5 big things that baffle me about Microsoft Surface RT

The Microsoft Surface RT doesn't seem to fit any one target customer profile particularly well. In this in-depth analysis, former product marketing director David Gewirtz subjects the Surface RT to a series of product marketing questions and comes away concerned.
Written by David Gewirtz, Senior Contributing Editor

I find myself morbidly fascinated by Microsoft's upcoming Surface RT tablet. When Microsoft initially showed the tablets -- particularly the one that runs Intel x86 Windows 8 -- I thought the company had a winner.

But then it bacame apparent that there were two Surface tablets, one that runs full Windows and one that runs a weirdly shrunken-head version of Windows. This second version, called RT, is intended for the Arm processor and won't run all the Windows applications we've come to rely on all these years.

From a business strategy point of view, it's fine -- and sometimes even critical -- to break from the past. Apple certainly did it with the iPhone and iOS applications, and so did Palm. Sadly, with Palm, the change proved ultimately deadly.

New rule: If you're going to name something Office, you have to let it be used in an office.

In Microsoft's case, there's no doubt consumers are moving away from complex computers and finally, after all these years, have the appliance devices they've craved. For a company the size of Microsoft, it makes a lot of sense to develop offerings that appeal to their various markets -- even if those markets are no longer a few large segments, but are instead quite fragmented.

But even in this context of essential change, of necessary rebirth and reinterpretation, the Surface RT tablet is baffling. As a former director of product marketing for a major software company, I understand marketing decisions and where they come from. To be honest, I haven't been as baffled by a company's marketing choices since the last few years of ill-fated Palm (who, you'll recall, was once the market leader in handheld devices).

Big Baffle #1: Who is the target customer?

This question is going to permeate the rest of this article, because all the questions I ask keep coming back to this. Is the target customer the consumer? Is it small business? Is it students? Is it educational institutions? Is it large-scale enterprises?

The thing is, as you'll see over the next few paragraphs, there are elements of the Surface RT product offering that -- essentially -- disqualifies this device for each of these markets. Like I said: baffling.

Big Baffle #2: Why would you ship a device not licensed for business use?

If you haven't been following the ball game, one of the weirdnesses that's become apparent about the Surface RT is that it ships with a full version of Microsoft Office that has a license that explicitly limits use to non-business and non-commercial activities.

This is where the target customer thing gets confusing. Students can use Office. Educational institutions can use Office, but only for students. Managing the office operations of a school would be business use. Retirees could use Office, but not if they're checking their stock portfolio.

Small business people could use Office -- oh, wait, they can't. People who want to carry Office when traveling and occassionally check their work email can use it -- no, sorry, they can't. A company that wants to equip an army of sales people with portable PowerPoint machines can use Office -- well, actually they can't.

My theory is that a marketing guy was caught between a lawyer and a customer agreement somewhere.

See what I mean? It's odd. Now, as far as I understand it, further digging by our intrepid team of ZDNet investigators has found out that you will be able to use Office for office work on the Surface RT if you pay some sort of upgrade fee or subscribe to Microsoft's on-demand Office 365 program, or have a corporate license to Office.

In other words, you get Office with the Surface RT, but think of it as a demo or shareware.

I have a theory about this. My theory is that a marketing guy was caught between a lawyer and a customer agreement somewhere. Someplace, there's a most-favored nation clause that triggers if Microsoft gives away a cheaper or bundled copy of Office and to keep that clause from triggering, Microsoft is strapping a boat anchor to Office on the Surface RT with this odd license restriction.

If that's the case, all the Staples and Office Depot and Best Buy sales people are bound to tell legions of small business customers that "Sure, you can use it" (wink-wink), and in all probability Microsoft will look the other way if some Surface RT buyer checks his work mail from home.

But then -- if this is all some sort of strange charade to keep a legal clause from exploding, isn't that odd? Sacrificing purity of marketing message to wiggle around a legal encumbrance is one of the clues that a company has mission conflict within the organization.

Next up: questions about competitive pricing and consumer appeal...

Big Baffle #3: Why isn't it priced really competitively?

The Microsoft Surface RT is a 10-inch device, so it's directly competitive with the iPad and large Kindle HD. Since there's really only one 10-inch tablet that matters, let's see what we're looking at compared to the iPad.

The Surface RT is $499 with 32GB. The iPad 3 is $499 with 16GB and $599 with 64GB. If you want to add the fancy flat keyboard cover to the Surface RT, add another $129.

With far fewer apps than an iPad, why wouldn't the typical consumer just buy an iPad?

On the surface, the Surface RT is moderately competitive with the iPad. Many think the iPad has a better display, but Microsoft claims the Surface RT has a competitive display. ZDNet's intrepid team says Microsoft's claims are not necessarily untrue, but more needs to be revealed.

If you add in the free copy of Office that comes with the Surface RT for that $499 price, the Surface RT might be compelling. Oh, wait, you can't use the Surface RT's Office in an office. Oops.

This brings us back to the target customer question. If the Surface RT is aimed at consumers, and it's essentially just as pricey as an iPad, and it has far fewer apps than an iPad, why wouldn't the typical consumer just buy an iPad?

Why, indeed.

The same applies to students. We don't yet know if the Surface RT runs Flash. If it does, it could be a bit more compelling for education, because there are just so many educational tools written in Flash. But students and educational institutions are incredibly sensitive to price, and if they need a super-cheap solution, they'll go with something like the $249 Samsung Chromebook or the $199 Nexus 7.

What about business people? It's not that they would buy this instead of a small ultrabook. Again, I must point to the $249 Chromebook or HP Sleekbook, which starts at $499 (and includes a keyboard in that price).

So the Surface RT is either too expensive for students and consumers or too not-an-iPad for them. It's also not really real-enough Windows to attract Windows consumers. Will it run Quicken? Small business people don't have time to be confused, so they might ignore the license restrictions on Office, but more likely will just go buy a Chromebook (and run Google's office suite) or an ultrabook.

Large corporate customers are again a possibility. Is all this simply aimed at big corporate customers, where purchasing agreements and negotiations can wipe away the commercial Office restriction like just so much excess baggage?

With so many people price- and brand-sensitive, it seems that -- if Microsoft really wanted to make an impact with the Surface RT -- they would have priced it quite differently. It's quite curious.

Big Baffle #4: If this is a straight-up play to win back consumers defecting to tablets, why isn't it more suited to consumers?

We've talked about the fact that the Surface RT won't run traditional Windows applications. Can you imagine just how many tech support calls Microsoft is going to get on that one?

We've talked about the price being too high to make it stand out against the iPad from a price/performance point of view (that's Amazon's strategy with the Kindle).

But if this thing is aimed at consumers, why doesn't it have a consumer-oriented name? After all, Microsoft has a winning consumer brand in Xbox. People know the Xbox doesn't run Windows software. Why not just call it the Xpad?

I find it impossible to believe that Microsoft considers this a consumer play.

But, even more to the point, if the Surface RT can't run mainstream Windows applications, it certainly can't run mainstream PC games. As we've come to know, consumers love them their games.

One reason consumers might flock to the Surface RT is if it ran something like Steam -- the gaming system so popular on PCs. But it doesn't. In fact, Steam's creator, Valve managing director Gabe Newell, called Windows 8 (and by extension, the Surface RT) a "catastrophe".

The PC's biggest game distributor thinks Windows 8 is a catastrophe, consumers won't know RT from a retrovirus, they won't understand the device won't run their old Windows applications, the Surface RT has far fewer apps than the iPad, and it's not priced aggressively competitively.

I find it impossible to believe that Microsoft considers this a consumer play. Is it a place-holder for a future set of offerings? Or is it intended for a different audience? It's all quite strange.

Big Baffle #5: If it's not suited to consumers, then why isn't it perfectly tuned for business?

This one is a baffle-inside-a-baffle. All of this work on the part of Microsoft has been, presumably, designed to regain a defecting consumer audience.

Microsoft's not really losing the "real-work" people like me, who need real computers to do complex work. Microsoft's losing the consumers who want to read email, play games, and socialize with Facebook. Clearly, the Surface RT -- despite what's been implied -- is not for this audience.

But let's say, then, that Microsoft is really going after the business audience with the Surface RT. Why this device? One thing makes sense: the Arm processors are more power-management friendly than x86 processors, and that makes tablets more practical.

But if that's the case, if Microsoft's really just trying to build a power-optimized tablet for business, why go through all the weird machinations with Office? Why not just plant the Surface RT out there as a business device, price it either so it includes Office or just make it an extra cost add-on, and stop confusing customers?

What do you think?

Where is Microsoft going with this device? Is there any customer class for which this is a perfect fit? If so, why not clean up the marketing to make the message more clear?

It's all quite baffling.

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