I find this a little misleading, because netbooks are very rarely someone's sole computer, and they seem to deliberately omit the growing sales of Macbooks and Macbook Pros (which aren't cheap) to make the story more convincing.
In fact, I'd say that this is a bit of a microsoft biased story in that the emphasis is "Microsoft can't compete on price" (which they can frame as "we don't want to compete on price") when in fact MS is losing at both the top end and the bottom end of the market.
The $250 netbook may not cut it, but I'm writing this on a brand new $400 laptop that has plenty of processing power, 2 gigs of ram and a decent graphics card. This power would have cost over $1500 two years ago. When the computer costs the same as the operating system, people will be more willing to play around with which operating system they use.
You're absolutely right that Microsoft is going to get squeezed from both directions by Linux and Mac.
The most likely near-term consequence is that Microsoft may be pushed out of the home market if they don't introduce a relatively cheap home OS.
I recently got a Lenovo s10 and I'm considering using it as my main development workstation (hooked up to decent monitor & keyboard, doing mostly Python stuff) after spending some time traveling with it: I absolutely love this tiny laptop and I could easily imagine people using it as their sole machine.
This is exactly what happened to me. I bought a cheap laptop to ensure my mojo worked in Vista. I made it a dual-boot with fedora to play with linux, and now it's my main rig.
I only really boot the xp machine so the rest of the household can reach a printer, when necessary.
No central heat + Boston winter = Many days I wish for a heated keyboard... not sure how you'd heat a trackball, but that would be appreciated as well!
A couple ways -- USB-powered electric gloves, combined with enough not-typing and cardio to make sure the blood's still flowing.
(Mozart and his wife, for example, used to dance in their cold apartment to keep warm.)
But hasn't Apple's revenue shifted away from desktops and notebooks towards phones and consumer electronics as well?
The article makes a point that there could be disruptive change on its way that leaves the world with much less relative, general purpose computing power in homes and small businesses. I don't think that is disproved by Apple's success.
Desktops yes, but their notebook sales are still strong.
In the college market that I'm in I see a lot of netbooks being used as the only computer... so food for thought. A lot of people genuinely do not see the value in paying $1K+ for a computer, and are willing to live with the poorer performance.
I don't actually have the figures but I believe that their computer business is a smaller part of their overall revenue than it was in the past. I know it's still growing, but the trend is even visible with Apple I think. I could be wrong though.
It's true - the iPhone and iPod now makes up the bulk of Apple's revenue. That being said, sales of their laptops are still growing by leaps and bounds (well, until recently anyway). There is still a large market out there for high-end laptops.
"It is spending a fifth of what it would be for traditional technology, said Jayshree Ullal, Arista’s chief executive."
[Traditional technology being mostly the standard Microsoft stack, replaced by various online applications.]
At some point, CEOs of more conservative corporations are going to be presented with these numbers in a board meeting, and will have a very hard time defending the value they're getting for the money they're handing over to Microsoft. True, there's the "we would have to retrain our employees" argument, but young employees are already used to doing everything online and will be asking the same questions.
Add to that the downward pressure on margins from netbooks (no one is going to spend $200 for an OS on a $200 computer), and I do not see any upside for Microsoft in the near future.
It's not just Microsoft, but they should be questioning the value they get from their entire IT departments when an entire infrastructure can be leased. The smarter IT departments will adapt and push for it, the dumb ones will try everything they can to block the adoption of it - fearing their own demise without regard to the best interests of the company they work for.
no one is going to spend $200 for an OS on a $200 computer
They would if they had to. Lots of people spend $200 on games for a $200 game console, don't they? I just spent $380 on a computer to run on a $20 power supply, because without the computer, the power supply is pretty useless.
The difference is that Linux is now good enough that they don't have to spend $200 on an OS.
Microsoft has been successful largely because the cost of their product was hidden in the cost of the computers on which it is pre-installed. $200 total price point does not leave them much room to hide. Because consumers have been trained not to think of the operating system as a separate cost, but just part of the computer, I don't think you can convince them now that the operating system, by itself, is worth as much of the rest of the computer combined.
This is not quite as true for businesses, but even there the cost of site licenses for the Microsoft product stack needs to be questioned for employees whose needs are web browsing, email, and basic document editing. And, of course, the article shows that newer companies are coming to that conclusion already.
You might be surprised at the economics of Microsoft volume licensing. Businesses are not paying retail price for every copy of Windows and Office. And neither are most consumers. In fact I wouldn't be surprised if retail revenue of these products was insignificant and they exist only to implant the idea of "value" in people's minds.
> Most online programs are so simple that there's no training involved.
That is manifestly not the case; complex work is complex regardless of the delivery method. I have worked on and with a couple of web applications where it took several days to train someone to use the application; mostly because of the sheer number of variables they controlled.
What I think you are trying to say is that there is no need to train people in the UI basics.
Maybe some people are missing the point of the article: hardware is cheap, getting cheaper: Moore's Law in action.
Software only becomes expensive when it is based upon this intangible notion of "sales," a per-unit figure that becomes largely irrelevant when factoring in dollars spent on marketing and advertising, licensing fees and things of that sort.
OSS has the unique ability to put both categories in somewhat of a corner. Not really intentionally, either; simply by being honest.
This is a great time to set up a business that helps small to medium businesses shave some of the IT costs; that's exactly what I am trying to do as a side-project. So not all is black and gloomy in this depression.
Cheap alternatives that eat into revenue generated from their more expensive counterparts are not really business model busters. They just compete better using the same business model in this economy.
I noticed the article started out by talking about Asus' EEE PC, but then went on to talk about how Acer is stealing Apple's market position. Is this a typo? I know Acer still exists, but I'm pretty sure Asus still sells the most netbooks.
In parallel, economic downturn means more innovation as individuals and companies get very creative to meet the changing expectations from consumers. When resources are scarce, thinking becomes abundant. This is the same reason why poor and hungry startups are always more innovative then large and stable companies.
In fact, I'd say that this is a bit of a microsoft biased story in that the emphasis is "Microsoft can't compete on price" (which they can frame as "we don't want to compete on price") when in fact MS is losing at both the top end and the bottom end of the market.