Microsoft yesterday announced a partnership with Dell that will let the latter sell the Surface Pro tablet-slash-notebook, a recognition that the device needs more support and service than Microsoft can provide to break into the enterprise market, analysts argued.
"This is an acknowledgement that they haven't really gotten past consumer and small business," said Tom Mainelli of IDC, referring to Microsoft and the rationale for striking the deal with Dell. It was also strongly reminiscent of the Apple/IBM partnership of a year ago, Mainelli agreed, with Apple, like Microsoft, needing a partner to push into the commercial business.
Under the arrangement, Dell will start selling Surface Pro tablets and accessories in North America next month through its enterprise sales force, and later in the year, online. In early 2016, Dell will expand sales into the 28 other Surface markets globally.
Most importantly, Dell will sell not only the hardware -- something Microsoft has been doing since 2012, and selected resellers have done since 2013 -- but also its usual gamut of support services, ranging from hardware warranties and enterprise-grade support to configuration and deployment services.
Dell will continue to sell its existing lines of Windows-based tablets and 2-in-1 devices that compete with the Surface Pro.
Most analysts dismissed the idea that the deal signals a further reduction in Microsoft's device strategy priorities. "This is really indicative of a distribution play," said Patrick Moorhead, principal analyst at Moor Insights & Strategy. "This shows that the enterprise is really, really important to Microsoft, which is a big shift from where they started with the Surface Pro. It says, 'We're all in on enterprise devices.'"
"To date, there's been a fair amount of tire-kicking," added Mainelli of enterprise interest in Surface Pro. To really push the device into corporate -- although Microsoft has trumpeted some large-sized sales deals, much of the interest in the Surface has come from individuals -- Microsoft needed more than its sales and support infrastructure could provide to enterprise hardware buyers.
"Microsoft realized that selling devices is harder than it looks," said Al Gillen, like Mainelli an IDC analyst. "They can't do it alone. But it may [also] be part of a reduced device strategy."
Two months ago, after taking a massive $7.6 billion write-down on its acquisition of Nokia's handset business -- and an accompanying licensing deal -- Microsoft recast its branded devices strategy, saying that it would pare its smartphone portfolio. At the time, analysts interpreted that change as a step toward an inevitable exit from that market, but not the tablet space.
Gillen was alone in wondering whether the Dell partnership hints at Microsoft backing out of in-house Surface sales.
"In some respects, it gives Microsoft a missing piece of what they needed to move more Surface Pro devices," countered Moorhead, sticking to the interpretation of a distribution deal. "There's a lot more to it than just having a really good product when you're dealing with a Fortune 500 company."
Neither Microsoft nor Dell said whether the deal is an exclusive, but Moorhead believes it is, at least a time-constrained one, pointing out that Microsoft posted a video clip of Dell CEO Michael Dell promoting the partnership. "Innovation isn't just about great devices. It's about partnerships that bring together products, software and services to deliver extraordinary customer value," said Dell.
"I don't think Michael Dell would have done a video if this was a temporary exclusive," said Moorhead.
Others will follow Dell into what Microsoft has labeled the Surface Enterprise Initiative, including Hewlett-Packard, Accenture and Avanade, but no timeline for those additions was mentioned.
The arrangement also demonstrated that 2-in-1s like the Surface Pro are, if not replacing large numbers of traditional personal computers in businesses, at least attracting attention. IDC's Mainelli referenced his research firm's projection that 2-in-1 shipments would nearly double in 2015, to 14.7 million units.
"Enterprises are interested in the form factor," Mainelli asserted.
Nor was the timing of yesterday's announcement coincidental, Mainelli and Moorhead contended, both pointing to today's Apple event, where the firm is expected to unveil a larger iPad, purportedly called the iPad Pro, to take on the Surface Pro and other 2-in-1s.
"If Apple comes out with [an iPad Pro 2-in-1], I'd put Microsoft at neutral to potentially negative," said Moorhead in an earlier interview this week. "But in the short term, anyone who does a 2-in-1 will benefit from the Apple iPad Pro. Whether it's Microsoft or HP or Dell or Lenovo, they'll get a short marketing benefit because they'll pitch it as validating the market."