Free Upgrade for Windows?

Microsoft recently announced Windows 10, with a strong indication that it may be offered as a free upgrade for licensees of Windows 7 and higher for the first year. Contrary to a lot of the analysis so far, I think this is a relatively low-cost move aimed at regaining mind-share and market share for Windows. I’m supportive, but they’ve got a heck of a hill to climb!

(Note: I’ve spent my career in software development and marketing, including Microsoft from 1992-2012. I’m speaking as a marketing professional here, not as a representative of Microsoft.)

First of all, it’s important to recognize that Microsoft makes final pricing decisions just prior to general availability (GA), so there’s still a lot of room for policy changes. I don’t think Microsoft is intending this latest announcement to be a promise for free software, but it does indicate the strategy in play.

One of the hazards of pre-announcing anything in tech is that you could stall sales of the goodies you are currently selling. So by implying that Windows 10 will be a free upgrade, or at least have a defined free period, Microsoft is urging customers to keep buying current devices and not worry about missing out on the shinier thing that’s coming next.

The Wall Street Journal and others speculated that this move could cost Microsoft as much as half a billion dollars of upgrade revenue. But I think that is way off.

Why? In my years in the industry, I’ve observed that customers rarely upgrade the operating systems on their personal computers. The customer investment in terms of money, time and risk that something might go wrong, is just too high for all but the most technical users.

A new version of Windows is designed to do one thing, and one thing only: sell more computers. And this is even more true as the hardware game has morphed and people now buy a variety of lower-cost devices which they keep for shorter periods of time.

So I think the half a billion might be overstated by as much as 10x. I also think that aside from not wanting to stall current sales, Microsoft has a huge hill to climb to gain back the relevance they previously had in the personal computing space.

In the early 2000’s, developer surveys showed that close to 90% of developers were developing for Windows, and two-thirds of those were doing so exclusively for Windows. But that number peaked with Windows XP, and has dropped significantly since then, being replaced by iOS, Java, Android, etc.

Without third-party developer support, Windows will shrivel up and die of irrelevance. So I think there’s a sad irony in the fact that right next to its Windows 10 article, the WSJ featured an ad for WSJ on iPhone/iPad bundled with Evernote. The battle that Satya and Microsoft are fighting is that WSJ and their readers are apparently not very hungry to consume WSJ on a device running Windows and Office.

After I left Microsoft in early 2012 to go to Adobe, I read a report indicating that more US-based college students were purchasing Apple computers than Windows-based computers. This bell-weather change spoke volumes to me as a marketer, and meant that consumer preferences had, and would continue to move away from Microsoft in a significant fashion.

So far I’ve painted a pretty bleak picture. I think the upside is that Microsoft is doing a good job of reducing development complexity across devices, has embraced open standards, and has an amazing treasure trove of technology in Microsoft Research. Satya has shown a strong appetite for change, and is taking some smart risks to try to maintain Microsoft leadership. They are down, but I’m not counting them out.

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