Microsoft tries pay-as-you-go approach for Windows PCs

While Microsoft's Windows operating system and software is popular worldwide, its relatively high price puts it out of the financial reach of many in the developing world. As a result, pirated copies of Windows and Office are endemic in some parts of the world, with the percentage of PCs running pirated software approaching 90 percent in some countries.

Microsoft is trying a novel approach to deal with the problem of affordability: a pay-as-you-go model. Dubbed FlexGo, the plan operates much like a prepaid cellular phone. Consumers buy a FlexGo computer running Windows XP Home at a reduced price from a retailer, along with some prepaid access cards.

Under the FlexGo model, usage is timed. As PC usage reaches a predefined limit, the computer goes into a limited-access state until more time is added. Users can add more time by purchasing scratch-off prepaid cards and entering the numeric code contained on the card onto the PC. The process repeats until the PC's owner has purchased a predefined amount of time on the PC. Once that occurs, all usage restrictions are lifted as the user now owns the PC outright.

Microsoft has conducted a trial of the model in Brazil over the past year. FlexGo PCs were sold through the popular Brazilian retailer Magazine Luiza; all users needed to get one was a small down payment. The program proved to be very popular with Brazilian consumers, and Magazine Luiza reported that sales more than doubled. Of those who bought PCs using Microsoft's pay-as-you-go model, 31 percent said that they would not have purchased them had the FlexGo option not been possible.

Because of the initiative's success in Brazil, FlexGo will be rolled out in Mexico, India, China, and Russia in upcoming months.

Microsoft looks to have an innovative solution to the ongoing problem of piracy. Right now, those who can't afford a Windows PC are faced with three alternatives: run Linux, run Windows Starter Edition, or obtain a pirated copy of Windows. The third option is often the most attractive one for consumers and conversely, the least attractive one for Microsoft. The company developed Windows Starter Edition as an alternative, but its limited functionality is a turn-off for many.

The FlexGo solution seems to strike a middle road, allowing consumers to get a PC running Windows XP Home for a minimal upfront investment, and pay it off over time without insane finance charges. Microsoft in turn gets the revenue from selling legitimate copies of Windows in markets where such sales would otherwise not happen.