Courtesy of InformationWeek It's been five long years--a lifetime in the software industry--since the release of Windows XP. During that time, Microsoft has invested nearly $9 billion in XP's successor, Windows Vista, and the Office 2007 suite of applications. Finally, the wait is over. At an invitation-only affair in New York this week, CEO Steve Ballmer will unveil Windows Vista, Office 2007, and Exchange Server 2007, an upgrade to Microsoft's market-leading e-mail platform. Desktop and server products last year accounted for 82 percent of Microsoft's $44.3 billion in annual revenue, underscoring how important the three new releases are to Gates, Ballmer & Co. Microsoft has been through this drill many times before--late on key products, under fire from nimble competitors, hawking yet another desktop upgrade--and it's always been able to keep software licenses growing. Can the company pull its magic yet again? Ballmer certainly believes so. In an interview last week, he called the new Vista, Office, and Exchange a "tremendous step forward" in personal and group productivity. To skeptics, Ballmer says: "Anybody who speaks to the contrary is in a different place than our customers." Microsoft isn't forecasting a revenue explosion in fiscal 2007--more in the range of 13 percent to 15 percent, to around $50 billion, compared with 11 percent growth in fiscal 2006. That would still be quite a feat for the world's biggest software company, especially as its 30-year-old business model is under siege by software-as-a-service and search-ad-driven rivals. Who wants to pay a premium for PC software when other, more interesting applications are free online? Vista and Office 2007 may be complete, but Windows Live, Office Live, and Office Online--Microsoft's software-as-a-service initiatives--are anything but. Office 2007 comprises 13 desktop applications, none of which is hosted on Office Online or Office Live. Ballmer's elusive when asked about that. "We have what we have online today," he says. "If you keep checking, there may be something new up there tomorrow." The trick for Microsoft is to demonstrate that software on a PC and software as a service won't merely coexist but will evolve together into a better way of working. Microsoft increasingly uses the term "software and service" to describe this convergence. Ballmer envisions "a new generation of seamless, personalized experiences based on a balanced approach that combines the best of the Web with the richness of the client" (see "Steve Ballmer's Own Top 10 List".) But Microsoft's not there yet. "We're driving very, very hard," says Ballmer. He contends Microsoft is in step with customers--not behind--as they begin to adopt software services. Vista represents a sizable step forward, with programmable miniapplications called Gadgets, a powerful graphics engine, improved search, new security and mobility features, and much more. Significantly, a new imaging format makes it easier to deploy and upgrade Vista across a business--and easier to distribute those all-important security patches. Software company InterKnowlogy just built an application using Microsoft's .Net tools and middleware and Vista's Windows Presentation Foundation for The Scripps Research Institute. The app lets scientists view 3-D images of cancer cells and attach notations. "On Vista, it just rocks," says the institute's Dr. Peter Kuhn. "Unbelievable." The scope of Microsoft's product launch, with hundreds of new capabilities, will be more than most people can get their arms around. We've narrowed it down here to 100 things that all IT professionals need to know. Microsoft's Office "system" comprises 13 desktop applications, available in eight combinations, plus nine Office servers. The names are familiar: Access, Communicator, Excel, Outlook, PowerPoint, Project, and Word, to name several. Office SharePoint Server, formerly SharePoint Portal Server, is the beating heart of Microsoft's application environment. Excel spreadsheets, for example, can now be centrally managed, but you'll need SharePoint's Excel Services to do it. Exchange Server 2007 marks the first major upgrade to Microsoft's e-mail system in more than three years. The key advance is unified messaging, where voice mail and faxes combine with e-mail in an all-purpose in-box. Upgrade Path How will customers upgrade? And when? According to an October survey of 672 IT professionals by InformationWeek Research, 10 percent will install Vista on existing PCs, 25 percent will bring Vista in on new computers, and 65 percent will do some of both. Thirty-nine percent plan to deploy Vista within a year of its release. As with earlier Windows releases, the business rollout will take years. But Ballmer expects businesses to take up Vista "a little bit faster" than they did Windows XP, if only to protect their companies with Vista's improved security. Competitor Ken Bisconti, VP of product marketing with IBM Lotus, isn't convinced. "I've yet to find a single customer that's going to upgrade Windows separate from hardware upgrades as part of their normal refresh process," he says. "For most customers, that's a 2008 event." Bisconti sums up the skepticism that dogs Microsoft every time it puts customers through a new software cycle. "Microsoft is still running a pre-Internet business model that expects the world to forklift upgrades of proprietary operating systems and proprietary applications," he says. "Do I really need more word processing features? The innovation in business value and technology is not dependent on a particular operating system or version of Office." Still, Microsoft's vast installed base remains the envy of other software companies. Can Ballmer pull another rabbit out of his hat? Anyone who has seen this act before will be watching every move.
