How Quickly Will Vista Catch On?

Solution providers can be forgiven for being a bit confused about all of the forecasts for how quickly Microsoft's Windows Vista will--or will not--catch on among business and consumer buyers. But resellers shouldn't get bogged down with the numbers. The upshot is that while waves of buyers won't be migrating to the new desktop operating system overnight, solution providers can expect steadily growing demand for Vista and related products and services through 2007 and beyond.

While some customers will upgrade to Vista because, well, just because it's there, solution providers can't forget that their job is to offer the value that makes upgrading worthwhile. "It's up to [channel] partners to give customers a good reason why they should upgrade," says Jonathan Edmett, sales vice president at Solutions Consulting Group (SCG), a San Diego-based solutions provider and Microsoft Gold partner.

Microsoft launched Vista Business, Vista Enterprise and Vista Ultimate for its volume-license business customers Nov. 30. Consumer versions of the operating system are slated to hit the channel Jan. 30.

Perhaps the most upbeat forecast of Vista sales comes from IDC, which projects that Microsoft will ship more than 160 million new client OS licenses this year and 56 percent of those—almost 90 million—will be for Vista (both business and consumer versions). In 2008, 88 percent of the 175,000 client OS licenses Microsoft will ship will be for Vista, according to the market-research firm.

Those numbers mean big business for solution providers, given that half of all the software sold in the United States is for Microsoft client OSes, says John Gantz, chief research officer at IDC. "I think it will be a good opportunity for channel partners," he says, noting that key technology upgrades like Vista, which require new hardware, services and training, don't occur very often.

In a Microsoft-commissioned study, IDC concludes that Vista will generate $72 billion in related hardware, software and service revenue for solution providers, hardware vendors, distributors and resellers. That's the return on the $10 billion the report predicts solution providers will spend on Vista readiness. Channel partners will generate $18 in service-related revenue for every $1 Microsoft earns through Vista sales, the report concludes.

NEXT: But other studies pour cold water on overheated expectations.

A November report from Forrester Research argues that consumers will adopt Vista at the same pace they adopted the earlier-generation Windows XP, not faster than any other Windows client OS, as Microsoft has trumpeted. Analyst Ted Schadler says it took Windows XP more than four years to reside on the majority of household PCs and he doesn't foresee Vista being adopted any faster. He forecasts that about 12 million U.S. households will own Vista this year, growing to 73 million (out of some 120 million households) by 2011.

In a report examining Vista adoption by businesses, Forrester analyst Simon Yates says that 34 percent of PC decision-makers at U.S. and European businesses will begin deploying Vista in this first year of its availability. But just how broad those deployments will be is debatable.

PC upgrade cycles, both within businesses and by consumers, will drive much of the demand for Vista. Softchoice (VARBusiness 500 No. 71), a hardware and software reseller, last month revealed the results of its own study concluding that 50 percent of all business PCs in North America don't meet Vista's minimum system requirements and a whopping 94 percent can't support Vista's premium configuration. That's due to Vista's sharp increase in hardware requirements and businesses stretching out PC upgrade cycles as long as five years or more.

Even PC upgrades are no guarantee of Vista adoption. Forrester predicts that 20 million of the 95 million business PCs in the U.S. will be retired, but that "the vast majority" will be replaced with new Windows XP PCs, not Vista machines. Only 5 million will get Vista. That's because IT managers prefer to standardize on a single, stable OS that meets their needs before introducing a new one, no matter how many bells and whistles it may offer, Forrester says.

And a lot hinges on how the U.S. economy performs this year, a big factor in how much businesses spend on information technology. IDC expects IT spending to grow 6 percent in 2007, about the same as last year.

The bottom line is that VARs can't sit back and wait for Vista orders to roll in. SCG's Edmett says resellers and service providers have to demonstrate to customers how the new OS will solve a business problem or streamline IT operations.

SCG engineers are already at work installing Vista at about 20 percent of the company's customers, those that "just want to be on the latest and greatest," Edmett says. But the other 80 percent won't upgrade without a catalyst, he says, predicting that integration with new software products in the Microsoft stack, such as SharePoint and new versions of Microsoft's ERP and CRM apps due out later this year, will be a major Vista demand generator. SCG, for example, is building a document-sharing system for one customer that incorporates SharePoint and Vista.