I’ve been looking at Microsoft’s new Equipt offering which bundles Microsoft Office Home & Student, Windows Live OneCare, Office Live Workdspace, and Windows Live Services (Mail, Messenger, and Photo Gallery) into a $70 annual subscription for 3 PCs. I’ve been using most of this solution largely by accident for several months now on my Dell One and I find it does pretty much all I want to do with a productivity package and I haven’t really even used Workspace or Photo Gallery yet. That’s a little under $6 a month for a typical house of PCs for the basics.
But this got me thinking about where the future of this will lead and reminded me of what made IBM powerful in the first place, including what brought us Cable TV, both of which had similar models. Let’s start with cable and then move to IBM.
The Beginning of Subscription TV
This reminded me a little bit of how cable TV got off the ground. The first thing I got was a service called OnTV and it provided an early single channel HBO-like experience (no on-demand). Coupled with someone who knew how to program an early VCR (there weren’t many of us) you could generally watch at least one movie a week when you wanted to watch it. If I recall correctly, this initial service cost about $10 a month and that was in the early 80s. For that price you got a set-top box and an antenna (which was kind of a pain to get installed at the apartment where I was living at the time), service and support, plus the programming. At first I taped everything and somewhere there is still a huge box of tapes I never actually watched twice.
From there we moved to Cable and Satellite where for a starting price of around $13 a month you get basic “free” TV and for around $90 a month you got a suite of TV programs including HBO. You also got access to pay-per-view but initially there was no on-demand capability. To get there Reply TV and TiVo created the PVR (Personal Video Recorder) market which recently has been partially co-opted by the cable and satellite TV industry.
But what else is interesting is that now I get my cable, internet, and phone through the cable provider for one fee, and it turns out to be much less expensive this way than when I was buying these services from three separate vendors. This suggests Equipt may eventually go down a similar aggregation path.
IBM’s Subscription-like Start
As some of you know I worked for IBM at one time and wrote a long report while there on why IBM nearly collapsed in the 80s and lost its market leadership. In its day IBM was more powerful than even Microsoft currently is because they owned the hardware, software, and services market in their day. How they got there was through leasing very expensive hardware and providing everything as a bundle. Basically a company would pay for their IT services much like they currently pay for power or you pay for a packaged service much like the telephone, internet, and TV service I noted above. To address a revenue growth problem, IBM sold the leased hardware to their customers thus breaking the annuity/subscription model and opening them up to competition. Since then a number of companies have been trying to recreate this idea of computers, software, and services delivered as a subscription but the market has fragmented to a degree that has made putting this back together again very difficult. Equipt may help change this.
Building a Future PC Subscription Solution
It is interesting many PC products also come as a subscription. Zune, Rhapsody, Slacker Premium, and Napster, among others, provide music to a PC platform on a subscription and services like Vongo provide TV. Games come in under a subscription model with World of Warcraft, City of Heroes, RealArcade, Wild Games, and Shockwave all providing content on a subscription model. We now loop in Equipt and, sans hardware; we have the basis for a full service subscription based model one that might throw off enough cash to actually subsidize your PC as part of a cable like solution.
If it weren’t for Apple which has been having real trouble getting subscription anything to work, I’d bet they would get this done first because they own most of the parts that touch their platform. However, creating a subscription offering that scales down to consumers is incredibly difficult and this puts Google and Microsoft on the short list to get this done.
Wrapping Up: Big Changes Coming
The market is under a lot of economic pressure at the moment and that often brings change at a higher pace. Subscription software suggests that a different hardware model may work better, one that better mirrors what the cable industry has and we are currently calling “Cloud Computing”. Both Google and Microsoft are in a massive race to bring out this next level of technology and service which promises higher reliability and a better overall solution once it matures. Microsoft Equipt clearly showcases Microsoft can play here and not it will be race between these two and others all trying to find that next big pot of gold under the technology rainbow. The good news is the direction the market is going appears to correcting mistakes made in the past and just think what this model is likely to do to operating systems and hardware over the next decade.
