News

Channel Gets a Crack at Selling Microsoft Surface

• By Scott Bekker
• July 01, 2013

A small group of high-volume U.S. resellers are authorized to sell the Microsoft Surface devices under a new program announced Monday.

Under the two-tier Microsoft Devices Program (MDP), three distributors will supply 10 resellers who can then sell the productivity-focused tablets to commercial, public sector and education customers. Previously, Microsoft sold the Surface only through its online Microsoft Store, its retail stores and through some retail chains, such as Best Buy.

The distributors are Ingram Micro Inc., Synnex Corp. and Tech Data Corp. The 10 authorized partners are CDW, CompuCom Systems, En Pointe Technologies, Insight Enterprises Inc., PC Connection Inc., PCM Inc., Softchoice, Softmart, SHI International Corp. and Zones Inc.

While Microsoft has sold hardware before, the Surface marked the company's first self-built PC. It represented a direct challenge to Redmond's traditional OEM channel partners, who were also making Windows 8- and Windows RT-based PCs. At the same time, Microsoft at first kept out another part of the channel -- the distributors and resellers who sell PCs along with Windows licenses to corporate customers.

"While we currently sell directly to commercial customers, we have heard the feedback that customers want to be able to buy the Surface through [their usual partners]," said Jenni Flinders, vice president of the Microsoft U.S. Partner Group, on a conference call with media and analysts on Monday.

While the initial group is made up of Microsoft's Large Account Resellers (LARs), Flinders emphasized that this reseller roster was only on phase one. However, her wording also suggests that Microsoft will continue to prioritize partners with the scale to reach a lot of customers. "I would say what you can expect is a broadening to other resellers, as well," Flinders said. "You will see us bring new strategic partners that meet the criteria for selling these devices."

Microsoft is certain to face a lot of pressure from smaller partners to be able to resell the devices, as well.

As vice president of product marketing, software and cloud services at Tech Data, Stacy Nethercoat is in contact with many of the 4,000 solution providers who work with the Clearwater, Fla.-based distributor. "A lot of partners are expressing great interest in becoming authorized [to sell Surface]," Nethercoat said.

Many of the partners brought into the initial phase of the MDP have themselves been asking Microsoft for the ability to sell the Surface since Microsoft first launched the Surface RT in October 2012.

"Surface was the No. 1 failed search on our Web site of all the products that customers had come and looked for and couldn't find," said Ed McNamara, director of communications and marketing for SHI, in an interview. "We definitely were extremely interested in being able to offer it."

Bob Bogle, senior vice president of sales at En Pointe, said his company has also been very eager to participate. "I think the channel in general has been chomping at the bit," Bogle said. While he said he doesn't have a granular sense of demand, he's been surprised by how many clients have brought up the Surface with his field sales force. "I can tell you it's a point of conversation everywhere."

Partners generally expect more demand to come on the Surface Pro side, than the Surface RT side. Microsoft in February expanded the line to include Surface Pro, which is similar in form factor to the RT version but works more like a full-fledged PC both in its ability to run legacy Windows applications and in its much shorter battery life.

"Given that we're a B2B channel, my gut tells me that it's on the Pro side," Nethercoat said.

"If I sit back and listen to clients, what's attractive about the device is the support for enterprise applications and the security. I think the Pro tailors to that more," Bogle said, although he added that some clients looking for solutions that involved mostly viewing information would be interested in the RT.

To date, the Microsoft Surface hasn't had a huge impact on the tablet market. Following Microsoft practice since the Surface launch, Flinders declined to specify Surface sales on Monday. Analysts at IDC reported that Surface sales accounted for 900,000 of the 49.2 million tablets sold in the first quarter of 2013.

Not all observers are optimistic that a channel push will accelerate demand for Surface. Michael Cherry, an analyst with Directions on Microsoft, said serious obstacles include the overall lack of apps in critical vertical markets, the short battery life of the Surface Pro and the generally non-corporate-friendliness of the Surface RT, illustrated by its Office 2013 Home & Student license, its lack of support for corporate re-imaging and its inability to be joined to a domain.

"It will be easier for corporations to buy these devices in bulk. There's no question that will help corporations," Cherry said. "The bottom line for me is -- OK, they put the Surface Pro into the channel; that's just another machine. They put the Surface RT in the channel; if I were a big corporation, I'm not sure why I would buy RT devices."

Bogle generally agreed that the Surface Pro was similar to a PC, but he puts the Pro in "a very small class" of very portable, fully functional PCs. "I would say the Surface Pro is in line with the Lenovo Helix and the Lenovo Yoga," he said.

He also added the caveat that for licensing, some of the challenges involved with corporate use of the Surface RT are overcome by the customers' existing Enterprise Agreements (EAs).

"Microsoft has done a good job of penetrating the market with EAs. There are some areas where [customers] are not necessarily penalized for having an extra device. I'm not as concerned in the enterprise space," he said. "There may be a hidden cost for a lower mid-market customer [with fewer than 250 employees] where there's not an EA in play."

In a blog post announcing Surface in the channel, Cyril Belikoff, director of Surface marketing, detailed some of the services the MDP partners will deliver. "In addition to offering Microsoft's extended warranty and accidental damage, resellers bring a variety of additional value-added services to the Surface family, such as asset tagging, custom imaging, kitting, onsite service and support, device recycling and data protection," Belikoff wrote.