Microsoft Adds New Tablet Partners, Still Just Scratching Channel Surface

Microsoft, which has been beaten badly in the tablet market by rival Apple, has added nine new Surface partners, including six of the top 100 partners in the country, CRN has learned.

The addition of the nine new partners brings the total number of solution providers reselling Surface to just 20 after more than two years competing against Apple's iPad tablet.

[Related: Head-to-Head: Microsoft Surface Pro 3 vs. Apple MacBook Air ]

Channel sources said the new national players now authorized to resell Surface under Microsoft's Authorized Device Reseller program are: ePlus Inc., , a $1 billion solution provider ranked No. 36 on the CRN Solution Provider 500; Pomeroy, a $630 million solution provider ranked No. 45 on the CRN SP500; ProSys Information Systems Inc, a $570 million solution provider ranked No. 49 on the CRN SP500; Technology Integration Group, a $335 million solution provider ranked No. 70 on the CRN SP500; NWN, a $270 million solution provider ranked No. 81 on the CRN SP500; Paragon Development Systems (PDS), a $186 million solution provider ranked No. 100 on the CRN SP500;ASI System Integration, No. 104 on the CRN SP500; United Data Technologies, No. 178 on the CRN SP500 and Arlington Computer Products of Buffalo Grove, Ill.

Microsoft accounted for just 2.1 percent of the tablet market in 2013 with 4.03 million units sold compared to 70 million units sold by Apple which ended 2013 with 36 percent market share, according to market researcher Gartner.

Microsoft has faced widespread criticism from the solution provider community from the outset with a plan to limit Surface distribution. It started with Microsoft's decision to resell the product initially through retailers like Best Buy and Microsoft's own stores. Then, in June 2013, Microsoft added 10 Large Account Resellers. And now the company has added another nine partners.

Solution providers from every segment of the channel have repeatedly criticized Microsoft for cutting them out of the Surface opportunity. They say Microsoft may have been able to make bigger inroads into the corporate market with Surface had it allowed more partners to sell the product.

CRN reached out to Microsoft for comment, but the company had not responded at press time.

Microsoft is missing a big opportunity by limiting distribution of Surface, said Michael Goldstein, president and CEO of LANInfotech, a Microsoft partner based in Fort Lauderdale, Fla.,

"We sell Dell and Lenovo tablets and are winning new customers with those products everyday," Goldstein said. "With Microsoft Surface we have to refer customers to the Microsoft Store or to a competitor. I just don't see the big picture with regard to why Microsoft refuses to make the product more widely available. I just don’t understand why they don't put together an authorized program for tens of thousands of solution providers."

Even though Microsoft still has a relatively minor market share position against Apple, a top executive for a national solution provider just selected to resell Surface said it gives his company, which does not resell the iPad, a competitive offering to go against Apple in corporate accounts.

"I am always looking for an Apple killer," said the executive. "For me this is still the most viable competitor to the iPad. It shows that Microsoft is maturing as a channel partner. This is Microsoft starting to recognize that the channel is the fastest and easiest way to get to a market."

Bob Nitrio, CEO of Ranvest Associates, an Orangevale, Calif.-based small-business Microsoft partner, said Microsoft has badly burned its longtime partners by not letting them sell Surface.

"This new announcement shows that they have little or no interest in working with the large SMB consultant base of partners that they have left behind in recent years," said Nitrio. "Microsoft is just not willing to make the effort and the investment to rekindle what was once a vibrant partnership with their SMB consultant partners. What they fail to understand and appreciate is the fact that we have been their evangelists for many, many years ."

Nitrio maintained that Surface authorization is more about sales volume rather than customer touch. "We are relational with our clients and Microsoft is transactional company at this point," he said.

NEXT: Future Tech Questions Microsoft Surface Partner Authorization Criteria

Bob Venero, the CEO of Future Tech Inc., a Holbrook, New York solution provider, No. 234 on the CRN SP500, said he has once again been disappointed by what he called Microsoft's "faulty metrics" for selecting Surface Authorized Device Resellers. He maintained that Microsoft favors sales volume rather than customer satisfaction and customer references.

"It appears they are looking purely at sales volume rather than mobile computing customer satisfaction and quality," he said. "Future Tech supplies mobile compute devices to its customer base in excess of 500,000 seats and we just displaced one of the newly added Surface suppliers in a major corporate account. Way to go, Microsoft."

Microsoft, for its part, sees government and education as the biggest growth market for Surface followed by small and medium business and finally the enterprise market, channel sources said.

The software giant is offering rebates on quarterly units sold, deal registration for deals over 50 units, market development funds, and demo units at a 50 percent discount. Volume discounts are available for deals of more than 500 units.

One top executive for a partner that was just authorized said he sees the Surface opportunity as much more profitable compared with Apple iPad or Google Chrome products in either education, government and the commercial market.

"This is a good program," said the executive. "We see a big opportunity to wrap a lot of services around the product including security."

Solution providers said robust security offerings tied into Microsoft's federated active directory services which allows secure sharing of identity will be a big differentiator for Microsoft versus Apple.

Partners said they see Surface Pro 3 as a significantly improved device over the prior versions of Surface. "It took Microsoft two revisions to get it right, but I think they have got it now with Surface Pro 3," said one solution provider.

The big question now, said solution providers, is when Microsoft will significantly increase distribution of Surface beyond just the 20 partners.

"I think it is going to be a while before Microsoft gets this in the hands of hundreds of thousands of partners," said one solution provider executive. "They are doing a phased-in approach and want to make sure they have all the support mechanisms are in place before they roll it out to more partners."

John Krikke, vice president of Onward Computer Systems, a Burlington, Ontario Microsoft partner for 15 years and a member of Microsoft's SMB partner area lead for Canada, said he sees Surface as more of an "evangelism and market builder tool" than a competitor to the tablets offerings he sells from Hewlett-Packard and Lenovo.

"Microsoft doesn't have the manufacturing or distribution capabilities to go head to head with Apple on their own," said Krikke. "It is not in Microsoft's DNA to be a device company. They do well to build an ecosystem that Surface is part of with all the other OEM partners."

Krikke said he believes Microsoft came out with Surface to kickstart innovation from its OEM partners. "From that point of view, Surface has done its job," he said. "Surface is a slick piece of hardware and it really works. It goes head to head against Apple especially in the business market."

PUBLISHED SEPT. 26, 2014