Touch Computing Hits Its Stride

Microsoft's Surface and other touch-sensitive products can simplify complicated interactions, but are software makers and consumers game?

by Aaron Ricadela


It's the computer that almost wasn't. Microsoft's Surface—a touch-sensitive table that could redefine the way people interact with machines—got its start in company research labs five years ago, though backers considered putting the project on ice several times.

Engineers wanted to build technology that would let users tell a computer what to do by moving everyday objects, such as a digital camera or a game piece, around the screen's surface. Yet some managers viewed the system as an unmanufacturable toy. "Probably every year I thought about killing it," said Robbie Bach, president of Microsoft's entertainment and devices group, picking over dinner at a San Francisco restaurant recently as he recalled budget meetings. "We struggled with the business model."


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Microsoft (MSFT) has overcome many of those initial challenges. And the company intends to bring Surface, initially intended for niche markets including stores, casinos, and hotels, to consumers. Research into tactile, or tangible, computing is one of the most fertile areas of electronic-product design. The systems incorporate familiar objects such as toys, game tokens, cell phones, or wine glasses—and even substances like sand and clay—into the computing experience. By taking advantage of people's natural sense of touch and spatial orientation, the systems can offer more precise control over what's happening on the screen than pointing and clicking with a mouse.

Done right, tactile computing could help users design products, play games, and complete business tasks. Microsoft is working on a giant, 6-ft. by 4-ft. version of Surface that lets groups of four or six people gather around it to collaborate. Hiroshi Ishii, a professor at the Massachusetts Institute of Technology's Media Lab, has designed systems that let architects shape landscapes and buildings using sand and clay, then see the results of their models on a computer screen. His Tangible Bits group has also devised a system that lets users move magnetic pucks to design cell-phone networks, and computerized animals that remember and replay the shapes they're twisted into. "Tangible Bits is an attempt to defy the gravity of the pixels," Ishii says.
Touch Pioneers

Apple (AAPL) has brought "multitouch" technology from its music-playing iPhone into its ultra-slim MacBook Air, and could in the future adapt it to specialized desktop computers. Hewlett-Packard (HPQ), Mitsubishi Electric, and IBM (IBM) have also done work in the field of tangible user interfaces. Anchors on CNN (TWX) manipulate maps, charts, and photos with their hands on the network's computerized "Magic Wall." And touchscreen technology for PCs is already showing up in products including Hewlett-Packard's TouchSmart PC (BusinessWeek, 6/25/08), which can recognize gestures like the flick of a finger for choosing albums to play or selecting photos to view.

A confluence of greater processing power, the spread of supersized displays, and the success of the iPhone at raising users' awareness of the power of touch computing has sparked interest in the field. Microsoft's Surface efforts survived in no small part because of advocacy from Chairman Bill Gates, long a champion of "natural" methods of interacting with a computer, including touch and speech. In fact, tactile computing is one of just a handful of areas (BusinessWeek, 6/26/08) that Gates will continue to help navigate after his retirement from full-time work at the company. "Bill's a half-step ahead of us, and two steps ahead of the market in his thinking," Bach said.
Industry Implications

As forward-thinking as they may be, Gates and other surface-computing proponents need to ensure the technology doesn't leave the rest of the industry behind. The systems are expensive, the vast majority of software doesn't work this way, and there's little agreement over the best way for users to interact with tactile computers.

There's also a nagging question over how useful surface computing can be in a work setting, since applications remain somewhat limited. Today, the systems handle such tasks as helping salespeople explain the features of cell phones in AT&T Wireless (T) stores; assisting patrons at a Harrah's Entertainment casino in ordering drinks; or letting users download photos from a wireless-equipped digital camera placed on top of Surface.

Bruce Tognazzini, a principal at usability consultant Nielsen Norman Group, who's also worked at Apple and Sun Microsystems (JAVA), says the technology has big implications for the design industry, for starters. Tognazzini, who worked for Apple from 1978 to 1992, says it's "very realistic" for Apple to design a multitouch Mac for graphics designers with a horizontal screen. "The payoff is going to be high enough that people are going to go for it," he says. Apple spokesman Steve Dowling declined to comment on what he called speculation about future products. Yet Apple is already broadening its use of touch computing. In addition to the iPhone and iPod Touch, Apple's MacBook Air laptop features a large track pad that lets users make pinching, swiping, or rotating gestures on it to manipulate text or images.
Will Consumers at Large Adapt?

Microsoft is looking into business uses of Surface, such as manipulating photos for a magazine layout, or letting two people compose a PowerPoint slide show together, says August de los Reyes, a user experience architect at the company. Gates showed a group of CEOs in Redmond (Wash.) a prototype system called TouchWall that lets users stand in front of a giant vertical screen and use finger flicks to flip through document pages or slide decks. And Microsoft recently demonstrated Windows 7, due in 2010 or so, running on a touchscreen laptop and responding to gesture commands.

Andy Wilson, the researcher at Microsoft whose work led to Surface, says Windows 7 could simplify what today are complicated interactions, like the multistep process of clicking, grabbing, and rotating an object in a drawing program by using a mouse. "If you're going to have these kinds of complicated conventions, sometimes it might be easier to put your hand on the thing and do what you want," he says.

As with every new technology though, the success of tactile computing may depend in large part on users' willingness to adapt. "People still have a resistance to changing their work style," says MIT professor Ishii. In design shops and other creative milieus, people draw on whiteboards, talk about ideas, and point to things—interactions that tactile systems can mirror. "That's an exception," he adds. "Most meetings are one guy talking, and many people listening."

See BusinessWeek.com's slide show for more on surface computing.

Ricadela is a writer for BusinessWeek.com in Silicon Valley.

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The reason I put this article up here is to highlight my belief that touch computing is the next big thing in personal computing. I remember how enamoured we were with the touch computing kind of technology in Iron Man.

--vj

Will Yahoo! Feel the Love?

Steve Ballmer's $45 billion marriage proposal is fraught with risk. But Microsoft can't let Google go on unchecked

by Jay Greene

Steve Brodner

With the hefty premium included in its $44.6 billion bid for Yahoo! (YHOO), Microsoft (MSFT) looks well on its way to persuading shareholders in the Internet company to support its unsolicited offer. Yahoo employees, however, will be another matter. Not only has Microsoft been a frequent rival, but many Yahoo staffers view it as a lumbering giant that doesn't understand the Internet. "I see culture clash," says Norm Fjeldheim, chief information officer at wireless chipmaker Qualcomm (QCOM). "If I was Google, I'd be thrilled. I can steal a lot of the top talent out of Yahoo."

Microsoft CEO Steven Ballmer has an astonishingly difficult task in front of him. To make his historic bid for Yahoo pay off, Ballmer will have to overcome a series of high hurdles, from winning the approval of regulators, who have warred with Microsoft in the past, to retaining key talent in the wake of an unwelcome takeover. He'll need to sort through scads of overlapping businesses, shutting down some units and laying off staff. All the while, he and other top executives will have to make sure that the nitty-gritty of making the merger work doesn't distract them from keeping Microsoft's other businesses on track and watching out for the Next Big Thing. "It's a mess," says analyst Charlene Li of the market research firm Forrester Research (FORR).

The challenge is made all the more difficult because Microsoft and Yahoo would merge as two struggling rivals, trying to catch up in the online advertising business to an increasingly powerful Google (GOOG). That, some experts say, could be an indication of troubles ahead. "Virtually all the deals from Hell are done by companies that are collapsing into each other's arms like a defeated prizefighter," says Robert F. Bruner, dean of the Darden Graduate School of Business Administration at the University of Virginia and author of Deals from Hell, a book that examines failed mergers.

"The Single Biggest Threat"

The history of tech megadeals is littered with unfulfilled promise. AOL's $164 billion acquisition of Time Warner (TWX) is only the most notorious. There's also Lucent-Alcatel, Sprint-Nextel, Excite-@Home, and many more. Tech deals are particularly prone to failure because change comes so fast in the sector. Any distraction from a problematic deal, and you're left in the dust.

Of course, Ballmer knows the history and the challenges ahead. But Microsoft has few alternatives. Google is racing ahead in online advertising, and the surging ad business threatens the very foundation of Microsoft's empire. Computing is increasingly moving to the Web, challenging the relevance of Microsoft's core products, the Windows operating system and Office productivity software. "Google is the single biggest threat Microsoft has ever had," says David B. Yoffie, a Harvard Business School professor.

Ballmer argues that Microsoft, with Yahoo, can get the sort of scale in Web surfers and online advertisers it needs to compete with Google. The same goes for capital spending. Microsoft could boost the returns on the money it invests in computer server farms, for example, if its online audience more than doubles. "The ability to do more, that's fantastic," Ballmer said in an interview with BusinessWeek.

What's more, the company is hoping to bring together Yahoo's research and development staff, who've done innovative work in online advertising auction theory and data-mining, with its own online lab. Microsoft expects to reap $1 billion in operating efficiencies by combining the 14,000-person Yahoo with the 80,000-employee Microsoft.

Dilemmas, Dilemmas

Looks great on paper. The reality, though, may be something else entirely. Start with efforts to meld or eliminate overlapping businesses. There are dozens of them, everything from news Web sites and Net portals to e-mail, instant messaging services, and online advertising technology. To achieve the projected cost savings, Microsoft will have to choose which businesses survive and which ones don't.

Ballmer says: "Yahoo, the brand, will live." But eventually he'll have to decide between Yahoo Mail and Microsoft's Hotmail, Yahoo Finance and MSN's finance site, and others. Inevitably, products will be jettisoned, managers will lose clout, and people will lose jobs. "They've really bitten off quite a bit," says Kevin Lee, executive chairman of Didit, a search marketing company that helps companies place ads on Google, Yahoo, and Microsoft Web sites.

One thorny call will concern Microsoft's adCenter and Yahoo's Project Panama, both technologies designed to help advertisers finely target online marketing. In a combined company, there's no reason for both to survive. And if you ask Tarek Najm, a distinguished engineer at Microsoft and adCenter's general manager, what Panama technology he'd like in his product, he's blunt. There isn't any. "We're the leaders in technology," Najm says. "Ours is better."

Layoffs Are Inevitable

Of course, getting to that $1 billion figure means cutting bodies, lots of them. "The cost structure of these companies is predominantly people," says Charles Di Bona, an analyst with Sanford C. Bernstein & Co. Who goes? It's impossible to know. But it won't just be lower-level staff. There's no reason to have two bosses for e-mail, instant messaging, and Web portals. Ballmer may have to chose between respected managers such as Brad Garlinghouse, the senior vice-president who runs those businesses at Yahoo, and Steve Berkowitz, the Microsoft senior vice-president with similar duties.

That sort of uncertainty can crush morale, something Yahoo has already been struggling with as its business has floundered. Some key employees have left in the past year, including sales boss Wenda Harris Millard, marketing chief Cammie Dunaway, and Yahoo Entertainment leader Vince Broady. Such defections are likely to mount if Microsoft takes over, even among the Yahoo engineers Microsoft badly needs to keep in order to compete with Google. "I just can't imagine most Yahoo employees wanting to stay on," says one former executive who left last year.

Much of Yahoo's appeal to employees has been its place in the Valley firmament as a Net icon. Being absorbed into Microsoft strips that away. "People at Yahoo have a little bit of that natural Silicon Valley hatred of Microsoft," says a former Yahoo vice-president who left last year. "Yahoo has always considered itself a bit of an upstart."

Microsoft may have little choice in bidding for Yahoo. If it wins, it'll have little room for error.

With Catherine Holahan, Robert D. Hof, and Steve Hamm