Editors Note: This story is part of , a continuing series of stories from the reporters and editors of Ziff Davis Internet. Instead of the usual mile-high look at the year ahead, these articles examine particular technologies and markets in transition, including whats in store for them.
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 giants new operating system will be one of Microsofts most important product launches this decade, when it goes live next year. But despite the products 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, arent 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 IDCs latest forecast.
“Our position is that theres 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, theres 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 Vistas first two years on the market will be more sedate than in previous years.
Gartner analyst Leslie Fiering said that her firm expects Vistas 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 were 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 weve 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 wave of PC rollouts. 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 Gartners latest forecast.
: No Worries, Mate “> Microsoft officials maintain they arent fazed by the numbers.
“We predict adoption of Windows Vista will be the largest and fastest in the history of any operating system weve shipped,” said Mike Burk, product manager with the Windows client division.
According to Microsofts 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 Microsofts 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 Microsofts 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, its 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 thats 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, Microsofts 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. Im not saying theyre not there, but theyre 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 Microsofts control, that could slow the market, Directions on Microsofts 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 dont even want to try to figure out what I should purchase today. [Its] 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 dont think they can time it much for anticipated system sales.”