Windows Blue shows why Microsoft may turn Windows into a subscription service

Windows Blue is likely to be available for free, but elements of it show that eventuall, Microsoft may turn Windows into an annual subscription service in the same way it's doing with Office.

By all indications, Windows Blue will contain far more significant features than a typical Windows service pack. It may bring back the Start button, include a boot-to-Desktop option, and will include features that make it simpler to use for those without touchscreens. Windows Division Chief Financial office, Tami Reller, said in a blog:

"It will deliver the latest new innovations across an increasingly broad array of form factors of all sizes, display, battery life and performance, while creating new opportunities for our ecosystem. It will provide more options for businesses, and give consumers more options for work and play. The Windows Blue update is also an opportunity for us to respond to the customer feedback that we’ve been closely listening to since the launch of Windows 8 and Windows RT."

That's clearly more than a service pack, but less than a completely new version of Windows. There's no Microsoft precedent for creating or pricing such a piece of software.

Computerworld's Gregg Keizer reports that analysts agree that Microsoft will be making Windows Blue available for free. Michael Cherry of Directions on Microsoft summed up what many analysts believe when he told Keizer:

"I don't think that in the current Windows 8 climate they can charge for the first update, as the perception of many users will be that any changes being made or features they are adding will make Windows 8 the way it should have been when they first purchased it. I know I'd be upset if Microsoft asked me to pay for this set of changes."

But analysts also said that they believed that eventually, Microsoft would charge for other significant updates that were less than full-blown new versions of Windows. Some analysts pointed to the way that Apple charges for annual upgrades to OS X, which have been $20 for each in the last two years. And Cherry even went out on a limb and estimated that the annual update would be between $24.99 and $49.99.

A more likely scenario, though, is that Microsoft will eventually turn Windows into an annual subscription service, in the same way it's doing with Office. Microsoft is heavily pushing its subcription-based service of Office for $100 a year, which gives you the rights to run it on five different devices, including Windows 7 and Windows 8 PCs and tablets, and Apple OS X computers.

It's doing that for several reasons. In a world in which people have multiple devices, Microsoft knows that it's simply too expensive for people to buy multiple versions of Office. If the company is to keep customers to moving to Google Apps and Google Docs, it needs to offer an affordable alternative for those who own multiple computers. In addition, Microsoft wants a steady, dependable income stream, and subscriptions offer that more than having people buy individual licenses.

That's where Windows Blue comes in. Microsoft certainly knew when it began developing Windows Blue that it would be far more than a traditional service pack. Microsoft also knew that it wouldn't be charging for it. But it decided to bake in very big changes anyway. I think Microsoft did that as a way to get people used to the idea that Windows would no longer necessarily be on a "big bang" release cycle -- big changes only made several years when an entirely new version of the operating system would be released. Instead, it wants to acclimate people to interim changes that are sizable, but not a complete revamp.

Once it's got people used to that change, it can start charging for updates. Given that it's pushing Office as a subscription, it may do the same thing with Windows, possibly even combining the two into a kind of super subscription service.

That doesn't mean it will stop selling individual licenses to Windows. But a single Windows subscription could cover multiple devices, including tablets, Windows RT devices, and traditional computers. It will be cost-effective for those who buy into the Microsoft ecosystem.

It would also solve a problem Microsoft has had since Windows XP -- once people buy a version of Windows they're happy with, they tend not to upgrade. That's a lost of lost revenue. Selling a subscription-based version of Windows would help Microsoft regain a good deal of that lost money.

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