Channel chiefs, Channel partner programs, Distributed Workforce

5,000 Microsoft Surface Resellers: Reality Check


Roughly 5,000 resellers now offer Microsoft Surface devices to their end-customers, according to the technology giant. But who are those resellers, and what's the true state of Surface device sales in the IT channel?

Microsoft Channel Chief Gavriella Schuster
Gavriella Schuster

Microsoft didn't disclose how many of those resellers actually sell Surface devices in large volumes. But the majority of Microsoft Surface resellers are best classified as VARs, according to Gavriella Schuster, general manager of Microsoft's Worldwide Partner Group. Schuster says most of the partners are in the U.S. and Canada, though international expansion has been accelerating, she told ChannelE2E.

What a difference a few years makes. Microsoft took some channel lumps when Surface devices debuted in 2012. The early offerings featured minimal channel opportunities -- with a heavy emphasis on direct sales. A low-end option -- Surface RT -- didn't sell well with anyone, and triggered a $900 million write off in 2013.

Microsoft Surface Device Sales Accelerate

But gradually, Surface found its stride. Microsoft expanded sales through distributors. And those distributors, in turn, signed up resellers to promote the combination notebook-tablet devices.

More recently, Surface revenue grew 117% to $888 million in Microsoft's fiscal Q4 2015. And Windows 10's launch has further accelerated Surface device sales, especially as small businesses seek "one device for life," asserts Schuster.

Admittedly, Microsoft recently ruffled a few feathers within the channel when the company allowed Hewlett-Packard and Dell to resell Surface. But... I'm not all that concerned about that market reality. Overall, endpoint devices are typically part of a larger solution sale for VARs and MSPs. Competing against hardware vendors for one-off sales -- particularly in the consumer market -- isn't a huge concern for partners that have mastered the mobile-cloud customer opportunity.

Microsoft Surface Partner, Customer Perks

Where does Microsoft go from here? The answer involves more customer perks -- promoted through the channel.

For instance, a permanent trade in program allows customers to trade in old devices -- for which they receive a credit on new device purchases, Schuster says.

Moreover, a Microsoft Complete for Enterprise program expands Surface warranty, service and support capabilities through the partner channel, Schuster added. Deeper details about the Surface partner and customer perks emerged in a blog from Channel Chief Phil Sorgen yesterday.

As the Surface journey continues, two things are clear to ChannelE2E: First, Microsoft won't please all partners -- especially as the company continues to sell Surface devices directly and now through PC giants like Dell and HP. Second, Microsoft will continue to innovate on the product front (example: Surface Book) while incrementally enhancing partner perks.

Nobody is suggesting a return to the glory days of lofty hardware margins for resellers and VARs. And ChannelE2E doesn't expect a Surface strategy that eliminates direct sales conflict. But it's a safe bet Surface device sales through the IT channel will continue to grow.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.