Windows licensing no longer a question of trust

Stan Beer
Sunday, 29 October 2006 14:19

Opinion and Analysis

Once upon a time there was a company called Microsoft that grew to be the largest software company in the world. It achieved this without the aid of online software checking tools that treat users as suspected criminals. Back in those days Microsoft trusted its users to do the right thing and generally they did, in the process making Microsoft shareholders rich.

These days things are very different. There are software tools that check the software users are running on their hard disks under programs called Windows Genuine Advantage (WGA) and Software Protection Program (SPP). There is a restriction on how many times users can transfer the boxed copy of Windows they purchase to a new machine.

Some users may find that Microsoft disables their machine so they can longer access their software.

According to Microsoft, WGA, SPP and the new license restriction are necessary because pirated copies of Windows proliferate throughout the world and need to be reigned in. It may be true that there are a lot of pirated copies of Windows floating around, but pirated software didn’t generate the US$13.09 billion of revenues and US$10.17 billion of operating profit that Microsoft raked in from Windows for the year ended Jun 30, 2006.

The problem for Microsoft is that the market is saturated and growth for two of its three great money spinners, Windows and Office, has slowed to a crawl. For the first quarter of fiscal 2007, Windows revenues grew a miserable 4.5% compared to the same quarter in 2006, while growth in operating profit was even worse at 2.6%.

For Microsoft, it would seem to some that the release of the new operating system Windows Vista is its great hope of a return to double digit growth. However, in most cases users will not upgrade to Vista until they buy new computers, especially since the software is particularly resources hungry.

There is no guarantee that Vista is going to provide a long term boost in growth of Windows sales. Vista will sell like XP sells – together with new computers. There will be no long queues of users outside computer stores lining up to buy a boxed copy of Vista Home Basic to load on their underpowered XP computers. Likewise businesses will upgrade to Vista when they upgrade their computer hardware.

So if Microsoft can’t significantly boost sales from its legitimate user base, perhaps it can from its illegitimate user base. Enter SPP and WGA. Perhaps Microsoft can force pirated software users to pay up. Perhaps it can also coerce those power users who buy their computers and Windows software separately into buying a new boxed copy of Vista every time they decide to upgrade their machine.

The strategy is a risky one. Like pirate CDs and DVDs, the vast majority of pirate Windows copies proliferate in second and third world markets. The reason is that many users in those markets find Windows prohibitively expensive. Can Microsoft force a significant proportion of them to go legitimate? Perhaps, or perhaps it will simply drive them into the welcoming arms of the Linux world.

Meanwhile, the vast majority of legitimate Windows users will be forced to put up with an intrusive system that continually checks up on them, assuming that they’re guilty until proven innocent. Occasionally, SPP and WGA will return a false positive which will force a legitimate Windows user to contact Microsoft and try to convince an unsympathetic voice on the other end of the line that a mistake has been made.

If Microsoft believes this strategy is the way to once again achieve double digit growth in Windows, it may find itself confronted with a rude awakening.