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Is Windows Worth $45?
bgelb writes "This article from the Wall Street Journal questions whether Microsoft really innovates enough to justify the enormous amount of money (nearly 10% of the cost of every PC!) it takes from consumers each year. Hard drive and chip makers innovate constantly, but what about Microsoft?"
There are choices for consumers and if they refuse to vote with their wallets, I have little pity on them,.
(I'm posting the text because the online access will go away in 7 days for non-subscribers)
Do We Get Enough In Innovation for What We Give to Microsoft?
It's 2004; do you know where your computer dollars are going?
One can learn a lot about the computer industry by looking at the breakdown of manufacturing costs in an average desktop PC, as compiled by iSuppli Corp., a market-research firm. Excluding labor and shipping, and leaving out the costs of a monitor, keyboard or mouse, the typical desktop PC these days costs the Dells or the H-Ps of the world roughly $437 in parts.
The biggest portion of that -- 30%, or $134 -- goes to Intel for a Pentium processor. The disk drives, including whatever CD or DVD is installed, cost around $104; the RAM memory is $54; and the remaining hardware items -- power supply, case, circuit boards -- total $100.
The final 10%, or $45, goes to Microsoft for the Windows operating system.
Because these prices are never disclosed, the figures here represent best guesses. But you can start to see the contours of the computer industry in that bill of fare. Specifically, you begin to understand how Microsoft could amass its $61 billion in cash and other assets. It's easy when you collect nearly 10% of the cost of every PC that's shipped, while having no manufacturing costs of your own.
Most technology companies that do well justify the money they make by saying that is what is required to fund innovation, that were it not for all the profits they were accumulating, the industry would be standing still.
The claim is suspect. The disk-drive industry, for one, manages to release drives with ever-larger capacities while often barely breaking even. And the technical challenges they face are among the most formidable, involving squeezing more and more bits of data onto ever smaller portions of a rapidly spinning magnetically charged platter.
Intel is no stranger to big profits. Analysts estimate the Intel CPU costs more than a comparable product from rival Advanced Micro Devices. What about the added charge? Think of it as an Intel tax on each PC.
Even if you're not an Intel shareholder there's arguably a benefit associated with that tax. Intel is like a research-and-development operation for the entire semiconductor industry. The manufacturing processes it uses for its latest-generation Pentiums are the most advanced in the world and cost billions of dollars. Eventually, though, these processes become widely available to everyone in electronics. This is one case where trickle-down economics seems to work.
That leaves Microsoft, and the question: What does the world get for the 10% Microsoft tax on every PC?
No one could ever say Microsoft is sitting idle. That was clear last week at a Research TechFest the company held at its Redmond, Wash., campus. Microsoft has an advanced research operation that employs about 600 people all over the world. These are some of the smartest people around, and they don't work on specific Microsoft products, but rather on long-range ideas, usually matching their own interests.
The TechFest was like a science fair. Researchers set up booths, and the managers of Microsoft's many products milled around, looking for useful ideas they could deploy in future products. The number of people doing the milling was in the thousands.
But is the innovation from Microsoft commensurate with the awesome resources it has been given? The average Microsoft customer probably wouldn't say so. Indeed, the advances the company lists for its new products all too often involve fixing shortcomings of earlier products, such as security and reliability in the case of its operating systems, and ease of use with its Office suite.
In fact, you can argue that genuine innovation is the last thing monopolists want, since it threatens to upset the very applecart that made them rich in the first place.
When asked which research from its labs has made its way into M
I think their estimates are off a little. $45 for a copy of Windows seems a little bit underpriced. I know an OEM installer, and he says that every copy of Windows they get (and they have to get multiple ones) costs on the order of $99. Granted, he's not a _big_ OEM builder, but he's still an OEM builder.
He also has a monopoly on the area's new PC market, but that's okay.
I've paid a Microsoft tax on two of my 11 PCs. Five of the others are too old to run Microsoft software, two of them are relics that will never leave my house. One is incapable of running any Microslut OS and it would be preferable if it stayed that way. One is a hunk of silicon which I didn't pay microslut taxes on. One other, my Quadra 630CD, runs a Microslut OS, but I didn't pay the taxes on that one, AAPL did way back when. (consequently, that thing runs Windows 3.1 on its 486/66 processor better than my native 486/66 did, with less RAM)
This is not the sig you're looking for.
It's a lot more than that, when Dell is selling it's low-end machiens for around $399. XP Home costs over 25% of the cost of that new PC. Pro is almost half!
You see? You see? Your stupid minds! Stupid! Stupid!
OK - if you have questions maybe you should RTFA first, where it explains that $45 is a BEST GUESS of how much Microsoft is charging for the OEM version of windows.
Seriously, this is about as straight-forward RTFA question as you can get..
Funny, the college I work at has the Academic Alliance thing... so our students get like just about anything MS has for $25 total, but only if they are majoring in the ITE fields.
Don't blame me, I voted for Kodos
Did you ever consider going into your local computer shop and purchasing a pc sans MS OS? I'm sure they would have been more than happy to load up your favorite linux distro.
Well, what do you know? A Dell machine with Linux on it, and another with FREE DOS. Just because you are an uninformed consumer who can't be bothered to look for a machine configured with the software you want (from the same vendor no less!), don't waste the time of the FTC.
Buy from the Dell Business site, rather than Dell Home, and you can get machines without an OS. There are some great bargains on the low end Poweredge 400SC servers.
yeah, but they get paid every time their song is played on the radio. radio stations pay apra or whatever the royalty collection organization is in your country.
I think you are wrong here. Rember, OS/2 gave the user the ability to run "windows" programs under the Win/Os2 shell. Ok, so it wasn't great, but it got the job done.
This feature, which was rather nifty, led to the demise of OS/2, IMHO. The reason? Software developers decided that since OS/2 could run windows apps, there was no point in developing for OS/2. All apps were developed for Windows first, OS/2 second. Before you knew it, there were no OS/2 apps out there to choose, so going with Windows was an easy decision.
Actually sometimes you cant even find the drivers for windows 2000/XP.
So if you have a PC Chips and want to use all of its features, you have to use win98SE, the white trash OS.
"Top 40" get paid to air songs.
You're thinking of ASCAP and BMI.
> That has nothing to do with being a monopoly.
I see where you're going with this, but I don't know if its that clear cut. For instance, three weeks ago I was talking to one of our NOC guys at school and essentially they're going to phase out Novell because MS is giving them so much free software (upgrades to XP and server2003) they can finally shift to AD and drop Novell.
Now how is MS able to pay for this generosity?
1. They abused their monopoly and are arguably paying for this kind of thing with their ill gotten gains.
2. They're just a good company. *snicker*
I'm leaning towards 1. Novell has money and doesn't want to lose customers either, but they can't afford to supply an entire 20,000 person campus for 2 or 3 grand.
You actually think OEM's pay Microsoft $1 per machine? And you actually think Microsoft has $61 billion in cash by collecting $1 per machine?
The WSJ numbers are OEM quantity numbers. MSRP for Windows is a lot higher (same for all the other components as well). It is true that Microsoft will massively discount for their friends; but $45 is the DISCOUNTED price.
The only problem is that Dell screws you anyway. I just tried their site and configured two identical desktop systems, except that one came with FreeDos and one with WindowsXP Home (but no Office software). The XP system came out $73 less than the FreeDos system. I guess that Dell though that nobody would notice, because the price difference wouldn't have shown up if I had decided to splurge and buy Office as well as XP.
There's no point in questioning authority if you aren't going to listen to the answers.
I am on smaller OEM and typicaly buy XP home OEM for $50-54 and XP Pro for $65 or so. I purchase 10 packs to get a price like this and go through 2 or 3 packs of home a month and a pack of Pro every six weeks or so. Dell buys direst from M$ while I go through a middle-man. I am pretty sure that since the big OEMs are buying 10000 the volume I do they get a better price.
Though they usually do opt for Windows as well. I looked at percentage of PC sales a while back and was confused. The numbers from all the big (and a couple not so big) manufacturers added up to around 50%. WTF? Was the data screwed up? No, turns out that still about 50% of sales are at local stores, or chains that do custom builds like CompUSA. The big OEMs have made huge inroads, and of course have the largest singular percentage slices, but they are NOT the only option, or even the most popular.
So ya, if you don't like the OEMs sticking Windows on there and not giving you an option, go to the mom and pop shop and get your computer there.
This violates the Fair Use and First Sale doctrines. Corps make it common practice to toss legal language into contracts knowing that it can't/won't be enforced. This is one way those with a clue like to abuse those without one.
Don't take is the next gospel just because it's in a contract or license.
A Pirate and a Puritan look the same on a balance sheet.
"is MS evil?
sure.
is $45 too much to pay for an OS?
no way."
It is if you are furthering the cause of evil.
No raindrop may be responsible for the flood but every drop does it's part.
So yes. Paying $45.00 to further evil in the world is too much to pay.
The best way to support the US war effort is to continue buying American products.
You may know what he paid, but you seem to fail miserably in knowing what he paid for
Whatever he paid, the EULA clearly states that it is the right to use on a single machine. You don't have to like it, you don't have to even agree to it. You should recognize that failure to comply with it is misappropriation of intellectual property.
Read. The. License.
Not all licenses are created equal. Not all licenses should be created equal. Comparing apples and lugwrenches by saying both are objects is fine, but it doesn't make an apple like a lugwrench.
I beg to differ, you don't understand. I suspect you would change your tune if you were selling your intellectual property and had your sales impacted by unlicensed use of your product your perspective might change.
Look, if I am selling something, and there is a glut of perfect replicas of what I am selling freely available, it lowers the value of my product. Even if you are not distributing your *perfect copy* of my product to others, by buying one and using two, you have deprived me of an opportunity to sell you a second copy.
I don't like windows. When at all possible, I install linux on harware I build, or by hardware that ships with non-Windows OS pre-installed. If you don't like Windows, don't use it. Please don't rationalize IP theft, wrong is wrong.
ACMD eht detaloiv evah uoy
The "Apple Tax" hasn't been $2000 for quite awhile now. Macintosh is what WinDOS wishes it will be when it grows up someday. That's certainly worth paying a premium for. Although, that "premium" ends up being $350 at most (giving the PC the greatest benefit of the doubt).
A Pirate and a Puritan look the same on a balance sheet.
What matters is whether the machine is cheaper when I order it without an OS
Well then you'll be glad to know that a Dell PE400SC can be configured to have "No OS" and the price drops by $499!
Vote for global prefs bug
I remember reading in an interview with Billy G, and he said Microsoft would not go after people that used the same license on two computers, as it would give them too much bad PR(not that it really matters, they are a monopoly, and I don't think there would be a mass switchout of Microsoft products if it did happen, people are too lazy to change). Even though they aren't getting paid for that fourth computer, they are atleast benifiting from it running Windows and expanding their dominance. It would probably cost too much in legal fees to go sue each and every user RIAA style, and there is really no way to tell who is an isn't, people who pirate software usually aren't dumb when it comes to covering their tracks by stopping the computer from phoning One Microsoft Way. More importantly it might just invalidate click-through EULAs if they took them to court, which ofcourse they couldn't afford to loose, it's what gives them leverage above the user.
I have just finished a six-month consultancy with a substantial beige-box OEM in Taiwan. They pay US$52 for XP Pro licenses bought in bulk lots.
A dream is good. A plan is better.
Actually, it's Windows 2000 that uses two licenses for each HT enabled CPU (Win2k doesn't know the difference between logical and physicaly CPUs), not XP. XP got it right... And 2003 of course.
I worked for a major OEM for several years. I don't know where you got your figure (but I can guess...), but it's wrong. OEMs pay about $45 per license. The price hasn't changed for years. It used to be $45 for WfWG, about $50 for NT 4 and the same for 98 and up. And that was back when MS was strong-arming exclusive contracts.
We had to consider the cost of every component that went into a PC, down to the screws. So even back when a hot computer was Pentium 166, that $45 was a chunk of change. You can bet that it's virtually intolerable today.
What really made us grit our teeth, though, was that we paid $45 to $50 for a copy of Windows, but we were responsible for all of the manufacturing costs, from the media to the packaging. We had to contract our own mastering, printing and packaging services. So, while we paid Microsoft their money, we also had to pay Phoenix another few bucks for the actual media. And when a new version of Windows came out, we had to pray that Microsoft would actually get us a master soon enough so that we could ship systems with their OS on the announced release date.
At the time, we were the second largest build to order PC company (behind Dell). I'd hate to think of how things would have been if it was a tiny outfit.
Not a dollar. Not even close.
-h-
Those were happier times.
It's true... I work for a small OEM and we get slapped for $80 for a single OEM license of XP Home.
That's BS. Unless you're telling me that OSS developers get things like apartments, food, medical care, etc for free, the developers are being paid one way or another. While quite a few may do development work as a hobby a lot of the core development people in the Linux world at least are employed to do OSS development. Hence, development costs money and someone is paying the price.
"When you sit with a nice girl for two hours, it seems like two minutes. When you sit on a hot stove for two minutes, it
CP/M ran on the Zilog Z-80, Motorola m68k, and Intel 8080 and 8086 architectures -- on microcomputers not manufactured by CP/M's publisher, Digital Research. MS-DOS copied many features from CP/M, and several early MS-DOS programs such as dBase and WordStar were ports from CP/M.
Neither Microsoft nor IBM invented the idea of a microcomputer operating system separable from a particular manufacturer's hardware. Indeed, several of the first IBM-clones (by which many would ironically include the IBM PCjr) were notoriously buggy, and many MS-DOS programs would not run on them. (CP/M programs were generally compatible on the same processor.)
As usual, the Microsoft-based copy of someone else's idea was much poorer. However, the Microsoft marketing machine -- and, more importantly, the willingness of the computing world to forget or deny the better options not taken -- have come into play.
How about factoring in software to make the computer actually perform the functions that are required? Sure, Windows by itself can perform many tasks like playing various media files, writing documents with primitive formatting, organize files, burn CDs, and play some very simple games. But these make it the "jack of some trades, master of none." The real value of Windows is that it allows you to run the software you need.
Take your typical business for example. The typical bare minimum installation would be MS Windows and MS Office. Supposing you bought your new Dell for $499, roughly $45 of that being Windows XP. If you needed Office XP for that, that's about $350 new with retail pricing. So right there, that bumped your cost of MS products for that computer to nearly $400, with the total percentage being nearly 50%.
Everyone complains about the cost of Windows with new PCs and the cost of Windows upgrades. Windows costs a lot for what it does, but compared to the apps, (in the case of Microsoft, it's Office), it's nothing. Look at AutoCAD or any common 3D modelling programs.
One of the things that really gets me though is the ratio of benefit to cost for the typical user or business for any of the major Microsoft software. Moving from Office 2000 to Office XP costs probably around $200 per seat just for the licensing costs. Then factor in compatibility issues, deployment time, training time and all of those other factors, and it gets very expensive. Microsoft has a tendency to hardly improve the useability and functionality of their software while at the same time introducing new bugs, changing the look and feel, moving things around and at times, making certain common tasks more difficult, and then charging for it. Off the top of my head, I don't think that I could name a single functionality enhancement to Office XP over Office 2000. I work in IT, and the only thing that I've heard has been that mail merging in Word XP sucks compared to previous versions. To me, that seems like a very common office task that should have been streamlined over time. Also, I've seen benchmarks that show that Office XP is faster than Office 2000. The benchmarks were also performed on huge documents, which in the typical household or business, you're never going to see. You get to buy a revised Office 2000 that finally has been coded properly and modified slightly. So, looking at the benefit of Office XP over Office 2000 for anything I can think of is basically zero, while the cost is quite high.
Now, looking further at upgrade costs...
Typically, you'd buy a PC which the hardware would last for around 4 years. The software on the other hand lasts for much less. If you exchange Office documents with others, you are likely going to need the latest and greatest Office software, meaning you need to upgrade every time there is an upgrade. Lets see, there was one in 2000, 2001 (XP), and 2003. So, if you bought Office 2000 for $350 back in 2000, and then upgraded twice for the price of $200 each time, that's $750 per workstation for Office. So, you bought your $499 PC, and then over 3 years, loaded $750 worth of just Office software on it. If you figure in the cost of Windows with the $750 for Office, that brings the cost of Microsoft software closer to $800, while the price of the PC is right around $450. Even if you bump the Dell up to a 4 year warranty, I can't imagine that price would exceed $800 for the hardware.
But then again, from a business perspective, everything comes down to profit, and if that money invested in MS products helped you increase your profit more than it cost for the software, then it was worth every penny. And included in 'increased your profit' is the fact that you can easily exchange documents with clients, which I'm sure for many positions this is essential.
Of course if you can achieve all of that same functionality and interoperability with OpenOffice, then that entire last paragraph doesn't really apply.
Just a few ramblings for ya...
You could had gotten a tadpole:
http://www.tadpolecomputer.com/html/
Your reasoning is correct but one niggly fact was wrong. You talk about OSs only being sold by the hardware manufacturer and you say "Microsoft changed that". But CP/M predates MS-DOS by a very long time and it was available on many personal computers from many vendors. You could even get CP/M for the Commodore 128.
While I agree with you that divorcing hardware from the software was important for the growth of the IT industry, Microsoft wasn't the first company to do it. Even UNIX could be properly seen as divorcing hardware from software; you could run UNIX on dozens of different minis (not PCs) well before Microsoft even existed.
Here in Germany you have to pay more than 100 Euro for the Microsoft Windows XP Home OEM edition, if you want to buy a laptop for example. There are only a few laptop manufacturers, which sell their machines without pre-installed OS. Just in case you don't need that OS, here are some legal ways to avoide the *Microsoft tax*.
Indeed. I used to run CP/M on an Apple ][+ clone through a Z-80 daughter-board. I'd certainly call that a personal computer.
Additionally, I could have sworn hearing that their'd been some controversy that not only did MS clone CP/M, but that even some of the Digital Research copyright strings found their way into the original MS-DOS.
You forget (or almost forget) to consider that for $45 you buy only Microsoft "Windows", their operating system with Internet Explorer, Mediaplayer and notepad.
For $79.99 at SuSE you buy an operating system plus the entire product line of applications.
When you go back to Microsoft, you would have to add Office, Exchange server, SQL server, Visual C++, Visual whatever, and the list would go on and on and on. The price of that entire lot would be astronomical compared to the $79.99
In that context, $45 for just the bare OS is pretty steep indeed.
As much as I detest the Beast of Redmond (and I *am* a Linux user), I have to admit that Microsoft Research does a huge amount of really good research in basic computer science and mathematics. And a *lot* of this research ends up in actual products.
I know for a fact that some wonderful research in statistical machine learning is actually being used on the XBox, while some equally great theory in stochastic processes is being used for image super-resolution.
While the end user might have to wait for a bit for the benefits of all the research to trickle down to the actual products themselves, from a pure research standpoint, some of that money that they squeeze out of their customers actually ends up getting spent in the right places.
"In mathematics, it's not enough to read the words -- you have to hear the music"
$45 IS cheap. In the UK it's GBP 120 for a full copy of WinXP. Or GBP 80 (why can't I use a pound sign????) for Home. That's $150! Ok, Americans may pay more for books than we do, but we pay WAY more for software it seems!
"Piracy" (or whatever you want to call it) is a real problem here in Poland. I honestly think most people here would prefer to own a legitmate copy of Windows. However, when a retail copy of Windows XP Pro costs more than your monthly apartment rent, it's hard to ignore the $5 copy available at the local open-air market.
And, FWIW, a retail copy of the latest Office Pro costs about 20-25% of the average yearly salary here.
This is one thing (of many) that I really hate about Microsoft. They don't adjust their prices based on the local economy (at least they don't do it here). Many other products sold here seem to have their prices adjusted based on the local standard of living. Not Microsoft software.
I think this is a great potential growth area for free/open source software: make quality software available to people who simply cannot afford Microsoft. For most of us here on Slashdot (I suspect) $45 US is probably our latte budget for the week. For many families here in Poland, $45 US (~170 Zl) is their grocery budget for a week or two.
Heck, some people would argue we were farther along when OS/2 was around than today. Until MS broke compatibility with the now infamous 2GB memory request for all its programs from Office 97 onwards and the total backwards incompatibility of Office 97 with previous versions (OS/2 was limited to 512MB max memory for VMs). If an MS app crashed within OS/2, the window would just close. OS/2 didn't care. Not to mention all the other nifty aspects of OS/2: true OO consistent interface, true multi-threading, support for multi-casting, etc. Yes, the PM had some issues, but after having used it extensively, and used all flavors of MS, PM is still years ahead of MS's latest effort, heck, it's years ahead of Longhorn's purported features list.
Next: is windows OO yet? nuff said.
Be: fast, small, fast, consistent, fast...did I mention fast? Ok, it had some short comings too, but it was a good system for what it did do, and it did those exceedingly well.
The cesspool just got a check and balance.