Beyond the Surface

By Lori Castle, Editor in Chief — May 20, 2014

The Windows 8 Surface Pro became available in February 2013; the Pro 2 in September  2013, and the Windows 8.1 Surface Pro 3 was unveiled today by Corporate VP of Surface Computing, Panos Panay, as the definitive “laptop replacement.”

In the last Q3 earnings release, the company reported over  50% growth in Surface revenue to $493 million, which sounds pretty good until the cost associated with making the device is seen. According to the last filed 10Q: “Surface cost of revenue was $539 million for the three months ended March 31, 2014.”

The device was meant to replace the desktop/laptop from the beginning with its exclusive Office functionality, but failed to do so. This latest gen device, however, seems to be only a shadow of the original. At that time, Leslie Fiering, vice president in the Mobile and Client Computing Team at Gartner, said in a phone interview with Mobile Enterprise that the Surface Pro appealed to a very strong requirement in the enterprise that a device works as a tablet. The problem, she noted, was that the hybrid involved compromises.

"I don’t want to take away anything from the remarkable performance," she stressed, explaining that the Surface Pro has good engineering and is definitely speedy, with power for apps, and a snap-on keyboard. However, the 10.6 inch tablet is a little bigger and bulkier than current tablets. And the notebook screen is a little small for large spreadsheets or content creation,” Fiering said.

Well, it’s even bigger now at 12 inches, but lighter at 800g and thinner at .36 inches.

As a category, Fiering had said it was too early to distribute the hybrid as either mainstream notebook or tablet replacements. Since then, a lot has changed in the market, and more so at Microsoft.
 
For the first time, analysts predict a slowing in tablet growth, but actually see the changing demand as an opportunity for Microsoft, which is trying to meet it (and go beyond) with the new Surface Pro 3. 

New CEO
Also different, the most popular tablet, iPad, back then did not have Office. Now it does. According to Senior Practice Director, Jeff Orr, ABI Research, that can still work in Microsoft’s favor. “Overall, it’s good to have multiple solutions (both hardware and software) available from Microsoft. It needs the broader solution set to address the shift towards more mobile computing use cases.”

The biggest change at Microsoft is, of course, new CEO Satya Nadella, and the new strategy and focus he has brought with him—cloud and mobile first. He introduced the Surface event today and emphasized that the device is not just a piece of hardware, but reflective of the new Microsoft itself. 

He said, “The question that needs to be asked and answered, why hardware? We are not interested in building refrigerators or toasters. We are not building hardware for hardware sake. We want to build an experience that brings together all of our capabilities.”

In a nod to both partners and, in a way, competition, Nadella said, “We don't want to compete with our OEMs; our goal is to create new categories and spark new demand for our entire ecosystem.”  
 
A New Surface
That brings us to a very proud Panay, who unveiled and effused about the Surface Pro 3, but first put the device in context of where users and the market are today. He pointed out that predictions of the tablet killing the laptop began about three years ago. “We designed products knowing this was coming, but look around now,” he noted as the camera panned to a room full of attendees who mainly had MacBook Airs’ on their laps.

“Where are the tablets? What happened?” he asked.

In fact, 96% of people who have iPads, are also carrying laptops. There's a reason for that, according to Pany. “Tablets are designed for watching and reading; they are made for browsing and snacking on apps. But laptops are designed to help you get stuff done.”

“Taking Away the Conflict”
When people go to buy a new device, they may walk into a store seeking guidance, and no matter where you go, said Pany, you will be asked the same thing. “What is it that you want to do?” This leaves the user with a dilemma; in conflict as he put it.

The Surface Pro 3 aims to take away the conflict. “We are removing the barriers,” said Panay.
 
This is not so simply done, he acknowledged. Everything has to be in one package—performance, battery life, looks, feel and functionality. Pany went on to review all that went into putting these things together from an engineering standpoint, and he demonstrated many of the features of the new device—highlighting cool capabilities for handwriting (yes, handwriting), Photoshopping and doing the New York Times crossword puzzle.  
 
For full drama, he put the Surface on a scale—one that was symbolic of the scales of justice. On the other side he plopped the MacBook Air and a tablet, wherein the scale promptly (and unfairly to the user according to Pany) tipped.
 
But it’s not just the specs which make the functionality that may make the device a killer finally, it’s the accessories that are critical for enabling the Surface Pro 3 to provide a true laptop experience.

And Orr said, “In my analysis of tablets since 2009 (pre-iPad), all of what was shown today has been done before; perhaps not all at once in a single device. For example, Surface has been challenged because Microsoft promoted the need for the touch keyboard as a highly recommended accessory. For productivity applications, it’s a fundamental requirement. If Microsoft is serious about its audience and messaging, it needs to make the keyboard and mouse standard equipment (on at least 1 SKU).”

Still, Panay passionately went over many granular details, saying, “Subtle innovation can have the largest impact.”

Enterprise Expectation
Much of what was covered in the event today spoke to business. Orr commented, “We heard a lot today about the specifications of the Surface Pro 3 from Microsoft and how it is designed to remove some of the constraints typically associated with the decision to purchase a laptop or a tablet. The messages seem to be targeted more at the CIO/IT roles than at consumers that are looking for a converged computing solution that they may wish to bring into the office.”
 
From a mobile perspective, “The opportunity for Microsoft to become relevant in the enterprise discussion really starts with Surface Pro 3,” according to Orr. However, he also noted that there was no mention of the BYOD experience, and how that might be expected with this device or how enterprise content will remain secure.  

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