Windows 7 – Free OEM upgrades?

As the windup to Windows 7’s pricing announcement came, many in the news industry suggested that Microsoft lower its prices to make up for bad public reception of Windows Vista.  Some analysts, such as former Windows 2000 developer-turned blogger Michael Cherry of Directions on Microsoft suggested that Microsoft should give away Windows 7 for free to Vista users as an apology.

Now OEMs are stepping up to the plate and offering some free upgrades of Windows 7 — but only to customers who purchase machines with Vista between the end of June and next January.  Lenovo became the second to announce such a program, airing the news on Friday.  Hewlett Packard, the top computer shipper in the U.S., had become the first to announce a Windows 7 upgrade program, releasing details on Thursday.

A concerned Microsoft reportedly has moved to limit free OEM Windows 7 upgrades to orders of 25 machines or less.  This provision was first noticed by Gartner analyst Michael Silver, who posted a research note urging businesses to stand up and demand equal upgrade treatment.  The provision is unlikely to affect the smallest businesses, but for larger firms it essentially puts free upgrades out of reach.

The move is not without precedent — Microsoft pursued a similar strategy with Windows Vista, limiting the free upgrades to five installs.  Mr. Silver, though, does take issue with Microsoft’s failure to widely publicize the limitation, writing, “Microsoft has not publicized this limitation to our knowledge … Gartner believes that Microsoft designs these program limitations to persuade organizations to enter Enterprise Agreements, enroll licenses in Software Assurance or purchase upgrades to obtain rights to run Windows 7.”

Mr. Silver is urging businesses to push their OEMs to provide free upgrades.  He details, “Press your OEM to give you free Windows 7 upgrades for all the PCs you buy until Windows 7 ships on new PCs. Larger OEMs administer their own programs, have latitude to do this and have made exceptions for organizations in the past.”

Microsoft enjoys little OS competition in the business market.  A few businesses — mostly software firms — use Linux distributions, and a few businesses — mostly creative media firms — use OS X as their operating system of choice.  The vast majority of businesses, though, use Windows.  Apple is aggressively marketing its new OS/service pack — OS X 10.6 Snow Leopard, but it is only available for Apple hardware minimizing its impact.  So the primary risk to Microsoft in forcing businesses’ hands is not losing customers, but rather losing upgrades (or the fees OEMs pay Microsoft for free upgrades).  In recent studies over 80 percent of businesses indicated that they will not be upgrading to Windows 7 in the next year.

The company is also facing criticism over the pricing of its full retail and upgrade editions outside of the pre-order and free pricing programs.  This comes despite Microsoft lowering the price of Windows 7 slightly from current Vista pricing, and significantly from Windows Vista’s release pricing.

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