Microsoft Channel Continues to Wait for Surface

Microsoft will launch at least one new Surface tablet next week and perhaps usher in a new generation of its homegrown tablets. While anticipation is building for the new device, nothing is being said about expanding Surface to the general channel.

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Microsoft surface resellerAnticipation is building around the prospects that Microsoft Corp. will unveil more than just a Surface Mini in New York next week and, instead, surprise everyone with a larger tablet, presumably Surface 3. Regardless, the chance of a channel announcement coming with the new product is slim.

The tempo of news reports and rumors about a Surface 3 launch is picking up pace. The PC universe believes Microsoft will launch a larger Surface with either an Intel Haswell or Broadwell processor. In either case, a larger unit that looks more like a Samsung Pro Note 12.2 with a keyboard puts Microsoft in the ranks of traditional PC vendors.

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Microsoft is making no official comments about the launch. In published reports inquiring about Surface 3, Microsoft has said posts in its support and development forums that reference the next generation device are merely typos that should refer to the current Surface 2. Even if a real “Surface 3” isn’t unveiled, the expansion of the line to a smaller, more portable version is equally significant.

Thus far, Microsoft’s release cycle for Surface tablets has been chaotic. The Surface RT debuted in October 2012, but the Pro version didn’t come out until February 2013. Second generations of both devices came out in October 2013. The inconsistency is bolstering speculation about the bigger product news.

While Microsoft is enjoying -- and likely feeding -- the hype, it’s dead quiet about the future of Surface in the channel. For nearly a year, Microsoft has restricted indirect sales to a handful of volume-focused DMRs, such as CDW and TigerDirect, as well as a few retailers, such as Best Buy and Staples. The primarily route to market remains direct, and Microsoft is quite aggressive in going after enterprise accounts, such as the 20,000 unit deal to Delta Airlines.

The rest of the channel, which has been implored by Microsoft to adopt Surface for their own use, has been locked out of the Surface opportunity. Rank and file resellers around the world have criticized Microsoft for not releasing Surface for general channel availability.

Channelnomics asked Microsoft for an update on Surface channel plans, but received no response.

When Channelnomics last spoke with Microsoft about its channel plans for Surface last February, channel chief Phil Sorgen said sales channels were restricted so Microsoft could learn about hardware sales, distribution and support. He reiterated what has become Microsoft’s standard response to such questions, “We’ll release Surface to the channel when we’re ready.”

After years of sluggish performance and eroding market share in core products such as Windows, Microsoft is beginning to show signs of rebounding. Part of the momentum is coming from optimism infused by new CEO Satya Nadella, who is roundly seen as the “anti-Steve Ballmer.” A larger part of the revival is coming from surging cloud sales that have catapulted Microsoft to a number two position behind Amazon Web Services. And, Microsoft is getting a boost from the release of Office for iPad, which was downloaded 27 million times in the first month.

Yet, even after Surface has been on the market for 19 months, Microsoft is no clearer about when or how it will introduce it to partners for broader sales.

Many partners and market observers say Microsoft needs to broaden its Surface sales channels to pick up volume. Microsoft doesn’t release Surface sales numbers, but analyst say Microsoft saw a 50 percent drop off in sales volume from Q4 2013 to Q1 2014.

Part of the reason why Microsoft may be holding back Surface is in deference to OEM partners, such as Hewlett-Packard, Lenovo and Dell. Microsoft is unapologetic when it points resellers to OEMs to sell their Windows-based tablets. However, those same OEMs are expanding the number of Android-based devices and launching more PCs running Google’s Chrome operating system. The lack of allegiance may prompt Microsoft to expand its Surface and hardware efforts, and eventually embrace the broader channel.

Surface is selling well, but it’s not a bestseller by any means. Solution providers like Surface and its market opportunities, and say they can expand Microsoft sales if only given the chance. And, even with the launch of Surface Mini or Surface 3, it appears the channel wait will go on.


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