Is the Windows Market Saturated? Microsoft Says No
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SEATTLE—Just because Microsoft has cornered in excess of 90 percent of the desktop operating system market doesn't mean the Redmond software vendor has no plans for expansion.
In fact, Microsoft's Windows client marketing team has a slew of ideas for how Microsoft and its partners can earn billions of additional dollars from Windows by making some fairly simple strategy tweaks.
If consumers would buy a new PC just one month earlier than they do currently, Microsoft and its partners could potentially see $1.4 billion in increased revenue, said Will Poole, senior vice president in charge of Microsoft's Windows client business, to Windows Hardware Engineering Conference (WinHEC) attendees. And if enterprise customers, currently on a five-year upgrade cycle, would increase the number of new PCs they buy annually by as little as two percent, Microsoft and its partners could see as much as $1.7 billion in additional revenues, according to Microsoft's estimates.
Poole provided attendees of WinHEC here with some of Microsoft's strategies for "redefining the PC opportunity."
While the PC market is growing seven percent, year-over-year, in terms of worldwide unit shipments, the average street prices customers are paying for business and consumer PCs is declining about seven to eight percent per year, Poole said.
To counteract the effect of falling prices, Microsoft and its partners need to convince users to buy their first PCs sooner, upgrade to new PCs more quickly; and be willing to spend more on their PCs, add-on devices and software, Poole said.
Microsoft took a first step to realize these goals by launching its largest Windows ad campaign to date last week. That 15-month campaign, known as "Start Something," is the successor to Microsoft's previous Windows XP marketing effort, "XP Reloaded."
Beyond the advertising side, Microsoft already is working to expand its presence in the less-PC-saturated developing-country markets via its Windows XP Starter Edition SKUs. And it also has been stepping up its focus on small businesses, not just in the Windows group, but in other Microsoft business units as well.
Microsoft believes of the 75 million small businesses throughout the world, only 50 million have PCs. And these small businesses tend to wait five years before upgrading their PCs, Poole said. If Microsoft could find a way to get these customers to see their Windows machines as key to improving productivity, they could grow this business substantially, Poole said.
Microsoft and its partners need to think about the kind of small-business applications that would appeal to this market. Focus on building small-busines PCs; small-business versions of existing applications. If Microsoft and its partners can latch onto these things, Microsoft believes "they (small businesses) will be more willing to buy and replace PCs," Poole said.
Additionally, Microsoft needs to focus on driving "attach," Poole said.
Microsoft recently surveyed Windows XP Media Center customers and found they buy on average $600 worth of attached devices beyond just the PC. Microsoft is investigating ways to encourage other Windows customers to spend in the same way.
Next Page: More on Microsoft's Next-Gen Windows Marketing Plan Simultaneously, Microsoft needs to find new ways to get customers to buy more than one PC. Microsoft is hoping to encourage users to make mobile machines their second or third PCs, Poole said. The protype mini-Tablet/eBook hybrid system, code-named "Haiku" – which Microsoft chairman Bill Gates showed off during his WinHEC kick-off keynote – is an example of the type of machine that Microsoft sees as having good potential to be accepted in this way, Poole said.
Microsoft is focusing intently on building its development and marketing programs around Longhorn, its next-generation Windows release, to help spur Windows growth, Poole told WinHEC attendees.
He said Microsoft is prioritizing Longhorn consumer investments and dividing them into three buckets: Confidence and Control; Live, Work and Play; and Next-Generation Platform. The Confidence bucket is all about security enhancements, including parental controls, that Microsoft is building into Longhorn. The Live/Work/Play one is focused around better multimedia handling, among other home-oriented functionality. And in the Next-Generation Platform bucket are the Indigo communications subsystem, Avalon presentation system and WinFX programming-interface set, Poole said.
For consumers, these "buckets" will manifest as specific Longhorn and post-Longhorn features and functionality, Poole said. Microsoft believes by the time Longhorn ships, users will come to expect high-definition media games in every room; all kinds of new "any room form factors" and the like. They will expect to be able to roam and stay connected all day; faster media access and more secure Web browsing and e-mail, he predicted.
Meanwhile, for enterprise users, Microsoft is focusing Longhorn development and marketing on three different buckets, Poole said. These include Lower Cost; Getting More Done; and Seamless Mobility.
In the Lower Cost arena, Microsoft is continuing to beat the total-cost-of-ownership drum, especially around the management of PCs. Getting More Done is all about productivity – helping people use their PCs more effectively at work. And Seamless Mobility is Microsoft's work to make Longhorn a better platform for connecting people and information, Poole said.
Poole said Microsoft believes it "can take twenty-five percent of the cost out of PCs by having well managed enterprise using Longhorn."
Microsoft's goal is to shift customers away from seeing PCs as commodity-cost items and instead turn them into something that users see as providing productivity and business value. If and when Microsoft and its partners can realize such a transition, PC upgrade rates should accelerate, according to Microsoft's calculations, Poole said. |
Comments (1)
If we want people buying PCs more frequently, we need to have a low-cost (sub-$100 XP Pro, Longhorn Pro) operating system that people can buy to place on ANY PC they buy, trade or are given.
As a long-time business user of Windows systems, and as a fully licensed one, I hear a lot from entities asking if I know how to put the XP they have on their one new PC on their other PCs, or whether this or that Pentium II or III they got at auction could run their old, often OEM, copies of Windows 98, etc.
All that is usually NOT legal and I will have nothing to do with that activity. Still, it's my impression that this is EXACTLY how most businesses "use" Windows.
Why is there such a tendency to cling to older Windows releases, to illegally copy Windows, and trade or buy older systems, rather tnan BUY a new PC?
ANSWER: Windows is TOO EXPENSIVE and now that it is Activated it is NOT REUSABLE in any easy way EVEN IF you have a legal copy.
Microsoft needs to greatly reduce the sale price of FULL Windows copies, and also stop nickel and diming, and angering, customers with the Home vs. Pro pricing differential.
AND, because Windows jacks up the cost of a new PC significantly, Microsoft needs to make the Windows that COMES WITH A PC portable, so that when it is time to get a new PC, that Windows can simply go on the new PC. This might seem to work against new Windows sales, but it would not in practice, because it would free a lot of cash the user might use to ADD MORE PCs to the mix. Yes, you move the one copy to the new system, but then another new system can be bought with a NEW Windows version with the saved money.
Then, when the cycle repeats, that system's previously NEW Windows goes to the new bare PC, and maybe another full new system gets bought with yet another NEW Windows copy included, using the money saved.
Microsoft cannot have it all ways at once forever; if MS wants to see lots of Windows PCs, it must recognizwe that the market will not tolerate being shanghaiied into bleeding cash just for Microsoft.
The new ad campaign strikes me as profoundly cynical, as it appears aimed at pressuring people to buy new Windows copies just as millions of illegal users--many of who really do not know they ae not legit users--will be told by Genuine Advantage inspections that they are not eligible for further updates.
This will not endear the public to Microsoft in my view. I suspect the effect will be to create some synergy for alternatives. For those that never ponied up before, the choice now that they must pony up might be to just buy a Macintosh.
Of course busienss users will be forced to go legit, which is not a bad thing. But I fail to see of this will serve to create an eager market for Windows, but merely just a tethered one.
Posted by Keith Risler | April 28, 2005 3:05 PM