Clouds over Redmond

With all the setbacks, it will be more than five years between Windows XP and Windows Vista. And for even that delivery schedule, Microsoft had to scale back many of the major advances that were planned for the new operating system.

Although Windows has largely maintained its dominant share of the operating system market, the software maker's inability to regularly update the product poses a growing risk to its cash cow.

"Microsoft is going to be feeling more pressure, especially as applications get to be more OS-agnostic," or not tied to a particular operating system, Gartner analyst Michael Silver said.

Microsoft has long spoken out about its need to be constantly innovating, with executives pointing to the fate that bedeviled IBM in the 1970s and 1980s, when it became seen as a lumbering giant in a field of nimbler and more agile competitors.

"I've been around IBM, and I saw how IBM overdid it," Steve Ballmer said in a 2003 interview with The Seattle Times. In that interview, the Microsoft CEO described the opportunities that IBM's slowed pace created for Microsoft when the PC came around, and talked about Microsoft's need to avoid that fate. "Maybe we will, maybe we won't--but we have strategy control, we have technology control, we've got financial control," he said.

Of course, recognizing the dangers and being able to escape the same fate are two different things.

One of the key problems is that the two halves of creating a new OS--programming and testing--are both getting longer to accomplish. On the development side, Microsoft has spent years re-architecting its software development practices in order to boost security, and such rigor also takes time. On top of that, the time spent testing new code has increased, although automated tools have helped some. Chairman Bill Gates noted on Tuesday that as many as half of the worker-hours put into Vista have gone into testing.

Microsoft also faces the challenge of trying to support all of the hundreds of millions of Windows machines out there. The company frequently takes pride in showing off how its latest and greatest operating system can run even the oldest applications.

"We are very backwards-compatible people," Gates said at an Office developer conference this week.

Apple Computer, which has taken a very different approach, has not been afraid to cut support for older Mac machines and software in its efforts to modernize its operating system. The results are a narrower security footprint and a much smaller number of types of systems against which to test.

Michael Cherry, a Directions on Microsoft analyst, said that although Microsoft is in a somewhat different situation, it can take lessons from Apple. The Mac seller took a one-time hit when it made major architectural changes with OS X and since then has focused on more modest, but noticeable, feature enhancements.

"There haven't been huge, massive changes," Cherry said. "But people have looked at them and said, 'Nice job. Let's buy it.'"

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Cherry said that Microsoft shouldn't need to make significant changes to most of the underlying architecture of Windows at this point--only occasional upgrades should be needed, to add things such as new networking protocols. "Everything else should be about putting fancy sinks on top of the plumbing," Cherry said.

With Vista, Microsoft originally hoped to make major changes to the underlying code, adding in a new file storage mechanism called WinFS, along with all-new graphics and communications methods. It eventually had to pull out WinFS entirely and scale back several other architectural changes in order to make the project more manageable.

In the future, Microsoft may well look to focus more energy in interim releases on updating some of the companion programs that are part of Windows, as opposed to the core operating system code. Gates talked on Monday of the need, for example, to update Internet Explorer more often.

But Cherry said it's more than just a different approach that is needed.

The analyst said that Microsoft needs to have a clearer set of features in mind when it designs a new version of Windows. It also needs to be able to assess what can be done in a particular time frame "and then be ruthless about staying on schedule," he said.

That discipline has been lacking at the Windows unit, Cherry said. "They've never met a feature they didn't like."

Changes on that front may be coming sooner rather than later. Sources say that Microsoft plans to tap Office boss Steven Sinofsky to head Windows development, reporting to Kevin Johnson, president of the platform products and services unit.

The Office unit has a proven track record of delivering new versions of its software suite on a much steadier basis.

Ballmer has made it clear that he wants an end to the days when all new product updates are "big bang" releases.

"The key is to make sure that for every line of business, we have the things that pop every six or nine months, pop every couple of years, pop longer than that," Ballmer said at a Gartner IT conference last year.

But Microsoft faces a tough challenge in deciding how much of the OS to change with each release.

"If they add too little, people don't find it compelling, and if they change too much, businesses can't absorb (the new software), even if they do get it out the door," Silver said. "This is the 'damned if you do, and damned if you don't' situation that Microsoft finds itself in."

Looking to Windows Live
Recognizing that it can't update its operating system or major software every few months, and that many businesses wouldn't want such a thing, Microsoft has been increasingly looking to online services, such as its Office Live and Windows Live products, as a way to augment and refresh its desktop software.

But that only works to a point, Silver said.

"Services are great, and they will appeal to some segment of the market," he said. However, he added, "There are some things that really should be part of the OS."

One option, Silver said, is for Microsoft to go back to an earlier approach, in which it had separate releases for business users and consumers. Only with Windows XP did Microsoft finally bring them together.

"Eventually, they will need to do consumer releases more often," Silver said. "They don't need to do enterprise releases as often, but they need to be predictable."

The Windows Server unit, under Bob Muglia, has been working toward a schedule that would see major releases every four years and interim releases every two years. Microsoft released Windows Server 2003 three years ago and last year shipped Windows Server 2003 R2, a relatively modest upgrade.

Of course, the Windows Server group is inextricably linked to advances in the core operating system, so any delays there are likely to spill over. And history has shown that an even longer testing period is needed for server operating system upgrades.

The company has been slated to release the server version of Longhorn next year, an effort that Microsoft said yesterday remains on track.

As for the lumbering-giant issue, IBM did manage to remain a pretty significant force. After all, it's still Microsoft's No. 1 competitor, Ballmer says.