Users want a smaller Windows that can run on low-priced - and low-powered - hardware, and increasingly, users work with "OS-agnostic applications," the two analysts said in their presentation. It takes too long for Microsoft to build the next version, the company's being beaten by others in the innovation arena and in the future - perhaps as soon as the next three years - it's going to have trouble competing with web applications and small, specialised devices.
"Apple introduced its iPhone running OS X, but Microsoft requires a different product on handhelds because Windows Vista is too large, which makes application development, support and the user experience all more difficult," said Silver and MacDonald.
"Windows as we know it must be replaced," they said in their presentation.
Their advice to Microsoft took several forms, but one road they urged the software giant to take was virtualization. "We envision a very modular and virtualised world," said the researchers, who spelled out a future where virtualisation - specifically a hypervisor - is standard on client as well as server versions of Windows.
"An OS, in this case Windows, will ride atop the hypervisor, but it will be much thinner, smaller and modular than it is today. Even the Win32 API set should be a module that can be deployed to maintain support for traditional Windows applications on some devices, but others may not have that module installed."
Backward compatibility with older, so-called "legacy" applications, should also be supported via virtualisation. "Backward compatibility is a losing proposition for Microsoft; while it keeps people locked into Windows, it also often keeps them from upgrading," said the analysts. "[But] using built-in virtualisation, compatibility modules could be layered atop Win32, or not, as needed."
Silver and MacDonald also called on Microsoft to make it easier to move to newer versions of Windows, re-think how the company licenses Windows and come up with a truly modular operating system that can grow or shrink as needed.
Microsoft has taken some new steps with Windows, although they don't necessarily match what the Gartner analysts recommended. For instance, the company recently granted Windows XP Home a reprieve from its June 30 OEM cut-off, saying it would let computer makers install the older, smaller operating system on ultra-cheap laptops through the middle of 2010.
It will also add a hypervisor to Windows - albeit the server version - in August, and there are signs that it will launch Windows 7 , the follow-on to Vista, late next year rather than early 2010.