Microsoft

Microsoft won't change the game by lowering price alone

Microsoft has made the decision to entice lower-cost device makers to adopt the Windows platform and remove cost as a barrier. Scott Lowe doesn't think price, by itself, is enough. Do you agree?

 

Windows price
 

Microsoft is beginning to cave to pressure on certain fronts, but (believe it or not) I’m happy to see this. This means that the company is acknowledging market realities. For decades, Windows has been a cash cow for Microsoft, raking in billions of dollars in revenue for the Redmond giant. Microsoft’s perch atop the operating system market gave the company ample opportunity to wring a significant revenue stream from consumers and enterprises alike. However, in recent years, many of Microsoft’s markets have undergone tremendous upheaval. In some cases, Microsoft has been slow to respond to significant market changes, and the company has found itself vulnerable on a number of different fronts.

This past week, Microsoft took some active steps to fight back against its rivals. The company announced it was dropping the price of Windows by a whopping 70% -- from $50 per OEM copy to just $15 -- but there's a catch. The $15 price is offered only for devices that cost the consumer $250 or less. Microsoft is painfully aware that it's being eaten from the bottom in some cases, and this price drop is just the first of what I expect will be many salvos.

It’s important to note that this price drop is for the full Windows suite, not the half-baked Windows RT that has created user confusion and generally muddied the waters for those looking to buy tablets. With devices purchased under this plan, consumers will be able to run the full range of applications, since this is the full Windows 8.1 experience. At just $15 per copy, I can’t imagine many OEMs clamoring for Windows RT -- even if it was free -- unless they want to build ultra cheap tablets that have a version of Office already installed.

I see Microsoft’s price drop as the first of many bitter pills that the company will need to swallow. When it comes to what's considered a commodity -- and many people are beginning to see the operating system as a commodity -- Microsoft will be unable to command the kinds of margins that it used to enjoy in this space.

Attacks from all sides

It’s no secret that Microsoft is threatened from all sides these days.  On the desktop, Google is working hard to unseat Microsoft as the king of productivity with its own web-based apps and Chrome operating system, all of which work with low-cost Chromebook laptops. In fact, the school district where I live is currently deploying hundreds of Chromebooks to students, and the teachers are really excited about the possibilities.

One such possibility that has become reality is collaboration between teacher and student. All students are provided Gmail accounts, which they share with their teacher. Using their account, along with Google Docs, students can work on their written assignments while the teacher provides real-time feedback.

Here’s the kicker: Office Online (formerly Office Web Apps) can do the same thing when combined with OneDrive (formerly SkyDrive). However, the real-time collaboration feature -- where each collaborator can see other typing in real-time -- is fairly new to Office Online. Furthermore, until very recently, Microsoft has done a spectacularly poor job in bringing together its various tools in a way that worked as seamlessly as Google’s tools, allowing Google to rein in the masses while it played catch up and worked out the kinks.

Now, though, it appears as if Microsoft is ready with OneDrive and Office Online.

Windows Server and cloud services are flying high

Microsoft has also been doing battle on the cloud front, working to fend off attacks from Amazon and Google, who would both love to eat up Microsoft’s enterprise business. Microsoft, in many ways, has been cannibalizing some of its own business, as it helps organizations shift from on-premises Exchange systems to services such as Office 365. At the same time, these kinds of moves would seem to damage the Windows Server market -- but that's an area of tremendous growth for the company. Cloud services have also been one of Microsoft’s fastest growing areas in the past year.  

Summary

Given the competition from systems that don’t carry a direct cost for the operating system, it’s no surprise that Microsoft has made the decision to entice lower-cost device makers to adopt the Windows platform and remove cost as a barrier. That said, in the tablet space, Android and iOS are firmly entrenched, and the Microsoft app-development ecosystem is a far cry from what those two systems enjoy. A price drop is welcome, but it will take more than just price to make Windows relevant in the tablet space. The fact that the price drop is for a full edition of Windows is a step in the right direction, though, as it provides the most full-featured user experience.

Do you think Microsoft will win over the mobile space by lowering the cost of Windows on inexpensive devices? If not, what will it take? Share your opinion in the discussion thread below.

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About

Since 1994, Scott Lowe has been providing technology solutions to a variety of organizations. After spending 10 years in multiple CIO roles, Scott is now an independent consultant, blogger, author, owner of The 1610 Group, and a Senior IT Executive w...

26 comments
otterpower
otterpower

Until Microsoft and its manufacturers figure out how to invoke the all-important right click of the mouse into their mobile devices they don't have a prayer.

DAMANgoldberg
DAMANgoldberg

I don't know the inner workings on Windows enough to truly have an informed comment on whether it's possible for the product known as Windows RT to run legacy apps in a hypervisor or virtualization mode, but it seems to me the only way that platform continues is a move like that.


I am not a fan of the Metro interface of Windows 8/8.1 on a non-touch enabled screen, so why isn't this either removed or deep hidden on regular systems only to be used on touch hardware? I do believe Windows 9 corrects this, but this can be fixed in Windows 8.2 or at minimum Windows 8.5 if the new CEO decides to wait on 9.

FlyByByte
FlyByByte

I noticed this article didn't mention anything about Ubuntu Phone.  Ubuntu Server has been established as a fast, reliable, stable server operating system, and Ubuntu Desktop has gained traction in a market where Linux Operating Systems have lagged behind Microsoft for years.  It is interesting to note that Google and Amazon are running some variant of Linux as the server operating system that powers their cloud services.  Ubuntu Phone could do very well on phones and tablets, and if so, Microsoft will have to figure out how to cut the price of OEM versions of Windows from $15 to "FREE".

PhysicsTech2
PhysicsTech2

There seems to be a mixed bag of feelings here, and many opinions are well held on both sides.

I would like to point out that there is a huge push to move people off of WindowsXP, and a lot of us with small businesses would like to see a cost effective way to move up on existing hardware to Windows7.

Most of us are aware that $99 for a copy of Windows is really too high.

Where is the push to provide people an easy way to stay on Windows, but upgrade cheaply??


You notice I have omitted Windows8 - what a piece of crap, and something that holds ZERO draw for those of us with good hardware that would like to upgrade our OS. The learning curve and hardware costs make an upgrade to 8 simply ridiculous. 

FXEF
FXEF

The reason Windows is losing market share has little to do with product price, it is the quality of the product that consumers are shying away from.... Not the price.

lk_bellsouth.net
lk_bellsouth.net

The discount that MSFT has offered is, IMO, too little, too late. We all know that Windows 8.* is a huge failure. The price doesn't matter. If one does not accept this fact then take a look at NetMarketShare.com. As of today the combined use of Windows 8 and Windows 8.1 is 9.25%. Today's figure for Windows 7 use is 46.42%. and gradually climbing. Whatever MSFT does to generate interest in Windows 8.* is akin to the coyote howling in the wind. It makes a lot of noise but serves no useful purpose at all. Retail customers and the enterprise generally share one thought in that they simply want it do perform the assigned tasks in the easiest and most seamless manner possible. If MSFT ever recognizes this fact then they have a chance to succeed. At this point it require a Herculean effort and, quite frankly, I question if the mindset that exists at MSFT is capable of recognition of this fact. 

Hazydave
Hazydave

Well, they certainly did achieve one thing here: they demolished the market for $300 Windows systems. 


I looked at this as a possible answer to competition with Android on tablets... cheaper tablets, anyway, can now ship Atom Z3xxx processors and Windows 8 with not huge licensing disadvantage against Android devices at that price point. And they killed Windows RT here, too, had it not already been dead (RT runs about $90 per unit). This affects the super cheap market, because Devices-Microsoft doesn't care about that market. They want to sell $500-$1000 tablets. 


But yeah, this does also shoot against Chromebooks. If one were to measure the success of ChromeOS against the fear it seems to have started at Microsoft, I'd claim it's a smash hit. First the ads, but sure, this targets the Chromebook price point as well... at least, a $300-ish PC can now sell at $250. Again, not the whole market, but the low end is more price sensitive. 


But neither of these alone work. I'm not sure Microsoft even understands why Android, iOS, or ChromeOS are each a real threat to Microsoft, because they're a threat to Microsoft's vision of personal computing. It's not just about money. ChromeOS is sold as a zero maintenance PC. Casual PC users don't really understand Windows... they memorize a few "recipes" for success with applications. And just one thing changes, they get into trouble. They're generally oblivious about malware, and how to stay safe on the Internet. ChromeOS pretty much fixes all of these things, and delivers a system that anyone can use. It's of no value to most of us here, but it's perfect for an educational PC setup: software in HTML is all you'll need for classroom use, no distribution, no need to debug Windows driver or other quirky problems (which I've done for my wife, a 2nd grade teacher, a least a few  times a year when their IT guy can't figure it out), etc. 


Similarly, Microsoft thinks tablets are basically just keyboard-quasi-optional laptops. They don't understand tablet users or tablet use. So sure, they're making a few tablets to replace laptops directly. But they're not making tablets to replace Android or iOS tablets. That doesn't fix their main problem, which is also not specifically one of price. 


But it's nice to seem them hammer in the last nail in Windows RT's coffin. 

said.fox
said.fox

I totally agree with that not only lowering the price will help. As a customer, when I decide to purchase a tablet, I will prefer Android based tablet because the wide variety of free applications found on the Google Play.

tjcolby
tjcolby

The $250 price threshold is too low.  The Chrome books I see on the market are closer to $300.

bpate
bpate

Microsoft could give Windows away and it wouldn't matter.  If you have used a full blown Windows tablet versus an iPad you would quickly realize how the Windows Tablet pales in comparison.  Just the apps in the app store alone is enough to make me not use Windows.  I am saying this also because I went out and bought an Asus VivoTab full Windows 8 tablet.  It stunk so bad I sold it for 25% of the original value and bought an iPad.  I paid over $400 for my vivotab and I had buyers remorse within a couple of weeks of making the purchase.  I have worked in third level IT support for almost 20 years.  I am sorely disappointed with Windows 8.  The interface is super confusing, the touch screen in the traditional Windows desktop is impossible to use, the on screen keyboard is terrible, and the lack of apps in the appstore make it a $400 paper weight.

jmdess
jmdess

I think that the problem for Microsoft is Windows "metro" interface.  People really do not like it and reject it.

sysop-dr
sysop-dr

Price is not what people are worrying about it seems. My wife is a typical mobile device user. She doesn't have the background in computers I have and just wants it to work so when we were getting new phones her criteria were, it has to be android (because that is what everyone else seems to have she thinks) and it has to be either Red or leopard print. Yeah, color was as big of an issue as OS.

She doesn't use Windows or Linux, she uses Firefox (the application) and Facebook and email (Microsoft based web email but she uses Google apps for documents.) What it is running on doesn't matter, as long as she can print stuff and send out her catalogs to her customers what the OS is doesn't matter.

We in the IT community are all about the OS it seems but to everyone else it just has to work and well they see more apps in IOS and Android so they go there. 

Windows could be free and they won't care because that is hidden in the price of the device and I think that the companies making these devices are not going to pass the whole savings to the users.

primartcloud
primartcloud

I find that win8 is the most fluid, complex, sophisticated OS out there. It needs processing power that only now has moved down the food chain so that inexpensive tablets can run it. Next year even more powerful processors will become available so that MSFT introduces new features that will increase the user experience. I anticipate  the breakthrough of Win9 Surface 3 running on a K1 processor.

Alienwilly
Alienwilly

As a diehard MS O.S, fan(W-7) and repair tech, I tried Ubuntu 13.04 the other day on a laptop and was quite impressed at how well it worked. If Microsoft continues in their present path I will be recommending a substitution O.S. to my MS complaining customers. Not everybody is happy, Microsoft.

Rusty Levo
Rusty Levo

About time, tap in regain the market and close the door. Hook line and sinker. Good on ya Microsoft. Peace to the People. O

Roland Eng
Roland Eng

More Apps with Widgets and good Voice Assit, Better Symbol Icon Interface Design to intuitiv Use by any Age !

Mwila Mushroom
Mwila Mushroom

The solution is simple, OPEN SOURCE... Open platforms attract innovations and enable more meaningful contributions from the developer communities.

Uttam Baroi
Uttam Baroi

U suck wth windows phone...dont mke it a phone fr james bond but make it to compete with other two

Blair Groves
Blair Groves

Microsoft could do what Apple and Google know works... LISTEN to your target audience, and don't try to solve problems that don't exist by creating new problems (I refer to the "modern" interface).

Rob Castro
Rob Castro

Pick your battles MS, stay out of phones.. stop trying to fancify the OS.. maybe factor some user feedback to evolve in a direction there is demand for, rather than just fighting to hold a position, or being a 'me too' product provider

Julian White
Julian White

Make Windows free, have users pay for extendability (office, dvd playback rights etc). Keep Windows XP as a fallback OS.

Karlos Salisbury
Karlos Salisbury

Not be Microsoft, I kid I kid. I'd say apps. The software available is really why you use any OS and why the Nokia, blackberry and windows phone operating systems aren't very popular. I personally can't see Microsoft winning a race to the bottom at this stage when iOS and Android are so entrenched, but if they could offer an OS with apps you actually wanted on a desireable device they could easily capture the market. iOS users are fairly loyal but there's not much fanboyism with Android, so users could easily be swayed to a M$ device for their next phone/tablet etc.

adornoe
adornoe

Okay. So, this is what I had suggested that MS do a few months ago, and finally, they're doing it.


With this move, Windows 8 can be installed on those things that Google calls Chromebooks, and put an end to the silliness of having Google clam that Chromebooks are as good as PCs and that people don't really need PCs. 


Any Intel-based tablet can also get full Windows 8 installed, and the silly consumption only tablets will have met their match, and could eventually disappear from store shelves everywhere.  


When the price of a full-blown PC has come down to tablet prices and less, why would anyone choose the simple tablets?


However, I think that the best price for Windows, is $0.00, where at that level, even the ARM-based Android and iOS tablets wont be able to compete.  MS has many services which it can make up the difference after the devices sales.  Services that have continual charges,like Office Online, can be the big selling points that make "free" OSes worth it.

Gisabun
Gisabun

For a device that would cost under $300, chopping off $35 - and that is before the manufacturer's mark-up is a small but decent discount. Considering at say $250, there is very little mark-up for most devices as it is. You don't see too often a $250 device reduced by $35 or more unless it is about to be discontinued.

I don't think Microsoft said specifically that it is for Windows RT only.

The $15 price was what Microsoft charged OEMs when netbooks were popular a few years back. Unlike then, there are no hardware restrictions [i.e. CPU, RAM, hard disk] - just as long as it's $250 or less.

adornoe
adornoe

@Gisabun The article above says that the $15 price is for the full Windows, not the RT version.  

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