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The ROI of free OS updates: Who wins, Apple or Microsoft?

Gregg Keizer | Feb. 4, 2014
Mavericks, Windows 8.1 hastened adoption, but what do the numbers really say?

Net Applications' numbers also imply something else.

Even if Microsoft followed Apple's lead and made Windows always free, including the rumored Windows 9 of 2015, the move would be unlikely to pay off. First and foremost, Microsoft would be leaving an incredible amount of money on the table. Although it might swallow the relatively small losses from giving consumers free upgrades — one-off upgrades bring little to the bottom line — it could hardly afford to chuck the billions earned each quarter from the sale of Windows upgrade rights to enterprises via Software Assurance and other volume licensing agreements.

More pertinent, why bother? According to Net Applications, although free motivated a bigger piece of the Windows 8 user base to update, that carrot was about half as tempting as Mavericks was to its audience. If free doesn't push most, not just some, to upgrade, what's the point of losing the revenue?

And how could it do free in any case, what with consumer and commercial so different in their opinion on upgrades? Actually, that wouldn't be an insurmountable problem, as Microsoft could offer free updates and upgrades — even to, say, Windows 9 — to those running the consumer-grade OS, Windows 8, while businesses running the more feature-laden Windows 8 Pro would have to pony up.

Give away Windows to OEMs?
Ross Rubin, an independent analyst with Reticle Research, had an even more radical take: Give away Windows to OEMs (original equipment manufacturers), the Lenovos and HPs of the world.

"Microsoft might monetize free Windows by bundling a basic version [with devices] but then using in-OS purchasing for upgrades," said Rubin last year in an unpublished interview. "Microsoft has long had the option in some form," he added, referring to the still-available in-OS option to boost Windows 8 to Windows 8 Pro. "It's more of a challenge to the OS because it's really a platform, but it's clear that much as is the case with Google [and Android], the opportunity is around Windows as the ideal gateway to Microsoft's services, particularly to Office."

Rubin's brainstorm runs counter to free upgrades — instead, he posited paid updates atop a free Windows foundation — but if Windows 8.1 didn't entice a majority to update, maybe free is a waste of time.

Rubin seemed to think so for what he called "larger releases," those that, like Windows 8 with its Metro UI or even a future Windows 9 that shifts Windows closer to Windows Phone, boast major invisible architectural or visible UI changes.

"Microsoft has charged for what it believes has a premium value associated with it," said Rubin in the 2013 interview. "There's discrete value in the larger releases.... Free for Windows 8.1 was similar to point releases of the past, which historically were given away.


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