Win9x/ME - Volume Licensing = More Unix?

utoddl asks: "Now that Microsoft is dropping volume licensing for non-NT versions of Windows, will corporate types who are forced to 'upgrade' from their Win9x OSes be any more likely to look at alternatives to NT (say, Linux, for example) than they would be otherwise? Could it be that Microsoft's attempt to increase the NT revenue stream by forcing the hand of slow adopters cause some to adopt something else instead?" Ouch! This will cause hell for shops who have a large number of Win9x based clients. Is this a desperate move by Microsoft to increase revenues from one area that they are expecting to lose in another year?

Comments

The crystal ball is cloudy.

[Black Parrot]

> Is this a desperate move by Microsoft to increase revenues from one area that they are expecting to lose in another year?

It's almost certainly a money grab; for the past year they have been announcing a continual stream of "reorganized" licensing plans, and in every case that I've heard of, the customer pays more for the same product or service, or pays the same and gets less, or pays more and gets less.

As a WAG, I would say the money grab has more to do with a cash flow problem than with pillaging a province that they think is about to be pillaged by barbarians anyway. There are multiple signs that MS isn't generating the kind of cash they need to from software sales. Reports of an (illegal?) "cookie-jar" scheme have been rife for over a year now. More recent reports claim that they made more money last quarter by selling off assets than by selling software. Moreover, the vaunted W2K "Unix Killer" has ended up instead playing Little Dutch Boy, vainly trying to stem the flow of Linux into the serverspace market that MS thought Manifest Destiny was going to drop into their own hands. Nor has W2K been a big seller in its own right: after a reported $1,000,000,000 in development costs and another whopping $500,000,000 in the initial marketing blitz, it's not exactly cropping up on every street corner.

For Microsoft, there's not much more to be had by increasing market share. The part of the world that can afford computers is practically saturated, and there's not much competition left for Microsoft to seize pre-saturated turf from. They find themselves stymied in serverspace, and on the desktop they have already reduced their most visible competitor to the status of a conquered client. So their cash flow is almost entirely dependent on the upgrade cycle, or ventures into entirely new fields (can you say "X-box"?).

And then there's the valuation of MSFT. From around 120 in late '99, it dropped to around 55 in mid '00. That was before the current landslide in tech stocks got started. MSFT did pull up somewhat from the 55 and stabilize for a while before the landslide started, but now it has been caught up in it and `fallen into the 40's. The outlook for their next quarterly report is bleak indeed.

And make no mistake: Microsoft isn't "about" software. Microsoft isn't really even about making money. Micorsoft is about the share price of MSFT. Cash flow and software design are both subordinate to that higher goal.

So I would guess that this and all other attempts to squeeze cash from its installed base is all about making the books look good so MSFT will soar again. (I wouldn't bank on it -- in fact I told a friend 18 months ago to get out of MSFT -- but Microsoft will keep trying to pump it back up as long as they have a customer left to squeeze or penny left in the bank.)

The interesting part of your question is, will that squeezing make customers turn elsewhere? Linux has been making inroads already, and by some accounts is already used on more desktops than the Mac is. It's certain that the world won't switch to Linux overnight. But the world could look vastly different in 12 months. If MSFT continues to fall, Microsoft will continue to squeeze. As Linux continues to make inroads into server space, more powerusers will be exposed to it and adopt it for their own desktops. As more people adopt it for server or desktop, more companies will port their commercial products to it. (There has already been a notable shift in that direction over the past year or two.) With I2O supported in Linux 2.4, the possibility suddenly arises that the latest newfangled peripherals will suddenly start working on Linux the same day they work on Windows.

The net result is that Microsoft not only doesn't have anywhere to expand, but it suddenly finds even its upgrade market shrinking, if only by a little. But when upgrades are your primary source of revenue, even a small shrinkage puts a real squeeze on your desire to look "way profitable".

You can think of Microsoft's market share as a leaky innertube. There is already a minor flow out toward Linux. Squeezing the tube can't help matters, and at some level of pressure will make the difference between a slightly accelerated leak and a loud pop.

Microsoft can't keep going the way they have been for the past 20 years. I think the X-box is a sign that they know it. Even if the courts veto a breakup, you can bet that they will have a radically different position in the market before long, probably within a couple of years. That won't be entirely or even primarily due to Linux, though Linux is playing a role in it. It's one factor among many.

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