Microsoft

Microsoft gives up on charging for Windows in China

Microsoft has tried to stem the tide of Windows piracy in China. It's time to embrace it.

Piracy

Call it amnesty. Call it common sense. Call it whatever you want, but Microsoft's decision to upgrade all Windows users in China to Windows 10, even if they're using pirated versions of Windows, is a clear sign that the operating system is dead.

No, not dead as in "doesn't matter," but dead in the sense of "not something anyone sells."

Microsoft is now giving away Windows 10 to "re-engage" with the three quarters of the Windows users in China who pirate Microsoft's software. It's doubtful that Microsoft will ever manage to sell them a copy of Windows, but it may lead them to purchasing other software services through Microsoft. That's the plan, anyway.

Microsoft in China

Microsoft is either a roaring success or an abject failure in China, depending on how you view piracy. While Microsoft has complained for years about the billions upon billions of dollars lost to Chinese piracy and recently has enlisted US state attorneys general to block Chinese pirates, but the reality is that this same piracy made it relevant to Chinese businesses and consumers.

In a world aggressively embracing free and open-source software, Microsoft had a problem: how to sell "pricey" in a country that wanted "free."

But piracy, it turns out, helped.

Years ago, in fact, Microsoft's Bill Gates conceded that piracy was the gift that kept giving to Microsoft in China: "It's easier for our software to compete with Linux when there's piracy than when there's not. Are you kidding? You can get the real thing, and you get the same price."

Piracy has kept Windows relevant in a way that squeezing a few yuan out of would-be pirates couldn't.

Making money elsewhere

Today, Microsoft faces the same challenge it has over the past two decades. As Ya-Qin Zhang, former head of Microsoft's Chinese R&D lab, stated in 2007: "In China we [don't] have problems with market share. The issue is how do we translate that into revenue."

The market share has been supported by piracy, as noted. But the revenue? Well, that can be solved with cloud.

Let's face it: it's not going to be resolved by Microsoft upgrading everyone to Windows 10 and then praying they'll love the "genuine" Microsoft experience and pay for Windows 11. And Chinese consumers probably aren't going to fall for Windows-as-a-cloud-service, either.

After all, no one expects to pay for an OS anymore.

With Apple bundling the operating system with hardware and all vendors — including Microsoft — now making the OS free with mobile devices, the day of charging for Windows is rapidly coming to a close.

China, more than any other country, is driving such changes, as I've written before:

"The future of China's software industry will necessarily look nothing like the history of the U.S. software industry. There won't be companies making billions of dollars selling proprietary shelfware. Intellectual property, in the Western sense, simply won't factor into China's tech economy.

"Instead, vendors will need to find a way to sell something other than software. Cloud services will succeed. Hardware appliances will, too. Ditto support and consulting services (though at lower margins). Basically, China's software industry will look like an industry filled with open source and no easy, proprietary crutches."

In other words, say goodbye to the days of charging for Windows, but hello to a world of charging for Office 365, Microsoft's cloud service. After all, while it's relatively easy to pirate software, it's very hard to pirate cloud services.

Open sourcing Microsoft's future

Open-source advocates have called for Microsoft to open source its Windows crown jewels for years. Well, it finally might actually make sense.

Sure, not long ago, former Microsoft CEO Steve Ballmer opined that Microsoft "made Windows too open," leading to undesirable effects like "crapware" loaded onto the OS. But that's not the kind of openness that matters.

In China, Microsoft was forced to share source code with the government. So, there's already a precedent for opening up. Doing so on a wider scale could actually lead to an even broader base of Microsoft software that would provide a foundation for even more Microsoft cloud-ware.

That's a good thing for a company trying to find its way forward in the modern cloud economy.

Of course, there's always the risk that Windows would be forked (as Google's Android has been in the Chinese market and elsewhere), making for hundreds of millions of copies unsold and unsuitable to host Microsoft cloud services. That's a very real risk, but it's one a newly open and cloud savvy Microsoft may want to take.

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About Matt Asay

Matt Asay is a veteran technology columnist who has written for CNET, ReadWrite, and other tech media. Asay has also held a variety of executive roles with leading mobile and big data software companies.

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