> So Microsoft faces a dilemma. Their business model of expensive software on cheap hardware is not sustainable. The future is nearly free software integrated into moderately priced hardware.
Apple, for all that's said about their software being excellent (and maybe it is) is a hardware maker. As such, they try to commoditize software: make complements to their own products as cheap as possible, so that the overall cost of buying Apple is as low as possible (while keeping their part of the profits as high as possible).
They have been immensely successful at this, obviously; but that doesn't mean "the future is nearly free software"! It means, Apple is trying to commoditize software and is doing a fantastic job at it. (Much better than what Sun tried to do for example).
But the answer to this, is that software makers should try to commoditize hardware. Of course, this is much harder, since the marginal price of a piece of hardware is non-zero. It may even be impossible, but that's still what Microsoft is trying to do -- it's not trying to jump into hardware making because "that's where profits are", it's trying to attack the hardware value proposition.
> the radical shift in Microsoft’s strategy is about the fight over the profits that remain after Apple’s
No, it really isn't. (Profits are the whole point, yes -- but the question is, what kind of profits are we talking about). Microsoft wants to bring the whole value of hardware down -- it doesn't want to take hardware profits for itself, it wants to make hardware profits disappear for everybody.
Consumers do not see profit, they see price tag. Hardware comes with a price tag, so the options are sell at cost or find a way to subside the hardware.
With Apple pushing for ever so cheap App Store software so much so it is willing to drastically cut its own premium software's price. The potential for a software subsided hardware business is diminishing fast. While Apple may forever lost the ability to sell hardware at 100% markup, Microsoft in the mean time is losing the ability to sell software for $100 and more . It is already reality in consumer space, and the price structure is collapsing too in the business world.
Microsoft has the money to give millions of Surfaces away for free, then what? It kills all its OEM in the process and can not make the money back on 30% software sales cut. And next year Apple brings out fucking iPad 4... Genius plan then?
It is important to remember that Apple hasn't succeeded in commoditizing end-user software all by themselves. It's ironic given the higher-level corporate competition, but their most powerful ally in that cause is Google (though Google is also actively trying to commoditize end-user hardware as well, which is part of where their conflict comes from).
He's right about that, though. The Windows RT Surface is rumored to cost at least $600, and that's with only a 1366x768 resolution display, and a Tegra 3 chip. A similar tablet with Android would go for $400 at most. By the time Surface gets released, they will cost $300, so half the price.
Plus, Windows RT/Metro has no ecosystem yet, whatsoever. Even if Android has only a few thousand or whatever tablet apps, it still has all the other 500,000 phone apps, and most of them should work on tablets.
Apple, for all that's said about their software being excellent (and maybe it is) is a hardware maker. As such, they try to commoditize software: make complements to their own products as cheap as possible, so that the overall cost of buying Apple is as low as possible (while keeping their part of the profits as high as possible).
They have been immensely successful at this, obviously; but that doesn't mean "the future is nearly free software"! It means, Apple is trying to commoditize software and is doing a fantastic job at it. (Much better than what Sun tried to do for example).
But the answer to this, is that software makers should try to commoditize hardware. Of course, this is much harder, since the marginal price of a piece of hardware is non-zero. It may even be impossible, but that's still what Microsoft is trying to do -- it's not trying to jump into hardware making because "that's where profits are", it's trying to attack the hardware value proposition.
> the radical shift in Microsoft’s strategy is about the fight over the profits that remain after Apple’s
No, it really isn't. (Profits are the whole point, yes -- but the question is, what kind of profits are we talking about). Microsoft wants to bring the whole value of hardware down -- it doesn't want to take hardware profits for itself, it wants to make hardware profits disappear for everybody.
(It should give the Surface away for free.)