Is Windows 7 the End of Microsoft's OEM Reign?

Posted 08/18/2009 at 7:21am | by Paul Lilly

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Financial struggles tend to put a strain on any relationship, and that's certainly the case between OEM vendors and Microsoft. Worldwide PC shipments in the second quarter of 2009 declined 5 percent from the second quarter of 2009, and whether fair or not, OEMs tend to put the blame on Microsoft.

"The word dysfunctional seems hardly adequate to this situation," says Rob Enderle, principal analyst at the Enderle Group. " Part of this is money-related in that the OEMs think that Microsoft is taking more than its fair share of the profits. But I think the root cause is a fundamental shift in these vendors' relationships. While initially PC vendors held the primary position, over time Microsoft has come to occupy the alpha position, and OEMs are passively/aggressively rebelling against this change."

OEMs complain about Microsoft's pricing, complexity, and the lack of funding to generate demand. Enderle says Microsoft treats OEMs as subordinates, not partners, by laying out the pricing terms and product retirement, but with Windows 7, the two sides are starting to come together. According to Enderle, Microsoft has made a better effort to treat OEMs like partners with the Windows 7 development and its retail operations, part of which includes outfitting its retail stores with PCs and laptops from partners.

"Microsoft is quietly moving to consolidate its control over the PC platform and, if they do it correctly, the result may be a set of products that blend the interoperability and compatibility of a Microsoft solution with the user experience of an Apple product.," Enderle said.

Image Credit: Microsoft