Microsoft: The Next Investigations 299
Runt-Abu writes: "Some of the UK's top companies (and some of the not-so-top as well but hey...) are questioning Microsoft's policy on pricing. In an open letter to the Secretary of State for Trade and Industry several of the top companies voiced concern at the cost of an extra £880m over a typical four-year investment cycle.
No one from Microsoft has commented at this time, given the current state of affairs it's highly likely many companies will not upgrade or seek alternative cheaper solutions." Basically, a large trade group is asking the British Office of Fair Trading (akin to the FTC in the U.S.) to investigate Microsoft's price increases. And Gogl writes: "It appears the attorneys general of 6 more states have voiced concern over Microsoft, particularly regarding the upcoming release of Windows XP. Microsoft and their allies claim that AOL-Time Warner was behind this, which AOL of course denies," pointing also to this piece on Microsoft's changing licensing costs.
Microsoft is fully in it's right (Score:5, Insightful)
It's up to Microsoft's costumers to decide if it's more cost efficient to upgrade to Windows XP or take any other path (including not-upgrading and stop having support in some years time or start a migration process of some or all systems to other operating systems with different cost structures)
As i see it a more expensive Windows just increases the number of situations in which it's cheaper to migrate/implement to/in another operating system and contract a System Administrator for that OS instead of a Windows System Admin.
What XP effectively is doing... (Score:5, Insightful)
Irony: Remember when institutions bought into this myth, that with Microsoft they could standardize on one stable platform? The last laugh is thinking of all these institutions dropping huge $$$ (or £££) on upgrades (not just license fees, but the overhead to "upgrade" all workstations.
I've seen some graphical representations of Windows penetration and W95 still holds a significant chunk. Expect XP to have slow penetration, particularly as institutions are doing a lot of belt tightening. If W95 or W98 works, leave it at that. We just upgraded our workstations from W95 to W98 (btw, I've got a bone to pick with anyone who says W98 is more stable than W95, it BSOD's as often at work as it does on my 2 year old laptop) and it'll be probably a decade before anyone around here sees XP.
IMHO I wouldn't be buying MS stock based upon high anticipated sales of XP. Maybe base it on the acceptance of their XBox or something else.
Re:The prices really do keep going up. (Score:3, Insightful)
at this point MS knows that they can attempt to kill off most of the pirating (yes, there are some copies that do not have to be registered). They have allowed it to go on long enough and have gotten a pretty nice niche (don't you think?)
They know that people are going to want to run Windows software and they know that most of their previous products have pretty much sucked. Win2k and XP are actually decent (from what I have heard).
I can't see people running XP over Win2k when they are both pretty stable.
What do I know though?
Re:The prices really do keep going up. (Score:2, Insightful)
It's a free market... (Score:5, Insightful)
To any business that's become reliant on MS technology, and thinks these price hikes might cost them dearly, I'd say this: This is what Richard Stallman warned you about 20 years ago. If you rely on proprietary software, belonging to a third party, you're putting yourself in a position where that third party has you by the nuts.
In future, leave yourself an escape route: at the very least make sure your business' IT is based on open protocols, and aim to use software which allows you to flit from support suppier to support supplier at will (at present OSS is the only kind of software I can think of which allows this).
Re:Microsoft is fully in it's right (Score:5, Insightful)
True, but they also are bundling Office XP - pretty much requiring people to buy new Office licenses to even PARTICIPATE in the new OS license program - which is their right but as a monopoly, its an unfair practice. I mean seriously - how many of you out there think moving from Office 2K to Office XP is worth teh cost? Hell Office 97 to 2K wasn't much of an improvement. But to require Office purchases to participate in the OS volume license is borderlne criminal. This quote was most chilling:
Microsoft has finally decided to use their monopoly to try and boost earnings in a crashing economy and at some point they push too far and FORCE people to look elsewhere and possibly TRY to move to other platforms. It'll hurt them.
For example, if you have Office licenses for ALL yoru PCs (many companies do) but realize that your coders don't really NEED Office - its just for browsing stuff sent from mgmt - you may start looking into alternatives, either StarOffice or even simple doc readers and then cut your licensing WAY back - this who fiasco will either vastly increase IT costs for companies (and thus costs to us the consumers) or will blow up in Microsofts face as companies finally throw up their hands and tell MS to GTH.
So? (Score:3, Insightful)
Not a lot, when you think about it.
Microsoft has saturated the market that made them a monopoly- either they need something more compelling than XP and Office 2000 (Which effectively dies on you if the OS thinks your hardware has changed- you have to update your license key and if MS thinks you're cheating, they'll charge you again for that software you paid for the privilege to use...).
Re:In a free country... (Score:2, Insightful)
Go MS! (Score:5, Insightful)
I hope they keep raising prices. The more they try to squeeze revenue growth out of a mature market, the greater the opportunity for alternative operating systems.
Think if the ketchup analogy that business types talk about. Heinz is the default ketchup brand. Why? Well they stick bunch of well known ingredients into a bottle, put a well known label on it, and sell it for a reasonable price. Sure other brands might be a little cheaper, but not by a whole lot, and Heinz gets to keep their market share even though they aren't doing anything particularly special. It works as long as they don't raise the price too high. If Heinz were, say, double the price of their nearest competitor then people would start to take notice and try the alternatives. Once they got to know some other brands Heinz would have a really hard time winning those customers back.
Likewise with operating systems. For a lot of people nowadays an OS is an OS. You can argue that Linux or MacOS don't have the application base that Windows does, and you'd be right, but they both have enough for a good many people. Most people are just buying the brand and they'll keep doing that as long as MS doesn't screw them too badly.
Unfortunately for MS, their shareholders expect them to magically produce growth rates in the double digits year after year. Employees expect it too, since that's how they make money from stock options. How do you make more money when your product is basically the same and the market is maturing? That's right, you squeeze your existing customer base. (Or you expand into video games and Online services, but that's tough when your competitors are Sony and AOL/Time Warner)
Individual vs Enterprise License Agreements (Score:4, Insightful)
I'm not the one in charge of purchasing the Enterprise License Agreements at MyCorporation, but I've read some articles in the Register and elsewhere that indicate that MS has a pricing policy that makes XP cheaper if it is purchased before a specific cut-off date that is looming rapidly. If you upgrade to XP later, subsequent Agreements will be more expensive.
I get the impression, too, that most corporations have been trying all they can to standardize on Win2K and are not interested in hearing about this carrot and stick ploy on XP pricing.
Of course, as time proceeds and our new users buy laptops with XPSP4 and Outlook 2004 that "works best with" XP and clunky with Win2K, our corporate IT support people will be coerced into a position where their wallets will have to crack open a bit wider to do that upgrade or suffer the wrath of users wondering why "we're behind the times".
If it didn't hurt so much financially, it would be pretty funny. Now that MS has dominated the market, the only revenue growth opportunity left to them is to force their customer's to upgrade more frequently!
Okay--so why buy it? (Score:5, Insightful)
I find it interesting that these companies even care. Windows XP offers a few bells and whistles--but it doesn't offer a lot more than Windows 2000. Sure--it offers support for joysticks and heavy-duty gaming. But that doesn't strike me as a compelling new feature causing a corporation to upgrade ("And, uh, this slide shows how we'll be able to use this new version to install Dirk Blasto Space Invader joysticks in all of our CSR workstations to handle irate callers...").
It seems to me that Microsoft isn't just trying to shift the business model from a "purchase" to a "pay-for-use" model, as many have suggested. I think they're also trying to--or will end up being forced into--a business model similar to Intel's. When the next round of microprocessors appears the chips are sold at a premium price--and the product clears the market at that price. As Intel rachets up production it can profitably lower the price, clearing the market of demand at that lower level. The cycle keeps repeating--Intel (and other semiconductor manufacturers) have this down pat.
Microsoft has done similar things in the past. Their Visual Studio 6.0 toolset is, by now, quite long in the tooth. They sold tons in the early days of the product, but sales are considerably lower--so Microsoft offers bundled books and tools, and offers lower prices to resellers, to sell product. In effect they're lowering the price to entice buyers into the market who aren't willing to pay the higher price.
I think we're going to see the same thing with XP. Corporations are simply going to stand pat: why upgrade? All XP gives you is some easily-ignored bells and whistles, and the ability to use joysticks. In order to get corporations to upgrade Microsoft is going to have to make it worth the corporations while--which will almost certainly mean price decreases and less draconian license restrictions.
My largest customer is number 2xx on the Fortune 500. They're just now rolling out Windows 2000 to desktops around the world--and they have shelved plans for even piloting XP. Microsoft wants them to upgrade--but can't make a compelling case for a whopping upgrade expense (plus the cost of actually installing the OS, labor, etc.) in a time of tightly-trimmed budgets and some layoffs. "Hey," said a friend and senior manager, "we just announced we're whacking 200 people. If we spend three million bucks installing XP we're going to have to whack another 40. Is the ability to use a joystick worth those peoples' jobs?"
Last week I attended a seminar that included an impromptu lecture by a highly-regarded economist. One of the key changes in the economy over the past 20 years, as he sees it, is that manufacturers by and large have lost control of their pricing. You don't ship shirts to a department store and tell them what to charge--instead you get a purchase order from Wal-Mart telling you what they're willing to pay. And you deal. The major exception that this economist mentioned was pharmaceutical companies, because they're protected by patents on their products. If your doctor prescribes ButaGlutaMax, you can only get it from one place. An exception he did not mention was software--and I think Microsoft is about to learn this lesson. In a booming economy with a bazillion dot-coms buying PCs, Microsoft sold a lot of OSs. The boom is over, budgets are drying up all over the world, and Microsoft is trying to force through a price increase. I don't think they're going to be able to control their prices this time around.
On the price of windows... (Score:2, Insightful)
Your employee makes $10/ hr.
Therefore your proposed free solution has to be good enough to retrain the employees in less than 20 hours.
Cant do it? Then you are in the heap of solutions that were good, but not better.
Re:Are they forcing you? (Score:3, Insightful)
Well, as an IT manager at a big corporation a few years ago, I can tell you that decisions like these (lagre scale licensing issues and software standards) are made MUCH higher up - the CIOs and their direct reports. The poor IT manager way on down trying to save $$$ in his budget for his small facility often has little choice. Been there, done that. 'Standardization' is a huge buzzword and Microsoft utilizes it to the hilt. If you decide to branch out and go with something different to save money in your budget (that would otehrwise have gone to the central site license group and then straight to Microsoft) you often are viewed as going against the grain, troublemaker, whatever. So unless you BEEN THERE, don't make such foolish statements. Yes, there are PLENTY of Microsoft sheep out there who rather than choosing Microsoft because they BELIEVE it to be better for their situation, choose because its what everyone else does. But also realize that often an IT managers' hands are tied from on high.
Re:It's a free market... (Score:2, Insightful)
Re:Are they forcing you? (Score:2, Insightful)
Just try to buy a machine without it pre-installed. Good luck! You ARE forced to buy it if you want/need newer hardware and don't want to build your own.
Economic Analysis (Score:4, Insightful)
As an economist, it is pretty clear what is going on here. If a monopolist wants to maximize current profits, he will always price on an "elastic" portion of the demand curve. In looser language, you maximize profit by raising price until the point where you really are driving some substantial percentage of consumers away. (Why? Because at lower prices, price increases don't cost you much in terms of lost demand and they also reduce your costs.) You can prove a formal version of this mathematically.
However, in the past MS was worried not just about current sales, but also about future sales. This is called "dynamic pricing". MS's attitude toward dynamic pricing is changing because: [i] they have close to 100% share already, [ii] the number of PCs in not increasing as fast (and so future market share is no longer much more attractive relative to current market share) and [iii] the threat of anti-trust regulation makes the future less certain.
Thus, MS is turning to the question of how to squeeze out current profits. This involves driving some customers away in order to raise revenue and lower costs for existing customers.
The opportunity for competitors (including Linux) is obvious. MS may be moving away from dynamic pricing too soon, if there really is a threat to its future market share.
Finally, Vermont is IN... (Score:4, Insightful)
Microsoft's situation is interesting, and perhaps a little sad. Their business model appears to have two cornerstones: Aggressive compound growth and fast, frequent shipment of incremental improvements focused on user perception. Besides that, they've until recently been a 'gentle monopoly' to the end user, not taking advantage their power to control prices.
This model has served them well, up until recently. But they've effectively reached the limits of desktop revenue, owning monopolies on the OS and the office applications. They're trying to break into imbedded, server, and game console markets. So far their fast/incremental business model has not helped them get as far into the imbedded or server markets as they'd like, where 'next release' and eye candy simply don't cut it when base functionality is unreliable or insecure.
With Win2k they've made great strides in reliability, but really they're only getting to the base function point. Prior to this, anyone but Microsoft would have been laughed out of the datacenter with most of what they sold.
In imbedded, they've stuck by WinCE in their usual fashion, but I can't see Microsoft playing in any arena where there isn't enough of a display to show the Windows logo.
In penetrating new markets to expand their revenue base, the XBox is probably the most important product they have. But Sony and Nintendo won't give up without a fight, and the timing of the recession is just plain bad for having the most expensive console on the market, no matter how capable.
So with the desktop OS and office market saturated, server and imbedded markets stalled or slow, and not quite ready for console games, in order to continue the revenue curve that is so essential to their invincible appearance, Microsoft had little choice but to ramp up the license terms.
They're between a rock and a hard place.
How dumb is this? (Score:3, Insightful)
'We think M$ software is too expensive, but we're not prepared to bite the bullet and use an alternative or fund the devlopment of other solutions to our problem.'
With 880 million pounds - almost a billion pounds, well over a billion $US, you could easily afford to pay for a team to write an OfficeXP to Office97 file format converter, even if it meant that team of people had to spend every waking hour for a month figuring it out.
You might even have a few bucks left over, like, ohh, about 879.8 million pounds, absolute worst-case scenario.
With a few of those millions, enough people could be hired to work on OpenOffice, StarOffice, KOffice or the GNOME Office suite to make it, if not a total replacement, at least a workable alternative to Office XP.
This, essentially one-time, investment would save the next 4-year period's 1.2 billion pound bill, as M$ jacks the price up again, since nobody has bothered to get off their fat corporate ass and do something about it.
Its like these companies have voluntarily beached themselves like whales and are letting a giant vulture (i.e. Microsoft) slowly eat their flesh while they slowly die of suffocation in the blistering sun.