One of Microsoft's biggest decisions this year will be whom to charge
for Windows 10, and the dollar figure on the price sticker.
Hints of that decision could come as early as Jan. 21, when Microsoft executives will not only unveil the next iteration in Windows 10's string of previews, but also further explain Windows' part in the company's overall strategy. CEO Satya Nadella has alternately portrayed that strategy as "cloud-first, mobile first" and "productivity and platforms."
In December, Microsoft COO Kevin Turner said that the firm would reveal its Windows business model plans in early 2015. Details of that model have not been disclosed, but would certainly include how Microsoft figures to make money off Windows after it's begun giving away licenses to makers of phones, smaller-sized tablets and inexpensive personal computers.
As part of an explanation of monetization -- which Turner acknowledged requires "creative ways" -- Microsoft might also use the January event to discuss Windows 10's upgrade pricing.
Or not.
Wes Miller, an analyst with Directions on Microsoft, was skeptical in a recent interview. "[Upgrade pricing] isn't the most important thing right now," he said, pointing out that Microsoft typically discloses that information just a few months before shipping, or early-to-mid summer when it releases a new operating system in the fall.
Make or break time for Microsoft
Instead, Miller believed that Microsoft would discuss Windows in more general terms in January, perhaps focus on its creation, or as he put it, "Talk about how the sausage gets made."
Still, Windows 10 will be "the real make-or-break" test for whether Microsoft can reinvigorate the consumer part of its PC customer base, Miller said. But he was painting in broader strokes, not focusing on upgrade pricing only.
Jan Dawson, principal analyst at Jackdaw Research, saw it differently. Although he had no predictions for what Microsoft would reveal in two weeks, he has called the upgrade pricing question one of the most important facing the company this year. "The single greatest test may be whether Microsoft can successfully charge large amounts of money for a new operating system to consumers and still see significant uptake," said Dawson in a piece published last month on Tech.pinions.
There is increasing evidence that Microsoft believes it will not be able to pass Dawson's test with Windows 10, and so will, through necessity, choose a strategy very different from decades-long pricing practices.
It's all about the price
That last means Microsoft must get the pricing right at the start or face more backtracking, something it should be loath to do, what with the backpedaling from Windows 8 in the last two years.
Altogether, the evidence points to a rethinking of Windows 10, including its pricing. But what are
Microsoft's options?
Dawson laid out three.
Option A: Free upgrade from Windows 8.1 seems like a lock. "This would be mostly about pacifying those users," said Dawson, referring to the complaints lodged about Windows 8 and even Windows 8.1, like the lack of a Start menu, and a reluctance to try "Modern," née "Metro," apps.
Option B: Free upgrade from older versions of Windows may be a stretch, but a free deal for Windows 7 would almost instantly boost the user share of Windows 10, where customers could be monetized through app and service purchases.
Option C: Free upgrades to all consumers, and possibly free licenses to all consumer PC OEMs, too, while continuing to charge for enterprise-grade licenses, would be the most radical move.
The options could be combined, so that Microsoft, for example, selects B but also applies C, giving a free Windows 7-to-Windows 10 upgrade to consumers only.
Not surprisingly, these options come with trade-offs and long-term implications.
Under any of its free upgrade options, Microsoft will surrender varying amounts of revenue, with the smallest hit from A, much more from B and the largest, by far, from C. With between hundreds of millions and billions of dollars at stake, revenue drop-off certainly has to have been at the fore of the firm's deliberations.
OEMs would rightfully see any broad-based free upgrade as a threat, something doubly difficult for them to swallow during the current tough times for personal computers.
Free upgrades would also set a precedent, Dawson observed, that might be difficult to later reverse. That alone makes Microsoft's Windows 10 decision important: It could be stuck with what it chooses in 2015. In some ways, however, that hesitation to break with precedent would be minimized. Most analysts expect that Windows 10 will be the last major upgrade, if not for forever, then for many more years than the usual three-year cycle, with constant updates replacing occasional upgrades.
Perhaps Microsoft believes the benefit of a widespread free upgrade -- anything more than Option A -- outweighs the revenue and OEM relationship problems. If so, one reason has to be its app issue.
Hints of that decision could come as early as Jan. 21, when Microsoft executives will not only unveil the next iteration in Windows 10's string of previews, but also further explain Windows' part in the company's overall strategy. CEO Satya Nadella has alternately portrayed that strategy as "cloud-first, mobile first" and "productivity and platforms."
In December, Microsoft COO Kevin Turner said that the firm would reveal its Windows business model plans in early 2015. Details of that model have not been disclosed, but would certainly include how Microsoft figures to make money off Windows after it's begun giving away licenses to makers of phones, smaller-sized tablets and inexpensive personal computers.
As part of an explanation of monetization -- which Turner acknowledged requires "creative ways" -- Microsoft might also use the January event to discuss Windows 10's upgrade pricing.
Or not.
Wes Miller, an analyst with Directions on Microsoft, was skeptical in a recent interview. "[Upgrade pricing] isn't the most important thing right now," he said, pointing out that Microsoft typically discloses that information just a few months before shipping, or early-to-mid summer when it releases a new operating system in the fall.
Make or break time for Microsoft
Instead, Miller believed that Microsoft would discuss Windows in more general terms in January, perhaps focus on its creation, or as he put it, "Talk about how the sausage gets made."
Still, Windows 10 will be "the real make-or-break" test for whether Microsoft can reinvigorate the consumer part of its PC customer base, Miller said. But he was painting in broader strokes, not focusing on upgrade pricing only.
Jan Dawson, principal analyst at Jackdaw Research, saw it differently. Although he had no predictions for what Microsoft would reveal in two weeks, he has called the upgrade pricing question one of the most important facing the company this year. "The single greatest test may be whether Microsoft can successfully charge large amounts of money for a new operating system to consumers and still see significant uptake," said Dawson in a piece published last month on Tech.pinions.
There is increasing evidence that Microsoft believes it will not be able to pass Dawson's test with Windows 10, and so will, through necessity, choose a strategy very different from decades-long pricing practices.
It's all about the price
That last means Microsoft must get the pricing right at the start or face more backtracking, something it should be loath to do, what with the backpedaling from Windows 8 in the last two years.
Altogether, the evidence points to a rethinking of Windows 10, including its pricing. But what are
Microsoft's options?
Dawson laid out three.
Option A: Free upgrade from Windows 8.1 seems like a lock. "This would be mostly about pacifying those users," said Dawson, referring to the complaints lodged about Windows 8 and even Windows 8.1, like the lack of a Start menu, and a reluctance to try "Modern," née "Metro," apps.
Option B: Free upgrade from older versions of Windows may be a stretch, but a free deal for Windows 7 would almost instantly boost the user share of Windows 10, where customers could be monetized through app and service purchases.
Option C: Free upgrades to all consumers, and possibly free licenses to all consumer PC OEMs, too, while continuing to charge for enterprise-grade licenses, would be the most radical move.
The options could be combined, so that Microsoft, for example, selects B but also applies C, giving a free Windows 7-to-Windows 10 upgrade to consumers only.
Not surprisingly, these options come with trade-offs and long-term implications.
Under any of its free upgrade options, Microsoft will surrender varying amounts of revenue, with the smallest hit from A, much more from B and the largest, by far, from C. With between hundreds of millions and billions of dollars at stake, revenue drop-off certainly has to have been at the fore of the firm's deliberations.
OEMs would rightfully see any broad-based free upgrade as a threat, something doubly difficult for them to swallow during the current tough times for personal computers.
Free upgrades would also set a precedent, Dawson observed, that might be difficult to later reverse. That alone makes Microsoft's Windows 10 decision important: It could be stuck with what it chooses in 2015. In some ways, however, that hesitation to break with precedent would be minimized. Most analysts expect that Windows 10 will be the last major upgrade, if not for forever, then for many more years than the usual three-year cycle, with constant updates replacing occasional upgrades.
Perhaps Microsoft believes the benefit of a widespread free upgrade -- anything more than Option A -- outweighs the revenue and OEM relationship problems. If so, one reason has to be its app issue.
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