It was clear from both Apple and Microsoft financial reports last week that tablets, or more accurately iPads, are cutting into traditional PC sales. Part of the reason for this is that they are the new hot product from Apple and expensive enough so that people can’t afford to buy both an iPad and a tablet. But part of the reason is that people are using them as they would a PC and while this has mixed success, they really aren’t great at creation, and the habit patterns being developed may keep an increasing number of iPad users off Windows as that platform matures.
There is a lot of similarity between the iPad and the first Mac, with one big difference – no Microsoft partnership, and that I think needs to be explored. There is also a big difference between the other tablets and the iPad that is worth looking into as well.
In the end I think what we are seeing is not a Tablet vs. PC war, but a case where the iPad is trying to take the place of the PC. More “Invasion of the Body Snatchers”, than “Battlefield: LA” to use movie metaphors. Let’s explore this.
The Fixing of the Ugly Birth of the Mac
When Apple first came to market with the Mac, they had a platform but they lacked a solution and they went to a little company called Microsoft to develop the productivity layer (Microsoft Word) for the product. This eventually became Office for the Mac and it still exists today but not on the iPad. On the iPad, Apple has iWork which is the best productivity suite on a tablet today.
While most are focused on iOS vs. Windows, that isn’t where the real battle is being fought – it is between Microsoft Office and iWork. Even Microsoft doesn’t seem to see this, as they think of it as a battle between hardware platforms, when really, it is a battle between solutions, with Steve Jobs working to undue a mistake he felt he made in the early days of the Mac – partnering with Microsoft.
Unlike the other tablets, which lack a good productivity suite, I’m still convinced that there is someone in Microsoft on Apple’s payroll influencing these decisions and isn’t allowing Windows Phone 7 on tablets. Apple has a clear field to drive their product into the market and numbers suggest it is like taking a hot knife through butter.
But, to be clear, what Apple did with the iPad is create a PC like platform where Microsoft no longer has any influence. That is something Microsoft should contest strongly but hasn’t yet.
iPad is Still Vulnerable
However 20M iPads, while impressive, is far from the 300M+ PC market. Yes they likely will pass 10 percent of the PC market easily this year, but it is only 10 percent and Microsoft could come back. What Apple is betting on is that Microsoft is too disjointed inside to present a comprehensive solution. iWork is subordinated to the iPad and future iOS products. So while Apple will continue to present iOS devices as a solution that includes productivity, Apple bets that Microsoft won’t and that Microsoft’s disjointed approach will weaken their response. It has to, because Microsoft is still dominant and no challenging vendor can displace a dominant vendor without the dominant vendors help or a ton more money than even Apple has.
This is because people just don’t like change and the move from a Windows PC to an iOS device is a big change. If Microsoft can suddenly appear adequate people won’t move. So, in the end, this is a fight for perceptions. If people see Windows as good enough Microsoft wins; if Apple can make the concept of a “Post PC World” stick with the majority and connect “Post PC” to iOS, Apple wins.
Apple has the additional exposure of possibly being hit by a successful Android tablet effort in the interim. But so far, Google has too many OSs and not enough focus on the total solution to do much damage. And they are up to their eyeballs in litigation (and seemingly living in some kind of self-denial), but the firm is starting to focus and the 3.1 tablets are vastly better than the 3.01 tablets were.
In the end, Apple is steadily focused like a laser to have folks think of the iPad and iPhone as their key productivity device. In other words, instead of being connected to Windows, “Personal Computer” slowly gets shifted into being connected to iOS, and on iOS there is no Microsoft, or the concept of PC moves to an Apple brand. Typically a firm like Microsoft would have the time to respond and they intend to with Windows 8. There they are both addressing the tablet form factor and building other parts of the firm, like Xbox, into the response. But this is a battle for perceptions and Microsoft traditionally both underfunds marketing and can’t sustain a long marketing campaign, weaknesses not shared with Apple who is a master of managing perceptions.
In the end it looks like Apple is moving to correct a mistake and that mistake, from their view, was Microsoft. If Microsoft can respond to this threat as a company, they can’t lose, and Apple is betting they won’t. That’s one hell of a bet.
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President and Principal Analyst, Enderle Group
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