It turns out that we shouldn’t have worried that Thursday’s launch of Vista and Office (et. al.) was rather ho hum - there are apparently two more Vista launch events to come and that’s just in the USA. CEO Steve Ballmer says Microsoft will spend hundred of millions of dollars marketing Vista making it Microsoft’s most widely marketed product. Now instead of wondering about the apathy, one is forced to question the overkill. After all, as Carl Howe observes, Microsoft is a toll collector:
So what’s wrong with being a toll collector? Not a thing. It’s just like being a utility — it provides a consistent earning stream that should generate significant dividends. The only problem: Microsoft isn’t valued like a utility; it’s valued as a technology company with a price earnings ratio of 23, whereas utility companies tend to be in the teens. And its dividend yield of 1.3% is a far cry from the 2% to 4% of utility firms. And utility companies don’t devote seven billion a year to research and development either, nor do they launch me-too music players like Zune. They do, however, have an obligation to do maintenance on their properties, and that’s exactly what Vista and Office are: maintenance.
Other surprises from the launch included the revelation that there is no schedule for Vista Service Pack 1. There’s no schedule for the previously presumed dead WinFS file system technology either, but Microsoft now claims to still be working on it. And speaking of schedules, of the major security vendors, only McAfee has product ready for Vista.
But back to the fundamental question of how the new releases impact the transfer of loot to the Microsoft bottom line. As I have observed previously (and to continue the toll collector analogy), Microsoft can only increase the returns by catching those users who have been sneaking through without paying or increasing the amount that the lawful users fork over and now is as good a time as any to examine the state of play.
For the former, Microsoft CEO Sees Less Piracy With Vista and the Vista System Protection Platform “kill switch” certainly makes that likely. The new Genuine Advantage programs for Windows XP and Office also make it less likely that pirates will find any havens there, so Microsoft is making the choice quite clear: pay up or don’t use Windows/Office. Whether this translates into more paying users or a flight to free Open Source alternatives remains to be seen.
As for the return per unit sold to lawful users, Microsoft has laid the ground work for upselling enhanced versions of Vista, but it’s similarly unclear how successful and lucrative that will be. Mary Jo Foley elaborates in Will Vista prices be on a par with XP’s everywhere?
Even though the Windows Vista versions don’t match up exactly, feature for feature, with the comparable XP ones, Microsoft has held retail pricing fairly constant, officials have said. (And ditto for volume-license pricing, according to the Softies.)
Outside the U.S., however, it seems customers are going to be charged quite a bit more for Vista than XP, according to early data from Australia and Germany.
Microsoft officials are blaming local retailers for the mark-up.
So far, I haven’t seen data on how much PC makers are planning to charge for Vista systems here or abroad. And given that far more customers buy PCs with Windows preloaded on new systems than buy retail copies of Windows, those figures will be more of a true barometer of how expensive Vista will be.
While there is no clear answer on the per unit returns, everyone seems to have an opinion on uptake:
When Microsoft’s two most important products become available for businesses (the consumer version of Vista will be ready in January), adoption is likely to be modest at best. To some extent, that’s because companies are cautious about adopting new technology. They want to make sure new products work with existing systems. And they don’t want to disrupt employees who are accustomed to using what they have.
But Microsoft faces another challenge. Many corporate buyers don’t believe there’s enough pizzazz in the new software to increase their budgets to deploy new products right away. The Society for Information Management, a trade group of business tech buyers, polled its members in October and found that 58% haven’t decided when they’ll roll out Vista. Another 27% plan to do so in 2008 and beyond.
Office 2007 is unlikely to ramp up much faster. That’s because most companies are going to wait to install Vista first, since the new Office takes advantage of many of the new operating system’s features. At an October symposium, research firm Gartner surveyed corporate tech buyers representing about 3 million corporate PCs and found that just 20% would deploy Office 2007 before Vista. Another 38% said they’d roll out both products simultaneously. And 16% said they’d wait and adopt Office 2007 after getting Vista out to employees. That suggests the vast majority of rollouts will come in 2008 and beyond.
As usual, however, ordinary consumers will be the early adopters – Microsoft Windows Vista to Gain More Ground with Consumers than Enterprises in 2007, Says IDC:
During calendar year 2007, Windows Vista Home products are projected to account for 90% of new Windows client operating environments deployed by home users. By comparison, Windows Vista Business and Windows Vista Enterprise will account for 35% of the new Windows client operating environments deployed by business users. During the second full year of availability, Windows Vista Business and Windows Vista Enterprise will grow to account for 80% of new deployments.
The crystal ball then is typically foggy, but it’s clear that not much is going to happen until consumers can get their hands on Vista and that story won’t unfold until February.