News Do We Get Enough In Innovation for What We Give to Microsoft?

From the Wall Street Journal:

It's 2004; do you know where your computer dollars are going?

One can learn a lot about the computer industry by looking at the breakdown of manufacturing costs in an average desktop PC, as compiled by iSuppli Corp., a market-research firm. Excluding labor and shipping, and leaving out the costs of a monitor, keyboard or mouse, the typical desktop PC these days costs the Dells or the H-Ps of the world roughly $437 in parts.

The biggest portion of that -- 30%, or $134 -- goes to Intel for a Pentium processor. The disk drives, including whatever CD or DVD is installed, cost around $104; the RAM memory is $54; and the remaining hardware items -- power supply, case, circuit boards -- total $100.

The final 10%, or $45, goes to Microsoft for the Windows operating system.

Because these prices are never disclosed, the figures here represent best guesses. But you can start to see the contours of the computer industry in that bill of fare. Specifically, you begin to understand how Microsoft could amass its $61 billion in cash and other assets. It's easy when you collect nearly 10% of the cost of every PC that's shipped, while having no manufacturing costs of your own.

Rest of article is here...


An interesting read. It's about time that "normal" people see this whole Microsoft "tax" and many kind of understand where people like us are coming from.

 

Well I read the article. But it is not complete really. What about people like me? I don't buy a complete system. I buy parts and scrounge the internet for the best deals on the best equipment. If you buy windows its not just 45 dollars. Its more like 500 dollars. So it is not 10% but more like 50 %

 

That's not what the article is about though. It's about people essentially being forced to purchase Windows when they buy a pre-built computer and if the additional "Microsoft Tax" is worth it...

 

Hmm which would be cheaper though, the support required for a ethusiasts free OS like Linux or a paid for consumer-friendly OS like Windows?

It would be somewhat like the difference between providing a car with a steering wheel or a bare shaft. One could argue the extra money for the steering wheel isn't worth it and a steering wheel is mainly bloat. Mind you getting a car going with just a shaft is rather tricky

 

I think it's probably not worth 10% of a new PC and that windows isn't worth what they're asking for it, but it is worth something. I've done very little programming but from what I've done, its a major pain. There's no way I could even fathom how much work went into windows. Seriously, its an amazing peice of software. I think a new copy of XP Home should be $75 and Pro be $100. More people would actually buy it instead of the rampant piracy thats going on.

 

I don't think it would be so bad if manufacturers offered an alternative to Microsoft. A joystick as oppposed to the steering wheel. Both can direct your car where to go, just in different ways.
And if you know where to look and who to ask, you can get XP pro for about $120 - 130. Legit.

 

I can see the point about being forced to purchase windows. But look at it like this: 90% of the people buying computers don't care. Windows is going on all of those computers because that is what people are using. The majority of the people who are going to want to use linux are the same people that are going to want to build their own computer anyway.

As for Dell, Gateway, etc installing windows and not giving an option, from a capitalistic business standpoint that makes sense for them. People buy computers with windows on it. If they didn't want windows, they build their own or buy a Mac, and both of those are groups of people that weren't going to give money to these computer manufacturers anyway. But not only that, think of the money that it saves Dell et al to only offer the one OS. The people building the computers only need to know how to install windows. The people supporting the computers only need to know how to support windows. If they offered the option to have another OS installed, then they have the added costs of having to have specialists who can install, configure, and support that OS. Not to mention any other costs if they happen to need to use special hardware for linux boxes versus windows boxes.

I, as an enthusiast, can certainly agree that I should not be forced to purchase windows. But face it, we really are a minority. And I'm not gonna spend the bloated prices that those companies are asking anyway. I'm building it myself and therefore I am installing whatever I want. I think it all comes down to supply and demand. Right now people aren't demanding anything differently. So why supply it for them?

 

Not really, just look at the corporate world. Where I work, I just put in a purchase order for 450 Gateway systems to upgrade a bunch of systems (PII 400's). About 2 years ago we upgraded all the os's to Win2k Pro which suits us and works perfectly fine. Now all of these new computers will come pre-loaded with full WinXP Pro licenses eventhough we have licenses for Win2k Pro and have no need to use XP. Now, if this article is close to accurate with the $45/computer figure, that figures out to about $20,000 in licenses we DID NOT NEED. How does any business make its money back? Raise prices. That translates to higher costs to clients / customers.

 

I would contend that if people (you) paid for it, then it is, by definition, worth it. If that addtional $20,000 broke the bank for upgrades then you would've gone another route so it is "worth" it.

I'm not saying it is necesarily "right" to do that but obviously the price has been positioned so that people are doing it. You say that you are forced to buy those licenses that you don't need but why was Gateway chosen in the first place? probably because of price and that price is a result of a negotiated license contract with Microsoft to push thier cost per PC down to make them competitive. They are not mutually exclusive. Another company that didn't work out the same licensing contract with MS would've been knocked right out of the bid for the original equipment because you would be buying essentially the same hardware and even more for the OS. Buying the cheapest workstations originally and then going back and demanding carte blanc on upgrades is having cake and eating it. If you want full flexability, you pay more money or you choose a company that has negotiated a better contract with it's suppliers.

PC Manufacturers are not in love with MS. They would love to deal with another company, not because of the product but because of MS's licensing model but guess what, that's what people want and manufacturers have to work out a deal with suppliers of all parts not just the OS. They have to get all the elements into their product that the customers want at a price they are willing to pay for, thus defining what it is worth.

just my $.02

 

I can't tell you why we picked Gateway other than that's who we use. It really doesn't matter if it was Gateway or if it was Dell, IBM, Sony, Compaq, HP - the end result is still the same. No, $20k doesn't break the bank, but it is a significant figure which could have been put to much better use seeing as we're a not-for-profit hospital.

My point is that no matter how a company goes, unless they have the staff to build systems, you will be forced to buy Microsoft's products when you decide to purchase or upgrade computer systems.

 

Actually...it almost ends up going the other way: it wasn't worth trying to make a statement or save a few bucks just to keep from getting extra licenses for windows. If computer prices ever get to the point that a company can build and support their own systems so they don't spend a little more on an OS they don't need then things may change. But as it stands now, it's not worth the hassle for most companies.

EDIT: Believe me...I would prefer if companies would build their own systems and not spend the cash on M$. Maybe I could actually get a job doing what I enjoy most and make a living at it.

 

Exactly... And what does this do? It moves more money to Microsoft who gets bigger, stronger and richer and more able to strong arm whatever they want.

 

At this point I think it's just icing for Microsoft. They are (and have been for a while) big and strong enough to do whatever they wanted. There is no doubt in my mind that they are, for all intents and purposes, a monopoly. And they control way too much. And I am trying to do my part to ensure they don't grow any bigger.

But I still stick by my point that for computer manufacturing companies it doesn't make sense for them to do it any other way....yet. As much as I dislike M$...you have to admit that they have certainly manipulated the system and played the game very very well.

 

(I hate defending Microsoft, but not because of this, other things) Upgrades are such a small portion of Gateway, Dell, etc... a VAST majority of their business is selling new systems to people who want Microsoft OS on them.

90% of computer customers want:
Internet/email - linux/ms
office suites - linux/ms (although most folks are comfortable with MS)
Games - MS
Being able to walk into BestBuy and purchase anything available - MS *Bingo

 

I totally agree that bundling an OS with a pre-built system is a good idea for the individual user along with maybe small businesses, but the thing of it is, and I really think that everyone will agree with me, is that people should be given the CHOICE of what OS they want, or IF they want one included. I realize that it may create problems with support, but that could be eliminated with the company stating that if you buy a linux os, you're on your own as far as software support goes - or something to that effect.

 

Whilst choice seems a good idea, a lot of people probably wouldnt understand that a PC can run with anything other than windows. When my parents first saw me using a non-windows OS they asked me where my PC had gone. As has already been said, the people who would want a choice would probably be the people who wouldn't be buying from a main stream manufacturer. A better idea might be not to choose between your OS, but to choose whether you want an OS included with your PC - which would save the $20k your workplace had to pay for stuff they didn't even need, Dad.

Do we get enough innovation from microsoft? Nope. No way. For crying out loud, outlook express is probably the biggest cause of the spread of worms/viruses, and it literally hasn't changed since win98. Internet explorer is just the same - it hasn't changed. It doesn't support tabbed browsing or CSS2, and is next due an update in 2 years time (apparently). All they seemed to do with XP was make it stable (yeah, thats a nice improvement (feature?) - but sadly Open Source has been like this for years on end), build in a roll-back system for when it screws itself up and make it look nice. Did we see anything absolutely revolutionary? Not really...

 

I'd imagine the vast majority of purchasers are buying a first machine, replacing one two or more years old, or adding an extra machine to the workplace. More than likely they need an O/S, because they don't have one to legally install.

And the vast majority of them, if they've bought a PC, want an OS that will run all the PC programs available, and that they and the family or the staff can use without too much RTBM or training. That's Windows. Love it or hate it, it's virtually the only game in town.

Reminds me of the situation buying a new car a few years ago - on top of the quoted car price you then had to pay for license plates. Caused resentment, everybody saw it as a hidden extra.

As an aside, I reckon the MS "standard" has kept the price of all software down - Corel, Adobe, etc, don't have to code (and support) half a dozen versions of their products.

 

I don't know about their other software, but Adobe Acrobat Reader is made for many OS's.

 

I, unfortunatly, work for the Gateway store in my town, and almost all of the people that I have come in are relativly new users, or just complaciant with what they happen to know.. (email, internet, downloading music, games, digital camera, and solitare), and no one has even asked me if they can get a computer with anything other than WINXP.. I've had one person ask me if they could put a dual platform on it, but that was it. a few people were pretty computer literate, but what they used was XP..

the people that buy this stuff pretty much want xp, or a windows product.. that's it. they want what gateway has to offer, and they don't feel they are being forced into buying windows..they are buying a computer that convienienly has windows on it already.