Rethinking System 7

Microsoft is in the midst of rolling out System 7, the newest generation of
Windows operating system. The company is betting much on the success of this
system, particularly after the lukewarm reception it received to Vista. What’s
more, System 7 is seen as the base of future generations for the software —
leaner, more secure, more capable and easier to use.

For enterprise-level organizations, System 7 is everything they could ask
for — a bridge between the more functional Windows XP and the system corporations
want and need.

For the rest of us, System 7 is a nightmare. Not because it is a bad system.
Not because it is a resource pig that will need upwards of 16GB of RAM to run
well. But because Microsoft’s marketing departments just aren’t
doing their job.

The company that built its reputation on savvy marketing and out-maneuvering
competitors would rate no more than a C-minus for its efforts. Sure, the company
does a great job of promotion, and has its distribution networks in place and
functioning. But marketing is a blend of four elements — product, price,
promotion and distribution. If the “mix” of these four elements
is wrong, it doesn’t matter how good the product is. And Microsoft has
the wrong mix.

Here’s what I mean:

• The product has too many versions. As of release time, there are six different
  versions that include Windows 7 Starter, Windows 7 Home Premium, Windows 7
  Professional, Windows 7 Enterprise, and Windows 7 Ultimate. Windows 7 Home
  Basic will also be sold, but only to emerging markets. A seventh will be added
  for European customers. Even if you can figure out which of these to buy,
  nearly all will come in both 32-bit and 64-bit configurations. Awk!
   
• The Windows product names are alphabet soup. We’ve noted before the
  goofy ways in which Microsoft confuses consumers by using the same name for
  different products. Explorer, for example, being the name of both your file
  system manager and web browser. With Windows, the problem is that they can’t
  use a consistent naming scheme. It was Windows 1, 2, 2.1, 3, and finally 3.11.
  Then, it leapt to Windows 95 and 98, followed by the incredibly forgettable
  Windows ME, then back to years with Windows 2000. And then, the went back
  to the alphabet again for Windows NT and XP, followed by the art department
  deciding to express themselves and call it Windows Vista. And now, we see
  a new naming scheme, Windows 7. Surely there is a better way.
   
• The product costs too much. Sticking it to your customer base is hardly
  a way to build customer loyalty, and by keeping the price of each new system
  so high (Windows 7 will carry an upgrade price of more than $200, while the
  competitive Mac OSX 10.6 “Snow Leopard” will sport an upgrade
  price of $29). All that this pricing strategy has done is to push more consumers,
  including small businesses, to software piracy in an effort to keep using
  Microsoft products and stay current. This has then forced Microsoft to resort
  to increasingly bizarre and draconian efforts to stop piracy that end up punishing
  users who have actually paid for their software.
   
• This pricing strategy cripples product distribution. If Windows 7 follows
  the standard Microsoft pricing strategy, it will offer the initial product
  at an astronomical price, and then drop the price over time according to how
  sales are going, how the product is received, etc. This strategy trains consumers
  not to use the system when it is first released (surely not what the company
  intends). In fact, the mantra for Windows operating systems is now to wait
  until the first service pack is released. Microsoft’s product pricing
  strategy therefore encourages customers to help drive up the distribution
  costs by forcing Microsoft to essentially scrap the first generation of its
  products in order to replace them with new products that incorporate the service
  packs.

The danger for any company of the stature of Microsoft is that it begins to
believe its own press releases. Far from being the marketing wizard it once
was, the company appears to be sitting on its marketing laurels, doing things
the way they have done them in the past with no real understanding of how the
marketplace has changed in the past 25 years.

They will change, eventually, as new blood comes to the company or sales continue
to decline. But that’s not what we want from Microsoft, and that is not
what will best serve accountants who use its products.

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