I recently wrote about how Microsoft should create loyalty by giving customers what they want instead of trying to trap them with monopolistic practices. And then I read this article on c/net: To secure IE, upgrade to XP.
Microsoft this week reiterated that it would keep the new version of Microsoft's IE Web browser available only as part of the recently released Windows XP operating system, Service Pack 2. The upgrade to XP from any previous Windows versions is $99 when ordered from Microsoft. Starting from scratch, the operating system costs $199.
That, analysts say, is a steep price to pay to secure a browser that swept the market as a free, standalone product.
"It's a problem that people should have to pay for a whole OS upgrade to get a safe browser," said Michael Cherry, analyst with Directions on Microsoft in Redmond, Wash. "It does look like a certain amount of this is to encourage upgrade to XP."
Of course, Microsoft denies that its goal is to get people to upgrade to XP. But since Longhorn has been delayed, it appears to be a good tactic from the corporate and investor perspectives to boost revenues for the OS division. But what about from the customer perspective? Why should I pay to upgrade to XP if I can get a free, safe browser from Mozilla or Opera? What happens if/when Google launches its own browser? (or even its own OS? Seehere and here)
Microsoft continues to rely on product bundling, a tactic that was very effective in the past when the market was less mature. But now customers have good alternatives to choose from. Some customers may want bundles for convenience, but others don't want all their eggs in one basket... especially not if they have to pay more for it. Sure, we could say that it's only early adopters that will choose to download Mozilla, and that surely it can't hurt Microsoft too badly. But where there are early adopters, others are sure to follow. When information and opinions travel so freely now over the 'net, adoption curves are shorter. More people find out about viable options faster. The overall trend is toward empowering customers through choice, not entrapping them into expensive, one-size-fits-all bundles that are often overkill for their needs. So they might make a couple billion from coercing some customers to upgrade for safety's sake... and create resentment among the remaining majority who will go in search of a lovable underdog to support. Me, I switched to Mozilla months ago. It's great.
Obviously I don’t work for Microsoft and I don’t know what the technical implications are of unbundling all their software. They originally created everything to work together, which was a smart strategy that got them where they are today. They’re in court right now arguing that there will be terrible problems unbundling Windows Media Player from Windows OS. Yet is unbundling really a technology challenge, or does it simply run counter to corporate philosophy? As SiliconValley.com comments:
In the past, Microsoft has argued that removing Media Player from Windows would harm the way the OS works. But RealNetworks proved the company wrong in 2003 when, at a closed door meeting of the European Commission, it showed an audience of more than 100 European competition regulators, opponents and Microsoft itself how easily Windows XP Embedded runs without the media player. I suspect that Microsoft will be proven wrong again if the court rules it must comply with the European Commission's order. Just as Real had little trouble tweaking XP to run without Windows Media Player, Microsoft will have little trouble tweaking its monopoly to run despite the commission's order.
I’m in the middle of reading The Origin of Brands by Al and Laura Reis, which supports my opinion that it’s time for Microsoft to start unbundling. Microsoft is swiming against the current toward divergence in the software sector. Instead of fighting to exist as the Swiss Army Knife of software (how many people do you know who actually USE a Swiss Army Knive?), Microsoft should seek to provide the best of each element: knife, scissors, toothpick… whatever the customer needs to accomplish the job at hand. Another great book along these lines is The Innovator’s Solution by Clayton Christensen, who talks about how customers “hire” specific products to accomplish certain jobs. He, along with Laura and Al Reis, berate the handheld industry for cramming too many solutions into one package.
By the way, I’m not advocating that bundling is always wrong. As Reis points out, many people want bundles for convenience. But it’s usually a smaller percentage of customers that want a bundle, and companies usually need to provide financial incentives to encourage customers to purchase more than one product from the company. So Microsoft (and any other company) should certainly keep its bundles -- or better yet, offer customized bundles with a discount –- but also offer each product independently for customers who want to take advantage of the many new choices becoming available within the territory. Otherwise you run the risk of losing customers entirely.