Look who’s buying Vista Home Basic (hint: it’s not home users)

Look who’s buying Vista Home Basic (hint: it’s not home users)

Summary: Who’s buying new PCs with Windows Vista Home Basic? Judging by the name, you’d assume those OS editions would be loaded on underpowered machines for starving students and penny-pinching families. But you’d be wrong. Based on my observations of the PC market over the past year or two, I think consumers have rejected Home Basic in favor of Home Premium. But small, budget-conscious businesses have embraced the low-end OS. In one large sample I looked at, nearly three out of every five machines destined for small business included Windows Vista Home Basic. Small-business buyers are apparently able to look past that name, and PC makers are happy to accommodate them. I've got the details on this apparent trend.

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Who’s buying new PCs with Windows Vista Home Basic? Judging by the name, you’d assume those OS editions would be loaded on underpowered machines headed for tract homes in the burbs and studio apartments in the city. But you’d be wrong.

Based on my observations of the PC market over the past year or two, I think consumers have rejected Home Basic in favor of Home Premium. But small, budget-conscious businesses have embraced the low-end OS.

budget_business_small.jpgIn one large sample I looked at, nearly three out of every five machines destined for small business included Windows Vista Home Basic. Small-business buyers are apparently able to look past that name, and PC makers are happy to accommodate them. The primary appeal of Home Basic isn’t technology, it’s cold hard cash. Vista Home Basic runs Windows apps just fine, and it’s dirt cheap. Dell, one of the world's two largest PC suppliers, in fact, is pushing Home Basic as the preferred option for many computers aimed at the small business market.

Take Dell’s Vostro 200, which is aimed squarely at the small-business market and starts at $269 with a Celeron 430 processor, 512MB of RAM, and no monitor. A much more capable machine with a Core 2 Duo processor, 2GB of RAM, and a 19-inch monitor sells for $449. All three machines in this line come with Windows Vista Home Basic. To upgrade to Vista Business or downgrade to XP Pro is another $99, which represents a huge percentage of the system cost.

The phenomenon is equally pronounced if you look at the Vostro notebook line, where more than half of all available configurations, 13 out of 24, include Vista Home Basic. By contrast, Dell’s consumer notebook line offers 34 separate configuration, of which only three start with Vista Home Basic. The remaining 90% come with Vista Home Premium (only one model includes Vista Ultimate by default).

You can see the same mix of Windows versions if you go to a business-focused reseller like CDW and look at a list of the cheapest available desktop computers, sorted by price in ascending order. Five of the 10 PCs on the list, including models from HP Compaq and Lenovo, come with Vista Home Basic. (Once you get past those low-end PCs, however, almost all computers sold at CDW include Vista Business.)

So how popular is Vista Home Basic, and who’s buying it?

Who's buying Vista Home Basic? See the details by segment -->

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To get a snapshot of different segments of the PC market, I went to one of my favorite data sources: the Dell Outlet. At any given moment, there are thousands of systems on sale here, all of which were originally configured by customers and wound up on the resale shelf as a result of a return or canceled order. It’s easy to use Dell’s outlet search engine to filter the list of available products by configuration details, including operating system. (For more details on why I believe this data set represents a good proxy for the PC marketplace, go back and read the details from the last time I performed this exercise, in December 2007.)

As one of the two largest PC makers, Dell’s customers represent an excellent proxy for the market as a whole. As long as the sample size is large enough, the inventory here should mirror customer decisions out in Dell’s main store and those of its competitors. Even better, Dell divides its outlet inventory into easy-to-categorize segments. I chose three groups of data to analyze.

For the Budget Business PCs segment, I started at the Dell Business and Education Outlet and filtered the results to show only Vostro desktops and laptops, which are the entry-level line at Dell. For the High-End Business PCs segment, I looked at OptiPlex desktops and Latitude notebooks, both of which are aimed at corporate buyers and are built extremely well. For Consumer PCs, I looked at all available computers in all lines at the Dell Home and Home Office Outlet.

Here’s the data for Budget Business PCs:

Low-end business PCs, by Windsows version

As you can see, 58% of all PCs in this business segment are choosing systems configured with Vista Home Basic. That’s more than twice as many as the second-largest block, Vista Business. All other options, including Windows XP, are in single-digit percentages.

Now look at High-End Business PCs, where the mix is very different:

high-end business PCs, by Windows version

The overwhelming majority of PCs in this category, 94%, are running Windows Vista Business or XP Pro (usually installed using downgrade rights from a Vista Business license). I can think of two good reasons why buyers choose the higher-end Business (or XP Pro) version for machines in this class: they include the capability to join a Windows domain, and they can be upgraded using a volume license. Home Basic editions fail on both those criteria.

And finally, the Consumer PCs category:

consumer PCs, by Windows version

Three out of four PCs in this category include Vista Home Premium. Only 14% are running Vista Home Basic. (And that percentage didn’t change when I filtered by price to look only at sub-$500 PCs.

On a percentage basis, at least in this sample, businesses are buying Vista Home Basic at four times the rate that consumers are.

An awful lot of cost-conscious businesses who don’t have to worry about corporate networks are choosing the lowest-priced edition of Windows. They don’t want bells and whistles or the complexity and higher price tag that comes with Business edition. That’s food for thought for anyone who thinks that Microsoft should offer only a home and a business edition.

It’s also food for thought for Microsoft. Maybe, for Windows 7, they could acknowledge this class of business buyer and give their entry-level OS a new, simpler name: Windows Basic.

Topics: Hardware, Dell, Microsoft, Operating Systems, Software, Windows

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143 comments
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  • Makes sense

    Makes sense. Your average small biz probably doesn't want very much. They just want something that works. If it runs the databases and the tax software, it's good enough. For a small business, a single PC is usually good enough.

    What's interesting is the stats for XP. The big businesses are sticking with it, and that's about it. Small businesses and consumers are pretty much all going to some version of Vista.

    That's also what I pretty much expect: The big businesses are the slowest. They're huge ships that don't turn on a dime. It takes a long time to roll out a new OS.
    CobraA1
    • Same thing with XP Home

      I've seen alot of smaller business machines with XP Home on them.
      AllKnowingAllSeeing
    • Makes sense to Cobra

      I say Small Business people got no clue what they're buying until they ask somebody to make that junk work on the network. They are usually too cheap to have an IT person so whenever they buy such a great computer, they call their friends to find a student to come over and set it up. Obviously when problems come, they're stuck until they find a student willing to take a look. Serious people stick with XP because it makes sense to use something that actually works. I've been there.
      dcdavy
      • Or maybe they're just smarter than you.

        Hmm?
        Sleeper Service
      • I'm sorry, am I supposed to be having some sort of troubles?

        "I say Small Business people got no clue what they're buying until they ask somebody to make that junk work on the network."

        I say most small businesses don't have a network, and if they do, it's a small one. It's all those big businesses that are networked all over the place.

        Not to mention Vista works fine for networking. My experience is that when it knows there's a problem, it works harder to fix it than XP does.

        "Serious people stick with XP because it makes sense to use something that actually works."

        Vista works. I'm on a network right now with it. I'm not having any troubles.

        "I've been there."

        I [i]am[/i] there. It's networking right now as I type.

        I'm sorry, am I supposed to be having some sort of troubles with my Vista machine? Because I'm not.
        CobraA1
        • small business

          that is....

          [i]I say most small businesses don't have a network, and if they do, it's a small one. It's all those big businesses that are networked all over the place.[/i]

          I even have a network at home.. you are talking really, really small... Or are you living in medieval situations?
          TedKraan
          • Most businesses have less than 10 employees.

            Yeah, I have a network at home as well. It's bigger than the networks at some of the small businesses I know of. Of course, they are non-tech businesses and the only reason they need a computer at all is to crunch numbers occasionally.

            Surprise, surprise, not all businesses are tech businesses. Take a walk down a commercial area, and you'll find many small businesses where they have only one computer to crunch sales figures at the end of the day. If it needs to get replaced, chances are they'll just grab the cheapest thing they can find.

            In addition, I don't think you realize how small small businesses are, or how popular they are. As of 2002 (I couldn't find more recent numbers), 77% of businesses have no payroll at all (likely to be sole proprietorships).

            Out of businesses that have a payroll, 47% of businesses have 1-4 employees, 18% have 5-9 employees, 14% have no employees at all, but have a payroll.

            Turns out only 5% of total businesses employ 10 or more people. Even if you only count businesses with a payroll, 22% have 10 or more employees, or less than a quarter.

            Either way you cut it, most business are in fact "really, really small".

            http://www.census.gov/epcd/www/smallbus.html

            EDIT: I found some newer numbers (2005). Dunno how it counts payroll, but I'm still getting 79% of businesses have less than 10 employees.

            http://www.census.gov/csd/susb/susb05.htm
            CobraA1
          • And most employees work at big companies...

            Thus most licenses are within big companies...

            Isn't logic a cool thing? :)
            TedKraan
          • Not when that logic is flawed.

            In the UK the small business sector accounts for over 60% of the total private workforce.

            Thefefore most employees work at small companies.

            I guess its the same in the US.
            Bozzer
          • Not when it means that you're changing the subject

            What's your point have to do with Bott's initial premise about who's buying Vista Home Basic? I too know many people who run "small" businesses who have ZERO need for any sort of network.'Tech' is only necessary when it comes time to keep the books or do payroll when you're a two or three person service-sector shop.
            flatliner
          • I did switch the topic..

            For good reason.. where do you think the bulk of the sale figures came from?
            TedKraan
          • @Bozzer: Interesting..

            This puts things in a whole different perspective.

            You can agrue about how to interpret some figures, but your argument does force me to think about it from a different angle.
            TedKraan
        • Problems? Vista Home Premium, No.

          I've been using Vista since I got a new notebook for christmas. Other than a learning curve for customization, i have had NOT ONE ISSUE!

          I think that there is just a lot of hype, just like virus hoaxes, because a few technogeeks pushing things to the limit didn't like something.

          If you don't like or want to use Vista, there are plenty of other OSes that operate computers just fine.

          To those people: Quit yer whihing!
          pixelated
        • Everybody networks

          I make a vertical package for independent auto repair shops. Our customers average 5 to 10 employees and have an average of 7 PCs and 5 of them are networked. I would guess that 95% are peer to peer. The techies and the owners who aren't there a lot of the time are the ones running domains requiring XP Pro/Vista Biz.
          mswift@...
      • makes sense to me too

        cheapest OS to wipe off and install XP.
        TedKraan
        • Actually...

          It would be much cheaper to order the system preconfigured with XP. The OEM price ($99 in this case) is less than any other price you will pay for a legit copy of XP through any channel. And XP is an option in every configuration I looked at.

          So no, I sincerely doubt that more than a handful of these machines are being wiped so that XP can be loaded.
          Ed Bott
          • I've been instructed personally

            to wipe some of the laptops and reinstall it with XP.

            Granted, an applefan system admin ordered me to do so.

            Still, it happened.

            Also note that it takes some effort to get the XP version by default you end up with some Vista version.
            TedKraan
          • A handful of stories is not equivalent to a market trend.

            Yeah, I know there are people out there with stories like this. Unfortunately, that proves nothing about the entire market. Even if I were to combine all of the stories I've heard together, I doubt I'd even get a fraction of a percent of the total number of PCs. There is nothing about occasional stories that makes them representational of the entire market.
            CobraA1
          • On the other hand..

            sales figures are as reliable as mortgage financing constructions.
            TedKraan
          • Or to put it another way...

            "The plural of 'anecdote' is not 'data.'"
            Ed Bott