Will Europe Delay Vista?

Are Microsoft and the European Commission set for a major showdown? Or is all the talk of a possible delay when Windows Vista ships in Europe and concerns about the new security features in the operating system just more bluster between the two sides? Microsoft has been speaking out of

Are Microsoft and the European Commission set for a major showdown? Or is all the talk of a possible delay when Windows Vista ships in Europe and concerns about the new security features in the operating system just more bluster between the two sides?

Microsoft has been speaking out of both sides of its mouth on this issue lately, trying to scare European lawmakers into pressuring the Commission to taking the action it wants; essentially specific guidance about whether or not Vista is in compliance with European competition law.

Last week the Redmond, Wash., software giant said it remains on trackto ship Vista in Europe at the same time as in the United States, where it is expected to be available to businesses in November and to consumers in late January 2007.

But the week before it was lamenting about how much it could not guaranteethat this would happen, as the Commission had not given it the assurances it sought with regard to the new security features in Vista.

Further frustrating Microsoft is the fact that while the Commission has said it has no intention of preventing Vista from being more secure, it also wants to make sure that those improvements do not in any way prevent competition between providers or for customers.

The Commission has also made it quite clear that it is under no obligation to give Microsoft the green light to ship Vista in Europe and that it is the software maker's responsibility as a "near-monopolist" to follow EU competition rules and not abuse its dominant position. As such, while Microsoft has included new security technologies like BitLocker, Windows Security Center and PatchGuard in Vista, the EC has not been shy in asking its competitors what they think about these new technologies being bundled into Vista.

So where does that leave Microsoft? In limbo, it appears, without any assurances that Vista meets the requirements of European competition law or that it won't yet be forced to remove some features before or after it ships.

The matter is further complicated by the fact that a 2004 judgment against Microsoft primarily dealt with Windows Media Player, not with the new security technologies that have been included in Vista.

Microsoft retains the right to challenge any changes the Commission finally decides it wants in Vista if it feels these are not covered by EU competition rules or the 2004 antitrust judgment, which included a record fine of €497 million ($631 million) and an order requiring it to produce a version of Windows without Windows Media Player bundled.

But the company has said talk of any potential legal action on that front is premature and speculative at this point.

However, Microsoft is not about to roll over and play dead. It is using all of the resources at its disposal to try and avoid the possibility that the EC might require it to remove some of the security features it intends to ship in Vista.

And those resources are pretty significant, from a $34 billion war chest, give or take a few hundred million, to the protest power of hundreds of thousands of IT companies in Europe that will produce, sell or distribute products or services running on Windows Vista, as well as the half-a-million-plus people they employ.

Pressure is already being brought to bear on the EC by European Parliament memberswho are concerned about the impact of a delay in the shipping of Vista in Europe. And, according to Microsoft spokesman Guy Esnouf, the company has received numerous questions from its European partners who need to know what the regulatory status of Windows Vista is in Europe.

Esnouf has also already cautioned that a possible delay is "a serious issue for the thousands of IT companies in Europe who are building their business plans around Windows Vista, and millions of customers who are eager to use its security and privacy features."

So why would a Vista delay in Europe be a big deal? Well, consider the facts. The Windows client operating system accounts for 30 percent of Microsoft's revenue and 60 percent of its operating income. That's pretty significant.

In a Microsoft-sponsored study titled "The Economic Impact of Microsoft Windows Vista" released this month, research firm IDC is predicting that Vista will be installed on more than 100 million computers worldwide in its first year.

The IDC chose six European countries as the test bed for that research, Denmark, France, Germany, Poland, Spain, and the United Kingdom, and estimates that Vista will be installed on more than 30 million computers in that region in its first year of shipment.

Vista-related employment will also reach more than 20 percent of IT employment in its first year in the region, and will drive more than 50 percent of the growth in IT employment, IDC reports.

In 2007 and within the six-country region, the more than 150,000 IT companies that produce, sell, or distribute products or services running on Windows Vista will employ more than 400,000 people; while another 650,000 will be employed at IT-using firms, the IDC estimates. The study also notes that the six countries considered account for over 65 percent of IT spending in the European Union economic zone, which is defined as the 25-EU member countries plus Croatia, Norway, and Switzerland.

Other analysts believe that, by publicizing issues with the EC and specifying security features as the root of the conflict, Microsoft may be preparing the market for the possibility of a further Vista slip by rallying consumer opinion and blaming the EC.

A news analysis by Gartner analysts Michael Silver, Stephen Kleynhans and David Mitchell Smith, says that while Microsoft will go far to settle corporate lawsuits that would delay Windows Vista, it is less likely to be able to resolve legal action by the EC as easily.

They also believe that Microsoft will not ship a single product worldwide if it means disabling security features to satisfy the EC. But, in contrast, it appears that Microsoft is getting all the guidance it needs from the U.S. Department of Justice to ensure that Vista meets the conditions of the final U.S. antitrust judgment against the company.

Microsoft has been in regular communication with the Technical Committee, which was established under the U.S. Consent Decree, about the design and development of Windows Vista. Over the past 18 months Microsoft has also given that committee access to the source code and the committee has been active in the beta test programs.

"We have provided demos of Windows Vista on several occasions to the DoJ. In turn, the DoJ has reported its findings regularly to the court overseeing the consent decree. In those reports, the DoJ has noted Microsoft's openness and willingness to make substantial changes related to middleware and default issues, which are covered by the Consent Decree," said a Microsoft spokesperson.

However, with regard to the situation in Europe, some analysts like Roger Kay of EndPoint Technologies Associates, Inc., say it is time for Microsoft and the EC to stop bickeringor Vista's European debut may well be delayed.

While Kay believes that what will and will not be in Vista will ultimately be decided by the Court of First Instance in Luxembourg, he argues that now is the time to make compromises.

"Microsoft wants to ship Vista. It can make changes, but the later it receives guidance, the more delayed the introduction will be. The company is not punishing the EU for not co-operating, but certain realities of the software business are inescapable. Changes take time, and there's precious little of it left," he says.

I wonder if anyone is listening? Write me at peter_galli@ziffdavis.com and let me know what you think.