MS Slashes Software Prices for Students in Developing Nations

In the battle to bridge the world's digital divide, the world's largest software company will offer a special suite of Microsoft (Nasdaq: MSFT) solutions to children in developing nations for a rock-bottom price of US$3. The program is an expansion of Microsoft's Unlimited Potential initiative and its Partners in Learning program.

Through the program, Microsoft will offer the $3 software suite to qualifying governments that purchase and supply PCs directly to students. The Microsoft Student Education Suite includes a specialized version of Windows XP, Microsoft Office Home and Student 2007, Microsoft Math 3.0, Learning Essentials 2.0 for Microsoft Office, and Windows Live Mail desktop.

Building Nations or Building Markets?

Because Microsoft is the world's dominant business software company, it could get flack no matter how altruistic its efforts might be. Looking deeper, regardless of initial intent, Microsoft stands to benefit by investing in developing nations.

"It's actually a surprisingly strong plan," Rob Enderle, principal analyst for the Enderle Group, told TechNewsWorld. "When you have products that price in the $300 range, dropping them effectively 99 percent is not an easy decision to make, but for education, it is the right one."

The program, Enderle says, is mostly an attempt to ensure that Microsoft isn't displaced in emerging markets or by a new generation of children growing up without using Microsoft solutions.

"I might argue that products for education should largely be free -- or close to it -- because they tend to seed or protect follow-on markets," said Enderle. Since most CEOs know they won't still be at their jobs by the time such programs would bear fruit, they are seldom attempted.

"Microsoft is one of the few companies that don't operate quarter-to-quarter and can still do things like this," he added. "I think it showcases the realization that if you lose education, you eventually lose the market, and education was moving, particularly in emerging nations, to Microsoft alternatives largely as a result of antipiracy efforts."

Previous problems with massive reductions to the purchase price has been complicated by product support costs. Because the suite will be provided via participating governments, the support costs will shared by the governments and schools, and may even result in additional training and education jobs.

Why Not Vista?

"I think, at one level, XP is a fully-baked and mature operating system, and for basic functionality, it might provide most of what a user would need," Charles King, principle analyst for Pund-IT, told TechNewsWorld. "One nice thing going for XP, except for the oldest systems out there, XP will run on pretty much anything and it has lots of support for different drivers."

If the governments are using recycled PCs with wide varieties of hardware capabilities, XP may be the best solution, though it's hard to imagine that Microsoft could not have developed a stripped down version of Vista.

Linux and SaaS

Microsoft has in front of it more challenges than just piracy and low-cost product delivery models.

"Linux is very popular in developing countries for reasons of cost and local control," Gordon Haff, an analyst for Illuminata, told TechNewsWorld. Linux is part of the One Laptop Per Child (OLPC) initiative, he said, which has a similar focus on providing PC technology to students in developing nations. "As the OLPC project itself, there's legitimate debate over whether it's the right approach -- vis-a-vis a more thin client approach -- but that's another whole discussion."

Indeed, Microsoft is already facing competition in the Office suite space with Google's (Nasdaq: GOOG) online document and spreadsheet applications.

"Microsoft doesn't have unlimited time to get this right," Enderle says. "The market is moving at an accelerating pace to a Software as a Service model and has been shifting to subsidy funding -- mostly advertising-based -- for some time."

High speed Internet access is an issue in developing nations, but for how long? Microsoft's student suite includes an e-mail package, of course, so Microsoft itself expects Internet access.

"I think it's easy to become complacent in the West. We're in an enviable position about being connected, about having the pervasiveness of high-speed bandwidth," King noted. "It's easy to forget that a billion and half people in the world don't have access to clean drinking water and face fundamental issues that are necessary to maintaining life. ... I think this technology can help make a difference even though it may also qualify as a doing well for yourself while doing a good type of project."