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.

To its credit, Microsoft already appears headed in the right direction. It has allegedly offered discounted Windows 8 licenses and bundled Office software to OEMs that are making smaller tablets. The iPad Mini has demonstrated that consumers like the 7-inch form factor, and Redmond desperately needs a presence in that market segment. Smaller components should drive costs down, so with Microsoft's OEM enticements speeding new models onto store shelves, consumers might soon have what the Surface RT should have been in the first place. These devices should help.

There's also speculation that Redmond could produce a Surface Reader, perhaps a 7-inch device that could offer a differentiated package due to not only Windows 8.1, but also Microsoft's Barnes & Noble assets.

Even so, the path is fraught with uncertainties. To Microsoft and its partners, a $350 Windows RT tablet might seem like a great deal, especially if it features the original Surface's impressive build quality. I'm not convinced that cost will be low enough. It would barely undercut the just-released Samsung Galaxy Note 8 and rate only comparably to the iPad Mini. Both of those devices run on platforms with entrenched and loyal user bases. If Windows 8 is to attract users with prices that are merely similar to those of the competition, it will need a truly unique hook, some sort of differentiated experience. Neither Microsoft's first round of Modern core app updates nor recent Windows 8.1 rumors have suggested that Redmond will deliver this sort of leap in the short term.

[ Can consumers have too many options? Read Windows 8 Device Choices Baffle Buyers. ]

Even the appeal of Office, the most prominent advantage Windows 8 currently has over its competitors, might be eroding. Google's recent release of Quickoffice for both iOS and Android won't topple Office from its perch atop the market. But as users come to accept this and other alternatives, Microsoft will continue to lose leverage. Lacking any truly magnetic features that could convert those not already in its stable, Redmond must therefore turn to low prices to build momentum.

It will have to do so while maintaining OEM relationships, which could get tricky depending on how Microsoft prices future Surface products. Redmond is also surely concerned about one-time actions turning into precedents; low costs and discounted licenses might be necessary at the moment, but Microsoft certainly hopes to return to high-margin living, and to avoid coming off as desperate. Such hopes put pressure on the company to make major strides between Windows 8 versions. Windows 8.1 isn't a colossal overhaul, but if Microsoft lowers prices now and wants to raise them again later, it will need to offer a superior experience that users recognize to be worth the upgrade. Given that a Retina-equipped iPad Mini is almost certainly in the cards, Redmond could also encounter trouble if it encourages OEMs to use low-quality screens to bring down costs. It's a challenging situation all around.

Even so, Microsoft's future is in the Windows ecosystem, and in the billions of users it hopes to keep plugged into it. Current devices and even Windows 8 are only means to this end. Redmond might have grand plans a few years down the roadmap, but it will have trouble getting there if it doesn't get consumers onboard in the present. That means we need good, cheap tablets, and we need them fast.

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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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