Microsoft Surface and Dell stick it to Apple in the enterprise

By teaming up with a quartet of heavyweights, Microsoft will push Surface into the enterprise and boost Windows 10 deployment

Microsoft Surface and Dell stick it to Apple in the enterprise

When Apple and Microsoft go toe to toe in the consumer business, the outcome is rarely in doubt: Cupertino, to put it bluntly, kicks Redmond butt. But the latest fight -- a battle to sell tablets into the enterprise -- may have a different ending.

Now that the iPhone has given Apple a bigger footprint in the enterprise, the company is pushing harder with new business services and the newly launched iPad Pro. In response, Microsoft made a move this week: announcing a partnership with Dell to sell the Surface Pro, presumably including a beefed-up new model expected to launch next month.

Businesses -- there are a lot of them -- that buy Dell computers and business services will now be obvious candidates to purchase the Surface Pro. More important, it will be a step toward deploying Windows 10 in business, a priority for Microsoft that far outshadows selling hardware.

For the first time, starting in early October in the United States and Canada, Dell will sell Microsoft Surface Pro and Surface accessories through its North America commercial sales organization; later in the year, it will do so on its website. Hewlett-Packard, Accenture, and Avanade will also later sell Surface Pro devices and accessories, Microsoft's Yusuf Medhi said in a blog post.

We haven't seen the rumored new Surface Pro, though I expect it to be a significant upgrade, and the new iPad Pro comes with the faster A9 processor and a better display. But tablet sales have been stagnant for some time, and it's far from clear that even major improvements will reverse that slide.

Reversal of fortune

The partnerships with Dell and HP mark an interesting reversal. Microsoft angered its longtime PC maker partners when it developed and launched the original Surface behind their backs. Even worse, the original Surface, particularly the RT model, was a dog that generated an astonishing $900 million loss. It was not former CEO Steve Ballmer's finest hour.

For a while, it looked like the Surface would simply fade away, but Microsoft -- a company slow to give up on flawed products -- revved the table several times, and it's now significantly better.

Microsoft's dogged pursuit of the tablet market has paid off. In the company's last quarterly earnings report in July, it said sales for Surface devices grew by 117 percent over the previous year with quarterly revenue reaching $888 million and annual sales of $3.6 billion.

Meanwhile, Ballmer made a very smart move -- he wasn't always wrong -- in 2013, loaning Michael Dell $2 billion to take his company private. Dell was fighting with institutional shareholders over the buyout, and he needed $24.4 billion to win.

Ballmer also allowed Dell to renegotiate payment terms for Microsoft software licenses at a time when it appeared that the company might stop selling desktop PCs. All in all, he managed to repair a key relationship with a company that has deep roots in the enterprise and an extensive network of resellers who now have an incentive to push sales of the Surface.

Dell wasted no time supporting Windows 10. Dell customers who ordered PCs with Windows 10 already installed were able to get them on July 29, the day the new operating system became available. Did that boost sales? Probably not by much, but it was a telling sign of Dell's commitment to Microsoft.

At the moment, there are no details on how HP, Accenture, and Avanade (a large seller of business services jointly owned by Microsoft and Accenture) will sell the Surface and related services. But like Dell, all are deeply rooted in the enterprise.

Apple, you might say, has a lot of sizzle to sell. But Microsoft and its new partners will deliver the steak. In the enterprise, that's what counts.

Copyright © 2015 IDG Communications, Inc.

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