Tuesday, May 19, 2009

Is Windows 7 really too expensive?

Posted by Andrew Nusca @ 4:34 am

It’s not even on store shelves yet, but Windows 7 might come with a price tag that may be a higher hurdle than expected for some early adopters.

Windows 7 is beating Vista in just about every other aspect, but the expected higher average selling price for Windows 7 systems may be a bit of a shock for consumers, a Dell marketing executive reportedly said to Brooke Crothers on CNET.

“If there’s one thing that may influence adoption, make things slower or cause customers to pause, it’s that generally the ASPs (average selling price) of the operating systems are higher than they were for Vista and XP,” Darrel Ward, director of product management for Dell’s business client product group, said in a phone interview, referring to the various versions of the Windows 7 operating system that are expected to appear.

“In tough economic times, I think it’s naive to believe that you can increase your prices on average and then still see a strong swell than if you held prices flat or even lowered them. I can tell you that the licensing tiers at retail are more expensive than they were for Vista.”

Obviously, this pertains to business customers as well: Windows 7 Professional is expected to be more expensive than Windows Vista Business, Ward reportedly said. The same hurdle is there for schools, small businesses and government, who may not be able to afford the extra cost, he said.

Why such a difference? Simple: Consumers have been conditioned to low Vista and XP prices. When Microsoft’s latest and greatest comes out with a price tag to match, it might be a lot to swallow for someone used to XP — and perceived as too much for someone upgrading from Vista, which looks similar to the new OS.

Oh, and did I mention that we’re in a recession? (Yeah, yeah, we all know.)

You can read the rest of what Ward said to Crothers in his article, but to me, this snag remains: Yes, Windows 7 improves markedly on the missteps of Vista. But how will Microsoft market it so that Windows 7’s price is perceived to be easily worth the revamped features?

Or: How can Microsoft convince consumers to buy Windows 7 without outright admitting that it missed the mark (and please, don’t hurt us)?

As you can see, it’s not really a question of price (though people sure get fired up about a free Windows 7, don’t they!). It’s the reality check thatcreating Windows 7 is the easy part, and selling it, on the other hand, is a tricky task indeed.

It certainly doesn’t help that this Dell executive didn’t frame the story correctly. Yes, he talked about the “momentum” behind Windows 7, but he really should have said, “Yes, the ASPs will be higher because we’re introducing new software that’s worth every penny. And wouldn’t you know it, Vista prices will likely drop considerably,” or something to that affect.

Obviously, it’s in Microsoft’s interest — logistically, fiscally — to get consumers on the same page, software-wise. What will be interesting to watch is rival Apple try to convince its customers the same thing with the introduction of Mac OS X 10.6 Snow Leopard: another operating system that leaves the core back-end and front UI largely unchanged but introduces many new features and incremental improvements.

Few deny that Windows 7 is anything less than a good thing. But for the average consumer who isn’t waiting at the store, cash in hand, Microsoft will have to try to effectively sell a car with nearly the same sheet metal and an all new powertrain and suspension.

One approach is to market Windows 7’s improvements as a cost-saving upgrade, rather than as a dollar-for-feature proposition. Need a new computer? Instead of dropping a grand on a new machine, keep your old hardware and install Windows 7 for a couple hundred bucks. It’s just like new.

Complicating the situation, as has been mentioned countless times before on ZDNet, is Windows XP consumers’ resistance to change. With the next-next-generation operating system on the shelves, XP will eventually be forced to die. How will OEMs like Dell handle the neverending funeral procession for XP — particularly as netbook popularity grows?

Not to mention the potential driver debacle at Windows 7 launch. Driver preparation is good, with some exceptions, Ward said to Crothers:

“Driver readiness–it looks pretty healthy compared to the past. (There are) some things that haven’t been worked out. The WHQL (Windows Hardware Quality Lab) drivers for AMT VPRO is a little behind,” he said, referring to Intel’s Active Management Technology, which allows remote access to PCs for security, maintenance, and management.

Which again suggests a trust issue with Microsoft. You had us thinking at Vista’s launch that drivers would be smooth sailing, and it didn’t pan out. So when you say Windows 7 is in much better shape than Vista, how do we believe you?

Are new features that some perceive as “shoulda, coulda” worth the headaches of switching and a couple hundred bucks less in the wallet?

I think it’s a good question. And “Laptop Hunters” distractions aside, I believe we’ll see Microsoft’s strategy come out soon enough. (Image: Flickr/AcidZero)

Andrew NuscaAndrew J. Nusca is an assistant editor for ZDNet.com. See his full profile and disclosure of his industry affiliations.

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