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Corporate buyers may be slow to adopt the new operating system and Office business programs
It's been five years since the last release of Microsoft's Windows operating system, and more than three since the previous iteration of its Office word-processing and spreadsheet program debuted. So when businesses get the chance to buy the newest flavors—Windows Vista and Office 2007—on Nov. 30, you might think there would be a lot of pent-up demand. Not so much.
When Microsoft's two most important products become available for businesses (the consumer version of Vista will be ready in January), adoption is likely to be modest at best. To some extent, that's because companies are cautious about adopting new technology. They want to make sure new products work with existing systems. And they don't want to disrupt employees who are accustomed to using what they have.
Not Enough Pizzazz
But Microsoft (MSFT) faces another challenge. Many corporate buyers don't believe there's enough pizzazz in the new software to increase their budgets to deploy new products right away. The Society for Information Management, a trade group of business tech buyers, polled its members in October and found that 58% haven't decided when they'll roll out Vista. Another 27% plan to do so in 2008 and beyond.
One company that's going to wait is Boise Cascade. The Idaho wood-products company isn't planning to add either Vista or Office 2007 to company PCs until 2008. Employees are happy enough with existing versions. And training and supporting the new software is an expense Chief Information Officer Robert Egan doesn't feel he needs to make just now. "We are all on [Windows XP], and we'd like to enjoy that for an extra year," Egan says.
Given that reaction, analyst projections for Vista deployments are conservative. Roger Kay, founder of the research firm Endpoint Technologies Associates, expects Vista to account for just 5% of corporate PC sales in the first quarter of 2007. He thinks that will climb to 10%, 15%, and 20% in the succeeding three quarters. All told, that translates to about 20 million PCs, a fraction of the roughly 160 million computers that businesses are expected to buy next year. Even companies buying new computers will look for PCs loaded with the existing XP software. "Vista adoption is going to be a disaster," Kay says.
Office Lagging Behind
Office 2007 is unlikely to ramp up much faster. That's because most companies are going to wait to install Vista first, since the new Office takes advantage of many of the new operating system's features. At an October symposium, research firm Gartner (IT) surveyed corporate tech buyers representing about 3 million corporate PCs and found that just 20% would deploy Office 2007 before Vista. Another 38% said they'd roll out both products simultaneously. And 16% said they'd wait and adopt Office 2007 after getting Vista out to employees. That suggests the vast majority of rollouts will come in 2008 and beyond.
There's reason for the reluctance. Office has an entirely new look and new formats for saving files in Word and Excel. Slick as it is, the new look will take some training to master. And the new file formats, which will be easier to use with high-end corporate programs such as those that run servers, mean users on older versions of Office will have to download a program to open documents and spreadsheets sent with the new technology. "This thing is not going to be all that easy to roll out," says Michael Silver, research vice-president at Gartner.
Microsoft is banking on the idea that companies will be able to save money and increase productivity with the new software. The company has made deployment and management of Vista much easier. Corporate tech support staffs will spend less time putting the software on individual PCs, something that can take several hours now. And Microsoft has made it easier to lock down PCs so that users can't install programs with viruses or even far less innocuous ones that merely slow computers. "All those things have huge benefits," says Kevin Johnson, co-president of Microsoft's platform and services division, which makes Windows.
Microsoft strove to make Office 2007 a better way to access data that sits on servers, the computers that run Web sites and corporate networks. That includes sales figures, strategic plans, and employee information. The company is betting that letting users tap into that data with the familiar applications, such as Excel and Outlook, will unleash information that's largely trapped and out of reach of many users. "For companies, access to business information—not having to pay for expensive business intelligence systems, making it possible for people to find information and get that business insight—that's what's important for them," says Jeff Raikes, president of Microsoft's business division, which makes the Office software.
And despite naysaying among analysts, Microsoft can point to plenty of eager customers among those who tested the software. Pacific Life Insurance began testing Vista on 50 PCs in August and found it immediately lowered costs. It reduced individual installations from four hours of employee time to less than five minutes, freeing up workers for other tasks. And simplified remote access reduced help-desk call time so much so that Pacific Life Chief Technical Officer Cameron Cosgrove expects to shift one of his employees off desktop support to another project. "That's the biggest driver for us—it's going to lower our total cost of ownership," Cosgrove says. He plans to roll out Vista to the 1,100 PCs he manages within the next two months.
Del Monte Foods (DLM) plans to be nearly as aggressive rolling out Office 2007. The company began testing the software on six PCs in May and found that it improved employee efficiency. The new software makes it much easier to share and update common PowerPoint slides used frequently throughout the company. Workers developing formulas for new products loved the built-in analytics in Excel, says Jonathan Wynn, business lead of Del Monte's strategic and capacity planning. The company won't upgrade to Vista immediately because many of the other non-Microsoft applications used by Del Monte aren't yet compatible with it. But that won't stop the company from rolling out Office 2007, which it expects to deploy in half of its 3,400 PCs within six months. "We see big advantages to moving to Office first," Wynn says. "We want to be ahead of the curve."
Now the challenge for Microsoft is to convince other tech buyers that they can use the new products to get ahead as well. If analysts are right, it won't be easy.