Traditionally, Microsoft has been a dominant force in the computing landscape, and with that domination it has cultured partnerships with many companies to have them build PCs based on Windows. Practically every computing device sold came pre-installed with the current version of Microsoft’s operating system, with the price of the OS factored into the overall cost of the device being sold. People wanted PCs, and those PCs were running Windows, so the partnership flourished. The only real competition came from Apple, but Apple was not interested in the tight margins created by the stiff competition for the lower cost PC, and Windows was left to monopolize the market.

Several major changes occurred over the course of the last several years which have certainly impacted overall Windows license sales – the meteoric rise of Android being the most powerful one, but another major shift was Microsoft changing its position as a seller of software to that of a hardware maker, directly competing with its long established partners. Microsoft of course had one major advantage over its partners in that it didn’t need to factor the cost of Windows into the Bill of Materials (BOM). This has certainly been a factor in the recent move by every single OEM which traditionally focused on Windows devices to broaden their efforts and begin providing devices based on competing operating systems – namely Android and Chrome OS.

Both Android and Chrome OS are free, which means a lower BOM, and inevitably a lower device MSRP.

Low cost computers
Chrome OS (Base Config) Acer C720 Samsung Chromebook 2 HP Chromebook 11 ASUS Chromebox
Form Factor 11.6" Laptop 11.6" Laptop 11.6" Laptop UCFF Desktop
CPU Celeron 2955U Exynos 5 Octa 5420 Exynos 5250 Dual Celeron 2955U
Memory 2 GB 2 GB 2 GB 2 GB
Storage 16 GB 16 GB 16 GB 16 GB
Price $199 $319 $279 $179
Android (Base Config) Dell Venue 7 Samsung Galaxy Tab 4 Lenovo Yoga Google Nexus 10
Form Factor 7" Tablet 7" Tablet 10.1" Tablet 10.1" Tablet
CPU Atom Z2560 Snapdragon 400 quad-core MediaTek MT8389 Samsung Exynos 5 Dual
Memory 2 GB 1.5 GB 1 GB 2 GB
Storage 16 GB 8 GB 16 GB 16 GB
Price $150 $199 $275 $399
Windows 8.1 Devices Dell Venue 8 Pro ASUS T100 Acer Aspire V5 HP 110-220z
Form Factor 8" Tablet 10.1" Tablet/Laptop 11.6" Laptop Tower Desktop
CPU Atom Z3740 Atom Z3740 A4-1250 Kabini E1-2500
Memory 2 GB 2 GB 4 GB 2 GB
Storage 32 GB 32 GB 500 GB (Hard Disk) 500 GB (Hard Disk)
Price $299 $349 $329 $299

This is certainly not the first time Windows has had to compete against a free operating system. Linux, while powerful, has struggled to gain any traction in the consumer OS space, but briefly with the beginnings of netbooks Linux was installed as the OS. Microsoft quickly countered that with a lower cost version of Windows XP for devices categorized as netbooks, which quickly dominated that market as well.

But this time is not like the rise of netbooks. Android is a powerful platform, with a multitude of apps available, meaning people actively seek it out, rather than settle on what came with the netbook. Chrome OS too, while certainly more limited in scope than Windows, is a polished OS which is being constantly updated. Many people who simply require a device to go online, and maybe perform some basic tasks, don’t need or want the complexity of Windows. Also, the low system requirements for both Android and Chome OS, as well as the free nature of the operating systems has allowed OEMs to manufacture devices for less, and therefore sell them for less than a comparable PC. Lower prices obviously drive sales, and it’s worked.

At Microsoft’s developer conference BUILD, a new update to Windows 8.1 was announced. One of the goals was to lower the BOM for Windows devices by reducing the required memory to 1 GB, and reducing the required storage to 16 GB. Also, it was announced that Windows (including Windows Phone) would be free for all devices with a screen size of less than 9”. Clearly the goal was to compete directly with the low cost Android devices that were becoming ubiquitous in the market. Today it was discussed on the Windows Experience Blog that a new OEM only Stock-Keeping Unit (SKU) of Windows would be available called Windows 8.1 with Bing.

Now, before you get concerned with the name, it won’t be marketed to end users as Windows 8.1 with Bing – it’s just the name of the SKU. The only change between this SKU and the standard Core SKU of Windows 8.1 is that Bing must be the default search engine in Internet Explorer. End users can of course still change the default search engine to whatever they like, so really the only change here is a requirement on OEMs for initial setup.

But how were the system requirements lowered?

To get to 1 GB of memory space as a minimum, the app store frameworks were refined, and the process lifetime manager is more aggressively suspending apps, as opposed to killing them. This is tweaking existing processes to make them more efficient, but the bigger story is how the storage requirement was dropped from 32 GB to 16 GB. The answer here is an entirely new way to run Windows directly off of a compressed WIM file, in a system known as WIMBoot.

Previous to Windows 8.1 Update, an installation of Windows actually included two copies of Windows – one compressed version for recovery, and once again in the uncompressed form which is the files Windows runs on. Clearly this isn’t the most efficient way to run a system with a limited amount of storage, and one of the first tips for anyone with a 32 GB Windows device is to move the recovery image from the internal storage to an external USB drive. A standard Windows partition layout would have looked like this:

With new devices based on 8.1 Update, Microsoft has taken the opposite approach with WIMBoot – rather than remove the recovery partition, remove the uncompressed files and run directly off of the image file. In the place of the uncompressed files are a set of pointer files which point back to the compressed install file called install.wim. Also included are the Windows RE recovery tools, stored as winre.wim, and an OEM specific custom.wim file. This leaves a partition layout of this:

The custom.wim file allows an OEM to quickly update images, by just replacing the custom.wim file. This file is for final customizations such as Windows updates, build-to order apps and drivers, and other requirements of the OEM.

If an end user does a refresh on their device, the pointer files for the install.wim and custom.wim file are reset, making this a much faster operation than before.

The end result is a significant reduction in the amount of space Windows requires.

WIMBoot is available for all versions of Windows – x86, x64, and ARM, but it does require UEFI as well as solid state drives or eMMC. Traditional hard drives, or hybrid drives, are not supported likely due to performance.

It’s unclear if there is any performance loss or gain from running on the WIM file rather than uncompressed files, but it’s certainly something I’d like to test. If the performance hit is small, it would be surprising if WIMBoot doesn't expand past the low cost devices to cover the entire range.

With these changes, Microsoft is hoping to kickstart a resurgence of Windows devices at the low end of the market. With the lower BOM, OEMs should be able to be price competitive with Android and Chrome OS now, but with a Windows experience.

Source: Microsoft

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  • name99 - Saturday, May 24, 2014 - link

    This is no about consumers, which means there are fewer legal issues.
    It's about the fact that right now search engines pay companies (from Apple down) to set their search engine as the default on a device. This is presumably a win if the cost of this is, say, $5, and the expected lifetime ad revenue generated from the new user is $10.

    What this is telling us is that Bing was not doing this until now (or was doing it in the conventional pay-the-manufacturer way). But now the money flow is slight different: rather than Lenovo, say, getting $5 from Google to set the IE default to Google, they'll get say a $5 break on the cost of Windows if they let the default be Bing.

    Why do it this way rather than a straight $5 payment? Who knows? My guess is there are tax implications that make it better for one or the other party to view the transaction as "Cheaper Windows" rather than "Normal Price Windows one way, plus $5 the other way"?

    MS may also hope to establish a precedent here for the future: accept MS anti-virus and you'll get another $5 discount (rather than that being paid by Norton or Kapersky). Accept MS Movies on Demand Live Bing Edition Pro for SkyDrive (a new service I just invented, named in the usual elegant MS manner) rather than being paid $1 by Amazon or Netflix to ship the box with those services all set up and ready to go, and you'll get another $1 off the price of your Windows...
  • MartinT - Saturday, May 24, 2014 - link

    "With the lower BOM, OEMs should be able to be price competitive with Android and Chrome OS now, but with a Windows experience."

    Which poses the (perhaps obvious) question: Is Windows still a preferred experience over Android or Chrome OS?

    I can't imagine Windows running any better than either of Google's offerings on the low-end hardware this is targeting, and Metro has proven to be, if anything, a customer repellent.

    Beyond those initial concerns, one has to wonder how Microsoft plans to make up for the revenue short fall they're only accelerating with this move, it's not like Bing is adding billions to the company's bottom line. (much the contrary)

    This move is fully reactionary to the changes in market conditions, and seems largely motivated by keeping unprofitable market share in the consumer market. Can't wait for them to explain how that'll increase their profits.

    #1 Give away Windows
    #2 ???
    #3 Profit!
  • CaedenV - Saturday, May 24, 2014 - link

    #2 track telemetry, search, and user data. Use that data to sell adds via Bing Search and Metro apps, plus take a percentage of paid metro apps. Push people towards Office 365, Skype, OneDrive and other 'freemium' and paid services.

    Really, at this point Win8 should be free. Drive up adoption, push developers to get some awesome apps in the store, and profit from app sales and app adds. That has to be more profitable than $140+ Windows in a shrinking ecosystem
  • name99 - Saturday, May 24, 2014 - link

    App sales (primarily Office) happen anyway.
    There is no way in hell ad sales are ever going to reach $140 per user.

    The basic issue is the MartinT's question --- is Windows worth $140? Or even $55 or whatever the low-end OEM cost is? The Windows fans all rush to say "of course" and tell you about the great things Windows can do --- and in a world with no other OSs, those things would be worth $140.
    The problem for MS is that there are now multiple OSs which costs a hell of a lot less than $140, and also do most of those things. They all come with various encumbrances (OSX means you have to buy high end HW even if you don't want to, Android isn't interesting if you want a laptop, etc) but the pool of people for whom the ADDITIONAL value of Windows is worth $140 is shrinking rapidly.

    MS is trying to square the circle here --- get the excess price of Windows down to zero for those who have no reason to stick with MS (ie consumers) while making up the cost by charging business more. This is the usual response to this sort of situation (compare airlines, or Intel) but it's tricky to maintain, especially for software. MS needs to keep enterprise hooked on Windows, at the same time that enterprise has ever more incentive to find alternatives because their Windows costs keep rising.

    What I think would truly reshape the situation would be more honest accounting rules for "software depreciation". Right now, enterprise can fantasize that, having written their software once, fifteen years ago, it's going to keep running on autopilot forever. This leads to all manner of problems, which are particularly obvious and pressing with MS pulling the plug on XP.

    Governments that want their companies to have an advantage in the world, and companies that simply want to not suck, will change their accounting rules to prevent this situation. I don't know how best to do it, but somehow there needs to be an incentive (analogous to depreciation) to force companies to effectively turn over their software every ten years or so. Not literally, but applying that sort of effort --- the initial cost of the software should be about 10x the annual maintenance costs.

    This would obviously give us better quality corporate SW --- but it would also create a very interesting situation for MS, which has been able to cruise for so many years because of massive enterprise installed base which wants to keep running that code written for Win95. It would present a massive opportunity for MS to finally clean out the crud (and get enterprise onto .NET) --- but it would also be the opportunity for everyone else to swoop in.
    In the absence of this change, I expect things will continue as they are today. MS will bleed consumers; they will make it up from enterprise; and enterprise will bitch and moan --- but be unwilling to make the substantial changes to break free --- they'd rather pay the additional MS tax every year than a one-time payment to port various internal apps.
  • Romberry - Saturday, May 24, 2014 - link

    You maybe "can't imagine Windows running any better than either of Google's offerings on the low-end hardware"...but that's down to a failure of imagination, because Win 8.1 Update runs remarkably well on low end hardware, especially in the Metro environment. In fact, based on what I'm seeing on several fronts, it does in fact run better than Android on low end hardware. (Can't speak to Chrome other than the browser. The next Chrome OS device I use will be my first.)
  • savagemike - Saturday, May 24, 2014 - link

    It will be interesting to see how this plays out. Windows is an entirely different paradigm from ChromeOS and the tighter storage would be a problem which would only grow over time - regardless of initial disk space.
    It doesn't seem like running from a compressed file while shorting the RAM and using a low end processor would be a good idea. I guess we'll see.
    Perhaps OEMs won't be full silly with it. 1 Gig RAM is pretty spare on a laptop or desktop where a browser is often open for long periods and commonly used with multiple tabs.
  • lmcd - Saturday, May 24, 2014 - link

    Actually, it really isn't a different paradigm at all. Microsoft pushes OneDrive storage over local for documents, pictures, and other elements, like Google Drive. Microsoft runs its apps through a VM and syncs them across many computers, like Google Drive. Microsoft accepts web pages as apps with the option for extra local features.

    The differences? Microsoft already has a stable, accelerated graphics API, more offline capabilities, and a more stable VM (.NET versus PNaCl) but a worse browsing environment. Oh, and way more device connectivity potential.
  • En1gma - Saturday, May 24, 2014 - link

    and how will winupdate work?
    it change/patch existing files or add new ones
  • Roland00Address - Saturday, May 24, 2014 - link

    Does this work with ssd caching? If so I wonder if the benefits of ssd vs ssd+harddrive will work better or stay about the same.
  • Towermax - Saturday, May 24, 2014 - link

    "Traditionally, Microsoft has been a dominate force"

    "Dominate" is a verb. I think you mean "dominant" force.

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