What Happens When Microsoft Runs Into Moore's Law

from the the-software-costs-more-than-the-computer dept

With the announcements in the past week or so about HP and Dell offering machines with WordPerfect instead of MS Office, there’s been some discussion about what this all means for Microsoft. Business 2.0 has an interesting article that points out that Microsoft is simply a victim of Moore’s Law. You can now get a white-box computer for under $400, but Microsoft Office still costs $450, which makes it a tough sell. Microsoft says they’re not worried, and they’re doing just fine with their current pricing plans. It will be interesting to see if that remains the case over time. Machines are going to keep getting cheaper, and it seems like things like OpenOffice are getting much better. I’ve been playing around with OpenOffice, and while it’s not quite there yet, it’s pretty close to removing any need for MS Office for me.

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Comments on “What Happens When Microsoft Runs Into Moore's Law”

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Dave Dixon says:

the declining cost of software

Even if you think that $450 is too much to pay for an Office suite, it’s certainly true (IMHO) that software nowadays costs lot less than it did when the PC first debuted (especially if you take inflation and other economic factors into account).

I wonder if there’s a sort of inverse Moore’s Law as whereby the cost to tool up a PC with a standard set of software declines over time with any sort of regularity?

Rmal1 says:

The solution to cost of software > cost PC

So OEM’s have found a stumbling block. There is less and less they can reduce hardware prices by, in order to keep PC prices shrinking. So they do the natural thing – reduce software prices.
But completely replacing MSOffice with Star or OpenOffice will probably be a short-lived tactic – it’s not going to be popular with those needing interoperability.

Why short-lived? A low-end-price-bombshell will be dropped when MS introduces Office subscription licences (note: for the actual programs, not the value-added ‘My Office Services’ that will sit atop Word, Excel etc). But OEM’s, not consumers, are gonna be the ones flocking to the subscriptions in hordes for their low-end PC’s, which after all, is where cost-cutting is most important.

Oh and they’ll probably stick to the nice round number of one year for the length of the subscriptions. And guess what? That’s just when most OEM ‘free-support’ packages run out…
So long term, PC costs are going to emulate the printer+ink markets – cheaper initial payment for the product…and a healthy future revenue stream via time-limited sub$criptions for software, support, etc.
Now can you hear those $$$’s rolling in ??

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