great fanfare, Bill Gates introduced the tablet as the next mainstream mobile platform. Non-
Windows tablets had been in use for years as niche products serving vertical markets like
healthcare and insurance. When questioned about whether the tablet was really up to
shouldering the mainstream computing needs of the broad horizontal market, Gates was
unwavering in his assertion that Windows XP Tablet Edition would make it so. Microsoft’s focus-
group research, he said, showed that people hated the tablet the first day, grumbled about it on
the second, sort of got it on the third, and so on until the 10th day, when they said they couldn't live
without it. I wasn't convinced, but many early forecasts reflected Gates’ thinking, showing growth
in the tablet market reaching 5 million in 2005, 9 million in 2006, and 14 million by 2007. Well,
here we are mid-2005 and not on a run rate to hit even 1 million for the year.
Those early forecast curves were truly exponential, but you’d need some sort of rocket fuel to hit
14 million by 2007. By 2004, two years after the Windows tablet’s introduction, it was clear that
these forecasts were not going to be realized. So, some market watchers revised their forecasts.
But the revisions did not actually change the slope of the adoption curve, just pushed it out farther
in time. So, now it’s time to make a serious revision to the actual slope of the curve. What follows
is the reasoning behind this revision.
Vertical, Yes; Horizontal, Maybe Not
The verticals I get: healthcare, insurance, field sales and service, utilities, all these make sense
for a pen-based tablet. You see, a pen is good at selecting things, tapping radio buttons, and so
on. And selecting things is what you do on a form. And forms-based computing is by definition
vertical because a form has to be a form of something, like an insurance form, a medical form, an
inventory form, and so on. So, tapping with a pen on a slate tablet makes lots of sense for the few
hundred thousand people who buy them every year. Slates are the preferred form factor of the
vertical markets, where applications are truly mobile (i.e., walking), and forms-based computing
can be done with one hand holding the device and the other tapping the pen. I expect this market
to continue to grow at a modest pace.
But what is the killer app that's going to drive the horizontal market? The real-looking signature at
the bottom of the email looks nice, but how much are you going to pay for that? In the commercial
market, sketching a rough for a slide presentation is fine, but who has a secretary much less an
art department these days to turn your inspiration into finished art? How about annotating
someone else's work with handwritten comments? That's a good one, but killer? None of these
functions is killer and justifies the premium and the alternative usage model. Now, artists love
tablets, but they don't have any money. How about handwriting recognition, or at least the storing
of metadata associated with handwritten files, data that can be searched and queried? Sounds
good on paper, so to speak, but the reality is handwriting recognition will never be completely
accurate, and some data will be readable only by the human who created it, and if it's me, then
often not. Meanwhile, searching text in various types of documents — Word, PowerPoint, HTML
pages, Excel — finds 100% of the instances sought. Not to mention that a whole generation of
computer users has grown up using the keyboard as input. Most people I know who have bravely
carried a tablet about, proclaiming that it’s the wave of the future, have abandoned it after a few
months at most.
The best form factor for the horizontal market is the convertible, the "notebook plus," which, in the
ideal case, is a great notebook with a screen that spins around on a mono-hinge and snaps into
a slate form factor for true tablet applications. One issue facing the convertible crowd is whether
to go with a subnote (i.e., under five pounds with a 12.1" or less screen) or a heftier thin-and-light.
Lenovo with its X41T, Fujitsu with its T series, and Acer with its 300 series have opted for the
former, while Gateway with its M275, Toshiba with its Tecra M4 have gone for the latter. Why this
choice makes any difference is that the larger models make better notebooks, potentially
replacing a desktop as a primary computer, but are pretty heavy for holding in one hand and using
as a tablet, and the smaller models, while easier to use as tablets, are a tough sell as a user's
sole computer given their lack of screen real estate and compromises on keyboard size. Unit
shipments in the subnote category, from which the smaller tablets are expected to carve share,
are low precisely because these systems can serve to replace desktops only for selected
segments (i.e., highly mobile, price-insensitive professionals in the United States and Europe,
and Japanese users, who prefer smaller machines). Thus, the convertible camp, on which the
future of the horizontal category rests, is divided.
Gates appeared to be basing his belief that the tablet would become the dominant mobile PC
form factor on the supposition that the tablet premium would decline to near zero, and every
notebook would be tablet enabled at some point with an active pen, digitized screen, and
Windows XP Tablet OS. Now, it might have been early, but Acer actually did come out with one of
these. It had a funny hinged brace that you could set to keep screen in place while you leaned
over the keyboard (without touching it!) and penned against the tilted screen. I hear that all four
customers were completely satisfied with it.
Let's look at that premium issue. The XP Tablet Edition OS is more expensive than XP Pro, and
the hinge (for the convertible) and screen digitizer cost more. Various OEMs have masked the
premium. Lenovo's X41T tablet is only $100 more than the X41 vanilla, but the costs are further
apart, some vendors say $200-300. Oh, and there's the active pen. Don't lose that or your
cooked. With a PDA, you can use your fingernail in a pinch, but the tablet digitizer requires an
active pen, at extra cost. Three years after introduction, the tablet premium remains stubbornly in
place. Economics would say if you want something to become mass market, you lower rather
than raise its price.
Forecast Reswizzle
So, where are we in all this? Early forecasts said 14 million by 2007. A revised version said 14
million in 2009. Are you ready? Take a seat. How about 3.5 million in 2009, 1.2 million slates
and 2.3 million convertibles (Figure 1)?
