XP - Excites And Exasperates

Analysts, the world over, are throwing mixed reactions about Windows XP. According to some of them, the retail release of Windows XP on October 25 is expected to help push PC sales. At the same time, others are still not convinced that WXP will do much to revive the slowdown. Resellers are keeping their fingers crossed hoping for the best.

The September 24th release of WXP to PC makers marked the first step in Microsoft's $200-million promotional budget. But, instead of the usual enthusiasm that ought to surround every new product launch from Microsoft, this one is mired with controversies.

Attempts are being made by various groups to stall the launch of WXP, alleging technology violation, privacy invasion, and unfair and deceptive trade practices by Microsoft. Besides, the new Windows Product Activiation feature and Microsoft's future plans to make XP a subscription model, has also caused confusion among people.

Market hopes

The retail release of Windows XP is expected to help perk up the consumer market, according to some resellers. They are quite hopeful about the product. According to them despite all the controversies, WXP will do well because of its reliability. 

Dr Nitin Paranjpe, Mediline, (MS reseller) says, "I foresee a good demand for Windows XP in India because many customers are yet to upgrade from Windows NT 4 to Windows 2000. They would get additional value at minimal additional cost by upgrading to XP."

Karthik Padmanabhan, Marketing Manager, Microsoft Corporation India says, "We are very optimistic about the response for Windows XP from the Indian market. Windows XP is a definitive release in the Windows family. The product provides a whole new range of user experiences for the end-user, whether it is a home user, or a business user."

According to Karthik, Microsoft is extending the reliability and security of the Windows NT/2000 kernel to the home user for the first time in WXP. "Windows XP is a great product, and provides both sets of users with compelling reasons to adopt -- and we are sure the product will do well in India," says he.

While there are quite a few betting on the new OS, some resellers are not very convinced about WXP doing any good to the market. According to them, if at all there would be an improvement in the market, it will be because of

Diwali.

Deepak Jhaveri, Director, Magnamious Systems says "I don't think users are looking forward for Windows XP with much enthusiasm. Usually, corporate users try to upgrade their software once in four or four-and-a-half years. Microsoft wants this upgradation to be done in two years. Corporates are finding this unacceptable."

Microsoft has brought out a scheme under which corporates were supposed to enjoy a two-year subscription advantage. However, according to Deepak, not even five percent of the corporate users have gone for this scheme. Even MNC users are not keen to go for upgrades because of the costs involved.

According to Ashish Aggarwal, Trifin Technologies, response to WXP will largely depend on prevailing market conditions. "I don't foresee too much upgradation happening. It is likely to pick up in the Nov-Dec timeframe."

D V Venkatachalapathi, MD, Vikas Microchip Technologies says, "Demand for a new OS as of now is not a probable proposition. The reason is MS launched its latest Windows 2000 Professional just about a year ago. People who have already invested on a Win 2K Pro OS would definitely not be interested to switch over to a new OS at a higher price. The software market is dicey and needs a basic stability for people to look at new technologies and investments for it."

G M Kamat, Director of PC Center (a MS reseller) says, "Sales of software is related to the sale of hardware. As soon as the hardware market picks up the software also will do well."

Sanjay Varmani, Groovy Communications, is not very sure about the demand for WXP. "Microsoft has stopped shipping upgrades from 1st October 2001. Customers today have no choice whatsoever and so the demand will surely pick up," says he.

Majority of Microsoft's sales come from OEM tie-ups. Because of high level of piracy in the home and SOHO segment, the demand for Microsoft products from this segment has been very low. However, according to Microsoft, the Window Product Activation Technology can curb piracy to a large extent in

WXP.

Kamat of PC Center says, "Five years ago only 10 percent of the users were using licensed Microsoft products. Now, almost 60 percent of Microsoft users use licensed products. The remaining 40 percent are the home segment, which Microsoft is not looking at as a major business area."

Turn-offs

The company's new product-activation technology, which locks Office XP or Windows XP to a particular PC hardware configuration, can deactivate unexpectedly, rendering the software useless until a code number is obtained from Microsoft. This technology was introduced to thwart piracy and promote subscriptions.

However, not many has found this feature encouraging enough. The activation process transmits hardware configuration information in return for an activation code. This makes sure that the software will run only on one computer and if the hardware is modified extensively, a new activation code is required.

K P Unnikrishnan, Country Head, Marketing, Sun Microsystems quoting analysts says, "The upgrade isn't worth the

money.

Analysts predict that Microsoft's new licensing policies will force companies to act precipitously." G M Kamat of PC Center feels, Microsoft will try it whether we like it or not. "If that comes in the way of sales, I think they will discontinue it," he adds.



"Definitely there is going to be a niche market for WinXP," says Venkatachalapathi. According to him, WXP requires hardware info of that particular system where it is installed and quite obviously some people will not be interested in any kind of "intrusion" in to their systems because of security and privacy policies.

"Besides, no software development house would adopt WXP until it is recommended by their own clients, and it obviously refers to the usage of this OS in US and other important countries where the prospective clients exist," he adds.

Despite the skepticism in some reseller quarters about the acceptance of WXP, Karthik of Microsoft feels, "There is no reason a genuine customer should reconsider a purchase decision purely on this basis. The activation process is a simple four-step procedure that requires minimal effort by the end-user. Additionally, we tested this technology with our Indian customers with the launch of Office XP and haven't received any negative indications or feedback from them."

Up against intrusion

Some groups have alleged that Microsoft's product-activation technology violates patents. Ten privacy organizations in the US have reportedly filed a complaint with the Federal Trade Commission, requesting the agency to delay Windows XP's scheduled shipment. The groups allege that Windows XP's poor implementation of security and privacy provisions constitutes "unfair and deceptive trade practices".

Apparently, WXP is bundled with a whole lot of applications which according to third-party application developers is unfair against them. Kamat says that WXP has shifted from being just an OS to a product for devices. "This is natural effect of globalization. Microsoft is calling it the Electronic Vision. The consumer will prefer it that way. You cannot prevent them. Other manufacturers will have to find their own ways."

According to Silicon Valley News Service, a coalition of consumer advocacy groups urged the US Federal government and State Attorney Generals to seek an injunction against the WXP operating system until the new judge has reviewed whether the bundling of several applications into XP violates antimonopoly law.

Pay once, pay again

Another turnoff from Microsoft is its intention to make XP a subscription model in the future. "Microsoft wants to have a steady source of revenue," says Ganesh. As of now customers are being given both the options: either have a subscription-based product or go for a perpetual licence. A customer needs to pay only 58 percent of the actual cost for two years if it is in the subscription model.

Reacting to the subscription model plans of Microsoft, Venkatachalapathi very bluntly calls it as "Extortion on software users". According to him Microsoft is a company that is existing since ages and their investments on newer and latest technologies are related only towards improvisation and re-engineering their already existing technologies and not reinventing the wheel. So, why should they charge for a product for which they have already collected their money for?

Karthik justifies the subscription model by saying, "Products and services on the Internet are an evolving phenomenon, and this program is part of Microsoft's ongoing efforts to better meet the needs of customers. However, considering this is still in its nascent stage, we will tailor our subscription offering based on customer needs and feedback."

"From a corporate perspective, it is a method where the organization can cross-check or audit the benefit of using a product periodically and decide whether the intended benefits are being accrued," feels Dr

Paranjpe.

If the investment does not provide intended benefits there are two choices available to them: discontinue the subscription - reduce IT cost or find out how to use the product more effectively.

This would lead to tangible business benefits in terms of reduction of cost, increased revenue/profitability or increased competitiveness. In either case, it translates into increased profitability. "Therefore, it is a good model for ensuring appropriate, ongoing utilization of IT investments," Paranjpe adds.

However, Sanjay Varmani of Groovy Communications says, "Looking at the existing market situation and the economic environment, it is not justified from a customer's perspective. This may even act as a deterrent in the success of the product." 

According to him the total cost of ownership increases considerably because of the additional costs one needs to incur in hardware upgradation. "Everything looks good only at a particular price point, beyond that the customer does not derive value. Besides there should be a willingness to upgrade," he adds.

Cracker's challenge

A German magazine recently reported that two out of three users are refusing the compulsory registration for Office XP demanded by Microsoft. It also said that more than two-thirds of the users are using a crack from the Internet to activate Office XP on their computers. "If such is the case with a Office XP's authentication code, how better can it be with Windows XP?" ask one reseller.

Sanjay Varmani of Groovy Communications says, "I am of the opinion that Microsoft is not serious about curbing piracy. They have all the requisite technology to introduce an effective lock either on hardware or software to ensure that piracy does not happen, but we have not seen that. They want their software to be all pervasive and then they put pressure to buy legal copies."

"Product Activation is not a single 'silver bullet' solution to global piracy. It is, however, significantly more sophisticated than past methods and is not easy for would-be pirates to circumvent. At the same time, it is a simple and unobtrusive process for legal customers," says Karthik of Microsoft.

He adds, "Product Activation will help reduce casual copying by ensuring that the copy of the software product being installed is legal and has been installed on a PC in compliance with the End User License Agreement

(EULA)."

According to him casual copying is by far the most prevalent and damaging type of software piracy, and Product Activation is not designed to target sophisticated and organized criminal counterfeiters.

Dr Paranjpe feels, "Generally, legalization becomes a mindset only when customers are in a position to extract business benefit out of IT investments. If the utilization is very minimal or half-hearted or myopic, there is no compelling reason to legalize software."

Current efforts to make people legalize software by highlighting the harsh measures which could be taken against them is a very passive way of enforcing legal software. "A much better way is to show the real value to customers and have a channel which can translate this real value from brochures to real life business for every customer," says Dr

Paranjpe.

"With activation technology, I feel the piracy would go down by a margin of as much as 80 percent. Given the innovativeness of our minds, the real proportion will be known only after the products has a sizeable installed base," he adds.

Piracy can't be eradicated overnight, but there will be certain level of control if this product is accepted in the

market.

Promotional aura

Promotion will be the key to generate sales for WXP. As per media reports, Microsoft has spent over $200 million over the first four months, which is double the amount spent on promoting Windows 95.

In a stunt involving Microsoft Chairman Bill Gates and Group Vice President Jim Allchin, helicopters circled the company's Redmond, Washington headquarters and the pair handed over Windows XP to PC makers on September 24. The helicopters were decorated with logos of Windows XP and major PC makers. Allchin was reported to have said "We expect to reach 85 percent of the target audience."

Microsoft has put in great efforts to popularize WXP as a secure and reliable OS. More than 500,000 people are estimated to have a beta version of Windows XP, with 2,50,000 signing up for the preview program.

In case of any product launch, Microsoft ensures that the channel is ready to sell and support the product efficiently. Channels in India are hoping for better support for WXP compared to earlier products.

After the release of Office XP suite, the following initiatives were taken by Microsoft to ensure channel readiness: Training on Office XP for select channel partners, availability of large amount of documentation, whitepapers, migration methodologies, toolkits, presentations, technical discussions and demos related to OXP on the Web and other deliverables.

Besides, there are plans for specific product launches for partners and customers to increase the awareness and generate demands, special pilot projects at key customer sites to show value of OXP in a live customer environment, discounted pricing for customers upgrading from earlier versions of Windows or competing operating systems.

After all the promotional activities carried out by Microsoft, the market has only sent mixed response. However, according to Karthik, Office XP is doing very well in the Indian market. He says, "We have some considerable wins and the customer feedback too has been very positive. Though we cannot provide you with exact numbers, it would be safe to say that the response to Office XP so far has been better than what we received for the previous versions of Office in a corresponding period."

But, Sanjay Varmani of Groovy Communications has a different view. Says he, "Office XP has not really picked up in the true sense of the word and besides there is not much business development that we undertake on behalf of Microsoft. Given a choice, Microsoft would be our last choice for a company to work with. Due to their near monopoly in the market they have become inconsiderate to the customer and are very arrogant in their approach."

Ashish Aggarwal of Trifin Technologies feels Office XP sales have begun to pick up. He says, "Customers are reluctant to buy Office XP because of the option of being able to load the software on a machine only a few times. Now that fear is going away. But Microsoft has failed to demonstrate the real power of Office XP and all its new features. A great deal of education is still required."

Same old support

Microsofit in India have embarked on the second phase of training (sales & technical) to systems builders and resellers on Office XP and Windows XP. The first phase got over by 31st May. As part of the Windows XP launch, Microsoft is working with many systems builders with the retail front to run auto demo kiosks to build excitement around WXP and OXP. "The indirect support provided via their site is pretty good. I assume it would remain so for XP as well," says Mani Bharadwaj of Deloitte Touche Tohmatsu India.

Windows XP will cost more than previous versions of Windows and will come in two versions: One for home users and one for business professionals. Microsoft's biggest challenge in selling Windows XP may come from explaining the differences between consumer and commercial editions, say analysts.

Most of the major features are identical, and most users won't know the difference until they fully explore the entire OS. Some of the features in the commercial editions may not mean much for small businesses and many small busineses may buy home-user version looking at the lower cost.

Detailed pricing for India is not yet available. However, based upon the information available so far, there is a very marginal increase in the pricing compared to Windows 2000. "Therefore, price should not be a deterrent for the sale of Windows XP," feels one MS reseller.

Hoping for the best

All said and done, for resellers the world over, Windows XP could become an important product to sell. Considering the reviews that are flashed on IT media, one thing that stands out is that, for Microsoft, Windows XP is a significant effort after the release of Windows 95. And despite all the controversies that surround the product, WXP is supposed to be a secure and stable product. So let's hope WXP will bring back cheers in a gloomy market.

By NELSON JOHNY in Mumbai, with inputs from Sunila Paul in Bangalore and

Mohit Chhabra in New Delhi.

All That Could Entice Buyers