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Microsoft's Metered PC Idea Is Not Greedy. In Fact, It's Almost Brilliant

Microsoft's [MSFT] new "metered PC" concept has the nerd world united in a chorus of outrage. Despite all the yelling, the pay-as-you-go model might be one of the best ideas Redmond has had in years.

As we reported this morning, the Windows-maker has applied for a patent application that describes a PC rental scenario that works on a pro-rata basis. A consumer buys a computer for a discounted price, with an embedded piece of software that measures usage (things like processor load, disk space, and time spent on certain software.) The customer is billed by that usage, with low-intensity activities like email and Web browsing costing cheaper than time spent gaming or editing HD video. Microsoft says the upshot for consumers is a cheaper initial outlay for the machine.

Computerworld calls it a "scheme." The Register calls the idea a "shameless" way of "saddling PC users with a machine whose components can only be used if you fork over more cash." InternetNews likens the concept to "those cheesy rent-to-own ads" that swindle the naive. Whoa. Cool it, guys.

Read the rest of the patent application, and you see that yes, Microsoft would stand to gain some serious revenue from a model like this. But consumers could also stand to save substantial cash, too.

Right now, the average PC user needs to replace his or her machine, say, every 4-6 years just to keep up with the hardware requirements of Windows and its latest software. That usually means a cost of about $1,000 each time. Ouch.

Now look at the pay-per-use model. But first, note that a lot of the products we use work essentially the same way. Cell phones are heavily subsidized by carriers when you buy them, because you're promising to pay them over the life of a 2-year contract. Even cars work akin to this model; take a lien, and you make payments of a few hundred bucks a month towards the principal, and pay for gas as you go.

These aren't perfect analogies, of course, but the model is essentially the same: you pay less up front for an expensive gizmo, and the monthly cost is as high or low as you want it to be.

Of course, the viability of Microsoft's model depends largely on the initial cost. Let's say that Microsoft's metered PCs sold for $450, when they were really worth an MSRP of $1300 (this is about the discount you get on a smartphone like the T-Mobile [DT] G1, which costs $180 with a contract but $500 without.) Then you chose a contract for usage, as the patent application describes, with features that depend on your interests and needs; make that $50 a month. After 4 years, you'd have layed out only $1150, not $1300. And just like with a cell phone, you'd probably be eligible for some kind of "upgrade" that would discount the price of your next machine.

As detailed in the application, Microsoft believes that most people end up buying much more powerful machines than they need on a daily basis, simply because they know that in a few instances the horsepower will be useful. That's like buying a Hummer because you go to Home Depot once a year and buy some lumber. Wouldn't it be better to rent Home Depot's trucks for $30 for the day than have your daily driver be total overkill?

Though this model is smart, Microsoft does have it a little bit backwards. Consumers and businesses shouldn't be paying Redmond for their computer usage. Redmond should be paying them.

When you're not using your computer, there's a ton of potential processing power sitting unused. If Microsoft wanted to introduce a real game-changing business model to personal computing, they'd rent PC users' ununsed power for their own cloud computing purposes. It's kind of like the idea behind a smart power grid: that any unused energy from a plug-in hybrid car could be sold into the power grid, making the car owner some extra cash.

If Microsoft wanted this already-good idea to be downright brilliant, they'd develop software that could harness a home PC when it's inactive (say, at night) and use it to store or process data it would otherwise need server farms to take care of. SETI@home has been doing this for years, using a piece of free software that lets home computers process telescope data for Berkeley's Search For Extraterrestrial Life. Over 3 million people have donated their idle PC power to the project; imagine how many people would volunteer if they were paid per megabyte.

With the "smart-grid" PC model, savvy computer users could turn unused PCs into small entrepreneurial ventures. Collect your friends' old PCs, set them up and let Microsoft's software have its way with them, then sit back and collect your check.

Of course, the way Microsoft has been developing products lately, it might take them one failed attempt — ahem, Vista — at the pay-per-use PC model before they realize there's a better way.

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  • Erik davis

    I feel like I am taking crazy pills... Microsoft is a software company, which builds hardware when others can't meet their needs.

    The "metered PC" concept has absolutely NOTHING to do with your PC. As hardware evolves into phone/netbook/tablet/star trek, the hardware inside becomes small and limited.

    <enter datacenters="" m$="" the="">

    Windows server 2008 with remote app execution, where your processing takes place on a virtual pc in the cloud, and you can pay the meter for base application performance, or ramp it up for a faster response.

    There is the skinny for all the conspiracy theorists, Customized SAS resources... so when your sloppy Access db needs 6 GB of ram, and your laptop has 2GB, you can crunch in the cloud and not go shopping for a battery chewing behemoth.</enter>

  • Scott Blachowicz

    Are you crazy? $1000 for a PC? I think that the last time I spent $1000 (or more) for a PC was 1995. Since then I've either built them from parts or (more recently) bought pre-built ones and spent less than half that to get more computing power than I really need. My last one was a dual core 2.6GHz CPU, 2GB RAM, 500GB disk...on sale for about $400...I would think that would be more than enough for the customers for whom a rental model would make sense. And...FYI...right now, I've got a total of 4 pre-built desktops and 1 2 custom built desktops. The only one that comes close to $1000 is one of the custom built desktops because it's my Linux media center computer.

    Go shop around on the Dell or HP (or whoever) sites and their low/mid level desktops are probably more power than most folks REALLY need. They start in the $300-400 range. Laptops start in the $400-500 range.

    You might get close to $1000 if you're buying a monitor and a printer or other peripherals to go with it at the same time, but I wouldn't think of that as normal if you're talking about the time when "the average PC user needs to replace his or her machine" (i.e. just plug the old peripherals into new machine).

  • Ed Mooney

    Not sure I agree. For 2 reasons. 1)I think most people have started buying a less expensive computer. I think this whole spending more $ for a machine is becoming less of an issue as more applications move to the web & technology gets cheaper so fast. Look at the rise in "netbooks" and Linux being installed on previously junked machines. 2)The model as described seems rather odd. For instance, If I lease a car, I do not pay for different rates if I go uphill or downhill, rev the engine, or drive like miss daisy. I pay for total mileage incurred. With the MS program it's based on what you do with it. I think in this approach MS is trying to become the Rent-A-Center of the computing world, which is fine - but I think there are too many other inexpensive feasible options. Good luck to them.

  • Brandyn Phelps

    I agree with "Not on your life," the math in this scenario is a little off. I think that might be one of the fundamental flaws in your excitement over Microsoft's model. Both companies and residential users of Microsoft software (Microsoft *is* a software company, not a hardware company) would like to purchase a license that they are guaranteed will work the say way they did when they bought it. Re: Windows XP. If we have no need to upgrade every four years (and truthfully, many of "new computer users" do not), this model becomes even more archaic. This is merely Microsoft attempting to reinvent the wheel in a way that will burn consumers for the sake of Microsoft executives' saunas.

  • RobertinSeattle

    It IS brilliant. The concept is not much different from long-proven processes such as the phone and cable companies have used for decades: Charge rent for your equipment and fess for you service. The only problem I have is the idea of anyone getting a patent for such an already established concept since it's basically prior art and shouldn't be considered a proprietary idea.

  • NotOn YourLife

    "Let's say that Microsoft's metered PCs sold for $450, when they were really worth an MSRP of $1300...Then you chose a contract for usage, as the patent application describes, with features that depend on your interests and needs; make that $50 a month. After 4 years, you'd have layed out only $1150, not $1300."

    I'm going to go out on a limb and say you failed math. Starting with about the 6th grade. Your example totals up to $2850 for that $1300 computer.