Last week, Microsoft announced their Surface and Surface Pro tablets. While a lot of details are unavailable and a lot of questions still unanswered, these two offerings pose an interesting potential for the future.
Two Different Models, Two Different Targets
Offering two different processors is interesting in itself. The Surface for Windows RT tablet, with an ARM processor, will likely be targeting consumers. Since laptops in the home are being massively cannibalized by tablets, Microsoft needs an offering that is somewhat on a par with an iPad.
The i5-based Surface Pro is geared much more toward businesses. Right now, most tablets are not powerful enough to run many business applications. This model aims to change that. If you look at its specs, it is thicker and much heavier than the typical tablet and has a footprint more like an laptop. This device will run Windows 8 and should handle the more demanding business applications and myriad other Windows applications that are out there. Both of these devices will use the Metro UI design.
While it is unknowable if these devices will take off, they should be taken seriously for at least one reason: These devices seem squarely aimed at the enterprise. Microsoft has deep inroads into large-scale organizations– these devices would fit well into their existing management infrastructure while providing applications that their users have on their desktops already. The lighter model would be aimed at replacing the iPad in the enterprise, which is a rapidly growing segment. The Surface Pro could be the next logical replacement for many laptops.
Pricing in a Competitive Market
Microsoft has yet to announce how much the devices will cost, but they will have to play a careful pricing game. The RT model will have to be priced very close to the iPad. Apple has trained the market to expect a price point around $500 for a great tablet, and it is the current standard against which every other tablet is compared. If Microsoft were to price the Surface higher, they would have to compete head-to-head against the iPad’s install base and applications. If they price it lower, they will be squeezing the margin on their device and positioning the Surface as being less valuable or capable than the iPad. The Surface Pro model will need to be priced around that of Ultrabooks, probably around $1,000. While this is not priced for most of the consumer market, this is a price point that businesses are used to.
Success through OEMs
Microsoft is arriving very late to the tablet game, and this is likely because they were trying to stick to their main strategy of letting OEM partners develop the hardware while Microsoft focuses on the software. It became increasingly clear to Microsoft that their OEM partners’ offerings have generally failed to catch on in the marketplace and they needed to take action or else risk being shut out of the tablet platform. This would be very painful since the entry level platform often “grows up” become the mainstream platform of choice.
To succeed in this space, Microsoft will need the cooperation of it of the very OEM partners that it may have annoyed in introducing the Surface. Though Microsoft has direct relationships with many large enterprises, they will need their partners to ensure even wider distribution through small and medium businesses. Microsoft also would benefit from tie-ups with the major wireless carriers. Offering devices like these with only Wi-Fi support is not enough: business customers will expect to be able to use cellular data networks for when they are not in a Wi-Fi network area.
Attractive to the Enterprise and IT
It’s too early to tell how the Surface will impact Android and iOS market share in the enterprise, as pricing is not yet known and many other technical details are not yet published. However, it’s clear that Microsoft will market the devices to its extensive base of corporate customers, which gives it a strong advantage over other platforms, especially Android. The iPad has already taken off across many enterprises, and many users won’t be willing to give them up. However, Android’s market share in the enterprise tablet market remains extremely low. If the Surface were to cannibalize any part of the tablet market, it will be Android. Microsoft will also have an advantage in that the Surface will not suffer from platform fragmentation the way that Android has. It also has a very rich and mature development environment for third party software developers.
For all of these challenges, Microsoft appears to have a very compelling device. And they will be very attractive to large-scale businesses that have a significant commitment to Microsoft technology. The Pro model will be able to run the software load that all of these large enterprises already put on their laptops and desktops. VPN access, Microsoft Office, and other commonly used business applications will be available natively. And for those companies that have not yet adopted a BYOD policy, this may give them a way of putting tablet computing in users’ hands while still maintaining centralized control with a company-owned device.
Stay tuned. We will see in the coming months what the price points and availability for these devices are, as well as the demand in the consumer and business segments for these products. Microsoft is making a clear statement here that it needed to take control by developing its own tablets to compete with Apple and Android, or risk being left behind.
