Microsoft's reputation, future riding on Windows 7

'Most important release ever,' argues one analyst, as experts ponder Windows 7's chances

Microsoft's standing as an operating system developer is on the line today as the company launches Windows 7, according to analysts and other experts.

"There's a reputation issue at stake here," said Michael Silver, Gartner's primary Microsoft analyst. "Apple has been making fun of them, and Microsoft wants to put an end to that, and all the talk about Vista. Microsoft wants to make clear that customers shouldn't lose faith that they're able to put out an operating system."

"A tremendous amount is at stake," agreed Preston Gralla, a long-time Windows watcher who has extensively reviewed Windows 7 for Computerworld. "Vista was so poorly received. Windows 7 will show if they can do operating systems right, or if they've finally lost it, especially since [Bill] Gates hasn't been around for years. The question is, does Microsoft still have it?"

Gates stepped down 10 years ago as the CEO of the company he co-founded, then left the firm in mid-2008 to devote more time to the charitable foundation that bears the names of Gates and his wife, Melinda. Windows 7, then, is Microsoft's first post-Gates Windows.

Microsoft finds itself in a position of vulnerability three years after the introduction of Vista because of its failure to convince users to upgrade from the even-then-aged Windows XP. After several delays that sent it scrambling to get out Vista, Microsoft found the operating system panned by reviewers and left in the lurch by OEMs, who initially failed to deliver reliable drivers and tried to sell underpowered PCs that didn't have the horsepower to run the operating system.

The company's critics and competitors -- particularly Apple -- took advantage of the misstep to bash the Windows ecosystem, ridicule its vulnerability to hacker exploits and claim that Microsoft had dropped the ball for the first time since 2000, when it released the also-dismissed Windows Millennium.

"For Microsoft, Windows 7 is the most important release of Windows, ever," said Silver, "because Vista was, by far, the worst release of its flagship product."

Everyone from home users and corporate administrators to bloggers and analysts questioned Microsoft's ability to deliver a reliable, desirable operating system. Was Vista a one-off failure, or the first in what could be a string of disasters that would weaken its grip on the operating system market?

"This is an interesting position for Microsoft," said Allan Krans, an analyst at Technology Business Research. "It's a critical release for Microsoft because Windows is their traditional core business. That's where they've made billions over the last 30 years."

But 2009 is not 2006. People now spend most of their computing time on the Internet, where the browser is the interface, not the operating system they equate with the computer. That's making some wonder whether a desktop operating system matters, or if it does, whether it matters as much as it used to.

Some think it increasingly doesn't matter.

"I don't think the success or failure of Windows 7 will change the dynamics," argued Krans. "The pressure against Microsoft will continue to mount. If it does succeed, Windows 7 buys them more time to put together the pieces of their cloud initiatives, which is their future."

Windows Azure, a cloud-based Windows platform that Microsoft first unveiled a year ago, is the company's bet on for the future, and the key part of that transition from desktop to Internet, said Krans. But other pieces, such as moving its Office franchise to the Web, something it started last summer with Office Web Apps, are also important.

"Their cloud pieces are key to what happens to them over the next 10 years," said Krans.

Silver agrees. The majority of applications used in business may require Windows today, but that's not a given down the road. "Organizations are more OS-neutral now," said Silver, referring to Web-based applications and services. "And consumers are embracing devices other than traditional PCs. Windows 7 is really important because desktop operating systems are still important today. But if current trends continue, by 2015 only a small percentage -- 30% or 40% -- of users will need Windows."

"Does the operating system really matter when everyone is connected to the Web?" asked Gralla. "I don't think we're there yet, but if Windows 7 isn't a big success, we're that much closer to saying, 'I don't care what OS I use, I'll use Google Docs or Office, and store my stuff on the Internet'."

Not every expert agrees with Gralla, Krans and Silver.

"A lot is riding on this release," said Yun Kim, an analyst with Broadpoint AmTech. "But I don't think Microsoft is in any jeopardy. If it fails, it's not going to hurt the company from a financial point of view," Kim continued, pointing out that Windows still controls a huge slice of the operating system market, and that when people buy new PCs, there are actually few alternatives to Windows.

Instead, Windows 7's success will be determined by the computer industry as a whole, by computer makers specifically, who have to convince people to buy in the face of a global economic malaise. "It's all driven by new PCs, so as long as Microsoft has an operating system out there, that's what you get. You have no choice, really," Kim said.

Exactly, echoed Gralla. In many ways, Microsoft's work is done, and it's now up to PC manufacturers to decide whether Windows 7 is good enough. "Windows 7 needs to be a big success because this isn't just a battle for the hearts and minds of users, but also for system makers," said Gralla.

By virtually all accounts, Windows 7 is a better operating system -- much better, say some -- than Vista. So Microsoft has that going for it.

"We expect the new operating system to be extremely successful," said Silver.

In some ways, that's a given. Companies in particular, but also consumers, delayed purchasing new PCs in the lead up to, and during, the recession. Those machines are now aged -- the majority of computers worldwide still run the eight-year-old Windows XP -- and must be replaced sooner rather than later. And Windows 7 will be the beneficiary.

But Microsoft did its part, too. "A lot of the problems with Vista were hardware-based," said Gralla, ticking off driver issues and system requirements that many machines, even new, couldn't match. "Microsoft made a serious, serious mistake with Vista. But it made the conscious decision to make Windows 7 run on Vista-level hardware," Gralla added. "They could just as easily have said, 'We have much more powerful computers now, let's take as much advantage of that as we can.' But they didn't do that."

Some continue to denigrate Windows 7 as the operating system that Vista should have been, or even dub it as merely a "service pack" upgrade from Vista. That's unfair, said Gralla, who noted a slew of interface improvements and considerable under-the-hood enhancements and additions. On the same hardware, Windows 7 is "a little bit zippier" than Vista, he argued.

Still, there's no denying today's launch is a landmark for Microsoft, if only because it may be its last shot at convincing its toughest audience -- the millions still running Windows XP -- that it's time to move on.

If Windows 7 doesn't deliver, it means more short-term competition from Apple and even Linux, said Silver. "But if it fails, the most important result will be that Windows XP won't die, which could force Microsoft to again extend support, which they don't want to do," Silver said. "XP is Windows 7's biggest competitor."

Not everyone sees Microsoft balanced on the knife's edge today. "The only way that it would not be a success is if there was a revolt against the OS, like users did against Vista," said Kim. "As long as it doesn't suck, Microsoft should be okay."

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