A call to unbundle

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.

Comments

[Vlad]

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[cnn]

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[Shannon J Hager]

The article doesn't mention that installing XP Professional is $299. The $199 price is XP home.

[Jennifer]

Thomas, thank you for your thoughtful comments and clarification on some of the technical issues. I agree that usability and ease of use is a key consideration. I'm not advocating that the integrated version should not be available for those who want it; rather, my point is that people who want a choice should be given a choice. I believe that the masses of worldwide computer users (most of whom aren't highly proficient) would prefer not to upgrade to XP if their current OS is satisfactory. I also believe that those who truly want the extensive online functionality that you mention are a small segment of the market. My big concern is that Microsoft and other companies who try to combine everything into one big "Swiss Army knife" offering are overserving the majority of the market; when highly specialized, less expensive tools come onto the market (ie. Linux, Mozilla, etc.) most people will abandon the Swiss Army knife in favor of those specialized tools.

[Thomas Baekdal]

Hi Jennifer,

I have been listening in to your excellent blog for quite some time - and I very much enjoy your posts and your opinions.

However, this post is a bit tricky - because although I do respect your opinion towards a company or a topic, there are some facts in this that is distorted by the media urge to bring up a scandal - instead accurately comparing Microsoft to its competitors.

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"Longhorn has been delayed"
- yes and no. Some parts are delayed, and will be shipped later - but Longhorn itself is actually still on track within the original deadline.

Upgrade to XP to get a safer browser:
- Yes, you need to do this, but what the media do not tell us is that 99% of every software companies on the planet are doing the same - even those who make security products like Symantec and McAfee.

What we need to differentiate is security problems and security enhancements. Security problems (e.g. that someone can hack your browser and take control of your computer) are still being updated regardless of version of Windows. It is only the "new programs/functionality" that you need XP for. Things like the security center, the build in firewall etc.

To compare this with a e.g. antivirus company, then when your buy their product you will of course get the latest anti-virus definitions to ensure that all security problems stays fixed - but you still need to buy an upgrade if you want the new features - like spyware detection. Unless you pay a subscription fee of course - maybe we should pay a subscription fee for Windows? :)

Mozilla is a safer browser:
I do not think so… Very recently 10 high-security problems were patched in Mozilla/Firefox, only 2 month before that 3 other high-security problems were fixed. At this very moment, Firefox's website is alerting that their users needs to update the browser, the avoid having their personal files damaged. It was only barely mentioned in the news - and these are browsers who get much less attention from hackers than Internet Explorer.

I am personally feeling more secure using Internet Explorer, where a lot of people is testing for security problems - than Mozilla where only a few people are testing, and lack an adequate updating feature.

IE, Mozilla, Media Player and RealPlayer
Something that really bugs me is how the media reports the issues between Microsoft's IE and Media Player and their competitors, because it is one sided story. The reason why it is so difficult to remove media player, is not technical, but because it is not just a media player. Media player is incorporated into a lot of product basically enabling them to include rich media experiences.

To give you an example: If you some day want to create Brand Management System, and wants to include rich media into the system as an integrated part - you can incorporate Media Player's functionality directly. It is the same with Internet Explorer. It is not just a browser; it is also an internet "enabler" - allowing you to add internet based information into other programs. Many programs that rely on internet based information, from the small ones showing the weather in your task bar, to larger systems that relies on instant online collaboration. These programs are "internet enabled" because they use Internet Explorers "engine".

By taking away Internet Explorer and Media Player, they are not just removing two separate programs (a browser and a music/video player). But they are taking away the ability to incorporate their functionality into other programs.

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I am not advocating Microsoft. I do not think that Microsoft is the best example of a good company. They are of course trying to make money, and they are very good at it - but so do their competitors.

What I am advocating is usability - ease of use. And taking away an integrated and consistent rich media environment like the Media Player and replacing it with a non-integrated and inconsistent stand-alone player (like RealPlayer) is not a very good idea. Making a less capable product and then take Microsoft to court in an effort to gain market share, might be good business for RealPlayer - but it is hurting those who have to use it - people like you and me.

BTW: Sorry for the long comment :)