Microsoft's Windows 8.1 licensing fee cuts will do little to spark the interest of enterprise IT professionals who might consider low-cost devices for their organization.
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The aggressive move is designed to help nascent Windows 8 tablet and smartphones gain ground in the enterprise and consumer markets -- segments already dominated by Apple Inc.'s iOS devices and Google Inc.'s Android partners.
This latest change to Microsoft's licensing fees illustrates an evolving strategy aimed at helping the Windows 8 operating system platform make some headway. The company earlier this month began shipping a standalone Windows Enterprise SKU in the hopes of gaining more traction for Windows 8 in business.
"Microsoft is … trying to get more Windows 8 touch devices into the market, but there is no royalty payment to pay Google. [It's] hard to compete with free," according to Ira Grossman, chief technology officer for end user and mobile computing at MCPc Inc., an IT solutions provider based in Cleveland.
I don't think we would be looking at cheap tablets in North America for everyday work tasks.
Brian Katz, director of mobile innovation at a pharmaceutical company
Microsoft reportedly is reducing its Windows 8.1 licensing fees to $6 to $15 for OEMs of sub-$250 devices, which represents a drop of as much as 70% in the number of OEMs that paid licensing fees of $30 to $50, depending upon incentives.
The drop anticipates what other industry heavyweights might be planning, such as Intel Corp., which also has pledged to be more aggressive in 2014 in the tablet segment. Analysts said this would require the company to drop the price of its chip to support a low-cost tablet market.
"For Intel, it's about getting some scale with tablets so [it] can leverage that into smart phones," said Tom Mainelli, program vice president for devices and displays at IDC in Framingham, Mass. "There is a similar story for Microsoft."
IT pros seemed skeptical about whether Microsoft's strategy to jump-start the sub-$250 Windows 8 device market would impact business organizations. Currently 8-inch tablets from companies like Dell Inc. and Asus have devices that list for approximately $300, while some Windows Phones are either free or cost as little as $99, depending upon the carrier contract.
"Enterprises are not going to buy a device that is substandard quality," said Grossman, noting there is little interest among his enterprise customers for Windows 8. "[The device] is going to be a no-name brand that will not have parts commonality. It is a disposable item. Maybe [some] enterprises don't care about that, but it depends on the type of organization."
Not all IT pros were ready to discount the low-cost Windows 8 tablet market, however.
"I think there are parts of the world [where] we would [consider low-cost Windows devices], as we are an international corporation, but I don't think we would be looking at cheap tablets in North America for everyday work tasks," said Brian Katz, director of mobile innovation at a large pharmaceutical company based in New Jersey. "Lowering the cost for a cheap computer and/or handset is huge for Microsoft, as it will lower the overall price to entry and will be highly successful in certain parts of the world," he said.
Microsoft recently signed on new Windows Phone OEMs, including Lenovo, Foxconn, Longcheer and Lava, among others.
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The Windows 8 tablet and smartphone markets have yet to capture a broad base of deployments. Instead, organizations have deployed Windows 8 touch devices in vertical markets such as healthcare, education, transportation and others.
The slow adoption could put a damper on deployments as the tablet market matures. The market growth for tablets will hit 19.4% in 2014 with shipments of 260.9 million units worldwide, according to IDC.
Although this growth is relatively healthy, it reflects a drop of 3.6% from IDC's previous forecast. The market research firm said market maturity and longer cycles for refresh and replacement of devices, as well as a lower average selling price all contributed to the slowing growth.
Only 14% of overall tablet shipments will be adopted in the commercial segment, and 86% in the consumer segment, IDC predicted.
Meanwhile, Windows Phone is projected to capture 3.9% of market share in 2014, IDC said. In comparison, Android is expected to secure 78.9% and iOS is forecasted to hold 14.9% this year. Blackberry is projected to capture only 1.0% while other tablets make up the remaining 1.3%.