Why the Surface Pro 3 is a Problem for Microsoft’s Partners

I watched the launch of Microsoft’s new Surface Pro 3 this week with great interest. Microsoft’s decision to enter the hardware business has been a double edged sword for them. On the one hand, they were able to use the original Surface RT and the Intel versions to help jumpstart the Windows tablet market and pretty much forced their partners to join them. But it also angered those same partners because Microsoft is now competing directly with them.

That is why when Microsoft CEO Satya Nadella opened the launch event by saying Microsoft does not want to compete with their partners, I had to do a double take.

Creating a premium product like the Surface Pro 3 and selling it in Microsoft stores and other retail outlets right next to similar convertibles and tablets from their partners seems like competing directly with them in my book. Microsoft’s partners have pretty much accepted the fact Microsoft is not getting out of the tablet hardware business, they are not really thrilled about it either. As I talk to Microsoft’s partners, I continue to hear complaints that this frustrates them and in some case actually angers them. But they are trying to be good soldiers and since Microsoft is still critical to their success at least in the enterprise, they just trudge along and hope they can be successful in their own right given the fact Microsoft is now going after their customers with this new tablet.

However, I suspect something that was emphasized a lot during the launch presentation is giving their partners even more concern about the Surface Pro 3. More than once it was said the Surface Pro 3 is designed to replace a laptop. If that is true and it is successful as such, this is very bad news to those who make laptops. Now, I realize this statement is pure marketing hype and the reality of the Surface Pro 3 replacing all the demand for laptops is absurd. But the message overall that the Surface Pro 3 could replace laptops is going to resonate with many in the enterprise. If Microsoft pushes this message too hard even consumers may start to think this new form factor is a laptop instead of what it really is — a tablet with a keyboard.

I have used an iPad with a keyboard for years and have multiple Surface Pro-like tablet hybrids. From my experience, I have found they cannot replace a laptop. Even with a 12 inch screen, the overall form factor is OK for some levels of productivity but not for serious heavy lifting. While Microsoft does provide a docking system to connect to a larger display, I am still not convinced this type of hybrid should be positioned as an actual laptop replacement.

Like of a lot of people in the industry, I am struggling with the actual role a tablet/hybrid will play in the long term. Don’t get me wrong: tablets are here to stay. And for some people this may be the only computer they need. When Steve Jobs introduced the original iPad he made a strong point about this product being focused on consumption and said little about its role in productivity. But once the iPad shipped, businesses like SAP, Salesforce.com and dozens of others adopted it for productivity purposes and by adding keyboards tried to make them like laptops. Stand-alone tablets excel at content consumption but even with keyboards, most hybrids have only received lukewarm reception especially in the Windows world. Part of the reason is most hybrid designed tablets have been much heavier and bulkier than the thinner and lighter iPads and similar tablets.

But the new Surface Pro 3, even at 12″, is the same weight as the original Surface tablets and even thinner. It has some new design features that actually makes it work in your lap, has Intel Core i3, i5 and i7 performance options and utilizes the pen better than any I have seen on these types of tablets. This product actually could be the first hybrid that actually can be considered a laptop replacement. The one downside of the Surface Pro 3 is its price. Even with the core i3 starting at $799 and adding the good keyboard and a docking system, it will go for about $1000.

The big question for me is how will the PC vendors respond to this? Clearly they can’t let Microsoft go after their customers without creating competing products of their own. But, do they really want to create a hybrid that actually competes with their top line laptops, which are extremely profitable for them now? Also, supporting tablets and hybrids are different than supporting mainstream laptops. I have not gotten my hands on the Surface Pro 3 yet to test it as a laptop replacement but I have spoken with some who have and they confirm its design and performance clearly puts it in the laptop category of portable computers.

This area will be important to watch over the next year. If Microsoft is even marginally successful in getting this viewed and reviewed as a true laptop replacement it would have eventual ramifications for all laptop vendors and eventually the PC market in general.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

13 thoughts on “Why the Surface Pro 3 is a Problem for Microsoft’s Partners”

  1. Microsoft seems to be divided into two parts: The Traditional one and the Modern One.
    They themselves are in conflict as to how to react. I mean with Windows 8 and Windows Phone 8, they had an opportunity to redo themselves and become a complete experience provider like Apple, but they seem to lose that opportunity.
    Why did they purchase Nokia for billions of dollars when they wanted to give away the Software to other OEMS for FREE?
    I mean, look at the kind of hardware HP and Dell are making? Absolute junk.
    With Surface and Lumia devices, Microsoft can easily take over 100% of Tablet and Mobile Market, But NO, even though Nokia holds 80% of the market, they want the share to go down by providing Free OS to OEMs?

    This is an absolute disaster. By providing a complete experience, Microsoft can make billions of the hardware coz the software market is losing its potential ( Apple is providing free Mac OS and iOS, Google is providing free Android OS and Chrome OS) The only money maker is Hardware, which Microsoft is allowing the OEMs to take.

    Microsoft to take monopoly of Windows RT and Windows Phone if they want to complete with Apple. Because HP and Dell and other OEMs don’t care about they experience but as to were to cut corners and maximize there profits.

    1. Your comment just made me think the unthinkable:

      What if MS stopped licensing Windows (7, 8, Server 2012 etc) to OEMs ?

      Given the inability of many organisations to function without Windows, they could charge a very large (monopoly based) premium for new Windows machines.

      This would be catastrophic for the long term success of MS I would have thought, but think how much money they could milk from their Enterprise monopoly ?

      1. Exactly my point, granted Linux and ChromeOS market share would increase considerably.
        And even if they ALLOW Windows 8 to other OEMs, they should STOP licensing Windows 8 RT and Windows Phone 8.1 to others because they earn nothing from it, Infact they earn more from OEMs using Google Android (Apparently Companies like HTC and Huawie pay Microsoft some amount for each Google Android based phone they sell to avoid legal ramification of violating Microsoft’s Patents.)

        Plus, Keeping monopoly of Windows Phone 8 and Windows 8 RT would force OEMs to use Google Android OS, thus saturating the Android Market and pushing many OEMs to bankruptcy in long run.

  2. From the laptop perspective, while SP3 is improved, I still don’t see it being as good a laptop, as an actual dedicated laptop. The keyboard/kickstand combo still is more fiddly/fussy, than a simple clam-shell hinge.

    To some extent. I think this is unfix-able, while Surface sticks with their unhinged keyboard design.

    It isn’t a step forward in laptop design. But Microsofts marketing money may convince some that it is, but I think it won’t be an easy sell.

    1. Your basically right, but I do prefer my Surface over any tablet. The pen is a big deal for me, and they are faster, more compatible, more versatile, etc.

  3. SP3 might work well for someone who is mostly moving from place to place – Equipment vendors, sales personnel, marketing personnel, QA people etc in the enterprise. As far consumers, it may not matter. They have cheaper alternatives in kindle, Android tablets and the iPad. If people are both consumers and in the enterprise, then SP3 might be something they can think about. But for such people weight difference between an ultrabook and the SP3 is not a serious concern. A laptop is relatively sturdier and rugged. We still do not know how stable and reliable the SP3 is in the long run. Mechanical failures, keyboard life etc will take time to reveal themselves. And SP3 does not come with its keyboard included. You have to buy it separately. Windows 8.1 can be used more robustly on a laptop with a touch screen. So SP3 might be a novelty for those who might want to give it a try. But enterprise invests its money with long term durability in mind, something the Surface Pro is yet to establish.

    1. Interesting comment.

      In my experience, all the people that I know that work in enterprise either can’t or won’t use their work PC for personal use. So there won’t be an overlap, unless they are the boss.

      Most enterprises will not spend $830 on the SP3 for their employees. Many larger enterprises just upgraded XP to Windows 7 in 2012 or early 2013, so won’t upgrade the OS for another few years. Stability is more important than features.

      I can see many great uses for the SP3, in specific situations. Many of these situations already have good custom tablet apps (and sever backend) for Android and iOS.

      I applaud MS for their efforts on the SP3, it has a lot of potential. I think it is going to to take a few years when we have SP5 and Windows 9 until there is any adoption

  4. interesting perspective. maybe the real plan is to force the microsoft ecosystem to innovate and differentiate in ways microsoft can’t even think…. or jump on the android ship, but that’s a slippery zero margin business with no corporate legacy hinges to hang on to , though that is getting less and less relevant year after year .

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