Vista Shakes Up the Ecosystem

The arrival of Microsoft's new upgrade is having a ripple effect on the industry, as software companies scramble to capitalize on new opportunities

By Aaron Ricadela

A host of software vendors aim to cash in on demand for Microsoft's new operating system; some may be waiting a long while.

Trend Micro (TMIC) has been on a roll: The antivirus software maker captured 11% of retail revenue in the security software market last year, leaving it second only to leader Symantec (SYMC). Trend Micro's share surged from 3% in 2005. It is benefiting from a pact with Best Buy's (BBY) white-coated "Geek Squad" tech support crew and an arrangement whereby Dell (DELL) installs Trend Micro software on new personal computers and laptops.

To keep the sales engine humming, Lane Bess, Trend Micro's president of North American operations, is counting on Windows Vista, the computer operating system that Microsoft (MSFT) uncorked for consumers Jan. 30. Vista's been called complicated, late, and the last gasp of a big-software era whose best days may be past.

Creative Disruption

But for Trend Micro and a swath of other software makers, its arrival could usher in a new phase of growth at a time when software profits are getting squeezed. "Since I am the underdog and have the smaller market share, any time the consumer is considering changing their operating system, that's an opportunity for me to grab share," says Bess.

When consumers upgrade to Vista—and for most, it's a question of when, not if—they might also reconsider the programs they use to ward off hackers. That could help Trend Micro capture sales from its larger competitors Symantec and McAfee (MFE), Bess bets. "The switch of operating system is a new decision point for the consumer," he says. "It's a clear opportunity to replace software that exists."

The release of any new version of Windows is disruptive for the computer industry. PC, chip, and other hardware makers need to get products working with the new system's technologies. Corporate IT departments must verify that their favorite programs still work. Perhaps the toughest job, however, faces the thousands of independent software vendors, including household names like Photoshop maker Adobe Systems (ADBE), TurboTax publisher Intuit (INTU), and Norton Antivirus maker Symantec, whose livelihoods depend on turning out products that work with Windows.

Big Role

Develop a product that exploits Windows' best features and secure the right marketing support from Redmond and the outcome could be a home run. Incur too many expenses or fall down on tech support and your product could fall flat. There's a lot at stake: A Microsoft-commissioned report released in December estimates that during its life Vista could catalyze a $70 billion market for companies that sell the software, hardware, and services that support it. And the shift to Vista could be especially crucial for software makers since it's been so long since the last upgrade (Windows XP came out in October, 2001)—and because there's no clear road map for what comes next (see BusinessWeek.com, 1/30/07, "Bill Gates' Vision for Vista").

Autodesk (ADSK) is among those hoping to ride the Vista wave.