Does Microsoft Have the Retail Touch?

Some 30 years ago, Microsoft predicted a day when there would be a computer on every desk. Now Microsoft wants to introduce the next generation of computing, where the desk itself becomes a digital surface. "With Surface we now see a day when every desk can be a computer, and it's not only your desk but maybe your kitchen countertop, the table in your breakfast nook, the mirror in your hallway or, at work, the conference room table," says Mark Bolger, senior director of marketing, Microsoft Surface Computing. "It's really a statement and a vision about surface computing being pervasive in the future. What we're doing is cross- pollinating between the physical world and the digital world to create a completely new-to-the-world experience." Microsoft's Surface interface was unveiled a year ago, around the same time that Apple launched the iPhone, which uses a similar "natural-user" interface on a simpler, smaller scale. But it's only now that consumers are getting their first glimpse of its potential. Last month, AT&T retail stores in New York, Atlanta, San Antonio and San Francisco debuted the technology. Other early adopters -- Starwood's Sheraton Hotels, Harrah's Entertainment, T-Mobile USA and International Game Technology -- are creating unique applications for the platform, as is AT&T.Surface allows users to touch digital content with their fingers and a flick of the hand. It is a multi-touch interface: Freed from the limits of a click or key, users can touch in dozens of locations. Because of those multiple points of contact and the surface size, it is intended for multi-user applications. Surface also has object recognition. Place a can of soup on Microsoft's envisioned kitchen countertop, for instance, and it may call up recipes or nutritional content. Microsoft is focusing on commercial applications initially, but as it reduces Surface's costs, the company expects to introduce it into the consumer market in three to five years. "The technology is fantastic, and we're really excited about it," says Ed Rogich, vp of marketing at International Game Technology. "But it's still like a concept car, and the question is: How fast will it become a real car?"Applications will be key. "With Surface, Microsoft is pushing the digital world to a new level with cool technology, but they need to convince other companies who develop applications to come on board," says David Daoud, an analyst with IDC. "The problem is, developing more applications will be challenging."Microsoft faces other challenges, too. Critics question whether the company can successfully create a consumer market for Surface after less-than-successful initiatives like its portable media device Zune, a distant competitor to the iPod. And it's not clear whether Apple, which didn't return calls, will attempt to trump Microsoft by marketing its own surface computing platform.Although Microsoft does market keyboards and mouse devices, the company is still primarily a maker of operating systems, not necessarily hardware. Initially Microsoft is manufacturing Surface's hardware, but as the product develops more commercially, the company will need to find a way to scale across markets and geographies. In its initial rollout of Surface, Microsoft is using a model similar to the introduction of plasma TVs. The company is focusing on leisure, entertainment and retail sectors where consumers can familiarize themselves with the technology while Microsoft works to reduce its price point, which is currently around $10,000 a unit for commercial partners. In using Surface, AT&T's aim is to simplify and streamline the sales process in stores that are sometimes as large as 5,000 square feet, stocked with brochures and wall-to-wall with cellular phone options and accessories. The stores' Surface computing units -- 30-inch table-like displays -- show and explain phone features and compare models simply by placing the handsets on the interface, which recognizes the devices and graphically provides information about their capabilities. Customers can also call up interactive maps detailing AT&T's wireless network coverage at national, state, local and street levels and, using fingers and hand gestures, can scale and move those maps to determine their coverage area."Selecting a phone can sometimes be overwhelming. Surface takes down those barriers," says Andy Austin, director of AT&T retail sales operations.The wireless retailer is still creating applications for the platform. AT&T says that in the future, customers may be able to drag content such as ring tones, graphics and video from a menu to their phones, which will capture the information. Consumers may also be able to place their old phones on a Surface counter, pull out and display content like photos and videos, and then drag the content they want to keep to the handsets they're purchasing. Although AT&T is not featuring Surface in its advertising, customer interaction with it would appear to be benefiting the company's larger brand image. "We want to be seen as cutting-edge technology," Austin adds. "Anecdotally, we're seeing customers come in and [talk about] AT&T as a cutting-edge brand."AT&T is currently featuring eight of its most popular phone models on Surface and is looking into expanding it into all of its 2,200 retail locations.Sheraton is still finalizing its Surface rollout plans, but hopes to have several units in place by the end of the year. As part of a large-scale upgrade of nearly half of its North American portfolio, the company is redesigning more than 100 hotel lobbies, which will feature Surface. Applications are still being developed, but Surface could be used as an entertainment center where visitors can browse through CDs and create playlists like a personal jukebox, send photos home, download books and order food and drinks via credit cards or their hotel loyalty cards. (One Surface advantage: Bills are easily split among multiple credit cards.)This is how the Surface technology works: Within the unit, there are five cameras that search the screen for user inputs in the form of touch, gestures and objects. That input is then processed through a Vista PC and projected back up to the surface through a DLP projector, which is like a rear-projection TV turned on its side. Microsoft's Bolger says the horizontal Surface unit can potentially be made smaller or larger or displayed vertically.Because it's a vision-based system, unlike the kind of passive-resistant technology found in ATMs, Surface can employ something called a "domino tag," a series of white dots that can be created in unique combinations on a darker background, enabling Surface to pull up associated digital content. (Bolger says Surface will eventually read bar codes.) In AT&T's case, the phones have domino tags. The tags open up a world of marketing possibilities. For instance, fast-food soft-drink cups could have tags printed on the bottom, which, when placed on the Surface counter, could then call up promotions. Fast-food chains could also place a tag on movie tie-in toys that activate a trailer promoting the movie, provide local show times and include an offer to purchase the soundtrack from an online music store. Sheraton is already playing with tag concepts. "By simply setting a tagged wine glass on the surface of the table, a Sheraton bar or restaurant could provide guests and customers with information on the wine, pictures of the vineyard it came from and suggested food pairings tailored to the offered menu," says Sheraton rep Nadeen Ayala. Microsoft's Bolger explains: "What we're doing, from a marketing perspective, is repositioning the tabletop. We're taking what was an inactive surface and turning it into a vibrant interactive display." Avenue A/Razorfish designed the Surface interface for AT&T. (Razorfish is now owned by Microsoft after last year's acquisition of parent aQuantive, but has been working with AT&T on its wireless business since 1999.) John McVay, vp and client partner to AT&T at the digital agency, says he found that, left without a mouse or keyboard, users become comfortable very quickly as they pan, zoom and manipulate digital content with their fingers and hands. "By removing the input device we did have to give some clues, but then users picked it up intuitively," he says. "It's the natural manipulation of objects."Since Microsoft debuted the technology a year ago, Bolger says the company has received "more than 3,000 partner inquiries from 50 different industries in 25 countries." Microsoft believes Surface can be a $2-3 billion market by 2010. The company wants it to eventually have applications in enterprise, government, healthcare and school environments. (Aside from bringing up lesson plans or programs students may be working on, for instance, Bolger says Surface could be a valuable tool in teaching autistic children.) Surface's multi-user platform currently allows people to share and exchange music and images. In the future, it may change the nature of computing itself. "Because we have this large work surface, which we call a 360-degree user interface, we have the ability to have multiple people collaborating at once," says Bolger. "Using Surface transforms the way people use technology because right now technology tends to be very isolated. Surface transforms the experience to be very collaborative."

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Does Microsoft Have the Retail Touch?

Noreen O'Leary

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