Is Microsoft a Software Company?
by Michael Camilleri
In response to the snarky line I had regarding Windows Vista in my post yesterday, Andrew made the point that Apple can afford to sell their new operating system at such a low price because they’re a hardware company and selling software cheaply encourages hardware adoption. (The implication being that Microsoft is a software company and so can’t afford to do such things.)
I think Andrew’s mistaken on two grounds. First, the price of Snow Leopard that has me interested is the upgrade price. If its his contention that Apple makes money by encouraging hardware purchases then Apple should most definitely not be selling me a new operating system for my old computer.
The second ground where I think Andrew’s mistaken is that Microsoft is not a hardware company. Quite clearly Microsoft makes hardware (Xbox, Zune, computer peripherals, etc). What Andrew means, though, is that Microsoft isn’t a hardware company in that it doesn’t make the computers that Windows runs on. This is true enough but I think it’s a mistake on Microsoft’s part if it doesn’t realise it’s in the hardware business.
The vast bulk of Microsoft’s Windows revenues come from bundled sales with hardware1. So to the extent that they keep raking in that cash they need to keep people on their platform. I’m not saying my situation is atypical in anyway but I think John Gruber hit the nail on the head when he said that Microsoft had lost the contest when it came to people who love computers. Many of us, myself included, are still on Windows. But we’re not interested in Windows any more. We’re writing blogs posts about Apple’s new operating system. More importantly, when we’re recommending computers to our relatives/friends/co-workers we’re no longer recommending a Windows PC.
So what does this have to do with operating system upgrades? My point is that upgrades are how you keep people on your platform. Microsoft should have learnt that lesson from the experience with IE. Because when I think about buying a Mac, I’m not comparing Snow Leopard with Windows 7. I’m comparing it with Windows XP. And that’s probably not a comparison Microsoft wants me to be making.
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According to Ars Technica, only 5 per cent of Windows sales are retail sales. See http://arstechnica.com/microsoft/news/2009/06/windows-7-pricing-announced-cheaper-than-vista.ars ↩
Comments
It goes beyond that. Snow Leopard in terms of new features for users is simply not very compelling, most of the changes are behind the scenes and you cannot make a neat 5 minute demo to get people to buy it, at least not at the standard price.
However they do have features they really want to promote to developers, which means they need a high adoption rate otherwise developers won’t use the shiny new features.
I think Microsoft do realise that they rely mostly on sales from people buying new PCs. But if you wish to have that argument, then comparing upgrade prices is entirely pointless, because 95% of people won’t ever see or use that price, they will just be replacing their machine. But they are still a software company, not a hardware company.
Apple’s cheap OS upgrade may have you talking about software not hardware, but it still ultimately has you looking at and thinking about Apple hardware. It creates conversation about Apple and Apples machines. Which certainly have suffered from a loss of focus by Apple of late.
Win7 doesn’t have Vista’s, largely undeserved these days, negative press, which should help with adoption in that category. Microsoft really have made a great product and at this stage even with a cheap upgrade for OS X, if I was replacing my laptop I’d do so with a windows machine, Apple’s prices for computer hardware in Australia are just far too expensive.
This is not to say that Microsoft doesn’t make things difficult for themselves, you linked to that upgrade chart, that really does make a mountain out of a ant hill.
I think maybe we have different opinions about what makes a new operating system ‘compelling’. Windows 7 is no more ‘compelling’ to me than Snow Leopard is to Leopard because when I compare 7 to what I would be upgrading from (XP) I don’t really see anything jaw droppingly incredible. The problem is that, at least for the momeny, we’re past the point where operating system upgrades are ever going to be the OMG moments they used to be. Any operating system you use whether it be Windows, Mac OS X or an open source solution basically will work. In that environment I don’t think charging people $200 to replace something that basically works make any sense.
True, but when 95% of your sales come from OEM, you also don’t want to irritate them by dropping your retail prices.
Apple has no OEMs to irritate.
This Week in Google 5 has the gist of my thoughts about Snow Leopard.