Microsoft Surface RT: Dumping Inventory Or Investing In Education?

Tens of thousands of Microsoft Surface tablets with Windows RT, a device the channel has yet to see, are being sold at deeply discounted prices or simply given away to teachers and schools over the next month, prompting some to question if Microsoft's recent price slashing has more to do with unloading inventory than with pushing into the education vertical.

According to a June 19 blog post by Anthony Salcito, vice president of education for Microsoft Corp.'s Worldwide Public Sector organization, 32-GB Surface RT tablets will be available to K-12 and higher education institutes at $199 per device, down from the retail price of $499. The same device will be offered with a Touch Keyboard Cover for $249 or with a Type Keyboard Cover for $289.

"We're making a big push into education as a company," Microsoft Director of Corporate Communications Ted Ladd said. "We timed the discount for education with the teacher trade show next week. We will be giving out 10,000 devices to teachers at that event."

[Related: Surface Giveaway Goes On: Microsoft Offers WPC Attendees Deeply Discounted Tablet PCs ]

Microsoft claims the generous offers are an extension of its dedication to education. Some partners on the other hand, believe Microsoft is simply attempting to unload the remaining inventory of an unsuccessful product.

"It's obviously a case where they have more inventory than they can possibly sell otherwise. It's pretty much marketing 101," said Bob Nitrio, CEO of Orangevale, Calif.- based company, Ranvest Associates.

The Surface tablet with Windows RT along with the Surface Pro with Windows 8 are two products Microsoft chose to sell directly and through select retail stores, never offering the products to channel partners.

"If they want to target a consumer market only, maybe that's the right thing for them to do," Nitrio said. "But the fact is, we have been working with HP and Lenovo and others, we have our own product stack. We have things that compete with Microsoft's hardware. There is no compelling reason for us to tell our customers, 'Go ahead and buy directly from Microsoft.'"

Nitrio argued that buying hardware from other vendors does not inhibit customers from utilizing Microsoft software platforms. Nitrio said he is seeing customers and other partners choosing to use Microsoft or its products in very small aspects or not at all.

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Pat Walsh, owner of Computer Station of Orlando, a Deltona, Fla., education reseller, did not completely agree with Ranvest's Nitrio's stance on Microsoft competition but did say he would be excited to see something new on the market. "They don't need the channel more than the channel needs them. I'm sure they recognize that," Walsh said. "My hope is that some company will figure this out and come out with a nice academic tablet program." Walsh said he much preferred HP's convertible tablet for education, adding, "I don't see why anyone would purchase RT in the classroom environment."

"I'm a channel guy, so I think [Microsoft's] direct approach is less than ideal," said Arlin Sorensen, CEO of Heartland Leadership Group, a Harlan, Iowa-based consulting company. "I don't think they are going to have broad adoption of their products until they get the channel involved."

Microsoft has been accused on several occasions by partners and the media of attempting to become more like Apple. The major evidence for the Apple-envy argument include Microsoft creating hardware, shifting from traditional software to cloud-based applications and opening Microsoft store fronts that nearly mirror the Apple marketing scheme, according to Nitrio.

"They are trying to force everybody into the model that they have created in their own mind that is the perfect model for them, but it's not the perfect model for everyone else. They are just hoping that they remain as relevant as they think they are," Nitrio said.

"It's been frustrating for us; we could have sold thousands of tablets," said Walsh. "Over the past 12 months there hasn't been any hotter topic in K-12 than tablets," he said.

Walsh noted the extensive time and manpower that goes into a tablet deal on the education front. The most successful sales happen after a tablet is demonstrated first hand to teachers and school officials. Then there is a certain amount of follow up for training, trouble shooting and maintenance that happen long after the tablets are sold.

"K-12 takes a lot of time and people on the street to help the teachers. Teachers are not technologists, and they shouldn't have to be," Walsh said. "I just haven't found any tablet that makes enough money to justify the sale."

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Nitrio, Walsh and Sorenson all said the inability to sell the tablets has not taken a toll on their respective company's sales. The source of their frustration revolved more around Microsoft's decision to shuffle around the channel, seemingly displaying a lack of transparency and distrust.

Microsoft's decision to forgo channel partners may have long-term consequences, especially if disgruntled partners can do something about it.

"It's the relationship that the partners care about. It's all in the customer relationship and having the opportunity to be involved in the decision making. As Microsoft goes direct, it puts partners one step further from the customer," Heartland's Sorenson said. "The channel has served them well all these years, and it seems a little bit out of character to take this piece of business and go a totally different direction. This was poor judgment I think."

"At some point Microsoft will need the partner base again because they will need us to help them promote something, and when they come back to the partner base, the reaction is going to be far more muted than it would have been in the past because of how they are treating us now," Nitrio said.

The discount for Surface tablets with RT for education will continue through Aug. 31 and can be accessed by educators in 25 countries according to Microsoft Corp.'s Salcito on the blog post.

PUBLISHED JUNE 25, 2013