Original URL: http://www.theregister.co.uk/2009/01/30/microsoft_netbook_sku/

Memo to Microsoft: Enough with the SKUed Windows

Windows 7 netbook plus for all

By Gavin Clarke

Posted in Operating Systems, 30th January 2009 03:42 GMT

When it comes to Windows 7, Microsoft should resist the usual inner demons.

A new client operating system from Microsoft is the gift that keeps giving. You don't get just one version. You get lots of different versions. There currently exist five editions - or SKUs - of Windows Vista, while its predecessor Windows XP came in six (never mind the additional two created following a European Union antitrust ruling on Windows Media Player).

If there was a genuine or substantial difference between versions based on user needs or markets, you could understand this. But so often, there isn't, and it's simply an attempt to up-sell what Microsoft must assume are a bunch of rubes short on nous and long on cash.

Take the Windows Vista SKUs. They start with the suboptimal Home Basic and range up to the fully stacked Windows Vista Ultimate. Windows Vista Home Basic has just three of the 13 so-called "features" offered by Windows Vista Ultimate.

Those features: "most secure Windows ever," "quickly find what you need," and "easier networking connectivity". All for the knockdown price of $199. It doesn't even have the Aero interface of the others, a fact that has landed Microsoft in legal hot water with customers who feel cheated.

Compare Windows Vista to Apple's OS X that comes in just one flavor, has application and infrastructure features that could be considered both basic and advanced, and carries the all-in price of $129 for a single user.

Microsoft's SKU strategy is simply designed to bring in the dollars and please Wall Street. It's like airlines that rely on high-paying business-class travelers to fund the cost of running planes packed full of low-paying economy class travelers.

On each quarterly financial call with Wall Street, Microsoft breaks out its mix of "premium" Windows sales, and that figure is usually in the 70 per cent range. "Premium" in the Windows Vista family is Windows Vista Business, Windows Vista Home Premium, Windows Vista Ultimate, and Windows Vista Enterprise. Most regular people don't get to see this latter edition as it's only available under Microsoft's volume licensing program.

During the recent second quarter, though, the wheels fell off Microsoft's plan and sales of all premium editions to PC manufacturers fell 11 points to 64 per cent, as sales of the PCs capable of running them crashed. Sales of cheap copies of Windows XP were up, largely thanks to growing sales of the low-spec netbooks that run them.

And therein lies the problem.

Windows 7 for netbooks?

Reports on Thursday surfaced that Microsoft is planning a version of the forthcoming Windows 7 for netbooks. The company squashed these reports, saying it's not yet ready to discuss packaging and version plans for Windows 7 other than to confirm Windows 7 "will run on netbooks."

That Windows 7 is being built to run on netbooks should come as little surprise to anyone paying attention during Microsoft's Professional Developers' Conference (PDC) last year. Microsoft said it's speeding performance, improving battery life, and boosting start times precisely so Windows 7 can run on netbooks, which have a smaller footprint than a regular PC.

Microsoft, though, should take the arrival of a new version of Windows to resist its past practices of market segmentation. Less SKUs would help Microsoft, customers and OEMs. It'll help customers who get the chance to get all the features without feeling like they are being bilked. It'll also make the purchasing choice easier when it comes to deciding between different PCs based on the version of Windows they are running - should they even be looking at this.

Fewer SKUs will help OEMS know which operating system to pick for clearly defined markets. They can then market and sell these machines, without trampling other lines of PCs. This would feed down into the channel too.

For Microsoft, fewer SKUs will help control development and marketing expenses on different SKUs in an era when, by its own admission, it's looking for ways to cut costs.

Now, when people get on this topic, the example of Apple and its single operating system are frequently cited as the way to go.

All Windows users could certainly benefit from the efficiencies and streamlining of a Windows 7 for netbooks. But a single SKU? Microsoft and Windows serve different and bigger markets than Apple and OS X. They are supported by an ecosystem of hundreds of thousands of business and consumer applications with different business and leisure needs.

It would make more sense for Microsoft to embrace the simplicity of Apple by reducing its SKUs - but rather than a single version have two: one for consumers and one for businesses. The foundation should be the streamlined Windows 7 netbook design, and it should have features such as simpler networking and being the "best choice for laptops" everyone needs.

Above that foundation, though, Microsoft should differentiate with, say, the ability to burn DVDs and create high-definition movies for the consumer version while businesses get remote access and back up and protection against hardware failure.

But with talk of at least five Windows 7 SKUs coming and rumors of the netbook edition in the air, it seems this is unlikely to happen. ®