Vista struggles to bust out as business customers snub it

— -- Will Weider is just the kind of customer Microsoft msft needs to keep its Windows computer operating system franchise growing.

He oversees tech for a chain of Wisconsin hospitals — 14,000 computers' worth. But Weider has no desire to upgrade to Vista, the latest version of Windows.

"I wouldn't put on Vista if it was free," says Weider, chief information officer for Ministry Health Care. "In the past, there's always been an important reason to upgrade, but XP (the previous version of Windows) is perfectly acceptable."

Even as it pursues Internet icon Yahoo to create a more potent online-advertising rival to Google, Microsoft is facing increasing pressure on its Windows cash cow. Corporate customers such as Weider are staging a rare revolt over upgrading to Vista, which launched with much fanfare in January 2007. Last week, Microsoft reported a 24% decline in Windows sales in the third quarter.

"This year is make-it-or-break-it time for Vista," says analyst Benjamin Gray of market tracker Forrester Research. "Vista is getting hammered right and left in the press, and companies are concerned. I'm getting daily client inquiries about skipping Vista altogether and waiting for the next version of Windows. Microsoft is having a tough time convincing their corporate clients that Vista isn't a risky bet."

Microsoft rebuilt Windows from scratch to create Vista, which has a dazzling interface and improved security tools. But so much computing power is required to run it that many people find their new PCs run slower than older, less powerful XP machines. To spur sales, Microsoft earlier this month said consumers will no longer be able to purchase XP as of June 30. The announcement and pending date have unleashed a firestorm of Vista angst.

Online magazine InfoWorld is waging a Save XP campaign. More than 175,000 signatures have been gathered. "Why pull the plug on XP when there's clearly a lot of people who still like it?" says Galen Gruman, InfoWorld executive editor.

Influential analyst Michael Silver at research firm Gartner calls the Vista launch a "disaster." Other critics have been no kinder. CNet called Vista one of the "biggest blunders in technology." PC magazine chronicles Vista's "11 Pillars of Failure." The Christian Science Monitor likened it to Coca-Cola's disastrous New Coke experiment in the 1980s.

Vista — not Windows — is the butt of jokes in Apple ads.

Working the bugs out

Microsoft says it has sold 140 million Vista licenses, mostly in sales to HP, Dell and others. About 80% of Microsoft's Windows revenue comes from direct sales to PC manufacturers.

While Microsoft says it is happy with Vista sales, CEO Steve Ballmer last week told reporters he might reconsider the June 30 end date for XP. "If customer feedback varies, we can always wake up smarter," he said.

The company's XP vs. Vista issue is with enterprise customers like Weider, who buy software for legions of employees. When Vista launched, many existing PC software applications and drivers for things like printers didn't work with it. That prompted many corporate IT departments to wait — as they normally do — for the bugs to be fixed.

Indeed, analyst Allan Krans of Technology Business Research attributes the weaker quarterly sales results in Microsoft's Windows division to enterprises putting off Vista upgrades.

Sales of Windows XP were up 10.5% at a similar period a year after its launch, he says. "XP found better reception from enterprise."

Microsoft says a recent update — Service Pack 1 — addressed most of the compatibility issues. "People need to look at Vista today," says Kevin Kutz, director of Microsoft's Windows client division. "We think people will have a great experience."

Still, UPS' WorldShip software — used by 550,000 of its small-business clients to ship packages to customers — doesn't work with Vista. (UPS says it will start supporting Vista by summer.)

Similarly, FedEx's Ship Manager software doesn't work with Vista. (FedEx says upgrades will be released later this year.)

Joey Mariano, who runs E-Geniuses, a Los Angeles-based PC consulting firm, recommends his small-business clients stick with XP. "We deal with small to midsize businesses, and they want to know that everything works. With Vista, they can't be sure," Mariano says.

At Harvard University's medical facilities, about 8,000 computers are in use by staffers, and there are no plans to upgrade to Vista, says John Halamka, dean of technology for Harvard Medical School. "XP is running well," he says. Microsoft "could potentially have another operating system on the market by the time we're in a position to do a major upgrade."

Gartner polled its corporate clients at the end of 2007 and found that Vista was in use on less than 1% of desktops and 3% of notebooks. Forrester Research did a similar poll and came up with 6.3% of clients by late 2007. Forrester's Gray projects corporate use jumping to 25% by the end of 2008.

Vista sales "clearly have been a disappointment," says Gray, who now views a 25% adoption rate as decent. "It would have seemed really disappointing if you'd asked me a year ago," he says.

Incompatibility issues

Despite corporate foot-dragging, Gray and Silver tell clients to bite the bullet soon, because incompatibility issues might get worse if they wait.

Robert Fort, vice president of information technology for Virgin Entertainment Group, a Los Angeles chain of music stores, installed Vista on 100 PCs for employees already and is delighted he did. "It works for us," he says. "It's a more solid operating system. We haven't had any problems."

Beyond business-customer resistance, Vista home users have jammed message boards, such as VistaBanter.com and Support 4 Vista (support4vista.com), with complaints about sluggish performance.

"In our tests, even with the new service pack, Vista is still much slower on the same equipment than XP," says InfoWorld's Gruman.

Adds analyst Roger Kay of Endpoint Technologies, "I have Vista on a notebook with 2 gigabytes of memory and a decent-size processor, and with Vista on there, it just doesn't work. It takes over 10 minutes just to open a Word document."

Many users have complained about Vista's aggressive messaging. In an effort to keep PCs safer from potential hackers, Vista built in "user account controls." The prompts ask you if you really want to move files or accept downloads, for instance. The result can be a very busy parade of messages.

"That drives me crazy," says Weider. "I always think I'm going to get a blue screen of death." (He refers to past versions of Windows, which sometimes crashed with a blue screen telling of a "fatal error.")

Apple, long the underdog in computer sales, has seen a revival in its fortunes thanks to the iPod and success of its Apple Stores. Macintosh computer sales also have risen substantially — up 51% in the recent quarter from the year before — as frustrated Windows customers have apparently switched.

"When your most important competitor stumbles at a moment when you're accelerating, it's going to have an effect," says Kay.

Vista lite?

This all comes at a precarious time for Microsoft, suggests Silver, co-author of a Gartner report, "Windows is Collapsing." The system has just gotten too big for its own good and scared off customers, he says.

"Lots of people are looking for PCs that have less resources — lower-cost, entry-level PCs — not more, and they simply can't run Vista," he says.

Silver says Windows needs to get smaller and modular — so that, say, one version would be available for entry-level PCs, while a bigger version could be used for more powerful machines.

Weider says if Microsoft could figure out a way to have a fast-moving Windows, he would happily buy it. "If a new version of Windows would boot in a couple of seconds and switching network users were near instantaneous, that would be worth the time, money and effort to upgrade," he says.

Microsoft's Kutz disagrees with Gartner's "Windows is Collapsing" report but admits the Vista launch could have gone better.

"Make sure all the applications and hardware are compatible and absolutely ready on Day 1," he says. "We could have done a better job on that."

And looming around the corner is the next version of Windows, which could be here sooner rather than later. Code-named Windows 7, Microsoft says it will be available by January 2010, just a year and a half away.