Analysis :Windows on the wane?

As the cost of PCs continues to fall, manufacturers are being forced to find more ways to reduce their costs. It stands to reason - if they are to cut the price of their machines, they can't spend as much on the raw materials.

While component makers can help here - Intel, for instance, is desperate to regain some of the budget market share it has lost to AMD - most people forget about the cost of software. You may get a copy of Windows with your new PC but while you don't knowingly pay any extra for it, it's certainly not free.

A recent speech by Michael Cowpland, CEO of Corel, pointed this out.

According to Cowpland, Windows currently represents a quarter of the cost of a $300 PC. If this budget sector is to grow, the cost of Windows is unsupportable. Accordingly, Corel is putting resources into developing a Windows emulator for Linux, while WordPerfect Office too will be ported to Linux.

The situation isn't as bad in the UK. An OEM licence for Windows costs smaller manufacturers around £50 per copy (sold to customers at about 50 percent more), around 10 percent of the cost of a cheaper PC. But it's still a significant cost - 'ridiculous,' according to a system builder who didn't want to be named.

PC manufacturers have two choices. Either they lobby Microsoft to cut the cost of Windows, or look for alternatives. Guess which option is more realistic?

Short-term, the next development of Windows is Windows 98 Second Edition.

The name reflects its status as just another update to the operating system rather than a full new version: it offers certain new Internet functions and IE5, better support for USB and other hardware, and includes various bug fixes.

Most of these updates can be downloaded free, so registered users will be able simply to buy an update CD for a handling charge ($19.95 in the US including a Windows book; likely to be under £10 here, though without the book). But for new users, it costs just the same as the current version of Windows.

This may not be part of a grand scheme to charge users annual licence fees (industry gossip suggests Microsoft is considering this), but it keeps users - and PC manufacturers - used to paying for a Microsoft OS, ready for the release of Windows 2000.

Realistically, if a PC manufacturer wants to slash its bill of materials and cut the cost of its budget PCs, it has to find an alternative to Windows.

Despite its dominant position, Windows isn't the only PC operating system around. We reviewed BeOS in March, and though it's aimed at power graphics users, its latest v.4.5 release includes updated hardware support and makes it more suitable for consumers.

More common is Linux. Until now, it's had a geeky feel - a free operating system originally developed by a Swedish student and sharing many elements with Unix. But with commercial - though still low-cost - releases by companies like Red Hat and Caldera now on the market, it's becoming more realistic for home users.

Certainly, Corel's involvement gives the Linux movement credibility.

If there's a heavyweight office suite like WordPerfect Office available, then one of users' main fears about moving away from Windows is quashed, while the planned Windows virtual machine ensures that file compatibility should not be an issue. With Corel planning to release its own version of Linux too, businesses won't worry about trusting their systems to software developed and maintained by volunteers. In fact, Compaq and Dell - among others - are respected names who have already started shipping server-specific versions of Linux with some of their servers, not a decision they will have taken lightly.

But such a move to Linux could have other advantages too. First, Linux is flexible enough to be modified for non-PC applications. It's already being talked about as the core of set-top boxes, designed for quick and easy Internet access at very low cost, and a version of it looks set to be included in Sony's forthcoming PlayStation 2.

Secondly, it's more stable than Windows. Trickier to install perhaps but both faster and less likely to crash. PCs sold like washing machines - and for the same price - have to be as reliable as washing machines.

If not, their manufacturers won't be able to afford to provide support for them.

Windows is far from dead. But with PC builders facing pressure to cut costs and improve reliability, it can no longer be the automatic choice for all.

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