Corel? Ooh, suits you!

Matt Loney: Software shipped with PCs is a major part of the cost, but some manufacturers are now turning away from Windows to budget packages.

Everybody loves cheaper PCs, and as hardware integration gets tighter, prices continue to fall. Processors, motherboards, hard disks and CD-ROM drives; they all follow the trend of higher performance for lower cost.

It is a trend that is bucked only by one essential part of the computer: the software -- or to be more precise, the software that comes with most computers. These days, if you want to add Windows XP and Office XP to your hardware it will burn a £600 hole in your pocket -- easily as much as the hardware cost in the first place. PC makers get a discount, but they get a discount on the component costs too, so the ratio remains the same.

Why does software cost so much? Software vendors -- and I'm not just talking about Microsoft here -- will tell you it is because R&D costs so much. Well R&D does, but Microsoft didn't save up $40bn of cash in the bank by pumping all its software revenues into research, and something tells me the money didn't all come from sales of keyboards, mice and SideWinder joysticks.

Software costs so much because of file formats. Most big software companies out there grew on the back of proprietary (read 'incompatible') file formats that forced you first of all to buy their products and once you had bought them to follow the annual upgrade cycle. And as more companies bought the software of one particular vendor, so more people had to buy that software if their files were to be read. If it were any other industry it would sound bizarre, but I have heard of government departments in one country demanding that all correspondence must be sent in a particular file format if it is even to be opened.

And of course not only did you have to buy the software, but as your business associates upgraded, so you had to upgrade. Ten years ago it was WordPerfect. Today it's Word. It's all the same, but it's changing thanks in part to XML, the great leveller of the file format.

In XML, word processors call a spade a spade and every other word processor knows what it means -- no more of the weird non-ASCII characters that fill proprietary file formats (and which you can see if you open a Word -- or WordPerfect -- file in Notepad).

Now WordPerfect can read Word files, StarOffice can read WordPerfect files, SmartSuite can read StarOffice files, and... you get the idea. The important thing is that compatibility brings us three very important things: competition, choice and freedom from the upgrade treadmill.

This compatibility is why Sony, the fastest growing PC manufacturer in the world, feels comfortable in shipping the WordPerfect suite on a number of high-end and budget PCs. It's why Dell bundles WordPerfect on its budget SmartStep PCs. And it's why Toshiba ships IBM's Lotus SmartSuite on some of its notebooks. No wonder HP -- now the biggest PC manufacturer in the world following its acquisition of Compaq -- felt confident in to ship the WordPerfect suite on its Pavilion desktop PCs.

The important thing to remember here is that it is not an anti-Microsoft thing. It is a pro-competition thing. After all, you can't have true competition so long as everyone feels compelled to use the same software. The battle now is for these companies -- hardware and software alike -- to rid consumers (and business buyers) of the mindset that says you must have Microsoft Office.

Once that is achieved, it's a small step to saying: "I don't need Windows either." After all, WordPerfect and StarOffice (and OpenOffice) run on several platforms. It doesn't mean you should necessarily get rid of Microsoft products, just that you should feel more comfortable choosing the appropriate operating system and office suite to suit your needs -- and to suit your budget. You can, if you want, achieve complete Microsoft compatibility for a song, simply by downloading a Linux distribution and the OpenOffice suite. All it costs is the connection time.

Even Microsoft has made some concessions in the face of this real competition, with lower prices for educational users. All of which makes for cheaper PCs, which suits us all.

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