Huddled Masses

Well, perhaps that’s overstating the case a little, Microsoft’s number one product has certainly not perished yet, and doesn’t show any real signs of loosing on the desktop yet either. However, they have serious problems coming in the next two or three years, and it will be interesting to see how they deal with it. Microsoft has been working for years toward the “commoditization” of Computer hardware; meaning standards-based hardware that becomes so common, and easy to make that anyone can make it, so cheeply, that they can practically give it away …

The reason for this is that at the time, Microsoft reasoned that if the hardware was all the same, and all free, then the differentiating factor between computers would be their software versus the competition. Thus giving their “superior” product the market advantage. But now that time has come. Computer hardware prices are essentially at the bottom of the barrel, and we’ve discovered that Microsoft have a couple of major problems:

1. They don’t have any real competition left in the commercial OS or Office/Productivity markets… so their technological superiority is in name only, and more importantly, there is noone else out there for people to compare their prices to. This makes the price seem unreasonable, especially when the only other x86 operating system is … Linux. Which brings us to:

1. The Open Source movement has come of age, and has in turn demanded standardization of software and software protocols with the intent of commoditizing that as well. But this time, the goal is not competitive or commercial profit, it’s “for the good of mankind.”

The combination of these two factors has put Microsoft in the unenviable position of being responsible for the largest of the cost of a new computer … just when the whole world is begining to cry out that technology is becoming the new class barrier. The reality is that for third world countries to ever catch up, affordable computers must be made available to them at prices we wound never have dared dream of five years ago.

I checked the prices today …

• You can get a laptop at Walmart for about $600.
• CompUSA doesn’t even have a desktop computer on their front page, because there’s no profit there. They do, however, have a low end Tower PC, without a monitor (but with Windows XP) for only $279 (of which $80 is for Windows “Home” Edition)

• You can get a $400 2.5Ghz eMachine from any retailer in the country … with Windows pre-loaded.

Windows is already a heavy piece of this cost, and if you want the professional version, the price doubles … making far and away the greatest cost in these low end, sub-$300 computers.

So, what’s the end result? Well, time will tell. And not a lot of it either.

Personally, I think the result is that Microsoft’s next OS will have to bring with it a dramatic cost restructuring. Either to a (rather low) annual fee, which they can (fairly) waive or reduce for third world countries … Or even to a give-away level price for the OS, with the hope of making up the money on sales of other applications, such as their productivity and office suites which are now standard. Or … maybe they’ll have a “home” version that they will sell really cheaply, while still charging hundreds for the corporate version.

Of course, that may depend on just how impressive Longhorn turns out to be, people are always more willing to pay for something that appears far advanced beyond the other available technology, and Linux is certainly not making strides in the “cool next generation interface” department, but is still playing catchup with Windows XP. Of course, that means it will also depend in large part on how ready Linux is for prime-time by the release date, and perhaps on Apple’s willingness to make their software run on this ultra-cheap hardware, instead of their overpriced proprietary platform.

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