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.

  1. According to Ars Technica, only 5 per cent of Windows sales are retail sales. See