Microsoft's Emulation of Apple Strategy Responsible For Downfall

Microsoft last week broadened the reach of its Surface with Windows RT product by expanding its retail distribution. Yet despite this, the Apple-focused consumer strategy is not working as well as expected for Surface, proving to be a burden on Windows 8.

With the news that Microsoft would start allowing other retailers (such as Amazon.com and Staples) to carry the Surface with Windows RT, many partners predicted that there would be little impact as a result of this. Partners stated that the real problem may lie in the fact that Microsoft has not been able to capitalize on its strong position in the business market by utilizing its vast partner network.

The founder and CEO (Arlin Sorenson) of Harlan, Iowa-based HTG Peer Groups, a 350-member peer-to-peer solution provider organization said: “I think this additional distribution will have minimal impact.” Over the last year, Sorenson's company has been working with Apple on iPad consultation certificates for its peer-to-peer members. He added: “I haven't had anybody tell me they prefer Surface over the iPad.”

As Microsoft extends the reach of its Surface with Windows RT, it insists that it had always intended to expand its retail presence following the first year of the Surface release. However, it was only seven days after Boston-based Detwiler Fenton & Co. reported that Microsoft was to ship between 500,000 and 600,000 Surface tablets in the current quarter that the additional distribution was announced.

This forecast is notably lower than its previously estimated 1 million to 2 million units. An analyst at Tech-Thoughts, Sameer Singh, stated contrastingly that Apple could ship anywhere from 24 million to 26 million iPads in the current quarter. Additionally, no plans have been announced by Microsoft on whether or not other solution providers will be used to sell its Surface tablet.

Commenting on how the distribution shift will affect partners, Microsoft released a statement: “Our plan has always been to expand the distribution channel for Surface after the initial launch. Based on the consumer response as well as interest from other retailers, it is a natural time to provide consumers with additional locations to get their Surface with Windows RT. Yesterday's announcement will impact production and distribution of Surface with Windows RT specifically. With regards to Surface with Windows 8 Pro or additional distribution channels, we have nothing further to share at this time.”

Sorenson stated that Microsoft made errors in copying Apple's product, sales and marketing strategy; failing to communicate and work with partners has meant that Windows 8 channel efforts have been set back six months. Sorenson said that Microsoft's move was different to all previous releases of Windows: “As a result we are still learning it and not really selling it as we would have been with other releases. They made a mistake in the way they approached the market, not allowing partners access with early testing. That has slowed the whole rollout process. We have been living in kind of a [Windows 8] black hole for the last year.”

Sorenson added: “I have never seen this from Microsoft. It is totally different than from the way they brought products to the market in the past. It was a calculated decision. I understand the logic in it, but they kind of overdid it. They are not Apple. They tried to be Apple, and it was the wrong approach in my opinion.” Other partners feel the same way, saying that Microsoft has focused too heavily on emulating Apple management and strategy.

The CEO (Bob Nitiro) of Orangevale, California-based Ranvest Associates, a small business-focused Microsoft partner, said: “Microsoft is looking for greater distribution for Surface [because] they want additional sales. But [...] they botched the entire Windows 8 launch, including Surface. They are looking at ways to emulate the Apple ecosystem, and they have in place new elements to do that with a cross-platform effort from the phone to tablet to desktop to server with Windows 8. But, then Microsoft says [they] are going to distribute Surface through retail stores just like Apple. The SMB community is asking: 'Are they truly becoming just like Apple?'”

The CEO of Microsoft, Steve Ballmer, concurred that Microsoft does not wish to lose ground in its fight against Apple. Earlier this year he stated: “We have our advantages in productivity. We have our advantages in terms of enterprise management, manageability. We have got our advantages in terms of when you plug into server infrastructure in the enterprise. But we are not going to let any piece of this [go uncontested to Apple]. Not the consumer cloud. Not hardware software innovation. We are not leaving any of that to Apple by itself. Not going to happen.”

New Signature's CEO, Chris Hertz, commented that by pushing Surface through the retail channel, it is likely that Microsoft is seeking to move towards the IT channel as well. He said: “Microsoft is not trying to cut out the channel. I believe the Pro Surface product will go through the channel. Microsoft has always said they are all about the channel. Conspiracy theorists are wrong about Microsoft going direct and cutting out the channel.” Hertz also believes that Surface Pro will be successful: “I was just in three meetings today, and customers were really excited about Surface.”

Another Microsoft enterprise partner, who did not want to be identified, said that sales of Surface RT are being hindered as a result of Microsoft's pricing and distribution. He added: “Giving RT to Staples doesn't help us on the business side.” The executive also stated that if partners were able to sell Surface RT, more Microsoft software solution engagements around software offerings like SharePoint and Lync would have been possible, leading to high-margin solution sales for the company.

Microsoft has not capitalized on iPad's shortcoming – it is “an entertainment device” which “doesn't improve productivity like Microsoft does with Office. If Microsoft wanted Surface to go into the business market, they made a big mistake, said the CEO of a large enterprise Microsoft partner who did not want to be identified. This mistake could have been avoided if Microsoft had worked more closely with solution providers in the business market. The CEO added: “Microsoft is not really a channel company,” signaling that by placing attention on the consumer market, the company has shown that it does not understand the channel.

Hertz of New Signature believes that Microsoft will be able to make an effective turnaround: “Microsoft has repeatedly stated the channel is important to them [and] has always been good to the channel. They would be gutting their business if they went direct and abandoned the channel. They have one of the most effective channel organizations in the history of business. That is one of the big reasons they have maintained market share. People can complain, but nothing Microsoft has done is disruptive to the channel. The last several years Microsoft has been relying more heavily on the channel, and it has been good for our business.” (CY) Link