Microsoft's Slow, Steady Tablet Strategy a Big Gamble

Could Microsoft's risky bet of choosing its client version of Windows over Windows Phone 7 as the OS for tablets pay off in the end?

Anticipation was high before this week's Consumers Electronics Show in Las Vegas that Microsoft would once and for all present a viable iPad competitor.

While Steve Ballmer's keynote speech has been criticized for looking back on 2010 rather than looking forward, Microsoft did finally address its plans for running Windows on the popular tablet PC form factor.

No, it won't involve Windows Phone 7, and it won't really come to fruition until ... 2012.

Microsoft has decided not to follow the Apple and Google route of putting its mobile operating system on tablets. Instead, Microsoft has chosen a more deliberate method where it will migrate its client OS onto tablets.

For now that means a limited amount of Windows 7 tablets running on lower-powered Intel processors. But the bigger news from CES is that Microsoft's next version of Windows (referred to by most as Windows 8) will work on ARM-based chips, which are widely used in smartphones and tablets like the iPad and those running Android.

Microsoft gave a demo of Windows on ARM during Ballmer's keynote, going under the hood to show some components but saving a peek at the Windows 8 user interface for another time. The next version of Windows is likely to launch in late 2012 if Microsoft sticks to its traditional three-year cycle.

This is, by all accounts, a daringly slow advance into a market that is progressing rapidly. Forrester Research recently forecast that the U.S. tablet market will reach 82 million tablet owners by 2015.

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One analyst, Michael Cherry of Directions on Microsoft, thinks Microsoft dropped the ball on two fronts: by choosing to port a desktop OS to a tablet in the first place and also to preview something at CES (Windows 8 on ARM chips) that won't be available for at least a year and a half.

In a Computerworld story this week, Cherry expressed disappointment over Microsoft's tablet plan.

"Do you really gain anything by taking the entire client OS of today and porting it across?" Cherry asked. "Why do they think that the power consumption of Windows will be any better on ARM? It's still going to be running a lot of processes.

"I saw this as a lot of hand waving," he says of the Windows/ARM announcement. "[Microsoft was saying] 'Look at the ARM architecture,' but there was no discussion about timing and other critical factors. I wanted to see some proof that doing the port to ARM will give me attributes that are important on a tablet."

Nevertheless, Microsoft is determined to leverage its strengths and do tablets its own way. Windows revenue has been growing consistently without having to reconfigure the OS to different devices like tablets, which is a time-consuming and expensive task.

Faced with a choice to chase Apple or carve out its own path, Microsoft is choosing the latter, says veteran technology analyst Rob Enderle, adding that it's a big gamble but it's still a reasonable one.

"It's kind of nice to see Microsoft not copy the leader and bet that in five years, by taking another path, it can come up with something the emphasizes what it does best," he says.

Enderle stresses that there is no proof yet that there is a sustainable market for limited tablets outside of the iPad.

"But there sure is proof there is a market for a PC-like product that has similar hardware to the iPad," he adds, "and those products could be a significant portion of the PC market."

Still, Enderle is conflicted on whether Microsoft should have just put Windows Phone 7 on tablets and get on with it.

"They could have done that very quickly, but they would have had to abandon decades of advantages in legacy software and PC accessories that represent billions of dollars," Enderle says. "However, with so many applications shifting to the cloud, I probably would have gone the Windows Phone 7 route and focused on my Web resources instead of my desktop legacy."

In the end, Microsoft downshifted its Windows tablet strategy when everyone was screaming speed up. It's a gamble for the ages, and the next year will show if Redmond made the right bet.

Shane O'Neill covers Microsoft, Windows, Operating Systems, Productivity Apps and Online Services for CIO.com. Follow Shane on Twitter @smoneill. Follow everything from CIO.com on Twitter @CIOonline. Email Shane at soneill@cxo.com.

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