Surface + OEMs
I've covered this in the past, probably even on this specific instance. And if not, then on Microsoft acquiring Nokia or on Google acquiring Motorola.
Anyway, the point is this... generally it hurts partnerships when a 1st party OS vendor changes from having no stake in hardware to having a stake in hardware. But, there is a right way and a wrong way to do it. And the outcomes, and the perceptions, should thus be very different.
If Microsoft made a wide array of hardware offerings are a wide array of prices, then OEMs would have every right to be upset. It is both true that they could have a technical advantage over other vendors and it is true that they will have a perceived advantage whether it is really there or not. And that means hurting sales across the board.
The way Microsoft handled the Surface lineup is an example of the right way to do it. The way they handled Nokia is an example of the wrong way.
With Surface their is one form factor. It is a tablet and regardless of model, all have the same style. It is intended to be used with the kickstand and a keyboard cover as well as with the stylus. So, right off the bat, there are a number of things about the device that won't appeal to every consumer segment which limits the impact. The other major thing is price. Every variation is overpriced, by which I mean there is room for an OEM to compete against any model on specs, offer it cheaper and still make a profit. The same is as true for the Surface 3 as the Surface Pro 3.
In this particular case... if the OEMs were delivering quality products and competitive prices... no one would own a Surface. And the story hasn't changed much. It has changed, but not largely. Surface now has momentum and a recognizable brand. But from a product positioning perspective, nothing has changed. Be it Surface or Surface Pro, it is still a single form factor and by the specs over priced. There is room to both undercut those prices with a similar offering, or to produce something else, like a laptop, or a hybrid with a different approach or different specs (another "weakness" of the Surface lineup is limited configurations).
Windows Phone is a different story. By purchasing Nokia and continuing in a similar vein, Microsoft was covering a wide array of price points, with a wide array of hardware and a wide array of specs. In phone there is no reason to produce other products as long as this scenario continues. It isn't even profitable for Microsoft despite having 95%+ of the market. And the new strategy is only marginally better. Sure, it sounds like they are drastically reducing their number of device SKUs, but what should worry OEMs there is the fact that both flagship and budget phones are still on the table.
Basically, Microsoft has committed to sticking with both of the only viable markets in smartphones. Flagships phones fare much better than premium tablets and PCs thanks to subsidies. And those who can't or won't buy subsidized often go cheap. Meaning that while they are scaling back in Phone, they aren't leaving any room for competitors. I would have preferred sticking with flagship because that matches well with both the Nokia and Surface DNA and then going the mid market route cost wise which is roughly where the regular Surface comes in.
Thanks to subsidies and the 1st market OEM effect, they would likely slaughter their partners there, but could claim it fits in with their previous hardware efforts. And without a true budget phone there would be room in the largest segment of Windows Phone for their OEMs still.
Or, alternatively, instead of tackling both ends of the spectrum on their own, they could work with OEMs in a Nexus-like fashion to produce one themselves and a signature model in cooperation with a partner. If, unlike the Nexus phones, they also allowed the partner to name the device and do the branding, it would have the possibility of boosting future sales for that partner with successive generations of that phone. Could call those Signature edition phones or the likes so that they could be differentiated in the market.
Probably a ton of other solutions as well. But committing to effectively tackling all of the viable ends of the market is a bit of a dick move.
Complaining about the strategy with Surface tablets on the other hand. That is also a dick move. Microsoft did nothing wrong there. They aren't cannibalizing sales because those devices shouldn't be selling at those prices. Except they are because there is no viable competition.
Don't get me wrong. I love my Surface Pro 3. But I didn't pay for it. And if there were a competing similar product (even one with a few trade offs) at a better price, I'd take it in a heartbeat over the SP3. Some of the new products out of IFA this year appear to be in that vein. As it stands with what is on the market today though... I would have bought the SP3 if I were in the market for a new laptop or tablet.
Anyway, the point is this... generally it hurts partnerships when a 1st party OS vendor changes from having no stake in hardware to having a stake in hardware. But, there is a right way and a wrong way to do it. And the outcomes, and the perceptions, should thus be very different.
If Microsoft made a wide array of hardware offerings are a wide array of prices, then OEMs would have every right to be upset. It is both true that they could have a technical advantage over other vendors and it is true that they will have a perceived advantage whether it is really there or not. And that means hurting sales across the board.
The way Microsoft handled the Surface lineup is an example of the right way to do it. The way they handled Nokia is an example of the wrong way.
With Surface their is one form factor. It is a tablet and regardless of model, all have the same style. It is intended to be used with the kickstand and a keyboard cover as well as with the stylus. So, right off the bat, there are a number of things about the device that won't appeal to every consumer segment which limits the impact. The other major thing is price. Every variation is overpriced, by which I mean there is room for an OEM to compete against any model on specs, offer it cheaper and still make a profit. The same is as true for the Surface 3 as the Surface Pro 3.
In this particular case... if the OEMs were delivering quality products and competitive prices... no one would own a Surface. And the story hasn't changed much. It has changed, but not largely. Surface now has momentum and a recognizable brand. But from a product positioning perspective, nothing has changed. Be it Surface or Surface Pro, it is still a single form factor and by the specs over priced. There is room to both undercut those prices with a similar offering, or to produce something else, like a laptop, or a hybrid with a different approach or different specs (another "weakness" of the Surface lineup is limited configurations).
Windows Phone is a different story. By purchasing Nokia and continuing in a similar vein, Microsoft was covering a wide array of price points, with a wide array of hardware and a wide array of specs. In phone there is no reason to produce other products as long as this scenario continues. It isn't even profitable for Microsoft despite having 95%+ of the market. And the new strategy is only marginally better. Sure, it sounds like they are drastically reducing their number of device SKUs, but what should worry OEMs there is the fact that both flagship and budget phones are still on the table.
Basically, Microsoft has committed to sticking with both of the only viable markets in smartphones. Flagships phones fare much better than premium tablets and PCs thanks to subsidies. And those who can't or won't buy subsidized often go cheap. Meaning that while they are scaling back in Phone, they aren't leaving any room for competitors. I would have preferred sticking with flagship because that matches well with both the Nokia and Surface DNA and then going the mid market route cost wise which is roughly where the regular Surface comes in.
Thanks to subsidies and the 1st market OEM effect, they would likely slaughter their partners there, but could claim it fits in with their previous hardware efforts. And without a true budget phone there would be room in the largest segment of Windows Phone for their OEMs still.
Or, alternatively, instead of tackling both ends of the spectrum on their own, they could work with OEMs in a Nexus-like fashion to produce one themselves and a signature model in cooperation with a partner. If, unlike the Nexus phones, they also allowed the partner to name the device and do the branding, it would have the possibility of boosting future sales for that partner with successive generations of that phone. Could call those Signature edition phones or the likes so that they could be differentiated in the market.
Probably a ton of other solutions as well. But committing to effectively tackling all of the viable ends of the market is a bit of a dick move.
Complaining about the strategy with Surface tablets on the other hand. That is also a dick move. Microsoft did nothing wrong there. They aren't cannibalizing sales because those devices shouldn't be selling at those prices. Except they are because there is no viable competition.
Don't get me wrong. I love my Surface Pro 3. But I didn't pay for it. And if there were a competing similar product (even one with a few trade offs) at a better price, I'd take it in a heartbeat over the SP3. Some of the new products out of IFA this year appear to be in that vein. As it stands with what is on the market today though... I would have bought the SP3 if I were in the market for a new laptop or tablet.
Comments
Post a Comment