Microsoft Corp.'s business customers may have come to expect delays in product releases, but the company is going to be under pressure over the next year to deliver its Windows Vista operating system on time, analysts said.
While the majority of business customers is unlikely to immediately switch to the new operating system, the official release will start a process for those planning major hardware and software upgrades. It's estimated that companies need about 18 months to test and deploy a new operating system for users.
Businesses that subscribe to Software Assurance, the Microsoft program that allows free upgrades as part of its volume-licensing programs, want to see new versions released to get value for their money. "The irritation for most enterprises is that they are not getting the new versions as part of their software maintenance agreement," said David Bradshaw, an analyst at London-based Ovum Ltd.
Microsoft hasn't publicly set a date for the release of Vista to manufacturers, but the company has said it's on track for the general availability of Vista in the second half of 2006, according to a spokeswoman for Microsoft's public relations firm. Vista's release date will be driven by the product's quality, she said in an e-mail response to questions.
Software Assurance offers other benefits such as telephone support, Web-based support and classroom training and has become a growing revenue source for Microsoft, Bradshaw said.
While the number of complaints has so far been low, Gartner Inc. has seen a "decent" number of organizations that dropped their Software Assurance agreements for Windows because they felt they weren't of value, said Michael Silver, a Gartner research vice president.
But by dropping those agreements, businesses could be left out of certain features. Microsoft has said that some Vista encryption features will only be available to customers who have Software Assurance or Enterprise Agreement coverage on their Windows client, Michael Cherry, an operating system analyst at Directions on Microsoft , wrote in his paper "A First Look at Windows Vista."
Users of Windows 2000 are likely to be the first to move to Vista, as vendor application support dwindles for that operating system, Silver said. Windows XP users have more time, as mainstream support from Microsoft for that software will continue two years beyond the Vista release, Cherry wrote.
About 25% of the installed consumer base uses Windows 2000, Silver said. For businesses, including educational institutions and government, the figure is around 37% of the market.
Organizations with Windows 2000 may opt for a total hardware and software upgrade, Silver said. Organizations using Windows XP may delay moving to Vista until they decide to buy new hardware, possibly coordinating a change with the release of Office 12, the code name for Microsoft's office suite currently in a technical beta release.
But over the next two to five years, the desktop business in the enterprise is going to undergo long-term challenges, Bradshaw said, arguing that the enormous cost of running heavy desktop clients may give way to less expensive, thin-client configurations.
Windows Vista is likely to see strong competition from vendors such as SAP AG or Oracle Corp. offering hosted enterprise applications running within browsers, Bradshaw said. Google Inc. and Sun Microsystems Inc. are also working together on a software-as-services concept, another potential challenge to Microsoft's long desktop reign.
A widely publicized memo last month from Ray Ozzie, Microsoft's chief technology officer, emphasized the company's commitment to the software-as-services concept. But, Bradshaw said, the question looms, "At what point do they begin to cannibalize their own desktop revenues" with those services?