Saturday, November 19, 2005

A Theory About how Microsoft Makes its Money

Microsoft makes a lot of money. Its profits, as many of us know, are a few times the GDP of some of the middle-sized economies of the world. But tell me, apart from the Office Suite and the ever crashing Windows operating system, has Microsoft made any other "successful" (selling) product? So how is it that the company keeps making these huge profits? Microsoft hasn't released a single product for the mass market in the last so many years -- nothing since Windows XP, if I am right. There's hardly any positive buzz about the company. Most of the good news and innovative products are coming from its competitors: Google and Apple. Firefox is steadily eating into Internet Explorer's share. So how is that Bill Gates still rakes in the moolah? That question plagued me for a number of days but I found the answer over the last week.

About a month back my PC went kaput. Somehow, in spite of taking numerous precautions, spyware had made my PC its home. My anti-virus and numerous spyware fighting softwares fought the good fight but they were unable to weed out these well entrenched terrorists. The situation clearly called for more drastic steps -- it was the time to send in the marines. I got hold of a computer servicing firm. The computer engineer had a look at my PC, shook his head a somberly for a few times and then said, "The machine will have to be formatted, all its drives if you want to be sure there's no more spyware. The spyware has become one with your operating system. You haven't installed any of the necessary software updates that are provided by Microsoft from time to time. What do you expect?"

So the machine went for a complete overhaul. It turned out to be a bit more serious than I had expected. The hard disk needed to be changed - the old one had barely managed to cling to life in the past few months. The service engineers installed a spanking new Windows XP and Office XP on my "as good as new" computer. I decided to go the the full hog and installed a new anti-virus system. Then for a good measure added two anti-spyware programs, a registry cleaner and a firewall. My service engineer nodded approvingly and then added, "All that is fine. But your PC operates on Windows and you use MS Office products regularly. So keep them updated too. Get a broadband connection, that'll help you download updates easily."

By that time I had smelt blood. So a broadband connection was installed. The service provider asked me to choose a package and I decided to go with the one that offered a Gb of data transfer for a Rs. 950 and would be valid for three months. One Gb for three months should be okay, I reasoned. I never download any heavy files.

With broadband installed, I went on to configure my operating system. I clicked on the Control Panel, went to the Security Center and switched "Automatic Updates" on. After all it is the "recommended setting." The Windows Security Center informed me that now "Windows will automatically keep your computer current with important updates." I heaved a sigh of relief and forgot all about it.

That was till last week. I signed into my broadband account last week only to be prompted that my Rs. 950 had dwindled to Rs. 100 and I should think about renewing my Internet connection soon, if I wanted to stay connected to world. I was a flabbergasted. I had downloaded nearly a 1000 Mb of data in the last three weeks!!!? This Internet package was supposed to last me a three months and here it was already nearing its end inside three weeks!

I went carefully over my Internet activities for the past few weeks. But I couldn't find anything amiss. I had checked my mail daily. . .but there were never any heavy attachments. I had surfed a bit, blogged a bit. Yes downloaded weekly updates for my anti-virus and anti-spyware programs but they wouldn't have added up to more than 20 Mb and even that figure was a bit on the higher side. Where had I used up nearly a Gb of data transfer. On a whim, I decided to check if anybody else at my home had downloaded and added any new programs (they wouldn't without telling me) that were not reflected in the Start and programs menu. So once again I clicked on the Control Panel. And then I clicked on "Add-Remove Programs." And I immediately knew what had guzzled that 1 Gb of data.

There were a total of 32 Windows updates installed to my computer in the last three weeks. Of these 18 were "critical" Security Updates, 11 were hotfixes (whatever that means) and 3 other updates. MS Office too had joined the party. The Office Suite had got itself 2 security updates and 6 other updates. 40 Microsoft updates in three weeks, averaging nearly 13 a week.

Suddenly the answer I was searching for all these days was right in front of my eyes. You want to know how Microsoft keeps making money, I'll tell you my theory:

Microsoft deliberately releases flawed software in the market: Operating systems that have flaws that need to be patched, hotfixes for numerous bugs etc. Microsoft knows that its buyers are suckers, after all they have bought Microsoft products. Next, every once in a while it releases a news bulletin about how a new flaw has been discovered in Windows or MS Office and how it can be fixed with a patch that can be downloaded from the Microsoft update site. A Microsoft spokesperson and a few well-placed articles in the media meanwhile fan the panic and urge Microsoft customers to use their windows update function to keep their computers current to ensure that their software is updated and that their PCs and their data is safe. So all the world immediately either visits the Microsoft site to download the patch or enable the recommended setting of keeping automatic updates on.

I am sure Microsoft has tied-up with Internet Service Providers around the world. Their sales pitch to the ISPs is simple. "We release flawed software first. Then we release patches and hotfixes for our software, hmm. . . at the rate of say about 5 a week. Actually we can, and we often do, release more. We have enough bugs in our software to keep us going for a decade. After that we release a new flawed version. Any ways think how much data transfer that means for your customers. So give us 50% percent of your revenues. What? Ok 35%. No? 25%. Think about it. We ensure you stay in business for many years. No, no, let me assure you that Microsoft will never release a complete and flawless product ever. We are looking at percentage earnings from ISPs as a major avenue to bolster our bottomlines. 15%? You've a deal. Bill will be happy. I think as a bonus, Microsoft will announce a new service pack to be downloaded."

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anthony said...

hahaha and not just that, they have a tie up with hardware vendors too.. Now i have been advised to upgarde my 256 inbuilt ram to 1 GB. My laptop was running so well untill i deicde to use GPRS to surf in emergency. I was told i need to have service pack 2 to be able to use gprs as the mode of connection.. looks they have a tie with GPRS providers too shit..
After i installed the SP, the speed of my laptop has gone bonkers. It is as if the OS has suddenly decided to crawl instead of run.

Vinod Khare said...

Yeah they most certainly are in league with harware vendors. The new windows Vista will need 512 minimum and 1 GB of recommended RAM. What kind or pocket-hole-burning configureation is that!

Vardhman said...

Af far as fun is concerned I agree with your post.
The reality however is different. The paying by ISPs will be a very difficult model for earning. I am sure they don' do it.
The hardware vendor thing is however total true, without doubts. The companies like HP, IBM, Toshiba, DELL sell the Windows software with an OEM model, where they sell the OS with the hardware. Thinking about it both get beniffited in the deal as ppl will get Windows and companies can sell their hardware and 'services'.

It might be difficult to believe but its true that if you want to buy a OS-less PC from these vendors its very difficult. In some cases the price of the hardware without Windows installed will be hiked so ppl don't by it without the Software. When people face some problems with the OS etc they have to seek help from the Hardware vendors because its they who provided them the software (whoever the manufacturer be) and there they make money again in name of services. Both Windows and Hardware thrives well in this model. They update the PC for the customers taking high amount of fees both for the software and the hardware. Thats the chief reason you get a HP comp for almost 2 times the price of an assembled one. Though the cost of the Windows licence may hardly count for 1.5 times the cost.

Kaushal said...

You don't need to download updates, Mandar - i never did. Just play smart with the web, know where u download stuff from and what u download (yepp it requires a lot of 'being careful') or get a Spyware detector (OK dont get a MS one, get any one!) i never used Windows Update EVER - before working with MS (its mandatory here)

@ Linux Addict - Totally agree with ur points. Nice story on the ISP-deal thing Mandar, but no, dont worry that's not true :) i work with Microsoft!

Another money-saving idea Mandar - get hold of PCQ/CHIP/Digit etc. - they usually carry critical patches. 100 bucks a month average. and NO ain't no evil nexus with MS & the publishers ;) c'mon u'll get much more value for money with a mag

Anonymous said...

You are such a moron! It's quite obvious from your post that you don't know much abt computers. Otherwise, you'd have had that problem at all.

You very clearly say that the hard disk itself had to be changed! that's a HARDWARE problem - not a SOFTWARE one. So stop getting on the standard "bash MS for my looney ideas" bandwagon. Its fashionable to do this and you're doing the same.

Regarding updates, go check out Linux as well. Install FC4 and then do a "yum update". You get over 600MB worth of updates! have fun with that.

Kaps said...

Paying for data based on volume of download is a phenomenon largely restricted to India. None of the ISP's in developed markets charge based on volume of data.

mezba said...


Got here by Desipundit.

The most wired country in the world (and that's Canada by number of citizens online) has its largest ISP, Rogers, set a broadband cap of 5Gb per month per account limit. In Asia, middle east, parts of europe, all broadband accounts have a download limit per month.

mandar talvekar said...

Hey everyone,
thanks for the comments.
The post was meant to be satirical. I was just trying to make some fun of Microsoft.
Vinod - You are right. I have also read that Vista will work only on 64-bit processors. Today only AMD manufactures them. What it means is that most present machines will be obsolete within a year or two. Can't help it though, I suppose. Software and hardware is moving towards higher configurations.
Linux addict - i know the ISP model of revenue earning is not viable. I just wanted to present it as a "conspiracy theory." Totally agree with you about hardware vendors and how they overcharge when they provide MS OS installed on their machines.
Kaushal - I know it is not necessary to download and install updates from MS (except the critical ones). It's just that after I overhauled my PC, I decided to keep it as up to date as possible (something i had neglected doing earlier despite knowing that it won't be good for the PC). And thanks for the PCQ/CHIP/Digit idea. Will try it, definitely. And yes I know MS wouldn't do anything like earning money the way I have said they are doing. But it would be great if Gates confirms it :) .
Kaps and Mezba -- thank you for your inputs on the ISPs in India and abroad. Broadband connections in India still aren't really affordable and ISPs should start looking into rectifying matters. That's one of the reasons I had avoided getting a broadband connection all this years. I had thought that the broadband market will shakedown and we can have good service providers and options within a year or two. Sadly that hasn't happened Finally opted for a broadband connection, not out of choice, but necessity. My dial-up connection wasn't too great and I didn't want to spend ages waiting for a page to download.

Which brings us to the single anonymous comment on this post. Whoever you are. . .I know enough of computers to know that regular updating the OS is a Software issue. I never claimed that MS made me buy a new hard-disk. I had to go in for a new one because my old hard disk was about to die on me any moment. I don't know about Linux, what you are saying is true probably. . . but I would rather let a person who uses linux to comment on that. I don't think MS bashing is "fashionable" or that everyone is jumping on a bandwagon. Most people are criticising microsoft for genuine problems that they face with MS products. For a company that's been in business for so long, it's amazing that versions after versions of microsoft's flagship products are so bug-ridden. MS needs to address these issues quickly and properly. Right now people are using MS because there doesn't seem to be a "non-geeky" alternative around. But if that changes, Microsoft will die a quick death.
Another thing, please restrict your comments to the matter of the post and refrain from getting personal. To put it very mildly, It's not a nice thing to do and it is not a good advertisement for you as a person (is that the reason for the anonymous comment?). I'll be deleting such comments in the future.

Anonymous said...

i work for the Quality assurance team for Microsoft Windows.
to deliberately release flawed software seems a little too much of an imagination!
True,the downloads for patches are pretty intensive, but in the US, no one cares for bandwidth used. I pay $44 per month for unlimited usage of the net! i even download movies legally from the web all the time!

So the bottomline is that, for a country like India, where web usage is still a premium, these products pose problems.

Btw, who buys licensed software in india anyways. the revenue for Microsoft from India is NEGLIBLE compared to its US market!

think outside India, man!
The reason MS makes its money is through its Office and Windows monopolies. In the US, people change machines every once a while and the number of users is extremely high.
Besides everyone buys LEGAL copies of the software!

The quality assurance team at Microsoft is the most intensive work i have ever been on!
Even a simple bug is taken so seriously to give sleepless nights for us!


mandar talvekar said...

Hi Shiv,
As I had clarified earlier, my 'conspiracy theory' was only an attempt at satire.
I know very few in India buy licensed software. But there's still a substantial number of people and (especially) organizations that invest huge amounts in buying licensed versions of software. These people and organizations may not be as many as they are in the US but they deserve the best service and returns for their investment. Anyways let us not get into a software pricing debate here -- there are too many issues involved and the exorbitant price of MS products is one barrier that's keeping many people from buying licensed versions. And let us also not get into MS monoply here. The US judiciary has said enough about how the monopoly was achieved.
India definitely has bandwidth issues -- broadband is still at a premium. Maybe it is because of this that we are so sensitive about where and how we are using our precious bandwidth and data transfer limits. While it is okay to point out that these issues exist, let us not forget that MS products do have issues too. I am sure a lot of effort and dedication is going into making any windows product as bug free as possible before it hits the shelves. But, with the number of updates that microsoft consumers have to download to keep their PCs upgraded, it looks like quite a few still seep through into the product. Maybe MS bugs are fewer than those of rival products, but to end-users they still feel to be way to many. Consumers wouldn't mind if the updates were "extensions" to the product but often these updates are for closing serious loopholes. I don't know if it's possible but MS has to give more thought to making its softwares more bug-free - especially from the angle of security.