On May 20, Microsoft officials announced the latest entry in the family of Surface devices, the Surface Pro 3. This device is a larger form with many updates to the existing pro device, the Surface Pro 2, and comes only eight months since the launch of the Surface Pro 2. So now, Microsoft has launched three generations of Surface in the span of less than two years, being incredible for a company which only recently pivoted to devices and services from software.
The launch of Surface Pro 3 however raised several questions: why isn’t there a Surface 3 (the ARM-based version) to complement the Surface Pro 3? Why also, didn’t the much-rumored Surface Mini launch alongside the Surface Pro 3? What is the goal of these Surface devices, according to Microsoft?
Where is Windows RT?
The first two questions have a common thread, and that is Windows RT. The ARM-based version of Windows has had very little success both from OEM adoption as well as sales perspectives. OEMs have slowly been pulling out of making such devices, and with Nokia’s devices group now a part of Microsoft, Microsoft is the only company that makes Windows RT devices. The operating systems group at Microsoft is undergoing some level of consolidation and transformation, and there is a possibility of some fundamental changes coming to the Windows RT OS as it merges with Windows Phone OS. It would be somewhat silly to offer a Windows RT device that may need some major updates in a few months when the operating system makes potentially big underlying changes. Also, let’s not forget that Nokia also makes a Windows RT device (Lumia 2520) which may now become a contender to be the only Windows RT device Microsoft produces. Hence, the lack of ARM-based Surface at this point in time.
No room for Surface Mini
Surface Mini on the other hand, has a bigger issue. The rumors were that it would be an 8” device and regardless of whether it was going to be an Intel-based device or an ARM-based device, it would really offer no differentiation from the several other 8” Windows devices in the market today. All of the existing devices are Intel-based and as a result, are able to run old Windows desktop programs just fine. Most of these existing devices are also priced at the very low end and as a result, Microsoft would have to start competing on the low end which I am not sure they want to do. There are also rumors that Microsoft CEO Satya Nadella and the new devices chief Stephen Elop decided to remove that device from the announcement for precisely that reason – it offered no differentiation from whatever else is out there in the market. If that is in fact the case, I commend them for doing so since it is not easy to change directions this way and at the last moment.
Who is the Surface for? What does Surface mean for Microsoft?
That brings us to the last question – what is the role of Surface devices? Microsoft executives have constantly said that Surface is not meant to compete with the OEMs but instead be a reference design for OEMs. However, the huge write-off Microsoft took at the end of the past fiscal year related to excess inventory of the original Surface shows that at least someone at Microsoft expected to sell these devices in larger volumes.
The Surface Pro 3 is indeed unlike anything else in the market today, both from a Windows devices perspective as well as the competition’s devices. There are Android tablets of all shapes and sizes that are selling quite well, but they are limited to a maximum of 10” form factor, and while there have been rumors of an “iPad Pro” sporting a larger display than the current iPad, those have been simply rumors. At the launch event, Microsoft made the point that the Surface Pro 3 is aimed squarely at the laptop user (there were a *lot* of MacBook Air comparisons) rather than the tablet user. The viewpoint they provided was that most of the iPad customers also have or buy a laptop, so why not make a device that can do both the tasks well? The Surface Pro 3 specifications are obviously more “computer”-like than “tablet”-like, starting with the processor which is not an Atom variant but in fact, it is a Core processor. At the same time, it is so much lighter than a laptop – even MacBook Air that they compared to at the event – that you could see yourself using it as a tablet every so often.
The Surface Pro 3 pricing is in line with a mid- to high-end laptop, depending on the configuration you choose. You could get the entry-level model with a Core i3 processor and 64GB storage for $799 and the highest-end model with a Core i7 processor and 512GB storage for $1,949. Both the ends of that spectrum are higher than the average for a Windows laptop with similar specifications.
Another example to understand where Microsoft is going with this family of devices is the included (and completely re-done) pen. There is a deep integration built into the pen which enables the customer to launch OneNote even when the screen is locked. The OneNote emphasis shows not just the integration aspects but also the intended, or expected, use of the device.
The screen at an excellent 2160×1440 resolution, the aspect ratio which is a much better 3:2 than 16:9, the higher power processor and the pricing all point to a realization at Microsoft that it is better to compete with the laptop than with the iPad. Think creative professionals like artists, medical professionals, or the “information worker” in corporations. Think students on a budget, who have the funds to buy only one device which needs to be their television, book reader as well as productivity tool. These are the customers Microsoft seems to be aiming at with their Surface Pro devices now.
So Microsoft is clearly going for the laptop user and giving that user the choice of using that device as a tablet. They know that the OEMs are able to compete at the low-end, especially with the recent announcement of making Windows free for 9” and lower screens. Knowing that Apple has consistently outsold Windows in the PC sales for the past several years, it makes sense for Microsoft to address the high margin area so they don’t have to sell extremely large volumes in order to justify the business.
I still expect Microsoft to release the mini tablet, and there are multiple possibilities there too: a productivity mini tablet which would have the upcoming touch version of Office (codename Gemini); a larger phablet-style device like the Lumia 1520 and of course, a gaming-oriented mini tablet with some type of Xbox brand and tie-in. All of those have dependencies that need to be addressed before these products can come to market in order to differentiate themselves from the competition.
There is an empirical truth to Microsoft products: by version 3, they perfect the product. Surface Pro 3 surely looks like a “perfect” product, we will see if the market agrees with Microsoft or not. The Surface business has steadily grown in volume and with Windows 8.1, Microsoft may have enough to get CIOs interested in upgrading to Windows 8.1. If so, there is a large-sized market opportunity that is for Microsoft to dominate, given their past relationships and reputation in the enterprise. If that happens, it may create the virtuous cycle that Microsoft has been able to create in the past with Windows and even now with Office. Many will use these devices in school and workplace and would like to continue that experience at home.
Microsoft certainly seems to demonstrate that it is in the devices market for the long run. Naturally, mastering manufacturing cannot happen overnight. It is now up to the customers to decide if all of that is worth it, by speaking with their wallets.
Are you interested in the Surface Pro 3? Were you disappointed by the absence of the Surface Mini? Sound off in the comments below.
(All images and the video, courtesy Microsoft’s official websites)