Why Windows 10 might be a fatal blow for the PC industry
To borrow a quote from Winston Churchill, Microsoft will always do the right thing ... after they've exhausted all the alternatives. Years of forcing iOS and Android users into third party apps when they wanted to view PowerPoint, Excel and Word documents on their smartphone or tablet are finally over with porting Office to those platforms. And after Windows 8 turned out to be another Windows Vista, a Windows you skipped, Windows 10 appears to be a truly decent product that will make users happy and engaged. Also, making the upgrade to Windows 10 free for users of Windows 7 and 8 is the right move following the lead of Apple with OS X and Google with Chrome OS. Or is it?In fact, Windows 10 might prove to be a fatal blow for the already ailing PC industry and backfire on Microsoft. Here is why:
No incentive to upgrade - All previous generations of Windows were hungry for performance. They required the latest CPU and the biggest memory to run well. Windows 8 in addition triggered an industry wide push for multi-touch displays. In stark contrast, Windows 10 is so efficient that it runs smoothly on hardware that is five or even more years old. While this is great news for consumers it is bad news for an industry that is already dealing with a 10% year over year decline. Yes, some of the new Windows 10 features like biometric login with Windows Hello and Windows Continuum for 2-in-1 devices like Microsoft Surface will trigger desire for new hardware but it is nowhere close to the hardware pull of previous generations. And it gets worse.
Making new PCs relatively more expensive - Microsoft may have overlooked this but they are actually making a switch to new hardware more expensive relatively speaking. While consumers get free upgrades for the none-pirated Windows 7 or Windows 8 installed on their old machines, PC makers still have to pay Microsoft a license fee of roughly $40 for every new computer they sell. Let's assume that PC makers pass this license fee through to the consumer without any markup. In the past, a consumer had to pay $100 on average for an OS upgrade. So when buying a new PC instead of upgrading the old one, a consumer "saved" $60 because the OEM offered the new OS cheaper. Put in relation to the average price of $400 for a new PC, this is a massive distortion of perceived prices.
Microsoft sits at the center of a fantastic and multi-tierd eco-system of hardware OEMs, ODMs and component suppliers that is spanning the globe. But it has been weakened by the lack of growth brought upon it by ever more capable smartphones. Further stressing this eco-system is not in Microsoft's interest as the demise of one or even several key players may trigger an uncontrollable domino effect. The right thing for Microsoft to do is to slash the license fee for PC makers now.
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