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New Windows Era

It's strategy time for Microsoft customers as Windows Vista goes into beta testing. So, what's your plan?

Microsoft started distributing the first test version of Windows Vista--the new name for the massive desktop operating-system development project formerly called Longhorn--to more than 10,000 hand-picked customers last week. It's the first step in an upgrade process that's been known to stretch for years. The planning starts now.

Microsoft's business customers will need to decide whether Windows Vista's better performance and management tools, souped-up graphics, and improved security are worth yet another costly PC operating-system rollout. The last time they went through anything like it was in 2001, when Windows XP was launched. Some have yet even to make that transition.

It could be the last time an operating-system release matters this much. With computing's center of gravity shifting from the desktop PC to online applications from competitors like Google Inc. and Salesforce.com Inc., and to consumer electronics like Apple Computer's iPod, Windows Vista is an attempt to show that the PC still matters. "Some people will ask if Windows Vista is the end of the last generation of software," CEO Steve Ballmer said last week at a meeting with financial analysts at Microsoft's headquarters. "I think of it as the beginning of the next era of software from Microsoft."

It will be an era that adapts to the fast growth of PDAs and cell phones and one in which "we deliver bits and services across the Internet," Ballmer said. In a continuing push into the software-as-service model, Microsoft is developing online products for regulatory compliance, document routing, and storage.

It's also moving toward "premium" editions of Windows and Office that would include more features for a higher price. "You could say the whole family's getting bigger," chairman Bill Gates said at the analyst meeting last week. When Microsoft releases new versions of major products, most of its new technology goes into the basic product, he said, but "we feel like we have enough innovation to take pieces of it" for premium editions. The company also wants more-frequent releases of Windows, akin to the way it rapidly streams out updates to MSN Messenger and other apps on MSN.com.

Microsoft has a lot riding on Windows Vista. Desktop Windows generated $12.2 billion in revenue during the fiscal year ended June 30--more than 30% of Microsoft's $39.8 billion total sales. But Windows sales grew just 6% in fiscal 2005, slower than a companywide 9% growth rate. By the time Windows Vista arrives, sometime around Christmas 2006, Windows XP will be more than 5 years old. That's an eternity in computing.

Are buyers ready? If Microsoft delivers on promised security improvements, that alone will get some companies to make the move. "It would be a great benefit to get more of the security from the operating-system company because they ought to know the most about it," says Bob Elward, director of client and server engineering with Air Products and Chemicals Inc., a maker of specialty gases and other chemicals with more than 15,000 PCs running Windows XP or Windows 2000. Elward expects to begin testing Vista on one or two machines this fall.

Security advances in Windows Vista include account-protection features that cordon off areas of the operating system to users, so admins can grant them only the privileges they need to do their work. Windows Vista also contains data-protection technologies that can encrypt a PC's entire disk so it can't be read by outsiders, even if a laptop is stolen. And beta 1 includes an early version of Internet Explorer 7 with rolled-in anti-spyware technology Microsoft got when it acquired Giant Software Inc., including the ability to block access to phishing sites (see story, Security: How Vista Fights Vulnerability).

Beta 1, which also will be available to the half-million developers who signed up at Microsoft's technical Web sites, is mainly aimed at programmers and IT pros. But it also includes a taste of new features that will appeal to users, such as animated controls powered by a new graphics subsystem, a new search engine, and the ability to tag files by their content. Used together, those technologies could make it easier for employees to find and sort through their ever-growing assemblage of documents, slide shows, spreadsheets, and audio and video files. Folders also have a see-through quality that lets users peek at their contents. Much of the user-interface work Microsoft is promising for Vista won't show up until beta 2, expected later this year. Microsoft last week also released a limited test version of the Longhorn Server operating system, which is due in 2007.

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