Microsoft chairman and chief software architect Bill Gates is a strong believer in the future of handheld computers. He's committed Microsoft to spending nearly $500 million to develop and market a version of his flagship operating system specifically designed for handhelds that, unlike earlier versions of Windows running on older handheld PCs, supports the use of a digital pen for all Windows applications without the need for additional programming. He formally introduced the Windows XP Tablet PC Edition last fall and, along with hardware vendors, launched a campaign to jump-start the market.

The operating system, combined with a wave of hardware products, is ushering in a new chapter in the history of tablet PCs, which have yet to achieve much success in the market. If vendor backing can make a difference, the tablet PC has a lot going for it.

"Microsoft has essentially put a booster rocket on the tablet PC by giving a full-strength operating system that will run any application, and it has created a set of standards that any software maker can write to," says Scott Eckert, CEO of tablet PC maker Motion Computing Inc.

American General Life is considering moving to Fujitsu's ST4000 tablet.

Microsoft's operating system integrates a tablet PC's digital pen with Windows applications in innovative ways. As a result, users can use "digital ink" to write letters, check boxes, and fill in forms, and the software's handwriting recognition will translate the writing into computer text. They also can run their existing applications on the handheld computer because it's running a version of Windows XP, and they can use Microsoft's .Net Framework to write their own tablet applications. Previous generations of tablet PC hardware ran older versions of Windows that didn't have handwriting-recognition capabilities. For many applications, the digital pen and ink replaces the touch-screen technology, such as an on-screen keyboard, used by many of the previous-generation tablet PCs.

Whether the tablet PC becomes a serious, mainstream business tool probably hinges on the number of applications ported to the system. Several well-known software developers, including publishing and graphics veterans Adobe Systems Inc. and Corel Corp., are writing applications to run on Windows XP Tablet PC Edition. But SAP is the only enterprise application developer to reveal plans to take advantage of the tablet PC's capabilities. The business-application developer this summer will include as part of a mySAP customer-relationship management suite digital-pen navigation and ink capabilities that let users more quickly and easily edit product data, generate order confirmations, and collect digital signatures from remote locations. SAP is evaluating all of its applications for tablet PC use, a company spokesman says.

This new generation of applications for the tablet PC is drawing a mixed reaction. "SAP is a perfect example of how I think this will proliferate," says David Engelhardt, president of integrator Advanced Technical Support Inc. "If you're a manager walking around your warehouse, and you want to access your application, it's right there."

Not everybody is convinced. American General Life and Accident Insurance Co. has been using tablet PCs since 1995, when it issued them to its field agents. SAP's first crack at a tablet PC application doesn't impress Charlie Turri, director of application development. "They took an application that had already been built for a keyboard and mouse and retrofit it for digital inking," he says. Even so, the insurer plans to upgrade its tablet hardware and software in the next year. It now runs homegrown applications and operating systems on 5,200 Fujitsu ST2300 tablet PCs and is considering moving to Toshiba 3500 or Fujitsu ST4000 devices running Windows XP Tablet PC Edition.

Turri has seen a demo of mySAP CRM on a tablet PC, but he says the industry needs large software developers such as SAP to start designing applications with the digital pen in mind. "That will make the tablet PC more valuable," he says.