Why Windows 7 should be free in China

Why Windows 7 should be free in China

Summary: Microsoft hasn't won the war on piracy in China, so why not strike before Google and produce a free OS closely aligned to its digital products and services?

TOPICS: Windows, China

commentary Microsoft hasn't won the war on piracy in the Middle Kingdom so why not strike before Google and produce a free OS closely aligned to its digital products and services?

Late in 2008 Microsoft CEO, Steve Ballmer, hosted a luncheon in Sydney where he proclaimed that China wasn't very important to the company's bottom line, even if he'd like it to be, because of the high rate of piracy and intellectual property theft.

"We need some IP reform in China for it to be important to our financial results," Ballmer told the audience.

Microsoft need not sit on its hands and wait for the government to police software piracy

Less than a year later and on the verge of releasing Windows 7, the company from Redmond still hasn't got an upper hand against pirates. Already counterfeit retail copies of Windows 7 Ultimate can easily be found on the streets of China for around AU$0.95 a pop (5 Chinese yuan renminbi (RMB)).

When the operating system officially debuts in China, the asking price from Microsoft will start much higher at AU$80 for the basic version and almost double that price for the premium copy.

As a straight conversion, these are some of the cheapest prices for Windows 7 in the world. Considering the average income in a tier 1 city such as Shanghai or Beijing is less than AU$800 per month one can see why this is expensive. Move out of the tier 1 cities and the average income is about a third of their urban counterparts. No wonder almost 60 per cent of survey respondents on Chinese portal site Sina said the prices set by Microsoft were still too high.

Outside multinational business users and OEM (original equipment manufacturer) installs, it's fair to say Microsoft won't win the war over piracy for the life cycle of Windows 7 under the current conditions in China.

Even though Microsoft is working hard to convince users to pay for Windows and that software piracy is a crime in China, policing it doesn't seem to be high on the list of priorities. Like many laws in China (and other countries) there is the law of the courts, the law of the land and what people do every day.

Which brings me to my point: Microsoft need not sit on its hands and wait for the government to police software piracy.

Microsoft has an opportunity to use Windows 7 as a trojan horse to aggressively compete for the billion-dollar digital ads through its online services. It's a space that Microsoft competes not only against search giants Google, but even bigger search competitors such as Baidu, which holds even greater market share than Google in China.

The software giant should make a free version of Windows 7 to consumers that is optimised with its online services such as Bing search, Live Messenger, Live Mail, Mapping services, the MSN portal, Silverlight and various Windows Live services. Microsoft could even create new services for the China market and focus on getting more third-party developers interested in the company's upcoming Azure cloud platform.

The company could even partner closely with the likes of Alibaba, which runs Yahoo's business in China. Alibaba also owns the biggest payment gateway and a marketplace website, Taobao, which dwarfs eBay inside the great firewall. While the partnership may have some overlapping products or services, Yahoo owns a 40 per cent stake in Alibaba and is keen to compete against Chinese search giant Baidu.

On the horizon is probably one of the biggest threats to the operating system/web platform world for some time.

This idea might sound familiar. It's a similar premise of the upcoming Chrome OS by Google, which promises to be a Linux-based, internet-powered operating system that ties the company's online products and services to a free operating system. An operating system that China's biggest PC maker, Lenovo, has already signed up for.

While Google might not be the poster child of online success in China just yet, Microsoft is trailing further behind. Other than Live Messenger, the company battles to compete for budgets such as CR-Nielsen's estimated US$223 million for digital advertising in July this year. China is also a savvy e-commerce market with volume expected to hit 3.22 trillion RMB by 2010 according to IDC.

Microsoft is on the verge of change in China. On the horizon is probably one of the biggest threats to the operating system/web platform world for some time. Previously, the company has relied on poor competition and cheap pirate copies of Windows to keep its platform as the operating system of choice in China. Times could change quickly if Google Chrome OS gains traction.

Microsoft can either sit on its hands and wait for a change on piracy enforcement before making a significant income from Windows 7 in China, or it can optimise a free version of the operating system to beef up the company's income from online services offerings and cloud computing ambitions.

Which direction Microsoft chooses in the cloud computing era in China could possibly shift the future of operating systems as we know it.

Topics: Windows, China

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  • different business model

    Google make its money from eyeball on ads, while MS makes money from... well... selling products.

    It would not work.
  • Microsoft want to be in the ad game

    Microsoft want to be in the ad game, they just haven't found the right mix of services and products to do so.
  • Even if consumers pay double

    Earning $0 from selling a product is still earning $0. The point is that Microsoft aren't winning with their traditional strategy.
  • They aren't going to use it if they have to pay for it.....

    My sympathy is with the user in China. Microsoft might sell some copies at a monopolist price to government and mult-nationals but average users can't afford the price. (True for 2/3 the world.) When you consider the Virus's included with the knock offs Microsoft would be doing everyone a real favor if they dropped the price down to $5 a copy. OS and Office. $5 would allow M$ to make money and avoid some accusations of being the DRUG dealer. Drawing them in with a cheap product and then increasing the cost when they can't function without it.

    My advise: use Microsoft enough to own them. Make your money and investments in Linux which in the end you really own and which you can eventually sell back to the West.
  • I think they tried that

    I think they tried that with 'Red Linux'.

    When 4 Linux discs costs more than the 1 pirated windows discs the choice is already made.
  • to china?

    correct heasline;
    Windows 7 should be free.
  • Why not all software be free?

    You can apply the same argument on all software being sold in China. Should all software be free then?
  • Software free, services cheap.

    > Should all software be free then?

    Yes it should. It should also be open sourced. Services (such as support, hosting, further development) should cost money. Individuals and organisations then pay skilled people to advance the current state of the art and the entire human race benefits from advancements.
  • Not free

    No, it shouldn't be free. Why should us programmers slave away only to give something away for free? When a carpenter builds a bookshelf, does he give it away for free and allow for the person who delivers it to make the money instead?

    If you want free software use the already existing open source software, otherwise PAY for it. Anyway, you could get almost anything for free under open source software nowadays. The paid solutions are just an alternative that you can also use.
  • on second thought

    Well, if the carpenter has 1 (or more) ads in his/her forehead then maybe he/she can make the bookshelf for free ;)