The launch of Windows Vista will create more than 50,000 technology jobs in six large European countries and will lead to a flood of economic benefits for companies there, according to a Microsoft-funded IDC study.
In "The Economic Impact of Microsoft Windows Vista," a white paper released on Thursday, IDC analysts emphasized that while Vista will earn Microsoft a great deal of money, far more will be generated by European companies within the Microsoft "ecosystem."
"If you add up all the spending on hardware and software that runs on Microsoft operating systems, as well as all the services around installing and maintaining Microsoft applications and solutions, you quickly come up with a number much bigger than Microsoft's revenues," IDC's John Gantz, Al Gillen and Marcel Warmerdam wrote in the study.
In the six countries studied, more than 150,000 IT companies will produce, sell or distribute products or services running on Windows Vista in 2007 and will employ 400,000 people, IDC said. Another 650,000 will be employed in the IT departments of businesses that rely on Vista.
The study covers Germany, the U.K., France, Denmark, Poland and Spain, which collectively account for more than 65 percent of IT spending in the European economic zone (the EU, plus Croatia, Norway and Switzerland). "(These countries) are quite representative of Europe as a whole and, for that matter, much of the developed world," the IDC analysts wrote.
A key finding is that Vista will not just sustain the existing Windows economy, but create thousands of new jobs. Using a baseline for economic growth due to existing versions of Windows, the research firm determined that Windows-related employment would jump by 100,000 jobs next year.
"IDC believes that more than half of the gain in Windows-related employment will be specifically related to Windows Vista. It is growth that IDC believes would not occur were Windows Vista not in the market," the IDC analysts wrote. "Windows Vista...will infuse significant new energy into the market in its first 12 months of shipment, driving important job growth and new industry revenues."
Microsoft in hot seat
In recent years, Microsoft has funded a number of studies highlighting the positive side of its near-monopoly in the market for desktop operating systems (it faces significant competition on servers, notably from Linux). The studies have appeared as Microsoft has faced antitrust actions in the United States, the EU and elsewhere, with regulatory attention most recently beginning to focus on Windows Vista ahead of its scheduled January launch.
Microsoft has also faced growing movements from some national and regional governments to promote or require open-source alternatives to Windows. One of the arguments governments have used in favor of open source is that it can foster a locally based software economy.
The IDC white paper outlines the immense local ecosystem derived from Windows in Europe.
Within the six countries, more than 20 percent of all IT employment will be Windows Vista-related in the first 12 months of deployment. That figure should grow substantially in 2008, when IDC expects Vista to account for 80 percent of Microsoft client operating systems shipped to enterprises. Thirty million computers in the six countries will run Vista in its first 12 months, and 105 million worldwide.
Moreover, for every euro of revenue that Microsoft makes, companies within the IT ecosystem will, on average, make more than 13 euros, IDC found. In the U.K., hardware companies are expected to see 7.24 euros of revenue, software companies 3.64 euros and services companies 2.74 euros per euro of Microsoft's Vista revenue, for a total of 13.62 euros.
According to Microsoft, that's not a bad payback for an investment that's such a modest part of companies' overall IT budgets--1 percent of the 214 billion euros the region will spend on IT in 2007 and roughly 5 percent of the packaged software spend.
"The economic opportunity Windows Vista creates for small and large companies across the region is clearly much more significant," said Jean-Philippe Courtois, president of Microsoft International.
European companies may not be directly involved in developing Vista, but they are participants nonetheless, IDC said.
"Windows Vista is not just a product of Microsoft. In the marketplace, it will be a constellation of solutions and services delivered by an entire ecosystem," according to the white paper. "The launch of Windows Vista will precipitate cascading economic benefits, from increased employment in the region and increased taxes to a stronger economic base for those 150,000+ local firms that will be selling and servicing products that run on Windows Vista."
Such benefits may help explain why it's only relatively recently that Microsoft has faced antitrust actions. "Microsoft does create economic opportunities, and that's probably why they didn't get slapped around by the Department of Justice sooner--it wasn't taking all the money for itself," RedMonk principal analyst James Governor said.
In 2000, the Department of Justice found that Windows was an illegal monopoly, and originally intended to break up the company. The European Commission in 2004 found that Microsoft had illegally used its Windows client monopoly to expand its market share in servers. Microsoft has not yet complied with all antitrust remedies, according to the Commission.
Some critics say that looking at jobs and economic growth doesn't tell the full story. For instance, a monopoly may create jobs, but can harm innovation, according to antitrust authorities. "If you want to foster a local product-based economy, there is certainly an argument that says it may not be beneficial if there are companies with aggressive policies that try to limit local companies' ability to grow and innovate," Governor said.
Open-source advocates, particularly in poorer countries, argue that dependence on Microsoft and other overseas-based, proprietary software companies may not allow the development of high-level IT skills in the local economy. That was the argument made in a famous open letter written to Microsoft by Peruvian congressman Edgar Villanueva in 2002.
"In respect of the jobs generated by proprietary software in countries like ours, these mainly concern technical tasks of little aggregate value," Villanueva wrote. In September 2005, Peru approved a Villanueva-sponsored bill promoting the use of open-source software by the government.