The buzz is building around Microsoft  Windows 7 -- in a tangible way. Despite the fact that the software giant's next operating system won't be available until October, people are flocking to Amazon.com and other retailers in droves to take advantage of special advance pricing.
Windows 7 is leading the list of available software products on Amazon.com once again this week -- discounts of 50 percent or more are available until July 11.
Amazon is selling the upgrade for Windows 7 Home Premium for $49, less than half the $119 suggested retail price. The Windows 7 Professional upgrade is selling for $99, half the retail price. Those who pre-order a copy of Windows 7 will receive the software on Oct. 22 when it is officially released.
Microsoft's Original Pricing Strategy
But pricing may not be the ultimate issue. Microsoft faces a number of challenges, ranging from competitive pressure from Apple this year, from Google in 2010, and from the European Union about what is provided in Windows 7, according to Rob Enderle, principal analyst at The Enderle Group.
"When DOS hit the market, it represented about one percent of the cost of a new PC. And the revenue it generated came increasingly from the tools and applications that resided on top of it," Enderle said. "Over time, the cost of the OS has increased by more than two times and the cost of a PC is now about 10 percent of what it initially was. The end result is a massive increase in the perceived price of Microsoft's operating system."
Complicating matters, Microsoft eventually launched a Windows group that measured its success by the sale of Windows. That, Enderle explained, turned a management process designed around a keystone product into one more closely aligned with a packaged application. That, in turn, resulted in pricing decisions designed to optimize revenue for the division tactically as opposed to profiting Microsoft strategically.
"This dramatically slowed the adoption of new operating systems and related software updates across the company, contributing significantly to slowing overall growth during the past decade," Enderle said.
Google Threatening
Meanwhile, Google is orchestrating multiple attacks on Microsoft with the clear strategy of undermining Windows with its Web-based software. The attacks are designed to first separate developers from the operating system by driving a windowing overlay offering into the market, and then to replace the underlying OS with Android, a Linux-based free OS that Google hopes will eventually own the desktop , Enderle said. (continued...)
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