Going cheap: Microsoft prices Windows 8 upgrade at $40 to defend market share

Microsoft has shocked the market this morning, after it announced its new operating system Windows 8 will be available to all Windows XP, Vista and 7 users – at an upgrade cost of just $US40.

The announcement is a huge change from Microsoft’s previous pricing models, which saw consumers paying hundreds of dollars for individual copies of each operating system. This announcement means individuals, and businesses, will now save hundreds in upgrading to the new software.

“It’s a shift that needs to be made,” Telsyte senior research manager Sam Yip told SmartCompany this morning. “It’s a strategy to maintain market share, and we’ve seen this happen in other markets.”

Experts point to the dropping prices among mobile devices, and especially apps, which offer increased usability for a low price. They say Microsoft’s announcement is simply the same thing in a different medium.

The Microsoft blog even pointed out when you use the Windows website to purchase the upgrade, it will make sure you have the ability to install the software. Users on Windows 7 can bring over settings, personal files and apps, while Vista users can bring along settings and personal files.

Windows XP users will only be able to bring along personal files. But users will be able to download the file, and then create a bootable USB or .ISO file. Any packaged version of the upgrade to Windows 8 will be available for $70 in stores.

“We wanted to share information about this upgrade promotion with you as we continue to drive toward the RTM milestone for Windows 8,” the company said.

Microsoft has already issued a release candidate – a type of early version of Windows 8 – before it hits retail either later this year or early in 2013.

The price is surprising not only because Windows 8 is a totally new piece of operating software, but because it’s such a large shift from previous versions of Windows. The user experience is quite different to Windows 7 or Vista, using a home-screen made of tiles similar to the interface on the Xbox or Windows Phone software.

But according to Yip, this is something the company has to do in order to stay competitive, especially as Apple keeps marching on the desktop market and cannabalising PC sales with the iPad.

“This is really about maintaining the customer base, and it’s something that needs to be done in light of increased usage of Apple products.”

“The other point is that Windows 8 has many features suited to the tablet environment, so it makes sense that Microsoft would really want to win on the desktop and tablet space together.”

But it’s also a move towards simplifying upgrade procedures for users. Apple has allowed Mac users to upgrade their OS through downloads for quite some time, and last year finally allowed users to upgrade their iOS software without connecting to a computer first.

The move will prove a win for businesses as well, which are used to being charged more than hundreds of dollars for each version of Windows they install. Even if they don’t upgrade to Windows 8 straight away, Windows 7 prices will drop. As Yip points out, the move is good for everyone.

“The winner, once again, is the consumer. You can expect more activities like this as businesses attempt to maintain customers.”

“We’ve seen it in the enterprise market, we’ve seen it with mobiles, and now it’s happening with desktop operating systems.”