Office on Surface Pro suggests a shift in Microsoft's sales strategy
Microsoft yesterday announced that Surface Pro tablets it will start selling in Japan on June 7 will come with a fully-functional copy of Office, a bundle one analyst said hints at a change in Microsoft’s sales strategy for its homegrown hardware.
Both Japanese configurations of the Surface Pro—one with 128GB of storage space, another with 256GB—will include Office Home & Business 2013, Microsoft confirmed Wednesday. The productivity suite will be a fully-licensed version, not a time-limited trial.
According to a press release issued by Microsoft Japan, the 128GB Surface Pro will sell for 99,800 yen, including taxes, or $986 at current exchange rates. The 256GB model will cost 119,800 yen, or approximately $1,184.
The tablets sold in Japan will not be the first from Microsoft to bundle Office: More than a month ago the company launched a special edition Surface Pro in China that included Office Home & Student 2013. But the Japanese configurations will be the first to come with a commercial-use edition of Office—one that can legally be used for work and in the workplace—and on a tablet powered by Windows 8 Pro. The special Chinese Surface Pro bundle relied on Windows 8, the consumer-grade OS.
Microsoft has also included Office Home & Student RT with all Windows RT-powered tablets, its own Surface RT among them. Like the Surface Pro in China, however, Office on a Surface RT is not licensed for work, and lacks the Outlook email client. Outlook is included with Home & Business 2013.
Surface Pro tablets now sold in the U.S. come with a one-month trial of Office 365 Home Premium, Microsoft’s rent-not-buy subscription service for the suite. That, too, is for personal use only, and not licensed for work.
What does it mean?
The addition of Office Home & Business to the Surface Pro in Japan sparked speculation from analysts.
“I think it’s possible this means Microsoft will do the same elsewhere to firm up the footprint [of the Surface Pro] in the market,” said Ezra Gottheil, of Technology Business Research. “After all, the cost of goods for software is zero.”
Wes Miller, of Directions on Microsoft, echoed Gottheil. “Definitely possible,” he said of Microsoft tossing Office Home & Business 2013 into all Surface Pro tablets. “This could reflect a different angle on selling the Surface Pro.”
Both analysts noted that the move would be in keeping with Microsoft’s apparent strategy to use Office as a prime selling point for its Surface line, and Windows 8-powered tablets in general.
By using Office as a carrot for Windows, the theory goes, Microsoft has decided to forego revenue it would generate if it released versions for Android and iOS—reportedly slating those editions for late-2014 shipping—instead putting all its horses in Windows’ traces.
Adding Office Home & Business 2013 would also reinforce Microsoft’s implied contention that the Surface Pro is for work, said Miller. And it would be a concession that the Surface Pro’s $899 to $999 price can’t compete in the consumer space.
The Japanese price for the 128GB Surface Pro is close enough to the U.S. price, said Miller, that if Microsoft does pre-load Office in America, it will probably maintain the current cost. “You’d get Office included for the same price,” Miller said.
According to a Microsoft price sheet, the pre-tax price of the 128GB Surface Pro in Japan is 95,048 yen, or about $944, just $45 more than the U.S. price.
Gottheil and Miller both said that if Microsoft does pull the trigger on bundling Office Home & Business 2013, it would almost certainly extend a deal of some sort to its OEM (original equipment manufacturer) partners for their Windows 8 tablets.
“They won’t do this to hurt OEMs, so maybe Microsoft will define a set of products that compete head-to-head with the Surface Pro, and make those OEMs the same deal, or a price cut on Office,” said Gottheil.
“I would expect some kind of similar pricing to OEMs,” said Miller, “or Microsoft risks more conflict with OEMs.”
Microsoft’s relationships with its partners has been rockier in the past year, kick started last June when the Redmond, Wash. developer surprised everyone—OEMs included—by unveiling its Surface line, the first-ever computing hardware designed in-house. The lackluster performance of Windows 8 and Windows RT has further strained those relationships, with several long-time partners dissing the latter and Dell, the world’s third-largest computer maker, blaming Windows 8 for some of its financial woes.
Japan’s Surface Pro configurations—128GB and 256GB, with the current 64GB model missing—may also signal that Microsoft will kill off the 64GB Surface Pro in all markets. That entry-level model has come under fire because the storage space available to users is a relatively meager 28GB.
The Japanese offering, however, may not herald a shift, cautioned Gottheil. “Microsoft may simply be experimenting with ways for a broader distribution of the Surface Pro,” he said of the bundling.
And other problems surface—no pun intended—with the inclusion of Office Home & Business 2013, Miller added. “If they’re branding the Pro as the business [system], what exactly is the Surface RT for?” he asked.
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