By John G. Spooner and Mary Jo Foley, Microsoft Watch
All the years in the making might hurt more than help the adoption of
Windows Vista, Microsoft Corp.'s next client operating system.
The release of the software giant's new operating system will be one
of Microsoft's most important product launches this decade, when it
goes live next year. But despite the product's myriad new features
and functionality, current market trends could inhibit initial
adoption of Vista, PC industry analysts say.
The two main levers Microsoft can use to spur sales—preloading the
operating system on new PCs and offering it as a software upgrade—may
be compromised to some extent by shrinking PC unit shipment growth
rates, which are predicted to slow to single-digit levels in the
latter half of this decade, analysts say.
"It looks like the launch window for Windows Vista should have been
[in] 2004 or 2005, and Microsoft missed it," said Joe Wilcox, an
analyst with Jupiter Research.
Originally, Microsoft had hoped to ship Vista (or, as it was known
then, "Longhorn") by 2004, three years after it delivered Windows XP.
But, as has happened in the past with other Microsoft operating
systems, the target delivery date slipped. To keep the launch from
slipping into 2007, Microsoft ripped the WinFS file system from it, a
decision announced in August 2004. Now, according to the latest plan,
Vista Beta 2, which is expected to be mostly feature-complete, will
arrive in December. Microsoft is hoping to RTM or release the product
to PC makers by next summer and allow them to ship it to end
customers in the fall of next year.
If Microsoft had made its original target of 2004, Vista would have
arrived at the height of the PC boom. While PC unit shipments are
projected to increase throughout the rest of the decade, the rate at
which they will grow will slow, both IDC and the Gartner Group have
predicted. The slowdown will come as corporations take a breather
following a post-recession PC buying spree that peaked in 2004 and
will tail off in 2006.
Even hardware improvements, including 64-bit addressing processors
and the proliferation of dual-core chips in mainstream desktops and
notebooks expected in 2006, aren't likely to keep pushing up unit
shipment growth rates, the firms said. Instead, growth rates are
predicted to slow from a peak of about 15 percent in 2004 and about
14 percent in 2005 to just over 8 percent in 2009, according to IDC's
latest forecast.
"Our position is that there's no reason for it [Vista] to have a
major impact," said Richard Shim, an analyst with IDC. "The days when
the OS has the sort of impact that Windows 95 did when it came out
are gone. When that happened it was a major change to the OS—just the
navigation of it—now you look at Vista and, even for all of its bells
and whistles, there's no one thing that people say, 'I have to have
it for that.'"
Thus, despite having a crack at a market that will grow from just
over 243 million units in 2007 to almost 288 million in 2009,
according to IDC, the year-to-year PC market growth seen in Vista's
first two years on the market will be more sedate than in previous
years.
Gartner analyst Leslie Fiering said that her firm expects Vista's
initial impact to be in the consumer market, which may see a slowdown
in the second and third quarters of 2006, followed by a pop in the
fourth quarter and possibly the first quarter of 2007 as systems
loaded with Vista come out. Businesses, however, are likely to allow
at least six months for testing the final version of the OS. Most
will wait 12 to 18 months, which gives time for continued testing as
well as the arrival of a service pack update.
"None of the clients that we're talking to are planning to jump Day
One. Most are planning to give it 12 months," Fiering said. "The very
soonest I have heard from the most aggressive of our clients is
adoption of [Vista] at the middle of 2007. This is only a couple of
accounts out of all those we've talked to. Most have looked at end of
'07 to the middle of '08."
Thus, major adoption may not come until the 2008 timeframe, when
Gartner predicts businesses will begin a new waveofPCrollouts.
However, the firm is still predicting slower growth for PC unit
shipments in the 2008 and 2009 timeframe.
Gartner predicts that unit shipments will grow almost 13 percent to
nearly 207 million units in 2005. But growth will slow to single
digits between 2006 and 2009. During 2009, for example, growth will
slow to 7.6 percent with the market total approaching 281 million,
according to Gartner's latest forecast.
Microsoft officials maintain they aren't fazed by the numbers.
"We predict adoption of Windows Vista will be the largest and fastest
in the history of any operating system we've shipped," said Mike
Burk, product manager with the Windows client division.
According to Microsoft's own projections, when Windows Vista is
released, there will be an upgradable installed base of about 200
million PCs; the potential for approximately 500 million new PCs in
first 24 months; and long-term growth potential in PCs, driven by
escalating demand in emerging markets, demand for advanced wireless,
multimedia and security features, and expanded distribution channels,
Burk said.
Burk noted that Microsoft's OEM business grew by 14 percent in the
most-recent quarter, in line with most PC market growth estimates.
"We think that the forthcoming releases of Windows Vista and Office
12 [Office is due in the latter half of 2006] will spur significant
demand from our customers and create opportunities for Microsoft, our
partners and the entire industry," he said.
In spite of Microsoft's unabashed optimism, when, how and if existing
Windows users will upgrade to Vista remain uncertain. Some analysts
say that, given the new OS' hardware requirements, it might even
spark some PC buying.
However, it's still too soon to tell how much buying could take
place, given that Microsoft has yet to reveal the final graphics,
memory and processor specifications that will be required for
existing PCs to run Vista and how the OS, which offers different user
interfaces, will react to them. Instead, the Windows team is offering
generalized guidelines, which some users have said are too uncertain
to use for planning purposes.
However, more recently, the company has hinted about specifications
for Vista technologies, such as Max, a new user interface the company
is offering for Windows XP owners to test. The software giant
recommends a 2.4GHz processor, 512MB of RAM, 200MB of free disk space
and a graphics card that's capable of handling its Windows
Presentation Foundation. That card, the company says in an online
FAQ, should be "the fastest PS 2.0 [Pixel Shader 2.0] card with the
most memory your bank account can afford. Avoid the low-end
cards—such as ATI [Technologies Inc.'s Radeon] 9200 and below, nVidia
[Corp. GeForce FX] 5200 and below—and go for the high-end [ATI
Radeon] X800 or [Nvidia GeForce FX] 6800 if you can afford it."
Whereas most corporate PCs use integrated graphics from Intel, which
are generally considered to be adequate, but no way near as high in
performance as an ATI X800, "I am not sure there will be that many
upgrades on the existing hardware," said Michael Cherry, an analyst
with the Directions on Microsoft research firm.
"It is hard to know how well Vista will run on older hardware," he
said. "It is not likely that it would run on hardware still running
Windows NT 4.0. Some of the newer computers that customers have
bought recently but that are running Windows 2000 may be capable of
running Windows Vista, but more than likely, to gain advantage of the
new graphics subsystems, and the TPM [Trusted Platform Module or
security chip], we could be looking at new computer sales driving
most Vista sales."
At the same time, Microsoft's decision to make some key elements of
Vista available for Windows XP and Windows Server 2003 users may
dampen upgrade enthusiasm. Microsoft is back-porting the Windows
Presentation Foundation ("Avalon"), Windows Communication Foundation
("Indigo") and Internet Explorer 7.0—all originally slated to debut
as part of Vista only—to older versions of Windows.
"One reason Microsoft is taking things out of Vista and making them
available for [Windows] XP is probably that the company realized that
most customers will be running XP for a long time," Wilcox said. "The
more Microsoft makes it available [for Windows XP] the harder it
makes it to show customers the benefits of Vista over XP. I'm not
saying they're not there, but they're not as obvious."
Jupiter numbers show that for U.S.-based businesses with 250 or more
employees, 76 percent run Windows XP Professional. But 51 percent
still run Windows 2000 Professional and 29 percent still run Windows
NT 4.0. The figures show that, even though Windows XP has been
available for more than four years, adoption has been fairly gradual,
with companies upgrading to the new OS only in some areas, Wilcox
said.
There are other factors, many of which are beyond Microsoft's
control, that could slow the market, Directions on Microsoft's Cherry
said.
They include confusion about 32-bit versus 64-bit hardware and
software and what drivers really exist for 64-bit systems, in
addition to confusion about the benefits of newer technologies, such
as multicore processors and virtualization.
"[Some may say,] 'I don't even want to try to figure out what I
should purchase today. [It's] too confusing. Too easy to stay with
what I have until the smoke clears, or just buy a Mac,'" Cherry said.
Thus, while it may be uncertain if Vista is in sync with the market
or not, Cherry says one thing is clear, right now.
"I think Microsoft just wants to get it done," he said. "If possible,
I think they would like to get the work done such that OEMs can hit
any 'back to school' or 'holiday' sales, but other than that, I don't
think they can time it much for anticipated system sales."
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Copyright (c) 2005 Ziff Davis Media Inc. All Rights Reserved.
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