The truth behind Vista's sales figures

• Tags:
• User Interface,
• Premium,
• Malware,
• Natural

Jason Hiner

Published: 12 Nov 2007 16:42 GMT

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When Microsoft released its earnings report to Wall Street on 25 October, it surprised investors and the technology industry by reporting its best rate of revenue growth (27 percent) for a quarter since 1999. Microsoft credited its revenue growth to strong demand for Windows Vista, Microsoft Office 2007, and Halo 3.

No-one was surprised to hear that Office 2007 and Halo 3 were part of the picture. Office 2007 is a strong upgrade that closely integrates with other Microsoft communications and collaboration products, and it features the biggest overhaul of the user interface in almost two decades. As for Halo 3, sales of the latest edition of the Xbox 360 game broke $300m (£144m) in its first week.

However, the fact that Microsoft mentioned Vista as part of the revenue boost caused a lot of people to do a double take. The newest Windows operating system has been received coolly by consumers and with icy indifference by most businesses.

Has Vista been getting a bad rap? Is it quietly gaining mainstream momentum? Or is Microsoft spinning the numbers to make Vista look like it is performing better than it really is?

Cool consumer reception
On the consumer side, Windows Vista sales are closely tied to new desktop and laptop sales. At retail outlets, Vista is now pre-loaded on 95 percent of all desktop PCs and 91 percent of all laptops, according to CNET News.com. In 2007, worldwide PC shipments have grown by 10 percent and will clear $200bn for the year, according to Gartner.

For Microsoft's fast-paced first quarter that it just reported on, the client business unit (featuring Vista) reported $4.14bn. So it's clear that a lot of Vista's revenue growth is coming from the momentum in PC sales. The question is whether Vista is driving new PC sales or is simply benefiting from growth in new markets and natural upgrade cycles. One thing that is helping Vista's revenue numbers is that a lot of users are opting for the two higher-priced versions of Vista — Home Premium and Ultimate.

The consumer version of Vista has certainly not received rave reviews but there are some clear benefits for home users, such as improvements to parental controls and better handling of digital photos, that at least make it palatable to most users. On the business side, the benefits of upgrading to — or even using — Vista are not as clear. In fact, there are even some obstacles.

The business response to Vista
Businesses and IT departments are notoriously slow to adopt new software. The benefits have to clearly justify the resources it takes to deploy the software and retrain staff on how to use it. However, it would be easy to chalk up Vista's slow adoption rate among businesses to IT departments' natural tendency to drag feet. The truth is that there is a deeper scepticism: 46 percent of IT professionals questioned as part of an InformationWeek Research survey in May stated that Windows Vista fell short of their expectations.

When making the pitch to businesses to upgrade to Vista, Microsoft has been focusing on three areas of improvement:

• Security — With User Account Control (UAC), users no longer need to have local administrator privileges on their machine to run software and do standard functions. Even for those who have admin access, UAC requires direct consent for a lot of higher-level activities to block malware from executing in the background (in theory). There are also important security enhancements to Vista's version of Internet Explorer 7 to block web-based attacks, which are now among the most common vectors of attack for malware.
• Manageability — Vista includes improvements to OS imaging, which IT departments have adopted en masse to simplify the standardisation and deployment of new PCs. There are also Group Policy improvements that make it easier to centrally control and manage machines.
• Mobility — Microsoft has integrated its tablet PC software into Vista Business and Vista Ultimate, rather than making a completely separate version of the OS, as was the case with Windows XP Tablet PC Edition. Vista Business and Ultimate also support ultramobile PCs (UMPCs). The improved mobility support in Vista can reduce total cost of ownership by 14 percent, from an average of $4,407 (£2,121) in XP to $3,802 (£1,830) in Vista, according to a Wipro and GCR study sponsored by Microsoft and published in September 2007.

Even with cost savings, the benefits in manageability and mobility provided by Windows Vista are still incremental improvements and not enough to…

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