Who wins, loses with browser-less Windows 7

Microsoft's move to offer Windows 7 in Europe without a browser may help rivals, but it could make life more difficult for European consumers, particularly those who want to upgrade their existing machines.

As first reported earlier on Thursday by CNET News, Microsoft plans to ship Windows 7 to both PC makers and retail stores with Internet Explorer removed.

Now, most people will get Windows 7 on a new PC. Presumably, in that case, the computer maker will chose to add back Internet Explorer, include one or more rival browsers, or do both.

Indeed, that is what Microsoft itself is suggesting.

"Microsoft recommends that OEMs pre-install either
IE8 or at least one other browser of their choice before distribution," Microsoft said in a memo to PC makers that was seen by CNET News. "If you do this, your end users in the European territory should be able to access the Internet without any additional steps or inconvenience."

The real hassle comes for those who want to upgrade their existing PC to Windows 7.

Moving from
Windows Vista to Windows 7 can normally be done via an upgrade that preserves one's applications and data. However, because it removes the browser, moving to the "E" version of Windows 7 can only be done with a clean installation.

At that point, users have a system with no browser at all. So if they want
Firefox or Opera or any other browser, they have no easy way to get it. For its part, Microsoft plans to make it as easy as possible for them to get IE. It will offer it via CD-ROMs at retail stores and via FTP, an old file downloading technique that has been largely sidelined due to modern browsers.

Forrester Research analyst J.P. Gownder said that the result is something that is very unfriendly to the very consumers that the EU is allegedly trying to protect. The European Union said in January that it had reached a preliminary finding that the inclusion of a browser within Windows violated its antitrust laws.

"It's a disaster caused by poor regulatory oversight," he said."It's definitely regulation gone wild and it's not going to help the consumer."

Matt Rosoff, an analyst with Directions on Microsoft, said the software maker probably made the move in an effort to avoid further regulatory action on the part of the European Union, which said in January that it believed the inclusion of a browser in Windows was a violation of European antitrust law.

"I guess Microsoft has taken the preemptive move to avoid a big fine," he said. "The EU didn't ask them to do this. They are still fighting the statement of objections."

So who benefits? Well, PC makers stand to gain, because they now have a more valuable piece of real estate to sell. In the past, they could offer deals to include rival browsers as the default on a new PC, but they were still shipping a PC with Internet Explorer. Presumably now, a browser maker could strike a deal to be the only browser on a machine.

"It certainly gives them a new placement to sell," Rosoff said. "Previously, with IE included, there wasn't as much incentive for browser makers to strike these kind of deals."

Of course, striking an exclusive deal would probably take a lot of cash. So it would seem Google, and not Opera (which brought the EU complaint), is in the best position to take advantage of the new landscape.

Gownder said he expects most new machines sold in Europe will still come with Internet Explorer, though some smaller PC makers might opt to exclude Microsoft's browser.

"It could be that there are some deals cut," Gownder said. "I would think the more typical case is that they ship with IE or IE plus one other."

As for Microsoft, Rosoff said that the company plans to offer an "Internet Pack" disc that includes not only IE, but also its Windows Live programs such as Windows Live Mail and Windows Live Messenger.

How Intuit managed to hold off Microsoft

The defeat of Microsoft Money at the hands of Intuit's Quicken marks a rare chapter in the annals of software history.

Intuit is one of the few companies to take Microsoft head-on on its home turf--packaged software--and come out on top. Even more notably, Intuit has managed to do it several times, with Quicken of course, but also with QuickBooks and TurboTax.

Of course, it was more than just Intuit's success that led to Money's demise, which CNET News first reported on Wednesday. The product was ultimately doomed by several factors, including a shift away from packaged software, the rise of Internet-based rivals like Mint.com, and a brutal economy that has forced Microsoft to scale back ambitions in several areas.

In its heyday, though, the battle between Intuit's Quicken and Microsoft's Money was a fierce one. While Quicken dominated in retail sales, Microsoft landed some key deals with banks and was able to get many computer makers to pre-load Money on new PCs.

Robbie Cape, who ran the Money business from 1999-2001 said that while the company could keep pace on the software end, it could never duplicate Intuit's marketing prowess or its dominance of the retail market.

Robbie Cape, who ran Microsoft's Money business in its heyday from 1999-2001, now runs Cozi, a Seattle-based startup.

(Credit: Cozi)

"It really has very little to do with technology," said Cape, who is now CEO of Cozi, a Seattle-based start-up. "What Intuit and Scott Cook were so formidable at was consumer marketing. He treated marketing Intuit very much the same way as one would treat marketing a bar of soap or bottle of shampoo. He made Quicken a household name. He spent outrageous dollars to get there."

Intuit spokesman Scott Gulbransen said his company simply had the better product. "Customers voted with their wallet," he said.

NPD analyst Stephen Baker said that Intuit won out because it was aggressive and built critical mass in the finance software arena, adding a number of adjacent products and dominating the retail channel.

Whatever the case, it was an epic battle that stretched on for years. Microsoft tried to buy Intuit in the mid-1990s but saw that effort halted by regulatory disapproval.

In the wake of the failed takeover bid, Microsoft doubled down in its efforts to take on Quicken. The company added a ton of partners, revamped the product's design, and tried to integrate a host of new financial planning tools.

Cape said the pinnacle of its effort came in 2000 when Wall Street Journal reviewer Walt Mossberg gave Microsoft Money the edge over Quicken in his review.

However, even with some positive reviews, Money never managed to overtake Quicken and Microsoft's product has been on the wane for some time. The clear sign that the end might be near came last year, when Microsoft announced it would stop annually updating the product and would shift to an online-only sales model as opposed to also offering the product at retail stores.

"The writing was kind of on the wall," Gulbransen said.

Baker says Microsoft's inability to make a viable business out of the online-only sales model shows that a Web-based sales approach isn't enough to keep all consumer software alive.

"While the retail packaged software market is tough it is not easier to be online only," Baker said. "Your audience is much more limited and (the) potential customer base is much smaller when you go to the cloud. That business model is not a panacea when you are in a struggling market."

Still up in the air is another Microsoft product that aimed to take on Intuit but fell short--Microsoft's small business accounting product. It was launched amid some fanfare in September 2005, but struggled to make inroads in a field dominated by Intuit's Quickbooks. Microsoft discontinued boxed sales of the product and last year made it available for free download as Office Accounting Express 2009 for free download.

A modest payoff from Money


As for Money, while it was never the dominant player, it did break some technical ground for Microsoft. It was one of the first programs at Microsoft to merge Internet content directly into a desktop application and it was also among the first PC-based programs to include advertising directly from a CD.

In many ways, Money was the precursor to Microsoft's "software plus services" strategy, in which the company posits that desktop software won't be replaced by online options, but will rather lead to hybrid products.

Scott Cook founded Intuit in 1983. He's now chairs the executive committee.

(Credit: Intuit)

Indeed, when Microsoft was plotting the future of its consumer software lines earlier this decade, it often pointed to Money as the archetype of how advertising and online content could merge with locally run code to form the hybrid application of the future. In a series of ThinkWeek papers seen by CNET News, Microsoft researchers argued that the company might need to even take things further and make many of its desktop products free, tapping advertising to support their development.

Of course, the question that lingers is what went wrong with Money. Was it that the strategy itself was wrong? Was Microsoft just too far behind, or did the company just not go far enough. Microsoft never opted to make Money entirely free, though it did offer a $20 Money Essentials product and included it in one of the Microsoft Works bundles often included on new PCs.

For his part, Cape moved on from Microsoft in 2001 and now runs Cozi, whose online tool aims to help families juggle a busy calendar. Cape said he learned a lot from working on Microsoft Money. Chief among those lessons was that user experience matters.

"Managing your family logistics and your family calendar is about as fun as managing your personal finances," Cape said. "It's not exciting. What we've done at Cozi, which is very much like what we tried very hard to do on Money, is to take that mundane, ho-hum experience and not only make it fun but also make it beautiful."

As for Microsoft and Intuit, the longtime rivals are now working together--building a tool that will allow Money users to move their information over to Quicken.

"We're working with Intuit to help develop a file conversion process that will help Money customers more easily convert their existing data files to Quicken," Microsoft director Adam Sohn said. "Both Intuit and Microsoft hope this will be ready to go for the new release of Quicken this fall."

Intuit says it is happy to have the business.

"We look it as an opportunity to show Microsoft Money customers what they have been missing...over the years," Gulbransen said.