December 15, 2008

Users Cling To Windows XP, Resist Vista

In an unconventional move, Dell Inc. announced this week that it would begin offering systems with the older Microsoft Windows XP operating system for an extra $150 beyond what it charges for machines running Windows Vista.  

The change comes just five months after the computer maker ceased offering XP on its Inspiron PCs.

Microsoft has twice extended its deadline for Windows XP downgrades, which is now in effect until July 31, 2009.  It's a solid indication that enough users wish to remain with the aging XP rather than switching to Vista.

Although XP's market share is down 10 percent this year as Vista makes slow inroads, XP still enjoys a 66 percent share according to Net Applications, a Web metrics firm.

Meanwhile, fees charged by Dell and others for XP downgrades will likely continue to annoy customers into 2009, and companies that wish to remain with XP will likely perform the downgrades themselves.

Industry analysts say Microsoft's downgrade fees are a small problem compared with the larger issue of so many users wanting to use an older, now discontinued operating system on hardware it wasn't designed to run on.

Analyst Rob Enderle, president of the technology consulting firm the Enderle Group, calls the XP downgrade fees potentially disastrous, and says they will ultimately be counter-productive for Microsoft since they exchange short-term revenue for long-term customer loyalty.

"The fix for this should be to focus like lasers on demand generation for Vista but instead Microsoft is focusing aggressively on financial penalties," Enderle told PC World.

"Forcing customers to go someplace they don't want to go by raising prices is a Christmas present for Apple and those that are positioning Linux on the desktop."

Businesses and consumers will likely keep a close eye on prices of laptop and desktop computers as the global economic crisis worsens next year.  Indeed, some, such as IDC, predict prices dropping 10 percent in 2009.

According to Enderle, the XP downgrade charge and pressure to switch to Vista will shine a spotlight on Microsoft in the year ahead.

"Instead of charging a penalty for XP, Microsoft should provide incentives for Vista," he said in an interview with PC World.

"They are too focused on margins for one product and are forgetting the damage they are doing to their brand."

Perhaps worse than the financial costs to consumers is the disappointment in their loss of choice, according to Roger Kay, president of research firm Endpoint Technologies.

"People never like being 'forced' to do anything. They tend to resent it," he says.

Windows 7, Vista's successor, has been seen as a solution to the Vista dilemma.  However, whether or not consumers choosing XP over Vista is enough to accelerate the availability of Windows 7 is not yet clear.  

Enderle predicts the software giant will accelerate its estimated Windows 7 ship date of January 2010 and release it next year instead.

"Windows 7 is designed to fix this problem [the Vista stigma], but it will need stronger demand generation marketing than Microsoft has yet proven it can provide," he said.

However, Kay is not convinced.

"Sinofsky [Windows senior VP Steven Sinofsky] is pretty clear about how his process works. Windows 7 code won't ship until it's ready."

Charging users for Windows XP downgrades may be Microsoft's short-term plan to lure users to Vista and Windows 7, but what else should Microsoft do to encourage customers to make the shift? 

Enderle said it all comes down to marketing.

"They have to step up to Apple-level demand generation marketing and work to remove the stigma from Vista more aggressively."

"They had an interesting start earlier this year with the Mojave project but it seems to have tailed off of late and Apple continues to out execute them sharply."

As Windows XP fees accumulate and the OS continues to get pulled from OEMs, its appeal to customers will wane next year, he said.  However, that the desire is there at all should concern Microsoft.

"Were this Apple, you wouldn't have the option to use an old OS at all. Granted you probably wouldn't want to, which speaks to the problem here."


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