Technology + Computing

End of the Operating System License as a Business Model?

Today, I was reading an article about the history of Unix. When I came across this paragraph, I had an intense instinctive and natural reaction:

Sun was already a success (with imitators!) when, in 1983, the U.S. Department of Justice won its second antitrust case against AT&T and broke up the Bell System. This relieved AT&T from the 1958 consent decree that had prevented them from turning Unix into a product. AT&T promptly rushed to commercialize Unix System V—a move that nearly killed Unix.

My reaction was: “Whoa! How can they think anyone would want want to pay for an operating system (OS)?

Bear with me, it was really an instinctive and natural reaction. I then started thinking about this because there is proof that you can make money selling OS licenses. Microsoft shows clearly that it was possible and, as it seems, is still possible.

Analyzing my reaction, I realized that for me personally, the OS has become such an integral part of the device(s) that I’m using that I stopped paying for any operating system for a really long time ago. It comes with my MacBookAir, with my iPad (or Android or Kindle-device), my iPhone (or Blackberry, or Android device) and I can’t actually think about paying for an OS anymore.

I am so used to getting the operating system for free (after all, what use a tablet would be without an OS? or a smartphone for that matter), that I instinctively reacted negatively to the idea of making money by selling an OS as a separate product.

I may be late to the game – but I believe that the emergence of iPad, Android tablets, Kindles, smartphones, Chromebooks, etc had such an educating effect on consumers that they see an OS as an integral part of the device that they buy.

Equally valid seems to be updates for an OS: the updates need to be free. This seems to be the predominant expectation by the consumers now. Because they get all the updates for free for their tablets and smartphones, they will, quite soon, expect the same for their PCs.

This is a tremendous challenge as well as a tremendous opportunity for the one company that generates a large chunk of its revenues by selling OS licenses: Microsoft.

The value-add of an OS from the consumer’s perspective is going towards NIL – they start expecting to have all updates for free and this will have massive negative impact on Microsoft’s OS license revenues. After all, all the third-party manufacturers of PCs (OEMs) will start reacting similarly if they see that consumers don’t value an OS anymore.

So, what should Microsoft do? From my point of view, Microsoft really needs to switch to becoming a devices-company with their OS pre-installed with perpetual, free updates.

I believe that within the next 3-5 years, the PC industry will go undergo such a dramatic shift that if Microsoft doesn’t change and start becoming a devices company that they could be a niche-player (if at all) or go out of business within the next 5-10 years at most.

I also believe that this is the best and right time for Microsoft to make the change – it is not too early and not too late. If they start now, they can change within the next two years, maybe three and start becoming a major player again. Otherwise, they probably will be buried in the history of computing like so many other company such as Atari, Commodore, DEC, Wang, IBM (PC-wise), and more.

And you know what? It would be a pity if Microsoft wasn’t there anymore. We need a healthy competition in high-end (against Apple) as well as in mid-to-low end (Android). This would be a really sad world if there wasn’t a major competitor keeping Google and Apple on their toes… ~

Note: A few day later, even The Register reports the death of the software platform as a business model