The commoditization of operating systems continues with Windows Blue
Microsoft is finally talking about Windows Blue, the long-rumored (and previously-leaked) version of its desktop operating system meant to unify Windows on Intel and ARM-based processors, allow for smaller, 7-and 8-inch tablets, and address consumers' concerns about the oft-maligned Windows 8. The update will be publicly available to developers in June, Microsoft announced today at the Wired Business Conference.
Windows Blue, which will be called Windows 8.1 upon release, is expected to put Windows on a yearly upgrade cycle, much like Android, iOS, and OS X. The update will be available through the Windows Store, allowing consumers to bypass the current upgrade method -- which requires a license and a download from Microsoft's website or, worse, an upgrade DVD -- and continuing the commoditization of operating systems.
Consumers used to pay hundreds of dollars to upgrade their computers' operating systems once every few years. Then the iPhone came and offered free yearly updates, changing consumers' perception of upgrade cycles just as it did with almost every other aspect of software. Android did the same not long after. And then Apple shifted OS X to a yearly upgrade cycle, cut the cost of upgrading from $129 to $29 and, now, $19, and moved away from upgrade DVDs to direct downloads.
It isn't surprising that Apple and Google would be willing to offer yearly upgrades for free, or at a significantly lower price than previous versions. Apple draws the majority of its revenues and profits from its hardware business; Asymco's Horace Dediu estimates that all of Apple's first-party software, which includes OS X, the iLife and iWork suites, Aperture, and other applications, represented just $3.6 billion in revenue for all of 2012.
Google is still primarily an ad-driven business. If Android allows Google to display more ads, or at least make consumers reliant on Google's services (and thus more likely to see ads when they visit those same services on the desktop) then it's worth keeping the operating system up-to-date, even if it doesn't have a direct benefit.
But it will be interesting to see how Microsoft might price yearly Windows updates. Expecting consumers to spend hundreds of dollars to get the newest features every year seems ludicrous when they can upgrade other desktop operating systems for $19, or their mobile operating systems for no cost. Offering free updates would be a massive change for Microsoft, which made $5.7 billion in revenues from its Windows division during the first quarter alone.
Microsoft drastically lowering Windows' price or offering it for free would be like Google removing ads or Apple adopting Amazon's model of selling hardware at razor-thin margins. For a company that hasn't fared so well in the hardware business with any product without "Xbox" in its name, the commoditization of operating systems is probably a "damned if you do, damned if you don't" situation.
But hey -- at least Microsoft will always have Office, right?