The Price Microsoft Pays By Ignoring Vista Customers

not listening

We read a lot about the value of listening to your customers and understanding your markets. We don’t hear as much about what happens when you ignore your customers. Thanks to documents exposed as part of a class action lawsuit, we get to see just how bad it can be. Maybe even billions of dollars.

Microsoft Pays Immense Price

Microsoft’s Windows Vista operating system release just over a year ago has been a smashing non-success. You would be impressed to know that they sold 100 million copies of Vista in the first 14 months. Until you realized that 250 million personal computers were sold last year – and most of them still came with Windows XP. Then you would be much less impressed. Microsoft intended to end-of-life (stop selling) Windows XP shortly after the Vista launch. But there was too little user adoption, too many bad reviews in the press, and too much push-back from their biggest customers – OEMs.

This week, Microsoft announced that they were lowering the retail price for Windows Vista. Not that that really means anything – the vast majority of copies are sold to OEMs. But it does put them back in the spotlight, as they try and do some sort of damage control for their poorly managed product / product release.

Note – it is important to point out that this is not a criticism of the Vista operating system. The quality of the OS, good or bad, is unrelated to what we focus on in this article. Simply put, Microsoft ignored the feedback from their customers prior to launch, and immediately after launch. And they are paying for it.
A judge ruled that consumers can file a class-action lawsuit for how Microsoft marketed Windows Vista. The suit may cost Microsoft a lot of money in settlement fees. It certainly costs a lot in bad publicity, which translates to revenues, and therefore market capitalization. And all because they ignored their customers and caved to the pressure of another heavyweight – Intel.

Intel Outside and Inside

We regularly hear the horror stories about people feeling like they got a “bait and switch” when it comes to buying new computers equipped with Windows Vista. Most computers (70-80% of all produced models at the time of launch) sold by OEMs (Microsoft’s customers) were labeled “Vista Capable” but could not run most of the features of Vista – including the new user interface that was the most visible change (to novice and competent users). It turns out that only between 20 and 30% of the desktops and laptops could run the Aero glass features (the cool new UI) at all, and then only poorly. Most computers had an older, cheaper Intel 915 chipset, with the 945 chipset available in a minority of computers.

In February 2007, just after Vista launched, Microsoft’s Steve Sinofsky told CEO Steve Ballmer that the 945 chipset, required for the “Vista Premium Ready” logo, could barely run Vista. And everyone (inside the PC industry, at least) knew the widely used 915 chipset that was awarded the “Vista Capable” logo couldn’t even think about running the advanced display driver model used to deliver the fancy Aero interface, considered one of the major selling points of Vista.

High time for Intel to get serious about graphics, Tom Krazit

Thanks to the class-action lawsuit against Microsoft, the court has released 158 pages of emails (pdf) specifically about the “Vista Capable” logo and Intel.

Tricia Liebert summarizes the situation today for Tech Republic:

It begins with the Intel chipset. In Feb 2006, the chipset in bargain notebooks was the 915. Unfortunately, the 915 chipset cannot provide the graphics power necessary to power Aero Glass. Intel voiced concern to Microsoft that it would not be able to supply the certified 945 chipset in sufficient numbers to qualify enough PCs for the Vista Ready logo. Microsoft’s response was to certify the 915 chipset, knowing that it would not be able to deliver the entire Vista experience.

What Microsoft was willing to do for “Wintel”, Tricia Liebert

Todd Bishop also writes a good detailed review of the documents. In another article, Tom Krazit highlights just how important this would be to Intel:

Intel apparently felt that if only 945 chipsets were deemed Vista Ready, that demand for systems with 915 chipsets–still a significant mix of its products–would fall off the face of the earth. And also, that it would be unable to produce enough 945 chipsets to meet its committments to PC makers–orders that might otherwise go to Advanced Micro Devices.

Microsoft emails reveal Intel pressure over Vista, Tom Krazit

So Intel shoved, and Microsoft toppled. But Microsoft’s customers were screaming “NO” at the time. And Microsoft ignored them.

As Bishop points out for us, John Kalkman, a Microsoft exect said in an email in Feb 2007:

In the end, we lowered the requirement to help Intel make their quarterly earnings so they could continue to sell motherboards with the 915 graphics embedded.

Customer Says…

The New York Times summarizes Dell’s opinions on several fronts, as expressed in the released documents. Slide 5 of a presentation from Dell to Microsoft (p14 of the court documents) explicitly asked Microsoft to not lower the bar for hardware to allow the entry-level machines to get tagged with “Vista Capable.” Dell cited concerns with education of their customers, setting of expectations, and communication. Dell also complained about the complex product (sku) structure that Microsoft was using.

Walmart also complained, as did HP. Some folks within Microsoft were listening, but unable to prevent the mistakes. Mike Ybarra said on Feb 01, 2006 (a full year before the launch) “I am passionate about this and believe the decision is a mistake.” One other Microsoft exec commented that this feedback was consistently heard from “all retail customers.”

It would be bad if Microsoft’s customers didn’t express their desires and concerns. It is horrible that they did, and Microsoft chose to ignore them.

Best Buy did provide an interesting perspective – they felt that if Microsoft kept their original approach of only labeling those machines that could run the full Vista capabilities, then Best Buy would prefer to delay until late summer of 06 to announce (instead of CES at the start of 2006).

One voice of futility from the trenches (p 137 of the court documents) that made me feel some compassion:

Based on the objective criteria that exist today for capable even a piece of junk will qualify :)

So based on that yes 865 will qualify.

For the sake of Vista customers, it will be a complete tragedy if we allowed it. I don’t know how to help you prevent it.

Anantha Kancherla, Mar 01, 2006

The Lesson

Listen to your customers, and stand up for them!

5 thoughts on “The Price Microsoft Pays By Ignoring Vista Customers

  1. Scott, that was an interesting chronology of events leading up to the release of Vista. As you point out, not only is it important to listen to your customer, it appears that it wasn’t as important to deliver it in early 2006 as Best Buy was willing to hold off until June. Managers leading products develop a myopic view of the importance of the release date to the expense of many other important considerations — some more important than the release date. In this case, the release date was less important than having a properly labeled “Vista Premium Ready” logo.

  2. Interesting set of emails.
    As I’ve been telling my naysayer friends “If you build a PC around what Vista REALLY wants, and stick with Vista 32, so that 16 bit apps run (too many 16 bit installers on 3rd party products out there) and you can use 32 bit drivers, Vista is fairly painless

    The biggest problems I have with Vista to this day, are “nitch market” and “Internal Business” products.

    Often the “Nitch market” products are developed by a 1 or 2 man shop. The developer is doing it on his spare time from his “real job”, and basically ignored Vista till it came out. Its bad enough, for instance, that they ignored things like “.HLP” have be depreciated since what, 1995? They have NOT followed the “secure computing” guidelines because “Oh, that’s a lot of work and I don’t need to” – and they didn’t (and at their day programming job, the company turned off the security stuff in XP SP2). Many Many of the applications are still in VB6

    As for “Internal Business” applications, the situation can be even worse, if you can believe it. I know of more than one company that still has VB 3.0 applications running around, because they felt VB 4.0 was unstable, so they never ported to the 32 bit world, and they are cursing themselves even now. Managers say “Oh, we’ll turn off features in Vista to make our apps run, and THEN upgrade our applications”, instead of having their developers spend a little time to make the application run on either Vista or XP

    To quote Steve Balmer “Developers, developers, developers, developers”

    Microsoft did very little (and is still doing very little) to win the SMALL developer to the “Microsoft Way”. Once upon a time, a copy of the “MSDN Professional” (and at that time it included everything) cost a couple Hundred bucks, and if you played your cards right, could be cheaper. Today, what does a copy cost you? 3K plus?

    Now, I understand what happened. Microsoft decided to spend a LOT more of their effort on large corp development, and went away from the small shop. I can understand why (I can remember Mike Rissie saying ‘YOUR job is to make your customers happy, MY job is to sell more of these boxes’ (while holding a VB box), but there is a problem. The small developer mindset has moved to the FOSS comunity. The small “I do my work at night” developer is between a rock and a hard spot. He’s either got to bootleg his software (Hey, I have it on my work PC, I’ll put it on my home machine), or he has to pay, what, Three, four thousand a YEAR for the combination of Microsoft products, plus a few 3rd party tools. In the mean time, he’s lucky to sell 100-200 of his product a year, with a $100 street price, or a $50 upgrade price. It doesn’t pay

    So all those programs that have been written over the years, all that cool stuff that runs under XP, just doesn’t work RIGHT under Vista. Microsoft need to spend a BUNCH of time helping these small developers moving their applications to Vista. I’m not talking reporting tools here. I’m talking REAL porting tools, or maybe dropping the price on some developer SKUs, and having Developer Support helping these people port products – and publicise this help. Yeah, it’s going to hurt Microsoft Consulting, and it’ll hurt the bottom line in say, developer sales, but you guys are in danger of losing mindset to the FOSS community. A LOT of people I know are saying “If I have to find new software that works, and I have to learn a new OS, why should I stick with Microsoft?” (and that scares me, as a developer who makes his living writing software for Microsoft OS platforms)

  3. Comment received via email:

    Overall, the actions of MS and Intel don’t surprise me. I’ve been in the corporate system and privy to decisions based on whim and fantasy, just completely disregarding all good advice. My first experience was really disheartening. I thought corporate decisions were carefully thought out and fact based. Who knew.

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