How Microsoft became a control freak with tablet makers

The way Microsoft works with its hardware manufacturers fundamentally changed with the release of Windows RT. Now those longtime partners are figuring out how to deal with it.

Microsoft CEO Steve Ballmer turned the company into a devices and services company, not just software.

Microsoft wasn't taking chances.

The company was about to introduce one of its biggest operating system releases, and it needed its hardware partners to develop products that could genuinely rival the iPad andAndroid tablets.

Microsoft took control of partners working with the new Windows RT software that ran on low-power chips normally used for cell phones. It held regular meetings with the small group of companies in its development program and dictated to a large extent what the devices looked like. Details were everything. Microsoft even told one company to move the location of its Windows home key, the button that toggles between the Metro-style interface and the traditional desktop view.

"We were required at various points to get their approval on designs and on the development of our product," one hardware executive who worked with Microsoft on Windows RT told CNET. "We were all 'OK, OK, OK' because it was a project they were doing with us. We were kind of building a product they wanted built."

But at the same time, Microsoft was developing its own tablet, Surface, that would compete with its partners' products. It didn't tell PC makers about the device until shortly before work on Surface was announced in June in Los Angeles.

"We were absolutely surprised they were doing that," another hardware executive said. "Compete with us if you like, but you need to provide a higher degree of clarity in where the line is drawn between the guys...who are our friends and those who are not."

No doubt, the stakes continue to be high for Microsoft. The company's key PC market is changing as consumers migrate to mobile devices. To compete with iOS and Android and maintain high quality, Microsoft wants to have its cake and eat it too. It's trying to behave more like Apple while still working with the manufacturers it has partnered with for so many years. That's no easy task.

For the PC makers, it means their relationship with Microsoft and consumers will probably never be the same. When computer companies introduce products at the Consumer Electronics Show next week, Windows 8 is sure to have a big showing. But Windows RT, the software geared at tablets, is largely expected to be absent.

Why? In part, it's because Microsoft controlled the development process so tightly that only a handful of companies have been allowed to make products so far. Also, initial timing for the products was geared for Microsoft's Windows launch in October, not CES (which notably will not include Microsoft this year). In addition, many companies are still evaluating their strategies for a second batch of Windows RT devices.

The new relationship with Microsoft may be a tough one for PC makers, but they don't have much choice. The development of Surface was a nasty lesson that Microsoft can and will go it alone if need be. Don't forget, it already has with its own very successful gaming consoles. And a firm nudge may be what PC makers need since they've failed to come up with compelling designs consumers have craved.

CNET spoke with 13 current and former PC industry executives to understand how working with Microsoft has changed. Most of the executives declined to talk on the record, and Microsoft declined to comment for this report. Executives had different opinions on their new relationship with the software giant, but they all agreed on one thing: Microsoft has become more of a control freak than ever before.

Making Windows mobile
Microsoft's Windows software is the most used operating system in the world. About a quarter of PCs, tablets, and cell phones combined used some version of Windows in 2012, while 10 percent used Android, and 6 percent used Apple's software, according to the research firm Gartner. But Gartner expects that to change over the next few years, with Android projected to slightly surpass Windows in 2016.

Android should gain traction against Windows.

The majority of devices sold in the future will be smartphones and tablets -- products where Windows and the traditional PC vendors like Hewlett-Packard and Dell have struggled. Mobility hasn't been Microsoft's strong suit. And because the x86 processors from Intel and AMD found in Windows-powered laptops and PCs require more power, they haven't been suited to mobile devices.

To overcome that problem, Microsoft created a version of its operating system, Windows RT, that would run on chips based on ARM Holdings technology -- the same kind of processors that power the vast majority of the world's smartphones and tablets. The new Windows 8 runs on x86 chips.

As Microsoft CEO Steve Ballmer noted during the Surface launch in June, the company designed the newest version of Windows "for the world we know, in which most computers are mobile."

Microsoft's move to support ARM caused a rift with its traditional chip cohorts, and it also forced its PC partners to figure out where to put their efforts: Windows 8, RT, or both.

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