Is Microsoft's Surface the saviour of the channel? - PC Retail

Is Microsoft's Surface the saviour of the channel?

Every major IT vendor is looking to the future and, with the launch of its new Surface tablet, Microsoft is no different.
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Microsoft recently caused quite a stir in the industry when it unveiled its Surface tablet. Much of the media rushed to make comparisons with Apple’s dominant device, the iPad, while others speculated on a possible rivalry between Microsoft and its various partners.

In fact, according to Microsoft’s director of partner strategy and programmes, Janet Gibbons, the device is intended to be a showcase of the very best that Windows 8 can offer.

“We announced it just to put the design point out there and to show what’s possible,” Gibbons told PCR. “It really opens up the opportunity for people to think differently about PCs and what PCs have to look like.”

GfK’s business group director, Carl West notes that this policy of using a single showcase device to excite the market is one that could pay off.

“As a proof of concept I think it’s a good move,” said West. “I think it’s an opportunity for other vendors to see and test the reaction of the markets based on what Microsoft has done.”

Meanwhile, Ronan de Renesse, principal analyst at Analysys Mason’s research division, dismisses the idea that Microsoft would be creating rivalries with its other vendor partners.

“It’s about showcasing Windows 8 rather than really being competitive in the tablet market against its partners. I think that when you look at other PC markets, if Microsoft lost those partners in other markets there could be a detrimental impact for it. Even though it’s quite comfortably settled in those markets, there’s still some risk.”

Regardless of whether or not it will create rivalries, the fact is that the tablet market is now too big to ignore. Figures from Analysys Mason predict that the market for tablet and e-reader devices will grow to see 140m units sold in 2017 compared to 33.5 million this year.

This trend is reflected in GfK’s sales figures, which track volume going through indirect channels.

“Just looking at the year to date in volume terms, this market has doubled,” explains West. “We only look at retail sales, which account for around 55 per cent of the tablet market and around 85 per cent of the notebook market, but we still see that tablets outstrip notebooks in sales volume. It is a major form factor. It’s already overtaken both notebooks and netbooks combined. Mobility is tablets.”

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These figures are corroborated by Entatech’s commercial group vice president Jon Atherton, who has recorded strong growth in the tablet category: “There’s been a massive growth spurt over the last couple of years, obviously mainly due to the iPad. I think the Microsoft Surface product will be unique and a real contender against the iPad.”

With all this predicted growth, de Renesse feels that there’s room for Microsoft to make its mark: “Apple’s got around 90 per cent market share, it’s really in the lead here so there’s definitely room for a second player in the market. I think that with the Surface, Microsoft is showing that it’s really after a share of that market and I think it has good chances.

“If it delivers on the promises, if it delivers on the OS and the price point is correct then they will sell.”

So what is it that makes the Surface so important? Well, the fact is that the tablet category is no longer complementary to traditional PC usage models – it is supplanting them. Businesses have been aware of the process that has been termed ‘consumerisation’ and ‘Bring Your Own Device (BYOD)’ for some time, and it is increasingly a concept that ties in with the Connected Home.

“I don’t think the desktop is dead yet, but there’s definitely a bit of cannibalisation coming from tablets. I think the tablet primarily is a home companion device, so the use of the tablet is either in the home or the office,” observes de Renesse. “It’s very nomadic, so the connectivity aspect in terms of being connected all the time like a mobile phone is not as important.”

This idea of having a device that essentially moves between two networks supports consumer models of the connected home – a concept that has become increasingly popular.

“The connected home is reality,” states West. “It’s very much a reality at this stage. Networking infrastructure in the home is growing, consumption devices like tablets are growing and the whole concept of the connected home is a viable industry now. If you go in to any retailer at the moment, you’ll see an increase in these products.”

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So it is with these developments in mind that we must view Microsoft’s recent changes in strategy. It has shifted its Office software to a subscription-based pricing model, brought out a new tablet and is moving towards selling software via an App store – all these are paradigm changes for the software giant.

“Steve Ballmer has stated that this is a going to be a new era for Microsoft and for our partners,” said Gibbons.

“The reason we say that is because, if you’ll remember, Windows 95 really pulled home computing into the mainstream and we feel that 2012 is going to be another year like that.”

It has reason to believe so. By the end of this year we’ll have seen the release of Windows 8, Office 2013, Windows Phone 8, Halo 4, and the launch of a new App store, as well as the acquisitions of Skype and Yammer and a strong commitment to the cloud. But where does this leave independents?

“The way I see it is there’s no mistaking that this mobile platform of computing is having a direct effect on accessories,” notes West.

“Sales of headphones, both in-ear and headsets, have grown dramatically this year and accessories that go with them – cases and so on. Independent retailers have the opportunity to really embrace this and add their level of service and knowledge of the products.

“There’s enough going on there to allow these guys to really specialise in the connected home – almost be a connected home consultant as it were. It’s an opportunity for independent retailers to really specialise.”

Among distributors, there seems to be a clear feeling that Microsoft is on the side of the channel, as Atherton notes: “With Apple, it has its distribution partners but it also sells direct through its Apple Stores.

“From a UK perspective, Microsoft doesn’t have stores. It has some in the US but in the UK it’s not its route to market, so hopefully the channel will win with the Surface rather than the iPad.

“Microsoft’s route to market is through the trade, but Apple tends to go direct so this is the kind of thing that the channel needs.”

There seems to be a watershed moment approaching in the IT market. New usage models are emerging – models that offer a number of different approaches to market for vendors, distributors and retailers alike. Although it is still at the early-adopter stage, the fact is that change is in the air. Interesting times.

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