Who makes money when you buy a new PC?
The hardware margin is far lower for PC makers than it is for Apple and the revenue Microsoft gets from a Windows license looks trivial in comparison to the £250 Google makes from search advertising in the UK for every PC sold (according to Gary Hearns of Dixons).
That also makes it clearer why PC makers seem unwilling to give up the extra money they make from bundling all that extra software that clutters up new PCs.
For a few extra dollars per system you get short-term thinking that hurts the entire industry, says Michael Angiulo, corporate vice president of the Planning and PC Ecosystem team at Microsoft.
He thinks things are getting better, but he calls the rise of crapware "kind of the worst era of PCs when nobody was thinking about the final PC as an end-to-end system. If you were a PC OEM you would look at the bill of materials, look at the component costs and say 'I can only mark that up 1% so the rest of my profit is going to come from trialware and bountyware and toolbar deals and anti-virus deals'.
"At the last minute partners were saying 'I'll give you an extra five bucks' - two bucks here, three bucks there - and in the short term that seemed like it made PCs profitable yet prices were going down."
The crapware problem
When Angiulo was deciding whether to take the job in the Windows team he ran into the crapware problem himself. "I bought this $3,000 notebook, it was the first one I ever bought with a solid state disk; it was the fanciest piece of hardware engineering at the time."
He refuses to name who made the PC "because it's embarrassing to them. This thing came with a disk defrag utility that was on by default. Not only do you not defrag SSDs because it reduces the life, it was using my CPU power!"
Angiulo describes his job as half planning for future versions of Windows and IE and half working with all Microsoft's partners, from chip makers to software developers to PC makers.
He's been getting PC makers to put in GPUs that deliver DirectX in models that have already shipped, ready to do hardware acceleration in IE9 – and it was an easy sell, he told us.
"We came to the partners without tactics where we're trying to pay for features but instead where we just use telemetry and product data; that's why the planning and the partner teams are both in my group.
"I go to partners and say 'we know from telemetry that 59% of the time people are on their PCs, they're using the web'. The 70 partners we have for the IE9 beta represent two thirds of the web traffic of the world, 800 million people…Those are the kind of numbers that make partners go 'oh, if I make sure my graphics subsystem going to be compliant with this new DirectX level of functionality, then I'm going to light up all of those PCs?Then yes I want to play, tell me what we need to do'."
The part of that job that Aaron Dietrich of the Fundamentals Ecosystem groups tactfully calls making sure that "the operating systems that actually get out to our customers when they buy an OEM systemare of the same high quality that we have in the core OS" may be tougher.
Angiulo claims things have got better since Microsoft showed PC makers what it was doing with Windows 7. Before then, he reminds us, "there were PCs that would ship with two anti-virus programs on at the same time, each of which thinks the other one is a virus".
He's not trying to stop PC makers from bundling any software with systems "if it's executed well and it makes sense and it doesn't degrade the core performance of the PC".
We've been saying for years that Microsoft needs to use its influence with PC makers to remind them that happy customers are more likely to be repeat customers, but from some of the PCs we've seen recently, the lure of the extra profits from bundled software is still strong.
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