Microsoft's Surface Tablets: Why Apple Should be Worried


This new tablet offering from Microsoft is in a way Zune II, and there are clearly two ways this could go.   Zune on paper was an iPad killer, but in execution was so flawed and under-resourced that it turned out to be a waste of Microsoft money. Now if Microsoft learned its lesson, and there are indications it may have this second attempt to prove that Steve Ballmer’s Zune idea was a good one – only badly executed.   If they under resource this again, however, then the outcome will be the same, and only worse in that Windows itself will then have a very high risk of failure. In effect, it’s becoming the next Blackberry or Palm OS like event, so a lot more is riding on this one.  

Let’s revisit Zune and talk about why this new offering from Microsoft is both similar and different in key areas – and why Apple should be worried. 

Revisiting Zune

Zune was Xbox with a budget. In effect, Zune attempted to do what the Xbox did, but with two unique problems that the Xbox didn’t enjoy; the team lacked hardware experience (they were largely music specialists) and they didn’t get the Xbox budget. Xbox also had nearly unlimited funding, and the Zune was massively under resourced.  

The end result was that when the Zune hit the product, it had four major advantages; three weren’t marketed properly, and the third wasn’t implemented. The first advantage was that it was far more robust than an iPod, and thus should have been much more acceptable to parents who bought most of these initial devices for their kids or for adults that used them for exercise; they also had a built in radio, which could be used to warn of weather changes or to interact with TV’s while at the gym; and they used a flat rate subscription and all-you-can-eat music plan generally favored in other parts of the market (cell phones, cable etc.). None of these were well marketed, and folks instead saw an ugly non-iPod. The final advantage was that the Zune had a huge screen and played video great, but there was no video service released with the product. Needless to say, this feature didn’t’ work.  

The one feature they did market was music sharing, which only worked if both parties had Zune – meaning they were selling a feature that wasn’t even viable until the product was successfully creating a cart and horse problem that virtually assured the offering’s failure.   

Microsoft Surface Tablets

The Surface Tablets also have three to four advantages, and while they are all implemented, they will still need to be marketed. Unlike the initial Zune, these are very attractive products, and beauty is arguably a key requirement for this segment. The three core advantages include; support for Microsoft Office, making them better for creation and email; the unique optical display – which can see what is placed on it; and compliance with management and security tools, which are preferred by business buyers and should make the tablet safer. 

Of these three, the optical display is the big one, as individuals will now be able to do things with a surface tablet that he or she couldn’t do with anything else, and this technology largely owned by Microsoft. You see, the display can actually see what is on it, so you can have physical game pieces for games or place things on the screen and have them recognized – all without actually having to touch the screen to interact with it (potentially less fingerprinting). The screen is very fast and accurate as well, which makes it far better for gaming and artistic creation than a typical tablet touchscreen. 

The fourth advantage, which is only on the Pro version of this product, is full Windows Legacy support.   This means you can actually leave your laptop at home and work fully on this offering.  

One other part which has been glossed over is that the product will have a white glove service attached to it, which will be very similar to what Apple supplies. Folks that are tied to this level of service – which was initially modeled after high end car firms like Lexus – should find an unusually good service experience with this product.

Wrapping Up: Execution

This product, like the Zune, hits a market currently defined by an Apple offering. While Steve Jobs is gone and Apple’s ability to respond to this kind of a threat is reduced, the company is still at the top of its game, and that means this new Microsoft offering will still – much as the Xbox initially did – be swimming upstream. If it is underfunded, then success will be equally elusive, but if Microsoft learned the Zune lesson and properly resources this new offering – which will have an additional disadvantage of being more expensive – then they could substantially cut into iPad sales, particularly for products used for work. They could even potentially take the lead from Apple like they did back in the early 1990s.   

All Steve Ballmer, Microsoft’s CEO, has to do is look at Zune and Windows Phone, compare those efforts to the Xbox, and then repeat that Xbox success. Given the Zune and the Windows Phone failures could have been eliminated in the first place, this is far from easy, and the result will likely define Steve’s time running Microsoft and how he leaves the company.  

One thing is for certain though; this will be a nail biter.    

Edited by Allison Boccamazzo
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President and Principal Analyst, Enderle Group

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