News - Microsoft urges the enterprise to move on from Windows XP

[Zadock]

If I had a pound for everytime I heard someone spout off about Vista without actually having used it.. etc.

I've spouted off about it but with good reason, it just didn't work for me when I first got it. However, since the service pack its a joy to use... my only quibble now is that I can't play Age of Empires or Freelancer online because of a directplay issue.

The company I work for has 6000 employees spread over about 150 offices, we are all using XP (SP2) and Office 2K3... We also have a fair bit of older hardware knocking around... for us to upgrade all of our machines to Vista would cost and absolute fortune, and in this current economic climate I really can't see us forking out anytime soon.

Also I think there are a lot of people here that would struggle with vista simply because they aren't used to it, productivity would go through the floor if we rolled it out too quickly.

[greenalien]

The problem isn't simply the cost of upgrading operating systems - the cost of the OS is a drop in the ocean compared with the cost of the rest of the software that many businesses, including ourselves, run every day. This includes CAD programs at £3000+ per seat and lots of customised Office apps with thousands of lines of VB / Macro coding. All of this works just fine with XP - there is absolutely no economic advantage for us to make the switch to any other OS. (we did finally get rid of our last Win2K machine last week though...)

[Saracen]

Perfectly reasonable then for quite a number of people to lose jobs due to greed then? Microsoft I'm sure could shift more units at a slightly lower cost and make more money overall. Would piracy be so rampant with Windows and Office at lower price points? I'm not so sure that would be the case.

Would piracy be so rampant? Well, the answer to that can only ever be a guess, but IMHO, probably close to as rampant, yes.

If people don't want to but the loaded Office, there's always Home and Student (for non-business buyers). But I wonder how many people still pirate Office? And of those that do, how many will cheerfully buy a £300 video card?

There is, in my opinion, a sizeable proportion of people that will pirate Office pretty much regardless of price. Why? There's two parts to that. One, because they can. Two, because while the marginal value of Office, when pirated, certainly exceeds the cost, that being £nil (or $nil or whatever), as soon as they start to pay for it, the calculation changes.

If it simply wasn't possible to pirate Office, what proportion of pirate users would suddenly decide they can find the £60 or so for the H&S version, and what proportion would suddenly discover the wonders of OpenOffice or some relatively cheap third-party WP/Spreadsheet? For that matter, what proportion would suddenly discover that the old version of Office they have, whilst not having all the latest bells and whistles, actually still writes letters and reports just as well as it did many years ago when it was the latest, all-singing product?

For instance, I know I can get just about any version of Office I want. I mean, they're not exactly hard to find. But what am I using? A legit, boxed version of Office XP. Would I like Office 2007? Yup, but not enough to pay several hundred quid for it, and not enough to use a pirate version when I've got a perfectly serviceable older version sitting here, doing the job just fine.

So if MS cut the price of a loaded, all-singing version of Office from, say £275 to £250, or even to £200, how many people would change their buying decision as a result? Few home buyers are going to pay either sum, and for business buyers, they're either on a one-off, or they don't really have a need for it if they can't stretch to £275. If they need a package like that, £75 is really neither here nor there.

Now what about costs?

For a start, a good chunk of that £275 isn't going to MS, it's going to the distribution chain, to importers, distributors, warehouse costs, rates for shops, etc. And of course, that's also bearing in mind that of that £275, about £40 is going to HMRC in VAT, so it's actually £235.

And that entire supply chain has to not just cover the costs they incur, but make a profit per item, too. So you're not only paying several lots of incremental costs, but several lots of incremental profits, too.

And then there's MS' costs. They've got an element of fixed costs, such as discs, printing, packaging etc. But they've also got all the development costs, they've got salaries to pay, they've got buildings to run, they've got capital programs to pay for, utility bills for all the lights and computers, sales and marketing campaigns, PR and so on. All those costs have to be funded by products like Office, so you have to spread all the up-front development costs, paid for before the product ever hits the streets, across the unit sales of that product during it's lifetime.

Plucking some figures out of the air, lets say that MS need to recover £50 per unit just to cover those costs, and that the supply chain takes about 50% of retail, which spread across several different companies may even be optimistically low.

If so, of that £275 retail price, £40 is VAT, and half the balance (£117.50) goes to the supply chain. leaving MS with £117.50.

But we agreed, hypothetically, they need £50 just to cover costs, so that £117.50 in revenue is actually £67.50 in profit. If you cut retail price by just £10, you're cutting profit by about 20%. If you cut retail price by the £25 I suggested, you've cut profit by about 40% and if you cut that £275 down to £200, you're probably making a loss.

Even with the middle path, the 40% loss, you've now got to three units where you previously sold two just to break even.

Obviously, all these figures ar hypothetical, and they're there just to illustrate the point, which is that when you say

Microsoft I'm sure could shift more units at a slightly lower cost and make more money overall.

they'd have to shift more units just to stand still, and unless you know the intricate details of their costs structures, and sales volumes, it's impossible to know what unit profits are.

MS are a company and their remit is to maximise profits. Like any other company with shareholders, the company has a constitution to follow, and shareholders rely on that when they decide to invest. So the executives aren't out to maximise profits because they're grasping profit-mongers, but because they have a legal duty to do so. It what the investors that own the company pay them for.

Which begs the question ... if they could make more money by selling more units at a lower price, and do it long-term, why haven't they done it years ago? It can't be because they're so stupid that they haven't thought of it. Perhaps they haven't because they tested that proposal and found it didn't work like that.

[sammie377]

Well there's a lot of work to be done on Windows 7 before it's ready, I installed Beta 1 and altough there is a newer one out right now I can't download it because Microsoft have stopped hosting it.

But over a 2 week period my PC had so many crashes mainly closing Internet Explorer whilst I was working I gave in, I recorded my info and on the day I scrapped it 18 crashes in just under 2 hours, plus quite a lot of my things don't work with it yet.

It's very hyped up as usual, it's nice it's quick but it doesn't work properly yet.