See, this is what happens when two nerds get married and have little boys.

Thursday, December 06, 2007

Why Apple?

I've been thinking a bit about Microsoft since I interviewed there last month (BTW: they didn't offer me a position, but I did accept a lucrative offer from Amazon in their Digital Media division). I enjoyed interviewing with MS, and liked the people I talked to. It's always interesting posting about a discussion I had with real people -- if anyone I interviewed with stumbles here, hello, and don't take anything I say personally!

Since I was interviewing for Program Manager, I decided to ask some questions about how strategy is decided in the Windows Experience group. I voiced my opinion that there were some strategy issues with the vista lineup -- perhaps a bold move in an interview, but it is something that I want to know. I specifically asked how MS decided which features to leave out of the lower versions. He corrected me and told me that they don't try to leave features out -- they try to look for features to ADD to the more expensive version. Well, in my book that sounds like marketing hype.

First, you should know that there are 4 versions of Vista that matter to individual users:
1) Home Basic: This version is, well, basic. It may be 'more secure' than xp, but certainly has steeper system requirements too. It costs $99, and doesn't offer a whole lot different from XP.
2) Home Premium: This version is interesting. It costs $199, but includes media center (very cool), a shiny interface, a dvd maker, 3 'premium games' (chess, mahjong, and inkball -- no shouts of excitement here), and a backup utility. Really, it only lacks one program: Remote Desktop. This is something that us nerds DO care about, so we can access our home PCs on campus, or from another room if you just don't want to get up.
3) Business Edition: This costs the same amount as Home Premium. All it does is include Remote Desktop, and leave out Media Center. Remote Desktop though IS an important feature for a lot of people -- who now have to make a choice between Media Center or Remote Desktop -- you can't have both, unless you get...
4) Ultimate Edition: At $399 (TWICE that of Premium), this was supposed to be the uber cool version. The interviewer I asked about strategy told me this was the version for those people who "just want to have it all" -- like some kind of status symbol that you could brag about to your friends who only have Premium Edition. Strangely enough though, this version doesn't actually DO very much more. You get Remote Desktop AND Media Center. That's really the ONLY REASON a power user would get it. As far as the 'people who want to have it all' group that the interviewer thought they were targeting, they may be the people who buy something 'just because' it's labeled the best, and MS may sell a few copies. But here's the list of features that you get in Ultimate:
a) Moving desktop backgrounds
b) A Poker game
c) Encrypt your entire hard drive, just in case you're paranoid or work for the FBI
d) Use more than one language on the computer (ie, switch between English and Spanish)
e) Media Center AND Remote Desktop

Wow! All I have to say is that it's asking a lot from users to ask them to pay $200 more for a poker game and remote desktop. You can get free programs that do Remote Desktop stuff. Sure it would be nice to have it built in -- but not for $200. And unless I'm mistaken, Remote Desktop only allows one person to use the machine at a time (two people can't remote login), unless you get some other Server / Enterprise edition.

After mentioning some of these arguments to my interviewer, he agreed that Remote Desktop would have been nice to see on Home Premium. But he still thought that there was a reason for a $400 Ultimate Edition, and I still disagree. If their target market is the status symbol market, then I think they picked the wrong target -- and then didn't back it up with any actual features. Since all DVDs are cheap to produce, paying extra for extra features just doesn't feel the same as buying luxury items for a sports car. Sure, there are development costs, but $200 to add poker?

Microsoft is getting too complacent if they actually believe this is a good strategy. I hate to make comparisons to Apple, but I think it's appropriate in this case. Sure, MS can say that they're far above Apple in numbers (and they'd be right) -- and they have the business section that Apple isn't even interested in (right again). But more and more I see people switching to Apple -- even though the machines are expensive. I give MS no more than 5 years before they start really feeling pressure from Apple. At first, they're quite secure in the business realm, since the IT staff don't want to have another platform to support -- until a manager high enough on the food chain demands to have a mac at work (he likes his powerbook at home) and the IT guys have to listen.

So why do people switch to Apple? Why is it the status symbol that Vista Ultimate isn't? Macs ARE more expensive after all. I think it comes down to strategy again. If you buy a mac,

1) Buying a new OS comes in a single $129 version
2) New machines come with iLife and automatically get the 'cool extras' like a movie maker and garageBand.
3) Adding a very functional word processor, spreadsheet, presentation software is $80. (Remember, if you want to actually (gasp) use Vista to write school reports, you need to go buy Office for another $150).

Sure macs are expensive -- but they offer consumers the feeling that they're getting a bunch of exciting features for that money. There's things that are lacking in the Mac OS -- the equivalent Remote Desktop is a totally different program, though you can share your screen for free. But Apple doesn't present those as add ons like candy at a grocery store -- they portray their OS as COMPLETE to begin with. MS gives consumers the feeling that they AREN'T getting features because they're reserved for the 'special versions.' Leaving aside potential interface or 'easier to use' considerations, which may be significant, and the fact that the 'extra features' in vista are really pointless, there is a fundamental good strategy in making users feel like they're getting all our cool stuff, instead of being denied stuff.

On the issue of OS pricing, I also asked my interviewer why the price was so steep for Ultimate. He replied that he thought it was an amazing thing that Windows hasn't changed it's price since Windows 3.1, many years ago. He said that with everything going up in price, isn't it great that Basic, which is way more functional than 3.1, still costs $99? The problem with this idea is that we're dealing with computers -- where processing power doubles every 18 months and keeps getting cheaper and cheaper. If your software doesn't do a ton more than it did two years ago (not to mention 15 years), something is very wrong! Remote Desktop, Media Center, and chess (a specially touted feature of Premium and Ultimate!) have been around for YEARS -- why does MS treat them as new features that you need to pay more for? Oh sure, it's not just Chess, it's 'Chess Titans', and don't forget 'Mahjong Titans' (since Titan is a cool word, you might as well use it in both products).

It's like selling a car with only an FM radio, an option to get cassette, and (if you're really into that status symbol thing), a CD player. And the FM radio costs only as much as it did in 1980! Sure, there are additions -- but they don't feel like anything special, and the lack of progress instead feels like regression. Claiming that adding a poker game and moving desktop backgrounds (which have also been around for a while) is progress only adds salt to the wound.

Of course, Apple still doesn't have an answer to the gaming market, sadly enough -- and strangely MS doesn't even market that capability, probably because they don't understand their markets like Apple. When Apple has gaming on it, they will be even more of a force to be reckoned with. Hopefully MS will change their strategy soon, or they're in for some rough times in five years.


Blad_Rnr said...

I agree with the premise of the article, but you repeatedly say Macs are more expensive. I think you are generally wrong.

When compared to what you get on a Mac (Firewire, the iLife suite, Unix security, no AV software needed to subscribe to, ability to run multiple OSes, etc.) the price is not a representation of what you would typically get on a Windows PC. Yes, when you compare a $1099 MacBook to a $699 Inspiron, it appears more expensive. But if you equip the Dell with what the MacBook has, it is pretty much a wash. Numerous comparisons have been done to show the gap is very small and sometimes favors the Mac.

I do agree that MSFT is out of touch with consumers. They have failed miserably in the consumer market, i.e. they lose money on everything they make (Xbox, MSN, Zune, etc.). They are not hip anymore and they just don't get it. $399 for an OS that is a resource hog and requires 2-3 times the processing power when compared to a four-year-old Mac that can run Leopard, it's no wonder they are failing with Vista as well.


James said...

Ah, perhaps I should clarify then: I've read the articles that show a Mac as about as expensive as a similar Dell -- but they really don't take into account the frequent sales. There are frequent sales on Vista machiens, so if you're a smart shopper you can really get stuff at a great price. Also, some additions (like RAM) can be bought far cheaper on your own.

To illustrate, I have a friend who just got a dual core laptop with 2.5Gb RAM for under $500. That's about half the price of a basic model macbook, AND has more than twice as much RAM.

If you want a decent video card, price rises very quickly. A Dell XPS with a 8600GT in it is $1500 -- a MacBook Pro with that same card is $2000, and has a smaller hard drive. That's NORMAL price for the Dell -- I'm sure sales can bring that down. In fact, you can't get leading edge consumer video cards at all on a Mac, even on the top of the line models.

Lets not even consider crazy coupon codes and rebates, and just take a look at some desktop models to drive home the point.

You can get a 20" imac with a midrange graphics card -- OR a dell with a 20" monitor, three times the ram, nearly the fastest consumer video card out there, and quad instead of dual core . That Dell also includes Office BTW, so don't say that it doesn't have the same software!

No shopping around, and I've found yet another example of how Macs really are more expensive!


James said...

I guess I should clarify even more though -- there's a lot you can TRY to quantify about why Macs are "a better value" -- but I'm talking really about price. Pure, easily quantifiable $$$$$$. Sure, your frustration with Vista may equate to money -- but that's hard to quantify. That's value, not price. You can't say that the price for ground beef and steak is "a wash" because steak is so much better. It IS more expensive.