Short supply of Surface stock slows channel expansion

The popularity of the latest Microsoft Surface devices has led to supply shortages for Australian resellers.

Stock of the latest model, the Surface Pro 4, is constrained for the Surface Authorised Device Resellers, according to half a dozen ADR partners contacted by CRN last week.

ADRs are commercial resellers who are directly managed by Microsoft, and were the second wave of partners to get access to Surface after retailers JB Hi-Fi and Harvey Norman. At last report, the ADRs were CompNow, Ethan Group, Southern Cross Computer Systems, ASI Solutions, Brennan IT, Ensyst, Data#3, Staples, Insight, Datacom, Dimension Data, Trident, Learning with Technology, Triforce and Somerville Group.

Both JB Hi-Fi and Harvey Norman currently have limited availability of Surface Pro 4 SKUs. None of the Intel Core i7 models were available for immediate order from Harvey Norman, while only the 8GB RAM i7 was available from JB Hi-Fi.

The stock shortages come as Microsoft admits its plan to open up Surface to the commercial channel via distributors Ingram Micro and Synnex, which was announced at its Worldwide Partner Conference, will not proceed until next year.

"We are committed to expanding the Surface channel in Australia and look forward to launching our new program in the early part of 2016. As customer demand for our Surface devices continues to be extremely strong, our priority is to deliver the very best program for our partners and customers," said Tina Flammer, product marketing lead Surface at Microsoft Australia.

CRN understands that many resellers have essentially been approved to procure Surface via distributors, but have been held up by the stock shortages and will be officially announced in early 2016. Entry to this group of distributor-managed partners is based on unit sales targets, understood to be in the thousands per year, and requires sign-off by both the distributor and Microsoft.

The new Microsoft Store in Sydney was last week still taking orders on certain Surface Pro 4 models, both the 128GB and 256GB i5 models as well as the entry-level 128GB m3.

Microsoft's online store had all models except the 256GB Core i7 model with 16GB RAM.

The models in demand from commercial resellers have different SKUs to the retail models. The differences are around warranty, rather than device specs.

"Across the Surface family of devices there is no difference between the consumer and commercial offerings except for Surface 3, which has tailored specifications for commercial customers - a 64GB model with 4GB RAM," said Flammer.

"Commercial customers can also purchase extended warranties through our partners, which are on top of the standard 12 month out-of-the-box warranty that is provided for all Surface devices," she added.

One Microsoft partner – which is not an ADR – told CRN that Microsoft would allow his company to get Surface stock drop-shipped from the store direct to customers and billed by his company.

It wouldn't be the first time Microsoft partners had looked for a backdoor into the Surface channel, with a history of resellers buying the devices from retailers such as JB Hi-Fi.

Microsoft denied that resellers could get stock drop-shipped via the store. "Microsoft Store only sells devices directly to end user customers in Australia - these end-user customers can be either consumer or commercial. Microsoft Store does not sell devices to Microsoft partners or other resellers."

It is ironic that Microsoft's biggest challenge around Surface is limited stock, given that the failure of its Surface RT range led to a US$900 million (A$981.5 million) "inventory adjustment" for the device in 2013.

Philip Goldie, director of partner business and development at Microsoft Australia, said the current constraints around Surface Pro range "is a good news story because the demand is massive, but it has been challenge as we have wound down on [Surface Pro] 3 and wound up on [Surface Pro] 4. That is something that a lot of vendors face."

He added that Microsoft Australia wanted to guarantee "that when we hit 'go' on the channel expansion, we have the stock".

Updated with Microsoft's comments confirming the store only sells directly to end users.