Microsoft: Buy now, buy later ...

Microsoft is cutting the retail price of Windows 7 in an attempt to encourage entrenched XP users to upgrade, and to be able to squeeze more money from users down the line.

Over the past few days a lot of ink (real and digital) has been spilled regarding Microsoft retail pricing for Windows 7. The retail price of Windows isn't usually important because most people get their hands on a new version of Windows with a new PC. With Windows 7, Microsoft wants to decouple Windows upgrades from PC upgrades, hoping that people who are holding onto an old PC will give it a new lease of life by upgrading the OS rather than the whole system.

So, what's Microsoft doing to encourage OS churn outside of new PC sales? Well, we first off we've seen deep time-limited discounts. Sure, they were very limited in nature, but they sure shook people into action and was a way for Microsoft to get people to put aside that analysis-paralysis procrastination and start spending. Judging by how fast Windows 7 rose in the charts at Amazon.com, I think it worked. Now there's conformation of a "time-limited, while stocks last" 3-user Windows 7 Family Pack ... another "spend your money now!!!" promotion.

What's interesting here is that Microsoft is pushing Windows 7 hard weeks before release. It's almost as though the Redmond PR and marketing machine want as many sales as possible in the bag before general availability. Why? Well, despite the fact that Windows 7 is miles ahead of what Vista was at GA (General Availability, or day of release), there are bound to be Windows 7 disaster stories, Microsoft knows this and wants your money beforehand. Just in case you change your mind ...

OK, that's the "buy now" ... what about the "buy later"?

Well, this is where Windows Anytime Upgrade comes into play. If you jump onto the Windows 7 ladder at the bottom end (Starter), then upgrading to the default edition (Home Premium) costs $80. Decide you want more power then it costs another $140 to make the leap to Ultimate. Windows Anytime Upgrade allows users to meander though different editions, handing Microsoft a roll of cash each time.

Microsoft's also got its eye on the future. After all, Microsoft will be looking at getting people to upgrade to Windows 8 (or whatever it'll end up being called) in a few years. Having a solid base of users with a Windows Anytime Upgrade mechanism build in (Vista and 7) will help Microsoft in pushing future upgrades.

So, Microsoft has a three-pronged plan here. Flood the market with cheap, time-limited offers, offer "Family Packs" and make it easier for users to move through the various editions, for a price. It's clear that Microsoft is interested in pushing new versions of Windows as a stand-alone upgrade, rather than one tied to system upgrades. A good idea, but it remains to be seen if Microsoft can pull it off.