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Microsoft facing Vista upgrade conundrum

Biggest competitor is itself

Now that Microsoft has finalised Windows Vista's six editions, the challenge at hand for the company is to encourage customers to upgrade once the new OS is available.

And that challenge is nothing to sneeze at, customers and analysts have said. According to them, Microsoft faces a variety of hurdles that could deter upgrades to the new OS (operating system), which is expected to ship toward the end of this year.

One major roadblock might be the sheer number of editions of Vista expected to be available at launch, said Joe Wilcox, analyst at JupiterResearch. Microsoft's last major Windows upgrade, Windows XP, launched with only two editions: Windows XP Home and Windows XP Professional. XP is now available in five editions, but the others – Media Center Edition, Tablet PC Edition and Professional x64 Edition – were added after launch.

Microsoft has already identified what it calls a "good enough" problem among customers that purchase Windows' client version, Wilcox said. That is, customers think the version of Windows they currently have is good enough for what they want to achieve with their computer, so they see little or no reason to upgrade to the latest OS. Complicating matters with several editions is not the ideal way to inspire customers to upgrade, he said.

"Microsoft's best marketing for Vista will come from simplicity – making the value of Vista as easy to understand as possible, so people can see Vista is a lot better than the version they have now," Wilcox said. With six versions expected to be available at launch, he wondered: "Are there too many of them to communicate the value of Vista?"

Some of the editions also pose their own unique upgrade issues for the vendor. A change in Microsoft's enterprise licensing strategy that will come with the new OS already has inspired ire among customers. When Vista is released, only customers with Microsoft volume licensing agreements – either an Enterprise Agreement or a Software Assurance contract – can purchase Windows Vista Enterprise.

Andrew Hintz, information technology director for the California Democratic Party, said his organisation will probably only purchase Vista in its Business edition if they acquire new hardware, but not upgrade to the OS for machines currently in use. Still, he said Microsoft might win over more SMBs (small and medium-sized businesses) to its Enterprise edition if the OS was available without license restrictions.

"Many SMBs will probably acquire Vista as we will: with new hardware purchases without a Software Assurance or Enterprise Agreement with Microsoft," Hintz said. "If the Enterprise edition was available as a low-cost add-on to PCs from Dell or HP, then we might be tempted to purchase it."

Robert Bagamery, a system support engineer at Canadian utility company Manitoba Hydro, said Vista's revised enterprise licensing, along with hardware upgrades that are required to get the full benefits of some of Vista's new features, are hardly incentive to upgrade. Furthermore, there are now a host of lower-cost alternatives, such as OpenOffice and Mozilla Thunderbird, to the application for which most businesses purchase Windows: Microsoft Office.

"Add to this the hardware costs to get full 'benefits' of Vista, and I think corporations will be having a second look at the ransom they pay and the continuing, escalating costs of doing business with Microsoft," Bagamery said."By submitting now, all they do is tie themselves more tightly to Microsoft and set themselves up for future price gouging."

Another hurdle to Vista upgrades is one that has plagued Microsoft for years: software piracy. The company has been cracking down on piracy with a host of new initiatives, such as Windows Genuine Advantage. Microsoft hopes its Windows Vista Starter edition, a stripped-down version of the OS, will go over well in emerging markets, particularly those in third-world countries. But as Wilcox points out, those are exactly the markets where piracy still runs rampant. "You can't sell it if everyone is stealing it," he said. "Microsoft has to get piracy under control."

Microsoft has about nine months until Windows Vista is available in full release, so the company has plenty of time to make a strong case for customers to upgrade. And as the company that sells the industry's dominant PC OS, the battle is theirs to win or lose, Wilcox said.

"When Windows 1995 was released, there was only one version for business and consumers, and Microsoft was competing with OS/2, Mac OS, DR-DOS – other things in the market that looked different and operated differently," he said. "Now Microsoft's only competitor is itself."


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