A "modest" price increase for Vista?

A "modest" price increase for Vista?

Summary: Microsoft's Vista boss tells a room full of financial analysts that the high-end version of Microsoft's new operating system will cost a little more, and he won't commit to a ship date. So why is this good news for Windows customers?

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TOPICS: Windows
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Joe Wilcox at Microsoft Monitor has two Vista-related tidbits from a presentation by Kevin Johnson, co-president of Microsoft’s Platforms & Services Division, at today's Microsoft financial analysts meeting. First up, the question everyone wants to know: When will Vista ship?

The big question is will Microsoft meet its January 2007 ship date. Kevin's response: "We will ship Windows Vista when it's ready." Kevin said there was nothing to indicate Microsoft wouldn't make its date, but that Microsoft would assess progress "milestone by milestone." The next milestone will be Release Candidate 1, which is expected this quarter. Bottom line: He didn't commit to the January 2007 date, which makes it absolutely uncertain. Microsoft may or may not make it. As I've said before, from a sales cycle perspective, January might as well be July.

When you couple thisThese are not the confident noises that a smoothly purring engine makes hesitancy with Bill Gates’ remarks in South Africa a few weeks ago ("I'd be glad to delay it"), I think it’s safe to say no one in Redmond really expects Vista to be ready to ship in volume in January. These are not the confident noises that a smoothly purring engine makes.

And how much will it cost? Microsoft isn't ready to publish its price list yet, but Johnston dropped at least one hint:

… Kevin confirmed that Microsoft would charge more for Windows Vista Ultimate, and presumably Windows Vista Enterprise, than current Windows XP pricing. He described the increase "modest." Maybe, but it's also the first Windows price increase in more than a decade. From one perspective, Microsoft should be able to charge for its products. From another perspective, Windows is a monopoly, which isn't necessarily subject to the pricing effects of competition, which is one reason consumers pay for Windows XP about what they did for Windows 95. During the same time span, the pricing of essentially all other PC components decreased as the result of competition and economies of scale related to volume.

I disagree with two conclusions in this part of Joe’s otherwise excellent analysis.

First, the presumption that Vista Enterprise will get a price increase equivalent to the one for Windows Vista Ultimate Edition  is questionable. Vista Enterprise will be available only to corporate customers who sign up for Microsoft’s Software Assurance (SA) program, and SA hasn’t exactly been a rousing success. One recent Gartner report estimates that “only half of Microsoft's customers with more than 1,000 desktops worldwide have purchased SA for Microsoft Office or the Windows platform, and only 65 percent of this clientele are renewing the maintenance program.”

Microsoft, of course, would like that number to be more like 90 percent. If the goal is to increase adoption, a price increase doesn’t seem like the smart way to do it, especially given the bad feelings that a lot of enterprise customers are going to feel having purchased three-year SA licenses for Windows and Office in September 2003 with the assumption that they were buying upgrade rights to Longhorn and Office 12. Oops.

I have yet to hear of a single corporate customer who is itching to deploy Windows Vista as soon as it comes out. Many are talking of waiting for at least a year before even thinking of deploying Vista. That gives those corporate customers a lot of pricing leverage with Microsoft.

As for the second point, I suppose it’s fair to compare the price for Vista Ultimate Edition with the highest price Microsoft charges retail customers for Windows XP today. If the price tag for Ultimate is higher, then yes, that’s a modest price increase. But it’s certainly not an apples-to-apples comparison. Today, if you want a high-end version of Windows, you can get XP Professional, with its corporate networking features, or Media Center Edition with home entertainment features. But you can’t get both. As I’ve pointed out before, Windows Vista Business Edition matches up neatly with XP Professional, and Vista Home Premium is the logical successor to XP Media Center Edition. If those two versions are priced the same as or even a little less than their predecessors and Ultimate Edition is only a small premium over either, then Windows users will actually be getting a better deal with Vista.

Topic: Windows

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  • Slow adoption

    I agree that nobody expects to see Vista ship in January. Shipping for corporate customers before then is likely to be slllloooowwww as well. A lot of shops won't adopt it before the first service pack, and they certainly won't adopt it until they perceive that Microsoft thinks it's ready for prime time (which will be after it ships in volume).

    It'll ship with new computers, but expect slow upgrade sales. Factors include:
    1. The increased price;
    2. Concerns about whether Aero will or will not actually run on your hardware. End users don't want a $300+ crap shoot;
    3. Confusion over what it actually DOES other than give you semi-transparent windows and desktop gadgets of questionable utility. If the end-user's perception is that this is some high-dollar version of WindowBlinds they may just give it a pass.
    4. Competition. It's never been a huge factor, but still it's there. For the first time since 1994 Windows has some really stiff competition at the same time they're hyping a new version. The hype isn't at the same level this time, and the competition is much better.
    dave.leigh@...
    • Competition? Where?

      "Competition. It's never been a huge factor, but still it's there. For the first time since 1994 Windows has some really stiff competition at the same time they're hyping a new version."

      Who from?
      Adrian Kingsley-Hughes
      • 2 places

        Now that Vista won't be available anyway, and Mac OS X 10.5 probably will be (at least they would be smart to make sure it's ready for X-Mas shopping), and Macs are Intels now, suddenly buying a Mac doesn't seem like a bad idea. You can buy it and use OS X until Vista comes out, and maybe, just maybe, you'll decide you don't need Vista after all.

        The second place where you'll get competition is from non-PC devices. You CAN buy nice electronic equipment for X-Mas that isn't a PC. You've got your iPods, cell phones that come with everything, game consoles and handhelds, DVRs, all sorts of things that will be ready to sell if Vista isn't.
        Michael Kelly
        • As long as an entry-level Macintosh ...

          ... costs twice that of a middle-of-the-road PC, which can be bought at almost any retailer in America -- not just at Apple stores and a few authorized resellers, I don't think it will compete with Microsoft -- with or without Vista! Counting non-computer electronic gadgets as competition doesn't seem relevant to me.

          The other truly viable alternative would be Linux -- if ANY first-tier OEM had a stake in it but they don't!
          M Wagner
          • I know too many people burned by CHEAP

            Those bargain basement PCs people bought over the past few years have proven thier weaknesses. They usually have an issue of some sort. That maybe that game won't run due to graphic card limitation or they find the hard drive space to little or not enough ram. Then when you open the box to try an upgrade they find they can't because of the style of case. I've seen this so many times that I figure people may think twice before going cheap again unless cheap is all they can afford.
            voska
          • Bargain Basement Shopping

            [b]Those bargain basement PCs people bought over the past few years have proven thier weaknesses. They usually have an issue of some sort. That maybe that game won't run due to graphic card limitation or they find the hard drive space to little or not enough ram. Then when you open the box to try an upgrade they find they can't because of the style of case. I've seen this so many times that I figure people may think twice before going cheap again unless cheap is all they can afford.[/b]

            Which is why it's usually best to roll your own. My last foray into this arena got me a fairly nice setup that was middle of the road as far as performance (not bleeding edge fast, nor bottom of the barrel slow) and only set me back about $450 which is still somewhat below a retail box of equal or lesser capabilities.

            Buying cheap doesn't mean you can't buy smart!
            Wolfie2K3
          • Exactly.

            Amen to that! Especially now after AMD's drastic price decrease you can build a very nice box for well under $1000.
            Furiousrog
          • entry level mac=middle level pc

            once you add in what you'd have to get to make a middle tier pc into something comparable with an imac, the macintosh looks much nicer overall. plus, it's ready to go out of the box and won't have an os that will take every oppertunity to crash that it can (last week with vista was horrible on the fiancee's turion, so i'm putting 2000 on it). and as much as i'd love for linux to be the mainstream os that it could be, it's going to take a lot more than a cruddy commercial distro (linspire) shipping on cheap walmart and microcenter pcs to get people to buy it. this would be a good time for sun and ibm to push the linux connection they have and show that linux can, infact, be a viable home system. now if the rest of the industry would listen, that's a whole other story. working for an isp, our corporate is scared of linux and open source, and barely supports mac (apparently, when apple went to the bsd core and had a huge explosion of customers, the executives lost interest.)
            nix_hed
        • Don't forget Microsoft itself

          They will competing against thier own software. XP might be just good enough for now.

          Then there is Linux too, not much of a competitor but it is there as well.
          voska
    • Slow upgrade sales?

      [i]It'll ship with new computers, but expect slow upgrade sales.[/i]

      Windows has [b]always[/b] had slow upgrade sales. Windows' 2 largest customer bases are:
      1. Home users who are not techno-geeks and, as long as their current version works, have no interest in upgrading. How many people are still on Win98? I now several because all they do is email, surf, and do a bit of word processing with some ancient version of Word.
      2. Corporations who usually wait years before upgrading. The 2 large companies I've worked at upgraded to a version of Windows that came out 5 years earlier.

      I seriously doubt that Vista's upgrade sales will be any slower than any previous version of Windows. Microsoft's biggest competitors are their old versions. Now think about that for a second. What does that mean? It means that, even in 2006, Win98 is good enough to do the job required. I know that must piss off all the "WINDOWS IS TERRIBLE, IT ISN'T STABLE IT ISN'T SECURE THE SKY IS FALLING" zealots that we get here but that doesn't make it any less true. It really doesn't matter that it is so inferior technically because most people just don't care. "Does it still do what I need it to do? Yes? Then I won't upgrade."

      I read your post and, while I admit that I tend to think in exactly the same way, we do not think the same way 95% of Microsoft's clients do. That is why many people here have a great deal of difficulty understanding why everyone hasn't moved from Windows to Mac/Linux.
      NonZealot
      • And each new version is just as bad

        Better the devil you know, than the one you don't. Each new version of Windows has been plagued by bugs and holes. I see no reason why Vista won't be the same. And only fools will buy things based on the side-show barking of the Microsoft Snake-oil salesmen.
        Dr_Zinj
    • Agreed on all points ...

      ... but I don't think that retail upgrades have ever made MS all that much money. Most people upgrade their OS when they buy a new machine -- and not before. Will they delay their hardware purchases now to get Vista in January? Probably not. Without an upgrade coupon, will holiday shoppers put off their purchase of a new workstation? Probably so. Once Vista ships, will any consumer put off the purchase of a new workstation to wait for SP1? Not a chance.

      All that said, no matter what MS does, the enterprise will not upgrade Vista 'en masse' for perhaps a year after Vista ships.
      M Wagner
  • Important that holiday PC's get upgrade coupon

    It would be very disapointing for the PC industry if MS does not provide for some sort of Vista upgrade coupon, or similar, for holiday PC buyers.

    I agree. Not having anything available by Dec-Jan - you might as well wait for dad's and grad's in the summer.
    Prognosticator
    • Vista WILL ship in time for Christmas...

      Christmas 2007*.

      (*Barring any unforeseen delays. Availability not guaranteed.)
      shraven
      • Yes, but only for corporate customers and it's not MS's fault

        Even if the code was ready earlier, MS couldn't release it to general customers for Christmas. All of the OEM PC vendors need a certain amount of lead time in order to drop images on thier PC's for Christmas sales. Some are not efficient and need as much as 2.5 months of lead time. Some need a few weeks. But in order to provide a fair opportunity for all OEM PC vendors they can't release it to any of them unless all OEM vendors can make it for Christmas sales. So some efficient OEM vendors get screwed. That's why the EA version will be available for download before the end of 2006 and the general release is after Christmas.
        erniescar99
  • Church of the painful OS

    Welcome bruddas and sistas!
    We here at the Church of the Painful OS love al a ya, all a ya, all a ya!
    My message today, "ya gets what cha pay fo":
    In this mean ol wurld of evils and strife, say amen,
    We have a sure anchor, a hope, ah, ah say a hope, yas sir!
    "ya gets what cha pay fo":
    I see dispair in the room!
    I, I, I sees gloom in the room, amen ah ha.
    I see, al seeees gloom in the room, BUT!
    "ya gets what cha pay fo":
    I declare that there is hope, hope, hope that flows like a mighty stream of data through the memory buffers of the heart! ah, ah, say yes!
    I see on the horizon a great Vista!
    "ya gets what cha pay fo":
    Be not perturbed bruddas, be not troubled sistas, be not cheap, ah ah say be not cheap!
    Ye shall reap, ye shall keep, ye shall heap blessings upon yo self.
    PAY! what dey say,
    STAY! in the way,
    LAY, up today, money, money mo money!
    "ya gets what cha pay fo":
    (soft music)
    The doors of the CHuCH is now open!
    (choir hums)
    Won't you come? Won't you come?
    Reverend MacFellow
    • Bravo!

      Now THAT is the funniest thing I've read all week. Bulletin board for sure.
      shraven
    • Oh where were thou!!!!!!!!

      I can just hear the creak of the pews and the moths flying out of the pocket books of the evangelized!!

      Reverend - I haven't been so entertained since I lost my satelite dish!

      Yeaaya! Bouaaugh!
      JCitizen
      • as for MY sattelite dish

        oh dear. i posted as a new part of the story..

        Welcome to eastern Australia. Home of violent storms and severe drought. We lost our sattelite dish in some kind of freak storm.

        Insurance salesman are hopeless.

        Gotta love australia.
        Justin Carmichael
  • welcome to the new world of piracy

    with all these price rises, it's almost guaranteed that microsoft's going to lose millions.

    NOBODY wants to pay for expensive software, so where do they turn? Piracy. I don't even need to spell it out.

    Cheap, free, and mostly effective.

    Wake up Microsoft. Not many people are going to pay extra for something better, not when they can get it for free.
    Justin Carmichael