How Steve Jobs’ Side Bet on the iPad Affected Microsoft’s Tablets

Even though Apple really did make the iPad for consumers, Jobs and his team fully expected it to also become attractive to business users.

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Justin Sullivan / Getty Images

Steve Jobs demonstrates the new iPad as he speaks during an Apple event on January 27, 2010.

When Steve Jobs took the stage to introduce the iPad in 2010, he did something that he had never done in past presentations: He moved stage right and sat down in a big easy chair.

From there, with the iPad in his hands, he showed off what his company’s new tablet could do. He used this easy chair as a metaphor. For the first time, computing had moved from a sit-at-your-desk or use-on-your-lap mode to one in which the iPad, a portable piece of glass with a computer behind it, could be easily used just about anywhere.

He also made it very clear to the world that the iPad’s real glory came from it being a consumption device. He showed how it could be used to consume information, music, movies and games. He did not give any indication that that it could or should be used for anything other than consumer applications.

But in a nod to the idea that the iPad could be useful to more than just consumers, Jobs had Apple SVP of marketing Phil Schiller come out and say that there would also be iPad versions of Pages, Keynote and Numbers — Apple’s office productivity software. With that, Jobs and his team placed a side bet that the iPad was not just a consumer device, but one that could also be used for productivity.

However, Jobs knew that if he had positioned it for productivity and business, he would have gotten shot down by the business media. He knew they would buy the idea of the iPad as a consumer product, but would consider it way too underpowered to be used for business applications. Jobs and his team’s genius lies in the fact that they actually knew that it could be used for productivity, and from the beginning built the software tools for business app developers to create iPad versions of their products.

For the first three months, the media and market pretty much just focused on the iPad as a consumer product and highlighted its various consumer applications. However, by the fourth month, we started seeing serious business applications written for use on an iPad. In fact, by the end of the iPad’s first year on the market, SAP had bought close to 10,000 iPads for company use; Salesforce.com also bought thousands for its workers.

By the anniversary of the iPad, there were over 10,000 business apps, and companies around the world were looking at the iPad as a highly mobile tool that could impact their users’ productivity. And schools had quickly seen that the iPad could be a valuable learning tool and started buying iPads in big numbers.

While the iPad and its consumer potential dazzled Apple’s competitors, they at first dismissed its role as a product that could threaten their business products — especially their laptops. However, by the end of the iPad’s first full year on the market, it had become clear that the iPad was very disruptive. And by the end of year two, the iPad’s impact on laptop sales became dramatic. Since the iPad hit the market, demand for laptops has slid negative 10 points each year for the past two years. And overall PC sales will be off at least -7% to -9% for 2013, much of that attributed to people buying tablets instead of buying new PCs.

This set off major alarms inside Microsoft. It was clear that if the iPad continued its ascent into business and IT, it would sap a great deal of energy and potential away from the Windows franchise — something that could have trickle-down effects on Microsoft’s continued thrust into business markets around the world.

It is my understanding that in about the fifth or sixth month of the iPad’s existence, the realization that it was on a major trajectory to become the tablet standard in business and education led Microsoft to create a secret team of hardware and software developers to begin plotting a way to develop their own tablet. The goal would be to make it as powerful as the iPad with the added benefit of giving PC customers access to existing programs as well as new ones written specifically for the tablet.

The key question was whether Microsoft would entrust its tablet effort to its hardware partners or create it in-house. I understand that while both options were considered, the decision for Microsoft to do the hardware itself was based on the fact that it would be developing Windows 8 with its touch-friendly Metro user interface. The software could be simultaneously developed with the dedicated tablet hardware in mind.

At that time, the next version of Windows was destined for desktops and laptops, but Microsoft now had the added burden of making it tablet-friendly. The company finally determined that the only real option it had was to work on both of them together and in-house. Had hardware partners been added to the equation, it would have complicated matters. Microsoft would not have had any control over hardware designs — designs that needed to be optimized for the highly secret version of Windows that was in development. Plus, adding a third-party hardware vendor to the equation could have delayed Microsoft’s ability to get a competitive product into the market quickly in order to try and stem the tide of Apple’s iPad gaining too much ground without a legitimate Windows tablet as an option.

While the first versions of Surface and Surface Pro were serviceable entries, the new models that are shipping this week are much better than the original ones. With their enhanced keyboards and additional accessories, I believe they are now good, competitive tablets for business and IT. In fact, this decision is starting to pay off. Recently Delta Airlines bought 10,000 Surface Pros for their pilots after a serious test program that looked at Apple’s iPad and an Android vendor’s tablet for the project.

And we are hearing that the Surface Pro is getting a lot of attention in many tablet bid processes. It is now looked at as a legitimate competitor to Apple’s iPad and Samsung’s business tablets. We are also seeing Windows 8 tablets from mainstream vendors like HP, Dell and Lenovo getting attention in business circles.

While the iPad is a great consumer device, it has evolved into being a powerful business tool. And I suspect that the new iPads Apple releases this week will be even more innovative, helping the company bring many more customers over to the iOS platform. I also expect Apple to continue to try and keep a solid technical lead over its competitors and to spend more resources on selling iPads to business users. It is clear to me that even though Apple really did make the iPad for consumers, Jobs and his team fully expected it to also become attractive to business users.

But where there is opportunity there is also competition. And Microsoft, even with its various stumbles with Windows 8 over the last year, now has to be considered a worthy competitor to Apple in business tablets. With the new Surface Pro, Microsoft actually has a tablet that is getting serious consideration with business users and IT buyers.

Bajarin is the president of Creative Strategies Inc., a technology industry analysis and market-intelligence firm in Silicon Valley. He contributes to Big Picture, an opinion column that appears every Monday on TIME Tech.

6 comments
CurtisQuick
CurtisQuick

The Surface Pro is a quality device and a great laptop replacement in a tablet form factor. The digital stylus alone makes the tablet awesome! The lighter weight makes my back feel better too! No more lugging around a heavy laptop AND a tablet for me.

snookasnoo
snookasnoo

The Surface Pro is both a lousy tablet and a terrible laptop. People don't like them and they don't want to use them. It also costs twice as much as an iPad. That is why they are getting very few sales.

Mauryan
Mauryan

Microsoft ridiculed the iPad when it was introduced. All they have done now is to make a smaller version of the laptop. They still have not understood the fact that a tablet is a consumption device that carries books, videos and pictures and some social media functions. It really is not meant to be a serious input device. The laptop is never going to disappear. The desktop has its place. It is just that the tablet has moved some of the functionalities that were exclusively on the laptops and desktops. Consumers mostly use the tablet for consumption. That is why they are called consumers. Every consumer is not an IT technician. At some point the tablet market also will stagnate. And then it would be a race to the bottom, much like DVD players went. Microsoft is not a consumer company, no matter how much they can try to paint themselves. Their real customers are in the corporate world and they must simply focus on that aspect. They could have launched a separate company that focuses on mobile devices and split off the XBox unit as well. That way no one would be criticizing Microsoft for making a soup where they have tried to add a little bit of cream, a bit of salt, some sugar, some coffee, some vinegar and every concoction to address all tastes. They will end up eating this concoction themselves. They already did by burning up $900 million the first version of Surface RT. They have money to burn. So let them throw in frogs and lizards into that soup as well. 

mattack
mattack

"demand for laptops has slid negative 10 points"

Sliding -10 points is the same as rising 10 points.  That's not what you meant.

ArsenyStarostin
ArsenyStarostin

I think calling tablets disruptive to productivity (business) markets (laptops etc.) is a bit much. Sure, they are valuable additions, but not full replacements nevertheless.
However, with docks they could be.

JamesKatt
JamesKatt

@ArsenyStarostin The iPad has been tremendously disruptive to the PC market. This is why the PC market has been seriously shrinking each year.  People are using their iPads instead of Laptops or Desktop PCs instead.  Of course they aren't full replacements.  No one said they would be.  But there is less need to buy a new PC when the iPad can be used instead.