Microsoft Surface RT: $499, On A Slippery Slope

Today, Microsoft announced pricing and availability for the Windows RT version of the Microsoft Surface ($499 for 32GB, not including the “Touch Cover,” available for preorder today, shipping 10/26). This product is intended to be a pure consumer play; Microsoft also plans to launch a Windows 8 version of the Surface, aimed at enterprises, for which it has not yet announced pricing. Yesterday, I spent the day with the Surface team led by Steven Sinofsky and Panos Panay, and I learned many things: Sinofsky is from Florida, for example, and when he stands on a Surface that’s attached to skateboard wheels, it doesn’t break. I learned about the importance of optically bonded displays, saw nifty 3D printers making plastic models, and heard about the many trips to China required to perfect the Surface manufacturing process. I was told many examples of the Surface team’s attention to detail, down to the sound design of the kickstand closure.

I did not hear, however, the answers to the most pertinent questions asked by our clients, many of whom are product strategists in Microsoft’s partner ecosystem (OEMs, ISVs, and potential app developers like media companies, banks, and retailers). Will Surface expand distribution beyond Microsoft’s stores and website? If Microsoft believes it’s making the “best hardware for Windows,” as Sinofsky told us, how does it expect its OEM partners to respond? No comment on both fronts.

My colleague Tony Costa made the call correctly: Microsoft can’t have it both ways. If Microsoft aggressively expands distribution for Surface, Microsoft will alienate OEMs, who are already scaling back Q4 sales forecasts. But if Microsoft keeps Surface distribution small, the product won’t have much impact.

Surface is a solid product, with a sleek and considered design, a bit heavier than the iPad but certainly lighter than the 5-pound Dell laptop I’m using to write this blog post. Its display is competitive with the Retina iPad. It won’t replace your PC if you use legacy Windows software other than Office, but it will serve as a fine device for Web, email, entertainment, and light productivity, which is what most consumers use their PCs for, anyway. But it is a transitional product, just as Windows 8 and Windows RT are transitional products: They meet consumers where they are today, in the gap between the PC and Post-PC Era, between keyboards and mice and touch and voice. But how long will this transition last, and will consumers look to Microsoft to carry them forward to the future? Consumer interest in Windows tablets has been waning: In a Forrester Consumer Technographics® survey conducted in January 2011, Windows was the most-desired operating system among consumers intending to buy a tablet, with 45% of US tablet shoppers saying they’d prefer a Windows tablet if it were available. By September 2011, that percentage had fallen to 25%, and by August 2012 it was 18%, as Apple and Android grew in mindshare. The idea of Surface was born in 2009, but in the three years it took to get to market, Windows’ relevance to consumers has declined significantly.

“Surface is not a tablet, but it’s the best tablet I’ve ever used. It’s not a laptop, but it’s the best laptop I’ve ever used,” said Sinofsky. Surface may defy categorization, but it can’t defy market realities. To succeed as a product, it needs to expand its distribution footprint: To be in as many retail channels as the iPad by Black Friday would be game-changing but seems unlikely at this point. And if it takes that expansive path, it will do so at the expense of PCs. According to Forrester’s data, 13% of tablet owners said they bought their tablet instead of a laptop; 18% say they’ll wait longer to buy their next laptop and 14% say they won’t buy a new laptop ever. It’s not hard to imagine a world where Microsoft takes an increasing share of the shrinking consumer PC market, while HP and Dell focus on enterprise or exit PCs entirely. Lenovo and Samsung stay in the PC game but put their real focus on mobility. Asus, Acer, Toshiba, and Sony fight over crumbs. Oh, and Apple’s expected smaller, cheaper iPad takes more share from everyone.

I’m not saying Microsoft is wrong to pursue this strategy. I’m saying, though, that it’s high risk and self-cannibalizing, and reaping the rewards requires pushing its partners out of the way. Sinofsky may not want to discuss his strategy today because this uncomfortable truth doesn’t make for great marketing. Cannibals survive, but they don’t make polite dinner conversation.

Comments

I Would Still Prefer Windows

I still prefer a windows platform over everything else, likely because my entire work and home life is engrossed in it. But I have to admit, I've been forced into android based on availability. I'm happy about this new tablet because what I really want to see is what apple users have, cross platform compatible devices. Honestly, I'm not sure why I care, because the things I want to share between my different devices now, actual share, maybe not as easily as the new Microsoft offering promises to offer. I have been getting familiar with windows 8 and learning about office 2013. I'm looking forward to what it is bringing. I'm not really a tablet user, I'm an e-reader user. I use my 7" e-reader to mostly read, but have now expanded into note taking, email reading, occasional web searches. I don't see myself plunging into a tablet unless I can get over my love for my e-reader. It's android based but I mostly read, so what do I care about anything else. I think another contributor to a slow adoption could be applications (apps) I've been scanning the apps and trying to find replacements for everything I use, I don't see that yet. I know I won't shift prior to being able to find either the apps I'm currently using in the store or a comparable app that I can switch to. Of course that can change with time.

I think the Microsoft Surface

I think the Microsoft Surface Tablet is much more stylish than the iPad, but my opinion may be different than yours. The Surface table is sleek and modern and not too fragile; it strikes the right balance of portability and toughness. The battery of the Surface is very good, it is speculated that it will last for 10 hours. Another reason why I personally like the Microsoft table more than the iPad is because of the affordability in price. It usually ranges from $399 - $499. Because of all of the competition and similar products, the Microsoft Surface price is much lower than the iPad's price. But, just because it is cheaper doesn't mean that users have to compromise on the quality; quite the opposite, Microsoft prides itself in the quality of its products. It is the perfect balance of play and work in a single product.

While fan boys can debate how

While fan boys can debate how well the iPad compares to similar devices, what is not in debate is the mind share Apple’s products have over other products. The average consumer thinks that Apple products are easier to use and are of high quality than competing products. This is why Apple makes a lot of money selling products that are more expensive than similar products. Even if the Microsoft Surface Tablet is a compelling device, Microsoft will still have the task of convince consumer to buy it instead of the iPad.