Ubuntu preloaded – business factors

I’ve been working alongside Impi Linux with one of South Africa’s major hardware vendors, to get them to offer Ubuntu preloaded on a desktop PC.

This is not a retail situation, but rather for a corporate/government client where a specific hardware model has a long lifetime. In other words, PC models destined for the shopping mall are replaced on the vendor’s price list more frequently because nobody wants last year’s models – but in the corporate market, the customers want a standard model that they can roll out over six months or even a year, without changing the hardware spec.

This is a good scenario for the vendor to try out Ubuntu preloaded, because each model we “certify” has the possibility of a large number of sales in identical configuration.

Mark Shuttleworth wrote in Pre-installing Linux,

First, margins on PC’s are razor-thin.

This is probably the most significant factor in whether this hardware vendor will offer Ubuntu preloaded. A PC with Windows earns them a higher margin than a PC without, so they will need to sell more units to make up the same revenue. It has been pointed out to them that they will be selling more PCs anyway, since the customer(s) do not have to pay for Windows and can therefore spend more on the hardware – however this message has to be “sold” within the organisation for Ubuntu (or the derivative, Impi Linux), to gain acceptance for preloading.

3 Responses to “Ubuntu preloaded – business factors”

  1. 1 Stuart Langridge March 26, 2007 at 3:55 pm

    Maybe I just need this explaining to me, but: how do retailers make more money on boxes with Windows on than they do with boxes without Windows? Do Microsoft actually *pay* vendors to put Windows on machines?

  2. 2 Morgan March 26, 2007 at 4:15 pm

    Stuart, this is how it works in South Africa, where most PCs are built from imported parts: The retailer buys a complete PC with Windows already installed, or the components to build the PC – including Windows, from a wholesaler or distributor who imports the PCs or components. They then typically add a markup on this complete price to arrive at the retail price.

    Therefore their profit margin includes a markup on the cost of Windows itself. Basically the cheaper the PC, the less profit they make per PC. This means that a PC with Ubuntu makes them less Rands/Dollars/Pounds/whatever than a PC with Windows, simply because it is cheaper.

    Multiply by the number of machines they currently sell, and you get a fear factor: a drop in their revenue at the same sales volume.

    Of course, Ubuntu actually gives them an advantage since they don’t have to pay for it, and they don’t really have to drop the full price of Windows – they could make some extra margin and still be cheaper than the same PC with Windows, but that means changing the spreadsheets.

  3. 3 Michael R. Head March 26, 2007 at 6:09 pm

    Also, don’t forget any additional support costs that the supplier might have to expend (which would probably have to be calculated on a marginal basis) to handle Ubuntu sales.

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