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Direct dilemma

Direct dilemma

There's more at stake than just the sale of the PC if the increasing trend of vendors going direct continues.

Some months ago, after the launch of Windows 98, I prophesied that Microsoft would look to extend the Windows Update feature built into that operating system so that it could move its mass of customers to a subscription-based service.

Windows Update makes it much easier for customers to update their system. Users only have to go to the Microsoft Web site and download the latest revisions to update their system.

In last week's Australian Reseller News (page 18), we ran an article describing a leaked Microsoft internal memo from Bill Gates, which confirmed that it is the software giant's intention to move to a subscription model.

It discusses a concept called Windows Tone or WinTone (Gates spelt it both ways). This is the idea that "customers can rely on Microsoft more for managing and updating their PC".

Intelligence will be built into the software, which automatically checks if it needs updating and if so, it will upgrade itself by downloading the enhancements from the Internet. Essentially, this means the end of big software upgrades because instead of adding functionality in one big bang, it is added as it is developed.

Users will subscribe to the software, instead of buying it, giving them the right to upgrade their system while their subscription is current.

But where will this subscription model leave the channel? After all, isn't "managing and updating their PC" part of the channel's responsibility now, and isn't this where a lot of resellers and retailers make money?

Important consideration

It's such an important consideration, because you can be guaranteed that once Microsoft introduces the subscription model for its operating system it will extend it throughout its entire lineup. And then every other software vendor is sure to follow.

The most important question for the channel then is will they still be able to make money from this. It's possible that some vendors will look to cut out the middleman. Will Microsoft? I doubt it. You can say a lot of negative things about the company but its commitment to the channel has been admirable. If it was ever going to do the dirty on resellers, it would have been through online selling of software. Yet its NITRO system will allow resellers to play in that game, when really Microsoft could easily have cut them out altogether.

Additionally, I don't think Microsoft would be keen to take on the billing headaches involved with dealing with every one of its customers directly. Especially, if it's going to base its billing software on NT!

Much more likely is that the reseller that makes the initial PC sale will also take care of subscription issues. I can see the PC market following the mobile phone model, where a software subscription, Internet subscription and PC sale are all bundled together. This will benefit the reseller if they can make the initial sale. But if that sale goes direct to the vendor then so too does all that subscription revenue.

E-mail me with your comments at philip_sim@idg.com.au


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