This week, Dell announced it will offer systems with the aging Windows XP for a surcharge of US$150 over the newer Windows Vista-this only five months after it stopped offering XP on its Inspiron consumer desktop and laptop PCs.
The deadline for Windows XP downgrades has been pushed back twice now, remaining in effect until July 31, 2009-a strong indication that enough users want to stay with the aging XP rather than give Vista a chance.
Though market share for Windows XP dropped nearly 10 percent in 2008 as Vista slowly made gains, XP still has a market share of 66 percent, according to Web metrics company Net Applications.
XP downgrade fees from Dell and other OEMs will no doubt continue to irk customers in 2009, while businesses that want to stay with Windows XP will do the downgrades themselves. Industry analysts agree that Microsoft's downgrade fees are a minor problem compared to the bigger problem of so many users still wanting an older, now discontinued OS on hardware that it wasn't designed for.
Don't Penalize XP, Incentivize Vista
Industry analyst Rob Enderle, president of tech consulting firm the Enderle Group, says the XP downgrade fees will ultimately be counter-productive and possibly disastrous for Microsoft because they trade off 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 says. "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."
As the economic recession deepens in 2009, the price of laptops and desktops, as with all retail items, will be closely watched by consumers and businesses. A recent IDC report predicts that the price of PCs will drop by close to 10 percent in 2009.
Enderle said the XP downgrade charge and the resulting pressure to move to Vista will put a magnifying glass on Microsoft in the coming year. "Instead of charging a penalty for XP, Microsoft should provide incentives for Vista," he says. "They are too focused on margins for one product and are forgetting the damage they are doing to their brand."
Worse than the downgrade fees is taking away a buyer's freedom of choice, says Roger Kay, president of consulting and research firm Endpoint Technologies. "People never like being 'forced' to do anything. They tend to resent it," he says.
Is Windows 7 the Solution?
Vista's successor, Windows 7, has been regarded as a solution to the Vista stigma, although whether or not users choosing XP over Vista is enough to move up the Windows 7 ship is still anyone's guess. Enderle predicts that Microsoft will change its estimated Windows 7 ship date of January 2010 and drop it sometime next year.
"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," Enderle says.
Kay, on the other hand, is not convinced that customer reliance on XP and the shunning of Vista affects Microsoft's OS release schedule. "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 solution to drive users to Vista and Windows 7, but what else should the software giant do to get its customers to move forward?
Enderle says it's mostly a matter of better marketing. "They have to step up to Apple-level demand generation marketing and work to remove the stigma from Vista more aggressively," he says. "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 add up and the OS continues to get pulled from OEMs, the desire to keep using the OS will likely wane in 2009. But that the desire is there at all should be disconcerting for Microsoft, says Enderle.
"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."