Government // Enterprise Architecture
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4/9/2013
03:29 PM
Michael Endler
Michael Endler
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Windows 8 Tablets: Why Microsoft Must Slash Prices

Microsoft can maintain its market dominance with Windows 8 if it tries something not in its normal playbook.

When consumers evaluate personal electronics purchases, one principle can generally sum up the experience: good, fast, cheap -- pick two. It's a tried and true business formula, a twist on the notion that customers get what they pay for. Microsoft needs to erase that two-out-of-three strategy from its tablet playbook.

With the first wave of Windows 8 tablets, consumer mileage has varied on the "good" and "fast" fronts. "Cheap," though, has rarely been a blip on the radar, least of all for Microsoft's Surface tablets. With both Windows 8.1 (Windows Blue's current nom de jour) and a new spate of devices on the horizon, this needs to change. Redmond needs to rush satisfying tablets to market -- and they can't just be competitively priced. They need to be downright cheap.

Here's the reasoning: The Surface RT, decried though it's been, is actually a pretty nice device. If Microsoft had charged $250 for the tablet and maybe another $50 for the Type Cover, I probably would have bought one at launch, and I suspect I'm not alone. At that price, I'd have been willing to remain patient while Microsoft developed its lackluster app library. Yes, the iPad would have offered more variety and polish, but the Surface RT would still have been a decent media-viewing tablet that, with its watered-down version of Office, would have featured better content-creation tools than anything on iOS. That's enough use to justify a couple hundred dollars.

[ How much does touch matter? Read Windows 8 Doubt: 3 Ways Touch Won't Help. ]

Unfortunately, the Surface RT costs nearly twice as much as I am willing to pay. Ultrabooks and even the Surface Pro -- the most thought-through Windows 8 device to date -- are no better. Newer, faster and more energy-efficient models that run on Intel's next-gen Haswell processor are just around the corner, so why should someone buy an expensive item today when a better, and perhaps less costly, alternative is only a few months away?

Windows 8 and Windows RT have struggled, in other words, due only partly to their UI awkwardness, mediocre apps and various rough edges. Cost has been the other culprit; there's a price beyond which customers simply aren't willing to deal with learning curves, impatience and other frustrations that might be more palatable with cheaper devices. For many consumers, the Windows 8 devices evidently cross that discouraging cost threshold, and the result has stuck Microsoft in a holding pattern of bad press.

Microsoft seemed to assume that Windows 8's dual identities would be an obvious game-changer, and that Windows RT's native Office app would trump the iPad. Had Redmond been correct, the story would be different. People deal with learning curves if the payoff is a premium experience. But it's become clear that most customers have decided Windows 8 asks too much while offering too little.

Asking less of the consumer would not only help Redmond stimulate adoption, but also help address its other lingering problem: apps. Where the user base goes, developers will follow. According to MetroStore Scanner, the Windows Store currently has around 57,000 Metro-style apps, and app submissions, which had been on a downward spiral since launch, but have risen steadily throughout March and April. The progress is nice -- but the libraries of iOS, Android and even BlackBerry 10 put Redmond's catalog to shame.

Microsoft allegedly spent $1.5 billion to promote Windows 8. It's an astronomical sum, enough to fund a typical Hollywood marketing blitz three or four times over. All that money was directed at the consumer market, which, as analysts have recently made clear, has the power to determine whether Microsoft remains a leader or regresses into a role player. Imagine if Microsoft had instead tilted its budgets such that an iPod Touch was more expensive than a Windows RT, and a MacBook Air more costly than a Surface Pro. Imagine if OEMs had been incentivized from the start to produce low-cost models, a process that has, according to unverified reports, only recently unfolded. How many millions of additional users might be in the Live Tiles ecosystem? How many more apps might there be?

But there's not much use at this point in criticizing Microsoft's earlier strategy. Hindsight is 20-20, and Redmond has probably reconsidered a number of previous decisions. The point in bringing up the company's earlier missteps is not to pour salt in the wound, but rather to prescribe appropriate remedies.

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eZrod
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eZrod,
User Rank: Apprentice
4/10/2013 | 1:58:48 PM
re: Windows 8 Tablets: Why Microsoft Must Slash Prices
Great article Michael, and good subject material. Microsoft has never been a "bargain" product source, but the utility of their products was worth the added expense. However, the tablet market is flooded with highly functional and easily affordable Android products that are consumer friendly in function and price. Microsoft playing catch-up is not an option, it's a fiscally strategic reality.

Consumer purchasing rules the marketplace, and reasonable pricing is #1 on the consumer's agenda. Subsequently, because of "unfriendly pricing" Windows RT is barely treading water regardless of the Surface moniker.
Laurianne
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Laurianne,
User Rank: Author
4/10/2013 | 2:46:49 PM
re: Windows 8 Tablets: Why Microsoft Must Slash Prices
$299 has always been a magic price point in the consumer electronic market. Can Microsoft go that low?

Laurianne McLaughlin
InformationWeek
pblanc108
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pblanc108,
User Rank: Apprentice
4/10/2013 | 5:25:40 PM
re: Windows 8 Tablets: Why Microsoft Must Slash Prices
I disagree and I disagree with the comment made by eZrod. the android tablets are fine for the low end consumer willing to accept low build quality in hardware and a less than stellar user experience. Android is not consistant, its quirky, lags, freezes, crashes, etc, etc.
For people looking for a higher end experience in the consumer market, the ipad offers everything.. fast, beautiful build quality, reliable and wonderful ecosystem. It cannot, however, replace a laptop or desktop for busienss use.
Enter the Surface Pro. It is beautifully made from high end materials, it is fast, very fast, powerful and is rock steady reliable. It is the ONLY tablet that can truly replace a laptop.
Some of us do not like carrying around a laptop and love the tablet from factor. The Surface Pro can replace my laptop and my ipad and is a true computer replacement. It is a very sophisticated device with no other product like it. Why shouldn't Micrpsoft be able to charge more for a premier device.
The Pro caters to the high end user who wants a full blown computer in a sleek, beautiful tablet form. For those looking for a cheap, plastic device , offering a low end user experience to sit on the couch and mindlessly surf then there is the google nexus or the samsung.
The Surface Pro is light years ahead of those and intellignet it guys are recommending the Surface Pro to their clients.
PWHITE000
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PWHITE000,
User Rank: Guru
4/10/2013 | 5:46:01 PM
re: Windows 8 Tablets: Why Microsoft Must Slash Prices
Microsoft can learn from Apple.
Apple was known as a high priced computer company. Before the first iPad release, people wondered if it would be around the $1000 mark. Apple surprised us all with a $500 tablet that even the competitors couldn't match for a long time... for the same quality. The result has been one of the most revolutionary products of the past decade.

As a tablet user for almost twenty years, I can verify that Apple's $500 iPad is simply remarkable. I had grown accustomed to most prior quality tablets costing over $1000 and only the junk going for $500 or less.

If Apple can bite the bullet, Microsoft can as well.
gwilson153
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gwilson153,
User Rank: Apprentice
4/10/2013 | 6:02:21 PM
re: Windows 8 Tablets: Why Microsoft Must Slash Prices
I haven't used any of the MS devices, but I do have a Samsung Galaxy tablet. In six months of regular use it has never crashed, it doesn't lag or anything else. It's a great tablet. However, I am not sure I would want it as my sole device yet. I think for a lot of people, especially people like me use to the Windows interface, it would require me to reprogram myself a little. I am a regular user of Google Apps, and while it has come a long way, there are still a few minor limitations.

I am sure the MS device is decent, took them long enough, but they have created a more confusing OS strategy now. I don't see MS's tablets being any more successful than there phones, which is to say not very. Actually, I hope I am at least partially wrong, and that we have a really, really good three horse race in the tablet market.

The most interesting aspect of this is that as MS improves Surface, which they will need to do to be competitive, the more 8 for the desktop/laptop will suffer. If I can buy a $500 device that is as capable as a laptop and more flexible, why do I want a laptop (still a few years away, but hopefully that makes sense). I am sure they realize this and know they have to go forward so they don't loose the entire end user market.
Erik W
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Erik W,
User Rank: Apprentice
4/10/2013 | 6:11:38 PM
re: Windows 8 Tablets: Why Microsoft Must Slash Prices
I've been dealing with Microsoft products since DOS 2.0 and have watched the computer industry grow over time. I've never seen Microsoft as an innovator, they were always more of a late adoptor.

They took the ideas of many small software venders and incorporated into the various products they offered past and present. E-Mail, Web Browsers, Image Viewers, Zip Files, CD Burning, essentially anything that was written on DOS or Windows.

There was a period much like a glorious renaissance in which new software and ideas would come out and a lot of innovation occurred. Almost every company I can think of that came out with something innovative was borrowed from by Microsof and subsequently gone out of business.

Now, today, anyone writing innovative software platforms on Windows can pretty much be labled as doing market research for Microsoft.

The point is, this company has never been innovative. They have always followed the lead of someone else and either just built a better mouse trap or bought the rights to it.
Michael Endler
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Michael Endler,
User Rank: Author
4/10/2013 | 6:16:00 PM
re: Windows 8 Tablets: Why Microsoft Must Slash Prices
I don't disagree that the Surface Pro is a dream come true for certain users. The build quality is strong, it's relatively powerful (though I wonder if it will seem somewhat less so when the Haswell tablets and hybrids hit), and it puts both a real laptop and a real tablet in one portable package. So why shouldn't Microsoft be able to charge more for a premium device? There's an argument to be made that in the case of Surface Pro, maybe a higher price is fine. It hasn't set the world on fire but it's sold much better than the Surface RT. It's also the only Windows 8 device that I've heard companies are currently considering. Still, the Surface Pro enthusiasts are a niche market, and a relatively high price (especially in light of the fact that Surface Pro might not seem so "unique" in a few months) doesn't do much to change that.

Microsoft's potential problem isn't that it's going to crumble into bankruptcy. It has $60 billion in the bank and is going to be around for a long, long time. No, the problem is that Microsoft might not be dominant for much longer. Producing niche products only contributes to Redmond being a mere player, not an industry-leading All Star. One could argue that niche products are fine for now, since Surface Pro is just a start. That's fair. Microsoft has some wiggle room due to the enterprise customer base. But that wiggle room buys only so much time. Analysts currently predict that Microsoft, currently ruler of 90% of the world's PCs, will be battling for second place with Apple OSes by 2017, with Android far ahead. To a company accustomed to being the biggest fish in the pond, this possibility is troubling. We haven't hit the point at which Microsoft has waited too long to produce a real crowd-pleaser-- but it's coming.

But Surface Pro isn't really what the article is about. I think Microsoft should try to produce premium devices that maximize whatever Windows 8 is capable of. Hopefully this will soon include not only elegantly implemented access to traditional software but also unique perceptual computing technology and apps-- not just touch but gesture and voice too. That's a role that, if carved out, could allow Windows 8 to establish its own personality, and to offer pleasing experiences and workflows that iOS and Android can't match. If those devices are excellent, then Microsoft can charge what Apple charges for its MacBook Pros.

But in the meantime, Microsoft needs Windows 8 adoption now. Inexpensive 8-inch tablets will do that.

Michael Endler, InformationWeek
zman58
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zman58,
User Rank: Strategist
4/10/2013 | 6:32:10 PM
re: Windows 8 Tablets: Why Microsoft Must Slash Prices
pblanc,
You are on the right track. I believe they should go even farther and raise the price of the product to double what it currently is. They are not asking enough for them. Doubling the price will create the impression that it is even more valuable than it is at current prices. This market perception of greater value should drive up demand and create far more revenue and greater margin for Microsoft. This would be a win win strategy--they should do it immediately. I will seriously consider buying one once they make this strategic move.
zman58
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zman58,
User Rank: Strategist
4/10/2013 | 6:35:47 PM
re: Windows 8 Tablets: Why Microsoft Must Slash Prices
You make is sound like they purposefully shot the cash cow in pursuit of a turkey in the woods.
nc300
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nc300,
User Rank: Apprentice
4/10/2013 | 7:26:59 PM
re: Windows 8 Tablets: Why Microsoft Must Slash Prices
There are different types of market - Government, Enterprise, Large Business, Medium Business, Small Business, Consumer, and many other in between. Government will buy anything expensive, consumers will buy anything cheap (I am making it simpler).

MS is trying to build a product that will please everyone, for over $1000. They will bundle everything and charge for everything. This strategy will not work in consumer market at all, where a user really only needs a few apps. So price is definitely #1 criteria in this market, and Michael is absolutely right about it.

#2, is Windows tablet really a complete replacement for laptop / desktop? (Maybe for a traveling salesman. But a traveling salesman can also very well use other cheaper tablets.) In fact, this tablet cannot do all the stuff that I am currently doing on my laptop.

So the big question is, who needs this tablet? And what extra can this tablet do that a cheaper laptop and/or tablet cannot do?

In an attempt to please all markets, MS has satisfied none.
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