Apple and Microsoft: The Difference in OS Sales Models

In a previous article I discussed Apple’s approach to cloning and how far they should go in shutting down that business. This led to the question “why can’t I just buy Mac OS X and install it on any hardware I want?”, which led to a pretty typical answer that the boxed OS X is sold as an upgrade, not a new (or full) license. This answer is sometimes challenged, and brings up the idea of what an “upgrade” is in the Mac world as opposed to Microsoft.

This is not an Apple vs. Microsoft argument. It simply attempts to outline the difference in each one’s approach to OS sales, and why each uses the sales model it does. Rather than claim one is “right”, I believe each is right for the business model it supports. 

Where Apple may be handicapped in terms of perception is that Microsoft’s approach is well-known and understood. Microsoft could point out that ~95 percent of the planet probably “gets” their model. Apple, for all their recent success — so much so that many Apple fans forget they’re still a drop in the Atlantic in terms of global market share — employs a different approach that, when viewed through Microsoft’s, might seem a bit strange.

Microsoft: Which Windows Version Are You Running?

There are four different versions of Vista: Home Basic, Home Premium, Business, and Ultimate. Each one is also split into “upgrade” and “full” versions. You make your pick, bring it home, and install it. Which do you choose? The decision of which of the four to purchase is up to the user, I only want to concentrate on the split between upgrade and full. 

The difference is straightforward. A full version installs on a PC with no proof required that a previous version of Windows is owned by the user. For an upgrade, however, such proof is required. The proof may be by installing over a previous version, or providing an installation disc, it doesn’t matter except to the extent that without proof the upgrade will not install; and you’re supposed to use the full version. 

(Let’s not get into all the ways you can skirt the “proof” process. Let’s all just pretend we’re honoring the spirit of the software agreement, OK?) 

Why does Microsoft do it this way? Their OS can run on thousands of variations of hardware platforms; it’s easier to verify you’re a valid user of a previous OS version. Further, this is the classic method of software sales; if there’s a new release, owners of older releases get a break in pricing. If you’ve never owned the product, you pay a higher price initially, but then enjoy upgrade prices from that time forward. Software has been sold like this for years and pretty much everyone understands this model.

In short, Microsoft requires a “full” version if you don’t own a previous one, and an “upgrade” version if you own a previous version, which the upgrade installation attempts to verify. 

Apple: Which Macintosh Do You Own?

Right off the bat, you see only one version of Leopard. That isn’t important, but what is important is that the one version is not split between “upgrade” and “full” versions. What’s up with that? 

The answer to that question is why Apple people claim that a boxed Leopard sold is an upgrade. It’s not an upgrade in the Microsoft sense as it makes no attempt to verify a previous version of Mac OS X. Rather, it verifies that you are in fact using a valid Apple Mac (i.e., Apple-labeled computer) and, once verified, lets you proceed. 

With Leopard verifying you have a valid Mac, there’s no need to verify the OS itself. Apple couldn’t care less at that point. You have a valid Mac and are therefore entitled to the Mac OS you just bought. So we see the huge difference between the Apple and Microsoft OS models, Microsoft must verify you own a prior version of Windows (doesn’t care about the hardware), whereas Apple must verify that you have a valid Mac. 

This explains why the boxed OS is thought of as an upgrade. Generally speaking, there is no reason a valid Mac owner would purchase a boxed OS unless it’s to upgrade. It can’t be new, because he got a full OS version with his Mac, and if he doesn’t have a valid Mac the installation will fail. (It’s this latter item that the cloners skirt, but this article isn’t about cloning, so let’s move on.)

By the way, the box OS allows full installs, too. Once the installer verifies your Mac you have several installation choices. 

Apple’s OS model is completely different from Microsoft’s. Ever wonder why Apple can sell “Leopard Ultimate” for only $129 (or less), and why they don’t need upgrade and full versions? Because they know you have a valid Mac, and as a company rely primarily on that hardware income. As for giving previous owners an upgrade price break, the “Ultimate” version at $129 is a great price. 

Summary: And The Winner Is… Both!

To think of Apple’s OS approach in Microsoft’s terms is a huge mistake; the business models are different. 

The reverse is also true. Apple’s model won’t fit into Microsoft’s world. Apple users like to make fun Vista’s versions, but when you don’t have the “luxury” of verifying a given piece of hardware, how else would you suggest Microsoft go? Developing an OS is expensive, Apple’s strategy allows them to simplify OS version and pricing because they rely primarily on hardware income. The disadvantage of this approach is that it’s tied to a Mac, hence the hucksters trying to skirt that issue. But when the issue is skirted, Apple’s model falls apart. 

Look at it this way: If Microsoft had to sell only the Ultimate version of Vista, with no hardware check, no differentiating between an upgrade and a full install, and for $129 (with other licensing options dropped accordingly), can you not imagine the drop in profitability? It would be harsh on their bottom line. That model makes little sense for an OS licensed for distribution widely on so many hardware platforms, at so many price points, by so many vendors. 

Meanwhile, if Apple had to continue selling just one version of Leopard, but could not verify a valid Mac was in use, then they’d be in the same boat as Microsoft above. In Apple’s case, OS revenues would likely increase, but not near enough to make up for the lack of corresponding hardware income upon which they rely. Apple is primarily a hardware vendor; tying the OS to the hardware makes that business model work, just as freeing the OS from a particular hardware vendor makes Microsoft’s work. 

I don’t believe either approach is necessarily better than the other, but it’s clear to me that either company being forced to used the other’s would be damaging.

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