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So what's the business case for Windows Vista?

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The next few weeks could be crucial in the evolution of Windows Vista, Microsoft's next client operating system. Microsoft engineers will crunch through feedback from 500,000 beta testers who evaluated the latest Windows Vista Community Technology Preview (CTP).

At stake is a "feature complete" Windows Vista CTP due for release in "early" 2006. At last, after three years of big promises and broken dreams, we should be able to cut away the hype and get a realistic idea of Windows Vista's features and capabilities.

As Microsoft decides what to put into Vista, one thing has become clear: after months of glitzy presentations Microsoft must explain in unambiguous terms why exactly corporate IT departments should bother upgrading, instead of waiting to receive the new software when they buy their next round of PCs.

Analysts at Directions on Microsoft believe the company has - as it did with Windows XP four years earlier - focused on features that are likely to appeal to consumers instead of those that would benefit business users.

Rob Helm, research director at Directions on Microsoft, argues that this a really big problem because now, more than ever, Microsoft needs business customers to buy copies of the software rather than wait for them to upgrade when they buy new PCs. PC upgrade cycles can run from two to four years, with some customers going longer.

Sales from upgrades under Microsoft's volume programs are called "unearned revenue." During Microsoft's first fiscal quarter for 2006 unearned revenue for Windows XP fell from 30 per cent of total revenue to just over 20 per cent. Overall, unearned revenue fell by four per cent compared to the fourth quarter of fiscal 2005.

"You are looking a pretty significant fall," Helm told The Register. "[Customers] are buying licenses with their hardware."

Seasonal spending factors aside, there are two key reasons for the drop: one, is the aging life of the current client, Windows XP. Four-years in, and we are safely past any adoption spike.

The second factor is the disastrous introduction of Licensing 6.0 and Software Assurance (SA), programs that proved wildly unpopular after they put volume customers on an upgrade treadmill. In theory, customers paid to receive upgrades as the new software became available during the lifetime of their support contracts. In reality, few upgrades were forthcoming, meaning Licensing 6.0 and SA increased customers' software costs ,according to analysts. Microsoft is still experiencing fall-out from the introduction of Licensing 6.0 and SA.

Early indications are Windows Vista should have features that would appeal to business users. This week's CTP introduces group policy management of USB devices to stop illegal copying of data and files, added security for laptops, caching to boost performance and a beefed-up Internet Explorer to stop viruses and phishing. "Security and more reliability are the big things so far," Helm said.

But it is painfully clear that Windows Vista falls far short of the grand client vision that Bill Gates, Microsoft's chief software architect, unveiled in 2003. And it is in no-way this decade's equivalent of Windows 95 - the mantra being fed to a younger generation of Redmond engineers who weren't around in 1995.

A new storage subsystem has been radically trimmed while the Indigo web services communications layer and Avalon interface will be back-ported to Windows XP and Windows Server 2003, making it even harder to justify Windows Vista.

"With Windows Vista, Microsoft has a real challenge," Helm said, looking ahead to the next 12 months for Microsoft. "It has to make the case to corporates this is an important upgrade that they need to make before they buy new hardware, or sales will continue to erode."®

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