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Thursday, August 30, 2007

Can Microsoft’s open source problem be solved?

In his recent piece about how Microsoft should be afraid of open source, our own Matt Asay stumbles on a solution to the problem.

He offers this nifty Forrester chart (right) showing how software revenues have changed in the last few years, from licenses to maintenance, with services declining as well.

There are good reasons for this. Open source is one. The need for continual updates on, say, anti-viral programs is another.

All of which leads to my cunning plan says perfume presents personality Ads by perfume strore


Stop selling Microsoft software. Rent it.

Microsoft is doing this already in the enterprise space. Contracts routinely include maintenance on server software. So why not do that in the consumer space?

Instead of selling Windows for, say, $150, through an OEM, sell one year of it for $99. Require registration for updates, and then charge $75/year for maintenance, just like the anti-virals do.

The same thing with Office. Don't sell it for $500. Sell it for $300, but for one year only. Then ask for another year of maintenance. Or, even better, get their credit card and charge $30/month for the whole shebang, Windows, Office and all.

Now you've got recurring revenue, you're actually getting more than retail (because people keep PCs for three years, not two), and you've got constant access to the customer's PC in order to provide the service that customer is paying for.

Plus there's constant customer contact and the ability to upsell. Companies like-y the upsell.

Instead of sending out a yearly service pack, you can send out daily or weekly updates, just like the anti-viral guys do. And now your money is coming from maintenance, not license sales.

This isn't rocket science, it's merely adapting what already exists in the enterprise space to the consumer market, using online channels Microsoft and its ISVs already use.

Sure, Microsoft will have to make sure it continually pleases customers, lest they cancel their contracts. It will have to take responsibility for the customer's set-up working.

But that seems like a small price to pay.

So, tell me I'm crazy here.

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