Microsoft Chief Executive Steve Ballmer said analysts are underestimating the demand for the company's new Windows Vista operating system, which was launched today along with its 2007 Microsoft Office and Exchange Server 2007 software.
"I think business customers are very much focused in on the fact that they need to drive top-line value out of information technology," Ballmer said, in an interview on CNBC's "Power Lunch." "It's all about empowering people and letting people get more value from information to drive sales, customer service. It's not all about reducing the cost of IT, even though that remains an important element of it."
Ballmer expects the launch of Vista will increase demand for new PCs among both consumers and businesses. His projection comes at a time when PC sales have been slowing. PC sales fell 2% in the third quarter.
Ballmer estimates more than 200 million people will use the new software by the end of next year.
Microsoft claims Vista, its first operating system in five years, will make it easier for users to connect and access information across networks and computer systems.
Businesses Are First Customers
Businesses, which buy Windows licenses in bulk, will be the first to be able to purchase the new operating system. Consumers can get Vista on home PCs beginning Jan. 30.
Microsoft and computer vendors contend that Vista will make Windows machines more secure, powerful and graphically dynamic, especially when combined with other products Microsoft is releasing simultaneously. Those include new back-end server software for businesses, as well as Office 2007, which brings sweeping changes to widely used programs such as Word, Outlook, Excel and PowerPoint.
Much is at stake for Microsoft. Most of its revenue and almost all of its profit comes from Windows and Office, funding the company's sexier ventures in video games and music players.
But even with all the touted improvements, analysts expect Vista to only gradually emerge, especially in big organizations where upgrading can be a costly, complicated affair. Gartner Dataquest predicts that it will be 2010 before Vista outnumbers the previous operating system, Windows XP, on business computers.
A company with 10,000 employees, for example, likely has 1,000 business applications, many of which need to be tested on Vista before a company can switch its PCs to the new operating system, said Gartner analyst Michael Silver. That process often takes 12 to 18 months and lots of labor by the technology staff.
PC makers say Vista will enable computers to do things that previously were difficult or costly. For example, Lenovo Group, the world's No. 3 PC maker, says Vista greatly enhances data-backup tools it builds into its machines.
"All those capabilities are going to be one step better with Vista," said Clain Anderson, Lenovo's director of software peripherals.
"No Compelling Need"
But many buyers want more dramatic reasons to change their PCs.
Kamal Anand, chief technology officer for TradeStone Software, a provider of supply-chain software, examined test versions of Vista and Office and found "no compelling need" to upgrade his company's 100 PCs and laptops anytime soon. Instead, Anand expects Vista and Office to slowly permeate TradeStone as it buys new PCs for employees in coming years.
"Nobody wants to go through the extra time and effort and money to upgrade an existing, well-working system," he said.
The programs in Office 2007 have been overhauled in many ways. Generally they can make it easier for people to collaborate on documents and to manage information from multiple sources. Excel in particular packs a wallop, with vastly increased number-crunching abilities. The Outlook e-mail program performs noticeably faster searches for tidbits buried in messages.
Some Office programs also have scrapped their familiar menu structure in favor of a "ribbon" atop the screen that reorders how command choices are presented to the user. While that new interface unlocks many features that were hard to find in previous generations of Office software, it will require some time to get used to, which might give tech buyers pause.
Another potential drag for Office is that the world has changed considerably since the last major release in 2003. Inexpensive, open-source alternatives to Office have gained traction. And rivals such as Google Inc. are increasingly delivering spreadsheets, word processing and other tools for free over the Internet, an attractive choice for smaller companies.
At Tabblo, a startup that lets people assemble, print and share online photo collections, CEO Antonio Rodriguez expects to upgrade many, though not all, of the company's 25 PCs to Vista throughout 2007. Tabblo's staff expects Vista to make it easier to back up files and synch data over multiple computers. Rodriguez and crew also have energetically adopted Microsoft's latest Web browser, Internet Explorer 7.
But Office 2007 holds few such attractions for his company. Tabblo employees have largely abandoned Excel and Word for free programs on the Web, praising the flexibility that comes with having files stored online. Just about the only Office program Rodriguez still uses is PowerPoint for presentations.
"To me, Office 2007 is a complete non-event. I have no interest in an upgrade," he said. "Most of what I like about computing now lives online."