Analysis: Microsoft bullish on Vista business adoption

Company hopes the extra steps it took to prepare customers will pay off

In the first year of Windows Vista's release, Microsoft Corp. is expecting businesses to adopt it twice as fast as any other version of Windows, with 10 times as many Vista business seats deployed at launch than any previous release of the operating system.

Despite this optimism, analysts still don't expect businesses to begin adopting Vista in earnest until late 2007 or even 2008, with many waiting for the first service pack version before they consider an upgrade.

One reason Microsoft is expecting Vista to be so successful is that the company has made a concerted effort to give customers the tools and training they need to adopt Vista across their businesses, said Brad Goldberg, general manager of the Windows Client Business Group at Microsoft. The company also put test versions of the operating system into as many people's hands as possible.

For the previous Windows migration, to Windows XP, Microsoft didn't release important tools to help businesses upgrade, such as a compatibility tool kit to ensure that existing applications would work, until Service Pack 1, which was released nine months after Windows XP shipped, he said. However, with Windows Vista, "we made the beta of the [compatibility] tool kit available with Windows Vista Beta 2," Goldberg said.

Microsoft has also opened test versions of the operating system to a wide audience, making Release Candidate 1 (RC1) available to the public. Microsoft expects that at least 5 million users will have access to Vista RC1, all of whom the company has encouraged to provide feedback about the release so it can be as polished as possible before it goes out to business customers in November.

Another reason Microsoft expects businesses to warm to Vista early is that the company is doing its share to educate customers on how much money they can save by adopting it, Goldberg said. Microsoft has worked with analysts to develop customer case studies to see how much money business customers can save per PC by upgrading to Vista from their current operating system.

Al Gillen, an analyst at research firm IDC, does not dispute Microsoft’s calculations for the return on investment (ROI) that  companies will make on Windows Vista, though he said that companies “don’t get the ‘R’ unless they put in the ‘I’ first.”

“The ROI story is exciting, but it requires that customers be mature and agile enough to do what they need to do afterwards,” Gillen said.

And while Microsoft may meet its ambitious first-year goals for Vista, that momentum will likely peter out, once pent-up demand has been met, Gillen said.

“Eighteen months out, the adoption curve will look like any other Windows product,” Gillen said. “It’s hard to move corporate customers faster than they are willing to go.”

Microsoft’s bullish projections don’t appear to jibe with most current third-party customer surveys, such as one online survey of 314 IT professionals conducted by Computerworld in August. Just 17% of IT professionals say they are considering rolling out Windows Vista in the first year. Forty-one percent of respondents said they had no plans to roll out Vista, while 35% said they would begin testing Vista only after it ships.

Of those who said they were considering rolling out Vista in the near or long term, the largest group (29%) said the cost was the biggest factor in determining whether they would upgrade. That was followed by the hardware requirements (16%), the amount of employee training (6%) and the amount of IT staff retraining (4%).

Even if Microsoft doesn't meet its goals for Vista, it's unlikely to affect the company's revenue. According to one financial analyst firm, Microsoft stands to lose about $400 million in revenue in fiscal 2008 if Vista business adoption does not go according to the company's plan, while the figure jumps to $2 billion in fiscal 2009. In its most recent fiscal year ended June 30, Microsoft reported more than $44 billion in revenue. While the company is optimistic about adoption in its marketing, it is being far more conservative in its financial estimates, analysts said.

This is obviously good news for Microsoft, but there is a downside. The longer Vista is available, the more it will cost the company if businesses continue to hold off on adopting the operating system. And any negative press or analyst feedback on lackluster Vista adoption could drive Microsoft's stock price down, analysts said.

Eric Lai is a senior writer at Computerworld.

Copyright © 2006 IDG Communications, Inc.

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