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

on May 23, 2014

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.