To be honest, the Vista price cuts Microsoft announced today don't mean a thing to you, the CIO. They affect retail box copies only, not the volume agreements you are using. They aren't even particularly aggressive, maybe $30 or $50 off, depending on your location.

But they may mean something for the software market in general, as Nick Carr points out this morning. He sees the cuts, and previously offered discounts, as evidence that competition in the business applications market is shifting away from the personal computer, and that consequently, Microsoft's power in the industry is dropping.

Nick may be right that a loss of pricing power indicates that the importance of the platform is dropping. After all, we can interpret many other recent Microsoft moves in the same way: the sudden shift in stance on interoperability matters and the overatures to open-source developers; the almost frantic bid for Yahoo. These are all major initiatives with significant risk, risk that shouldn't have to be taken if the company was still in the pole position in the industry.

On the other hand, we've seen the company react strongly to threats to its position before; realigning itself to the Internet suddenly, and late, was just as significant, and yet looking back we don't see that the company lost any power in that moment... in fact, they gained and consolidated as never before. Is it possible that these signs we are seeing today aren't just a futile reaction to a shifting paradigm, but instead calculated moves to keep the company in power even through the paradigm shift?

It's dangerous to count Microsoft out, but I still don't see how anything that they are doing will benefit them in the long-term as the industry changes. They still refuse to accept the basic premise, the philosophy, if you will, of cloud computing. While, as I discuss in the post in that link, this may benefit their market share in the short term by addressing the reality of current business needs (just as price cuts may boost Vista sales in the short term), it's not going to build the base which their domination can continue... just as cutting the price on Vista isn't going to make it a good upgrade for most people from XP.