Microsoft Surface: Overpriced for Full Adoption [Opinion]

When Steve Ballmer, CEO of Microsoft, announced Microsoft’s Surface Tablet, the first hardware device made by Microsoft running Windows 8, in June, the tech world began to buzz with interest. After all, this was a signal that Microsoft was serious about the tablet market and would be competing directly with its OEM partners. Tablets have been a huge focus for Microsoft’s Windows 8 platform, which was built with touch in mind, so a competitive price to compete with Apple’s iPad, Amazon’s Kindle, and the glut of Android tablets is important for mass adoption to take place.

Price Announced

Today, Microsoft announced the official price of its Surface. The Windows RT version, which is up for preorder today and shipping October 26, will cost $499 for the 32 GB version and $599 for the 64 GB version. The Surface’s keyboard, which was demonstrated back in June, was a huge selling point since the keyboard doubled as a cover. However, this is sold separately at $120. A package deal of the 64 GB Surface and the cover can be bought for $699, a savings of $20. The Surface will ship with a RT version of Microsoft Office 2013 Beta, which makes the price point slightly more attractive.

Keep in mind that this is the Windows RT version, which does not have backwards compatibility with older Windows software and programs. Windows RT depends on Microsoft’s Windows app market, which is still budding. Think of Windows RT as Windows 8 minus support for all of your older Windows 7/Vista/XP programs. The linchpin that will connect Windows 8, Windows RT, and Windows Phone 8 will be the app ecosystem.

For a general run down of Windows RT versus Windows 8, check out this post.  For further reading about the general misconception between Windows RT and Windows 8, read this. A Surface with Windows 8, which has legacy support for older programs, will be released at a later date. Other OEMs are creating tablets that run Windows 8 and not Windows RT, as well. For more about Windows 8/RT and a quick look at what Samsung, Sony, and others are doing with Windows 8, check out this guide.

The Tablet Market Competition

Microsoft’s Surface is overpriced if it wants to penetrate the tablet market in any significant manner. The price of $499 places right in line with Apple’s iPad, but Apple currently has a proven track record that consumers will base their purchase on. Not only that, but Apple is already prepared to announce its 7″ mini-iPad on October 23. Apple seems to believe that there’s a market for smaller sub-10″ tablets and is looking to enter that market, which is primarily dominated by Amazon’s Kindle and various Android tablets including Google’s Nexus 7.

The competition is already tough in the tablet market. A recent Pew study shows Android is already catching up to Apple’s iPad and this study was done before the release of Google’s Nexus 7, which had good early sales, and Amazon’s latest revision of the Kindle, the Kindle Fire HD. Android, which heavily competes on price, has quickly eaten into Apple’s dominant market share. Microsoft, if it wants to find any traction in the market, needed an enticing price point to attract customers. Without a budget friendly price, Microsoft is effectively shooting itself in the foot.

Importance of Adoption Rate

I am a strong proponent of Microsoft Windows 8 and believe the OS has a huge opportunity to disrupt the market. However, without a proper tablet strategy, I feel the overall effect will be diminished and Windows 8 will take longer to ramp up support. The Surface tablet is perfect for tech enthusiasts – the early adopters. However, according to the technology adoption life cycle curve, Microsoft will need more than the early adopters in order to reach market saturation. Microsoft needs to overcome the first 15% and penetrate the early majority area of the curve.

A new Windows OS already takes a couple of years for mass adoption since people don’t upgrade their computers right away and Windows 8’s biggest strength is in its shared ecosystem between desktop and mobile (both tablet and phone). This shared ecosystem depends on Microsoft attracting app developers to the platform to bridge the gap between Windows RT and Windows 8. Having a strong app market today is a requirement for people to buy into any ecosystem. A low priced tablet would attract early adopters and fuel future decisions in desktop and phone. Instead, the effect will be muted with both the desktop/laptop and tablet markets using the same strategy: pray people will pay the price and enjoy the new Windows. The muted effect will also reduce app development and some early adopters will be upset by the small app library. This may lead to bad buzz and affect the general population through bad word of mouth, creating another Windows Vista scenario. Many businesses are planning to continue using Windows 7 although that’s not very surprising since businesses are usually late adopters due to various IT considerations and cost.

The Future

I still feel Windows 8 has a huge amount of potential. Windows RT, for me, feels like a bad attempt to take the tablet market based on what consumers believe a tablet should be. However, Windows 8 has the power to redefine how we interact and use tablets. Currently, tablets are primarily used for media consumption and not productivity – that is still in the realm of ultrabook laptops. A robust OS like Windows 8 can bridge the gap between media consumption and productivity. Imagine carrying around the tablet while on the go, but being able to hook it up to an external monitor once you return home. No matter where you are, you’ll have access to all of your files and projects. There’s an opportunity here to redefine the desktop and how we interact with our computers. It’s unfortunate that Microsoft may be botching this with a poor strategy… again.

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