Windows 8, Surface Face Cannibalization, Sales Concerns

Microsoft’s Surface team recently hosted a small group of journalists and analysts, spending a whole day demonstrating all the detail-work that went into building the sleek Windows 8 tablets. One of those on the tour, Forrester analyst Sarah Rotman Epps, wrote up an Oct. 16 blog post about the experience; and in her view, Microsoft is walking a tightrope when it comes to profiting from Surface without disrupting the longtime ecosystem that’s powered the Windows franchise to blockbuster sales.

“I did not hear, however, the answers to the most pertinent questions asked by our clients, many of whom are product strategists in Microsoft’s partner ecosystem,” Epps wrote. “Will Surface expand distribution beyond Microsoft’s stores and website? If Microsoft believes it’s making the ‘best hardware for Windows,’ as Sinofsky told us, how does it expect its OEM partners to respond? No comment on both fronts.”

Microsoft, she added, can’t have it both ways: “If Microsoft aggressively expands distribution for Surface, Microsoft will alienate OEMs, who are already scaling back Q4 sales forecasts. But if Microsoft keeps Surface distribution small, the product won’t have much impact.”

The strategy behind Surface is therefore high-risk, because it involves stepping in front of Microsoft’s hardware partners in order to seize market-share and profits: “Cannibals survive, but they don’t make polite dinner conversation.”

Corporate Adoption—Or Lack Thereof

Aside from Surface, there’s the larger battle for Windows 8 adoption. And in that context, a September survey by research firm ITIC of 500 organizations found something potentially worrisome for Microsoft: satisfaction with Windows 7 desktops and laptops is suppressing business interest in upgrading to Windows 8.

“The failure of Windows 7’s predecessor, Vista, and the decision by many organizations to remain on Windows XP, created a huge swell of pent-up demand for Windows 7,” ITIC analyst Laura DiDio wrote in an Oct. 17 research note. Some 61 percent of respondents to the firm’s survey said they had “no compelling business need” for Windows 8 devices, followed by 49 percent “who indicated their Windows 7 desktops are sufficient.”

Another 39 percent of respondents said they were holding off from adopting Windows 8 because they wanted to wait “to ensure compatibility with existing and legacy applications,” while another 22 percent said they were “unhappy with the Windows 8 Touch interface.”

Windows 8’s touch interface could become an issue for corporate workers used to the “traditional” desktop interface of previous Windows editions. “Our concern with Windows 8 client desktop is its dramatic departure from Windows 7/Vista/XP styling,” an unnamed IT manager told the ITIC survey-takers.

The new interface, that manager added, “represents a steep learning curve and we expect negative reactions from clients on having to ‘learn’ something new ‘again.’”

DiDio believes “Microsoft badly miscalculated” on the issue of touch screens with corporate users; for consumers, the target audience for tablets and devices like Surface, she thinks that Apple’s iPad and Android remain significant challenges. The one path to success, she argues, is a “cogent, compelling marketing campaign” backed by a combination of solid support and an “aggressive pricing model.”

Microsoft reportedly plans to pour a billion dollars into Surface advertising alone. Whether that sways the consumer appetite for Windows 8 remains to be seen—but for the corporate market, if this survey’s to be believed, it could be even more of an uphill battle.

 

Image: Microsoft

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