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.