NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Over the weekend, Microsoft posted information about the six editions of Windows Vista it plans to offer — only to remove the information from its Web site a day later, saying it has yet to make a final decision. Interestingly, one of these editions appears to be a more limited version aimed at developing countries.

This wouldn’t be Microsoft’s first foray into BOP markets. In 2004, the company released it’s Windows XP Starter Edition, a stripped-down version of its OS that was initially installed on PCs shipped to Thailand, Malaysia, and Indonesia, and then later to Brazil, India and Mexico.

Although at first reluctant to distribute a cheaper version of Windows, Microsoft’s hand was forced when the government of Thailand’s Peoples PCinitiative successfully began selling a subsidized Linux-only PC aimed at the masses. After 46,000 PCs with Linux and Open Office software were ordered under the program in just three days, Microsoft made headlines by dropping the price of its Windows/Office package in the country 85% from nearly US$600 to $37.

The wider release of Starter Edition was intended to accomplish two things: 1) slow the adoption of Linux, and 2) reduce the number of people running pirated versions of Windows. Indications are that it did neither. For one, Starter Edition had much more limited functionality compared with its full-version cousin, and was described by some as “closely resembling shareware” or “crippled”. Perhaps due to this limited functionality, most first-time PC users in Thailand found that the free Linux Thai Language Edition was easier to use than Windows. Not surprisingly, sales of Starter Edition have been slow to catch on.

Will the company make the same mistake with Vista? It appears that they’re headed in that direction. Indications are that the most basic version of Vista, Windows Starter 2007, is so far removed from the full OS that it doesn’t even use the Vista branding. Microsoft would be well-advised to heed the words of BOP-guru C.K. Prahalad, who warns that to be successful in emerging markets, “high quality, rather than cheapness and lower quality, should be the goal.” Especially true in a market where the full version is easily available for little more than the CD it’s burned on.