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Microsoft Releases Latest Windows Platform

January 30, 2007 at 2:20 PM EST
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MARGARET WARNER: After more than five years and $6 billion in development, Microsoft’s latest software system went on sale to the public today. It’s a new computer operating system called Windows Vista, with a complementary product, Office 2007.

An operating system manages all of a computer’s hardware and software programs. More than 90 percent of the world’s personal computers run on Microsoft systems. And they account for most of the company’s $44 billion in annual revenues.

The company says Vista is more secure and more user-friendly than earlier Windows versions. The cost, if purchased independently, ranges from $100 to $400.

In their announcement yesterday, Microsoft Chairman Bill Gates and CEO Steve Ballmer acknowledged that the technology landscape has changed dramatically since the first major update of Windows in 1995.

STEVE BALLMER, CEO, Microsoft: If you think back, as Bill did, to the time of 1995, the PC was sort of solitary in the technology world. The Internet wasn’t really developed. People didn’t own cell phones, really, very much or digital cameras.

Here we are, 12 years later, and Windows Vista comes to market. There’s many technology products. But at the center, the product that brings it all together — the hardware, the cameras, the photo frames, the connectivity to other machines in the house, the new applications, connections to Web sites — it really is the PC running Windows, and particularly Windows Vista, that enables that next generation.

Differences from previous versions

David Pogue
The New York Times
Most people think of Windows as something sort of utilitarian and corporate, but they've really made an effort to make it, well, more Mac-like in this version.

MARGARET WARNER: For more now on Vista and Microsoft, we turn to David Pogue, technology writer for the New York Times, and Kevin Werbach, professor at the Wharton Business School at the University of Pennsylvania. He studies the technology industry.

Welcome, gentlemen.

David Pogue, first, what is so new, and different, and special about Vista? How is it different from earlier Windows versions?

DAVID POGUE, New York Times: Well, I'd say Microsoft spent most of its effort in two ways. Number one, the security. Spyware and viruses and all the other nasty stuff from the Internet has been really giving Microsoft a black eye for years.

And the second big category is looks, and elegance, and smoothness. Most people think of Windows as something sort of utilitarian and corporate, but they've really made an effort to make it, well, more Mac-like in this version.

MARGARET WARNER: And what market are they aiming at, at first? I mean, did they expect it just to go into new computers that are bought, or are they really hoping and planning to have individuals or companies buy it and install it as an upgrade?

DAVID POGUE: Well, I don't think anyone is kidding themselves here. Everybody knows that upgrading an existing computer is a hassle. You know, your speakers won't work for two weeks, and it takes all Saturday afternoon.

So even Microsoft admits that 90 to 95 percent of the world will just get Windows Vista pre-installed on the next computer they buy. They don't expect a lot of people to upgrade existing PCs.

And, by the way, there's a good reason for that. Windows Vista has much higher horsepower requirements than an any previous version, so a computer older than about a year-and-a-half old won't even be able to run it with all its features.

An incredibly long development time

Kevin Werbach
The University of Pennsylvania
For Microsoft to build these millions and millions of lines of code that run on so many devices with so many combinations is just a tremendous challenge.

MARGARET WARNER: And why did it take so long to develop this? They've been talking about this for over five years. That's a lifetime in the software universe.

KEVIN WERBACH, University of Pennsylvania: Well, it's an extraordinary...

DAVID POGUE: Five years since...

MARGARET WARNER: Go ahead, David Pogue. And then, Professor, I'll turn to you, in just a sec.

KEVIN WERBACH: Oh, I'm sorry.

DAVID POGUE: Well, halfway through the development process, there was what they call a "reset." There were executive shufflings and a sober realization that they had perhaps bit off a little more than they could chew. They had designed something that was too ambitious and that would take too long to get out the door.

So a couple of years ago, they literally stripped out a bunch of the features they had intended to come out. And what we're left with is a much more manageable piece of meat on the plate.

MARGARET WARNER: Professor Werbach, your thoughts on why this took so long?

KEVIN WERBACH: It's an extraordinary engineering challenge, when you think about it. They have to make Windows work with every different kind of hardware, every different kind of software, and every different kind of use. This is a fundamentally horizontal product.

We're seeing today the release of the consumer version of Windows, but Windows gets used for servers. Versions of Windows get used in mobile devices. It gets used for all sorts of things.

So for Microsoft to build these millions and millions of lines of code that run on so many devices with so many combinations is just a tremendous challenge. And even though they have the best software developers in the world, the best software project managers in the world, they barely got this thing out the door after five-plus years.

Challenges for Microsoft

Kevin Werbach
The University of Pennsylvania
The challenge for Microsoft is that the world is shifting. The innovation, the energy, and economic activity is moving online, onto the Web.

MARGARET WARNER: And so, Professor, what does this do to Microsoft's position in the marketplace? We heard Steve Ballmer talk about all these other new technologies that are out there now.

KEVIN WERBACH: Well, Microsoft is still in an extraordinarily strong position. They're still the dominant player in the PC industry. Their software still runs on virtually every PC, and they're still at the center of the world, to the extent that anyone is.

The challenge for Microsoft is that the world is shifting. The innovation, the energy, and economic activity is moving online, onto the Web. So companies like Google, and Yahoo, and Amazon.com, and eBay, and so forth deliver their services over the network. And they don't depend on the PC as much.

So if you as a user think about the PC as basically a way to get to the Internet, you're not as concerned with what Microsoft lets you do or what it enables on the PC itself. It's just a tool to get to where the real action is.

MARGARET WARNER: David Pogue, do you agree that really what's happening here is a shift to a new model, that your access is no longer something you buy in a box and take home and install?

DAVID POGUE: Actually, I don't agree. I hear this a lot in headlines. It is very exciting to think that some day we might not need this computer that we have to keep upgraded and troubleshoot all the time.

But, in fact, you're always going to need -- I think, for the near many years, you're going to need a hub. You're going to need something that holds your pictures, your music, your videos, all your documents, and, yes, gets you online.

I've noticed that, in the history of technology, new technologies tend to add on. They don't replace. So radio didn't kill off -- I mean, TV didn't kill off radio. The DVD did not kill off going to the movies.

And in the same way, yes, you can access the Internet from your cell phone now and you can watch videos on your iPod, but those aren't great experiences. Those are make-do experiences when you're on the road.

I think most people will still want a big screen and a real keyboard when they get home.

MARGARET WARNER: What about that point, Professor? That's the point that Ballmer was making, that still managing all of this will be your computer, that will be the hub.

KEVIN WERBACH: Well, it's not about killing off. So think about the technology industry today. There's something like 800 or 900 million PCs around the world, big, big market for Microsoft. There's something like 2.7 billion mobile phones.

And the money that Microsoft makes on its PC operating systems, on Windows, dwarfs the money that anyone makes on mobile phone operating systems. It's a different economic arrangement.

So the challenge for Microsoft -- and I think David is absolutely right. There certainly is still a lot of value for Microsoft. They're not going to be suddenly steamrolled or disintermediated or something. They still have a lot of value.

But over the long haul, the question is, does the value that users get move away from the PC? And also, is Microsoft ultimately the best at that integration? They're certainly the best at integrating in the different software pieces for all the different kinds of hardware choices and so forth that a PC user has.

But if the challenge is to integrate in software on a network of hundreds of thousands of computers, running in data centers across the world, which is basically the challenge that Google is extremely good at addressing, then Microsoft is playing catch-up. They're very good there, too, but it's not their core competency.

Facing a shifting industry

David Pogue
The New York Times
Think of how you feel when you use an iPod. It makes you feel good; it makes you satisfied with what's going on. And I think Windows Vista does more of that than any previous version.

MARGARET WARNER: David Pogue, do you think they're playing catch-up in some of these new fields?

DAVID POGUE: There's a good deal of catch-up going on in Windows Vista, in particular. I counted about 35 of the new features in Windows that actually have pretty prominent predecessors in Apple's Mac OS X.

And Microsoft doesn't pretend otherwise. Steve Ballmer was asked about this in an interview. And he said, "We take good ideas wherever we find them," or something along those lines.

It makes Mac fans very upset, but on the other hand it makes Windows better. I mean, it was a successful strategy. Windows Vista is so much more elegant, and smooth, and silky than it ever has been before.

And it's not just eye candy. I mean, stuff like that means something. Think of how you feel when you use an iPod. It makes you feel good; it makes you satisfied with what's going on. And I think Windows Vista does more of that than any previous version.

MARGARET WARNER: So, Professor, the success of Microsoft, I mean, financially, has been that they had this near monopoly, without getting into the legal ramifications of that term, and it generated huge revenues, which then they were able to use to put into development of either new products or upgrading their existing ones.

Are Vista and Windows 2007 strong enough, in your view, to continue providing that kind of a cash cow for them?

KEVIN WERBACH: For the near term. It's a great product. It's going to get used very widely, but ultimately the challenge for Microsoft are these fundamental shifts in the industry.

So David is absolutely right. They've taken lots of great innovations and put it into this operating system, but in the time that it took Microsoft to get this version of Windows out, Apple released five versions of their Mac operating system. They're going to release another version in a few weeks, or at least in the next couple of months.

And Google, companies that deliver services online, can innovate and change their operating system every week if they want to, because it's something within their control. They're not selling this in a box that goes out to lots of users.

So, certainly, Microsoft is still in a strong position. They're going to make billions of dollars on Windows Vista. This is if you take into account the value not just to them, in terms of their sales, but to the entire industry, probably a $100-billion product launch, in terms of new revenue.

So no question, they're not going away. However, over the long haul, the fundamental foundation for their incredible economic success is insecure. And they understand that.

MARGARET WARNER: All right. Kevin Werbach and David Pogue, thank you both.

DAVID POGUE: Thank you.