Saturday, May 31, 2008

Microsoft’s Vista : Is migration really worth ?

Nearly 16 months after Microsoft launched Vista, the company is still trying to convince some consumers of the operating system's merit. "Vista is a disappointment," says Shawndra Hill, operations and information management professor at Wharton and a Vista customer. "It's too complicated. We had Windows XP and were using it fine. Then Microsoft decided to provide us with something new. But there wasn't anything really new" about it.

Legal studies and business ethics professor Kevin Werbach says Microsoft faced multiple challenges with Vista. "Successfully building a software system as complex and interdependent as Windows Vista is a nearly insurmountable challenge, even for Microsoft. It's hard enough to make the operating system run reliably with all the legacy connections and potential software and hardware combinations, let alone provide sufficient innovation to justify an upgrade," Werbach says.

Although Microsoft executives disagree with the Vista naysayers, perception problems linger. Infoworld has an online petition urging Microsoft to keep XP in circulation. Dell is allowing professional customers to exercise their "downgrade rights" after June 30 when Microsoft will stop licensing XP to PC manufacturers. Downgrade rights, which come with Windows Vista Business and Windows Vista Ultimate, allow anyone with those software versions to downgrade to Windows XP Professional. Dell will install XP at its factories if customers choose. Other PC vendors have similar offers. Microsoft's usual practice is to phase out an operating system as PC manufacturers and their customers move to the new one.

"Microsoft made a mistake with this one," says Wharton management professor Lawrence Hrebiniak. What's unclear is whether Vista suffers from a perception problem that can be cured with better marketing or whether it faces more entrenched problems. In its fiscal third quarter ending March 31, Microsoft had client revenues (what the software giant calls its operating system sales) of $4 billion, down 24% from a year ago.

Some of those analysts are beginning to worry. "The overall reputation problem that Vista has developed with both business and consumer users could be beginning to exert a material impact," said Tsvetan Kintisheff, founder of Sofia, Bulgaria-based Kintisheff Research, in a research note.

Google CEO Eric Schmidt declared at the company's annual shareholder meeting on May 8 that "the shift from PC-centric to Internet-centric computing is the defining shift of our generation." And Microsoft CEO Steve Ballmer has acknowledged that this shift was one of the primary reasons for Microsoft's bid for Yahoo.

Meanwhile, another technology called "virtualization," which allows multiple operating systems to run simultaneously on one PC or server, is diminishing the importance of products like Vista and raises questions about its future. The OS was originally intended as an abstraction layer between software applications and the computer's hardware. But with the new abstraction layer between the hardware and the OS provided by virtualization and products like Adobe's AIR that sit between the OS and desktop software applications, the role the operating system once played is becoming increasingly diminished.

Despite these new developments, Microsoft finds itself at a crossroads, according to Werbach. "The platform for most uses of PCs today is the Internet, not Windows. Windows plays an important role in the ecosystem, but it's not the center of the world in the way it used to be. Microsoft has made several attempts to integrate Windows and the web, but the center of gravity for innovation and monetization keeps moving to the network. Microsoft needs to decide whether it cares more about the next 5 to 10 years, or the 20 years after that."

Another radical shift for Microsoft would be to make Windows a more open platform where the company would give away the software to collect revenue from transactions and advertising. "The only long-term solution is for Microsoft to make a radical shift and turn Windows into a truly open platform," says Werbach. "Eventually, the big money is going to come from services and transactions, not software licenses. Microsoft understands this and is moving in the right direction, but it will eventually have to go much further. As long as it has the DNA of a software company, it will be weighed down in the new era."

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