While everyone will undoubtedly focus on the impact of the Surface on Apple, I think the impact could be far larger for Google. It could be good for some aspects of Google’s business, but for their Android and tablet business, it could be devastating. All of this depends partly on how well the Surface sells, and partly on how the Windows OEMs react to Microsoft’s intrusion on their turf.
Increased Interest in Chrome
Let’s start on how the Surface and Microsoft’s entry into the personal computing hardware space can help Google. The Surface announcement means that the OEMs that are paying substantial royalties to Microsoft are now helping a direct competitor. As an OEM, you would have to ask yourself: why am I helping another company take sales away from me? Granted, Microsoft isn’t selling desktops or notebooks. But tablets are intruding into the sales of notebooks, and a sale of a Surface is potentially a sale that an OEM doesn’t get for one of their products, either notebook or tablet.
But what are the options? One potential boost for Google is increased interest in ChromeOS and Chrome-based computing. So far, only Samsung and Acer have really risen to the challenge of building and selling Chrome machines. But in a world that is being driven more and more by cloud-computing and cloud-based systems, the idea of spending money on locally installed software and local persistent storage could be called into question. One solution: a notebook or desktop that is essentially a browser on steroids. Sure, it needs some local storage so that work can be done offline. But with almost every enterprise on-line 24/7, particularly those that use local servers, having a device that only works when it is connected (or at least works better when connected) isn’t a liability. It allows bigger companies to keep everything inside their network. It reduces the costs associated with maintaining notebooks and desktops, particularly since securing them can be easier. It also allows small companies to scale efficiently without dramatic increases in costs.
Does this mean the end of Windows? Not likely, and certainly not in the short term. But a PC manufacturer like HP or Dell might become more willing to look at a system like Chrome, at least for enterprise customers (which still represent a huge part of the PC market). A company like HP, in particular, might be able to make Chrome an attractive offering, since it could be easily integrated with the rest of the enterprise stack that HP offers. An increased manufacturer footprint for Chrome benefits Google, and could give the OEMs an alternative to Windows over the long-haul. It won’t mean much in the short term, but the long-term potential impact is certainly there.
Potentially More Android Tablets
Dell took a tentative step into the Android world with a sort-of tablet. HP has ignored Android in all of its products, having previously focused on WebOS. But OEMs looking to get into the tablet game may decide that to look at Android in addition to, or possibly instead of, Windows 8. If the Surface is a resounding sales success, it may mean that there isn’t much space in the early days of the Windows tablet market for anyone else. But Android is still wide open, and does have a reasonably healthy ecosystem of apps. It is also a market that hasn’t had a wealth of great offerings, the best coming from Samsung. Amazon’s attempt to make a cheap tablet hasn’t really gone anywhere. But if you bring a computing heavyweight like HP or Dell into the picture, that could potentially change.
The downside here, though, is covered below: that the Surface could basically end Android tablets.
But The Surface Could Hurt Android
If the Surface succeeds, it will likely do so at the expense of Android tablets first. Right now, Android is vulnerable on tablets, and has been for some time. The best “success” has been the Kindle Fire, and it saw sales drop dramatically once the holiday shopping rush was over. Samsung has done well, relative to other Android tablet brands, but it is still a small fraction when compared to iPad. This isn’t to say that a Surface success won’t impact the iPad. It will. But I believe that the impact will first hurt Android.
This won’t be good news to OEMs looking to Android as their tablet OS in order to avoid supporting a competitor in the Surface and Microsoft. Having an alternative to Windows 8 is one thing. Having an alternative where the players are carving up a small and shrinking slice of the market is not encouraging. This is one reason why OEM reaction, and possibly adoption of Android, could be given pause. Is there more money to be made at the margins of Windows 8 on tablets (assuming it is successful) or is an Android play a better bet?
What the Surface won’t do is hurt Android on smartphones. A better tablet for Windows doesn’t mean a better phone, and to call reaction to Windows Phone tepid is an understatement to say the least. Google’s biggest competition on the smallest computing devices is still Apple at this stage. Microsoft is no threat here.
But tablets are a different beast, and it is here that Android has struggled mightily. Again, assuming the Surface is massive hit, this simply makes the job of Android on tablets all that much harder, and ultimately that hill could be too steep. Android is still short on apps when compared to the iPad, and the Surface brings a substantial number of Windows applications into the picture. It is the apps that are driving iPad sales, and right now, Android has a lot of catching up to do. Surface hits the market with a lot more content, albeit with only a tiny few optimized for a touch interface. But what matters are the numbers, and not necessarily the quality at roll-out.
What further hurts the Android tablet in this picture is enterprise integration: part of Android’s problem has been in security, and that hasn’t helped the platform in the enterprise. Windows 8 may not be the paragon of security, but it will be understood, and it will be built for enterprise integration right out of the box. Enterprises already know what it takes to secure Windows, and Windows 8 isn’t expected to be radically different in that regard. The enterprise is an important part of Microsoft’s world, and they understand what it takes to keep enterprise customers happy. Even if Android might have some hope in the consumer market, a successful Surface could effectively close down the enterprise to Android.
No Room For Three Horses?
As the PC and smartphone markets have demonstrated, there is barely room for 2 big competitors, let alone 3 or more. Microsoft still owns the desktop with Windows, and their next biggest competitor (the Mac) is still a long ways behind. Android and iOS own smartphones, and the rest have either disappeared (WebOS, Windows Mobile, Symbian) or have been relegated to the sidelines (Blackberry, Windows Phone, Bada). The tablet market is basically iPad and “other systems”. If Surface is a hit, that makes it a 2-horse race between Apple and Microsoft, and likely makes Android an “also ran” in the “other systems” category. This isn’t a problem for Google on the smartphone side of the equation, but it could put a spike into the struggling Android tablet market.
Of course, this is all speculation at this point. The tablet market could end up like the MP3 player market, with one player completely dominating the space, and a handful of others that are just hanging on. If the Surface were to founder at launch, it could be a shot in the arm for Android: people who want a tablet, but don’t want an iPad and didn’t like the Surface, decide Android will suit them. It doesn’t solve the issues for enterprise customers, but it could help Android on the consumer side.
Ultimately, Is Surface Good Or Bad For Google?
I would say that the Surface is a mixed bag for Google. On the plus side, it could mean increased interest in Chrome from disgruntled OEMs that don’t want to support a direct competitor. It could mean increased interest in Android for tablets, but that could be offset by Android getting squeezed out by Surface in the tablet space. Naturally, how this plays out depends entirely on the success of the Surface, and success is no sure thing at this point. But I would be most worried for Android on tablets, because I suspect it will be the first one hit, and the one hardest hit initially, by a successful Surface.