The ROI of free OS updates: Who wins, Apple or Microsoft?
- 03 February, 2014 18:17
By ripping the price sticker from their latest operating systems, Microsoft and Apple have accelerated the adoption pace of their newest OSes, according to data released Saturday by analytics company Net Applications.
But Microsoft is not Apple, nor Apple, Microsoft, and so it should not be a surprise that their uptake stories reached different endings.
Last month, OS X 10.9, aka Mavericks, accounted for 68% of all Macs running it and its precursor, Mountain Lion, an increase of 5 percentage points from December, said California-based Net Applications. Mavericks passed Mountain Lion by the end of the former's first full month in the Mac App Store.
Meanwhile, Microsoft's Windows 8.1, which launched five days before Mavericks, captured 37% of the total combined user share of it and its predecessor, Windows 8, by the end of January, up from 34% the month before. Even so, Windows 8.1's user share trailed Windows 8's by a wide margin.
The rapid user share increases in both Mavericks and Windows 8.1 set records for Apple and Microsoft, easily breaking earlier marks for adoption. For example, Mavericks reached the 40% bar three months after its launch, three times faster than Mountain Lion. Free boosted Windows 8.1's uptake even more when compared to the not-free Windows 8. The former reached 37% three months after its launch, seven times more than the latter's 5% of the combined Windows 8-Windows 7 share at the same point in the 2012 release cycle of Windows 8.
Although the Mavericks-Windows 8.1 comparison is not perfect, they share several characteristics: Each shipped about a year after its forerunner, each was much more evolutionary than revolutionary, and maybe most important, each was free.
'Free is good'
Both Microsoft and Apple trumpeted the fact that they were giving away the newest operating system, a move that by Net Applications' statistics has paid off.
"Windows 8.1 will be delivered as a free update to Windows 8 and to Windows RT. Customers today who have Windows 8 or who plan to buy a device can seamlessly get the advantages of Windows 8.1," Tami Reller, then the co-chief of the Windows division, said in May 2013. After last summer's corporate reorganization, Reller is now Microsoft's top marketing executive.
Apple's Craig Federighi, who leads software development at the Cupertino, Calif. company, was more enthusiastic when in October he said, "Today, spending hundreds of dollars to get the most out of your computer are gone. Today, we're announcing that Mavericks is free. Free is good."
OS X Mavericks converted nearly twice as much of its predecessor's user base than did Windows 8.1 in the first three months after the updates were given away. (Data: Net Applications.)
Analysts applauded the moves to free, saying it benefited both the OS vendors and their customers. Accelerating adoption reduces fragmentation, they said, letting developers focus their efforts on the newest edition, and no-cost updates bring personal computers in line with the expectations of consumers, who -- trained by the widespread practice in mobile -- think they're entitled to free OS upgrades.
A clear winner
But the comparisons fail when one examines the numbers: Mavericks came out the clear winner, converting almost twice as much more of its immediate ancestor's share than has Windows 8.1 so far.
On the surface, that seems odd, as both Mavericks and Windows 8.1 are not only free, but automatically offered to people running each OS's predecessor. Microsoft, for instance, nags Windows 8 users with an update notification even if they dismiss the alerts. Those reminders appear once a week for the first month after the initial notification, then twice each month until the customer cries uncle and updates to Windows 8.1.
One likely explanation for Windows 8.1's less impressive adoption is the same used to describe why it takes years for a new flavor of Windows to become dominant: Businesses are conservative.
While consumers generally do not hesitate to upgrade as long as their machine supports the new OS, businesses steer clear because they're wary of the hidden costs, like employee training, OS deployment and application compatibility testing.
Apple's Macs may be gaining ground in enterprises and retaining their traditional strength among creative professionals, but for the most part they're consumer-owned personal computers. Windows machines, on the other hand, are the bedrock of business.
That would explain the slower uptake of Windows 8.1: Businesses that have accepted Windows 8 -- a minority, most believe -- would treat Windows 8.1 with as much caution as any migration.
IE11 is a factor
To that risk aversion, add Windows 8.1's new browser -- Internet Explorer 11 (IE11) -- and the fact the OS update came just a year after Windows 8. Browsers are notorious pain points for corporations, which upgrade that mission-critical software only when forced, and the faster release tempo still has them stumped.
"The faster pace is absolutely the biggest pain point," said Gartner analyst Michael Silver in an interview last year. "The problem with faster release cycles is that [enterprises] don't know if their apps will work with each new version of Windows and IE."
So while the zero-dollar price of Windows 8.1 kicked the OS in the digital seat of its virtual pants, giving it the fastest-ever Windows uptake, there's little evidence to show that commercial will be as agile as consumer when it comes to updates and upgrades, free or not.
Net Applications' numbers also imply something else.
Even if Microsoft followed Apple's lead and made Windows always free, including the rumored Windows 9 of 2015, the move would be unlikely to pay off. First and foremost, Microsoft would be leaving an incredible amount of money on the table. Although it might swallow the relatively small losses from giving consumers free upgrades -- one-off upgrades bring little to the bottom line -- it could hardly afford to chuck the billions earned each quarter from the sale of Windows upgrade rights to enterprises via Software Assurance and other volume licensing agreements.
More pertinent, why bother? According to Net Applications, although free motivated a bigger piece of the Windows 8 user base to update, that carrot was about half as tempting as Mavericks was to its audience. If free doesn't push most, not just some, to upgrade, what's the point of losing the revenue?
And how could it do free in any case, what with consumer and commercial so different in their opinion on upgrades? Actually, that wouldn't be an insurmountable problem, as Microsoft could offer free updates and upgrades -- even to, say, Windows 9 -- to those running the consumer-grade OS, Windows 8, while businesses running the more feature-laden Windows 8 Pro would have to pony up.
Give away Windows to OEMs?
Ross Rubin, an independent analyst with Reticle Research, had an even more radical take: Give away Windows to OEMs (original equipment manufacturers), the Lenovos and HPs of the world.
"Microsoft might monetize free Windows by bundling a basic version [with devices] but then using in-OS purchasing for upgrades," said Rubin last year in an unpublished interview. "Microsoft has long had the option in some form," he added, referring to the still-available in-OS option to boost Windows 8 to Windows 8 Pro. "It's more of a challenge to the OS because it's really a platform, but it's clear that much as is the case with Google [and Android], the opportunity is around Windows as the ideal gateway to Microsoft's services, particularly to Office."
Rubin's brainstorm runs counter to free upgrades -- instead, he posited paid updates atop a free Windows foundation -- but if Windows 8.1 didn't entice a majority to update, maybe free is a waste of time.
Rubin seemed to think so for what he called "larger releases," those that, like Windows 8 with its Metro UI or even a future Windows 9 that shifts Windows closer to Windows Phone, boast major invisible architectural or visible UI changes.
"Microsoft has charged for what it believes has a premium value associated with it," said Rubin in the 2013 interview. "There's discrete value in the larger releases.... Free for Windows 8.1 was similar to point releases of the past, which historically were given away.
Even then, Rubin qualified his take.
"But it's going to be harder to charge a large premium [for larger releases] under the trend of what Microsoft is trying to do with smaller, more frequent updates," Rubin said. "And when you think about it, Microsoft's not had that many must-have offerings on Windows that justify paid," he argued.
Any Windows come to mind?
Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is email@example.com.
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