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Dell admits MS price gouge is hurting business

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Here's a story that will dampen hopes that Windows XP, and its associated subscription model, can lift tech spending out of its current slump. Michael Dell yesterday admitted that far from boosting business, Microsoft's aggressive new pricing structure for Windows XP is having the opposite effect, and deterring the traditional Wintel upgrade cycle.

He conceded this in a one-word answer at the Lehman Brothers semiconductor analyst conference in San Francisco, asked about the reception subscription model (users are now locked into an annual cycle). But his terse admission is highly significant. Dell Computer is a staunch Microsoft ally, and its founder's prognostications are followed almost as closely as Alan Greenspan's used to be.

In the past, you'd expect pent-up demand for XP, which offers genuine reliability and performance improvements over the cruddy Windows 9x codebase, to translate into some kind of spending kick. For sure, XP requires reasonably modern hardware, but the support savings from standardising on a single client platform are not inconsiderable; that's what helped drive the Mac out of mainstream businesses in the mid nineties (it had been popular with marketing folks until then) and into its current niches, even though few found Windows 3.1 and later Windows 95 particularly lovable. With XP Microsoft has, after fourteen years (MS OS/2 version 1.0 trickled out in early 1987), again standardised its client desktop on one platform.

However the combination of product activation and the annual vig appear to be dampening technical enthusiasm for the software. The new XP licences could increase costs by 130 per cent.

Last month a Morgan Stanley survey reported that tending to Microsoft desktops and networking was one area of the corporate IT budget that would actually increase. But as Bloor Research's IT Analysis astutely observed, that didn't necessarily mean that the bucks were being exchanged for shiny new upgrade licences.

In truth, while XP gives your Windows 95 or 98 user a more stable platform (and, hey! alpha-blended icons...) you'll see little difference if you installed NT 4.0 and left the machines to chug happily away. That's the flaw behind the fascinating - for all the wrong reasons - Forbes' XP ROI calculator we wrote about yesterday: the assumptions section omits to ask what you're upgrading from, and without that information, the "60 minutes per year saved over Y" savings metric is essentially bogus.

And, er... that's it. Dell's one-word response means that this is one of those stories that should have "NM" appending the headline, but we can't get let you get away that easily. ®

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