The week that Bill Gates left the Microsoft building for the last time was the week that Microsoft shipped Windows XP for the last time. If Windows XP proves to be the last truly successful version of Windows, we’ll be able to claim that there’s some poetry in this, and perhaps we’ll all call attention to this synchronicity and write accounts of how Microsoft was unable to recover from the loss of its founder and leading light.

Alternatively, Let’s Get Real

Bill presided over Vista and that’s where the Microsoft pain is coming from right now. Vista was a PR disaster because it was so late and because many features that were originally promised went missing. Aside from the eye-candy interface, it offered very little that was compelling. Microsoft got Vista wrong in many ways (see 10 Reasons Why Vista Is A Disaster for an inventory), but many of those problems (software drivers, performance issues, etc.) will diminish with time.

The real doozy of a problem, though, was that Vista would not run some of the applications that Windows XP ran quite happily. To quote Microsoft senior VP Bill Veghte, “The architectural changes that improved security and resilience in Windows Vista led to compatibility issues with existing hardware and applications.” Existing hardware can gradually be replaced, but business users don’t rip out applications so easily.

That’s one of the reasons that many corporate IT departments will not be deploying wall-to-wall Vista any time soon. Computing is all about the apps. The New York Times reported last week that Intel has decided not to deploy Windows at all on its 80,000 internal PCs. So while Vista may have Intel Inside, Intel will never have Vista inside. It will probably stay with Windows XP until Windows 7 appears in 2010. (Microsoft will provide full technical support for Windows XP until 2010.)

Windows Going Forward (for the PC)

Microsoft’s fundamental Windows problem is that it has never had to compete and now it does. In competitive situations Vista loses out. If you’re tracking the Apple Mac then you’ll know that it had yet another month of 50% year-on-year growth in May. That’s the consumer market, mainly - which is where actual competition happens. ASUS has also opened up an avenue of competition with the Eee PC which runs Linux (or Windows XP, but not Vista.)

Microsoft had promised a real Windows make-over with Vista and it never delivered one. For all OS X’s excellence, it should be remembered that OS X is a good deal younger than Vista, with the Mach microkernel sitting under BSD and a coherent interface layer sitting above it. Windows has archaelogical layers of software buried under the covers, because Microsoft chose to provide a great deal of backward compatibility.

The problem for HP, Dell, Lenovo, Acer, Toshiba, Sony et al, is that they can do very little to compete with Apple if they only run Vista. I’ve heard that some of these vendors are already in a mild panic about Apple’s success in the consumer market and with iPhone (which seems to create a halo effect.) As Apple evolves its line of media products and invents new ones,  they will be forced to compete or roll over. This will naturally spur them to come to market with alternatives, most likely based on Linux.

The mistake Microsoft has made is the same mistake that Xerox made. After playing an almost perfect game of monopoly for over 15 years, it let the competition in. At the exact moment that it should have been samming the doors on Apple yet again, it was announcing yet more delays to Longhorn. Now it’s too late. Apple will continue to grow its share of the consumer PC market, as it spreads its business model across the globe. It can no longer be stopped.

The Corporate PC

Nevertheless, Microsoft will retain control of the corporate PC, except at the workstation end of the market where Apple has always had a strong footprint and Linux also has traction. The problem here is that the PC is gradually going to disappear into the data center through PC virtualization (click here for further infromation) It won’t happen quickly, but as it does happen buyers will care less and less about the OS.

The point is this. There are only some applications that need a PC. Pretty soon all the traditional PC apps (WP, spreadsheet, presentation, etc.) will run very well in a browser. This means that the virtual PC can head towards being a browser based environment which cares not-a-jot whether the OS is Windows, OS X, or Linux. The user won’t even know and is never going to ask for an OS upgrade. The advent of rich interfaces (some call this Web 2.0) will hasten this.

Windows has generated masses of PC revenue in the corporation on the basis of built-in obsolescence, but that opportunity is beginning to close. It’s Microsoft’s misfortune that the obsolescence ploy no longer works.