Enterprises push back XP purchase plans

The US$1 billion marketing and promotional blitz that Microsoft Corp., Intel Corp., and its business partners are expected to wage in promoting Windows XP may be only so much as white noise to many corporate users who say they will push off buying decisions until next year.

Although the long-awaited operating system make take root among consumers, which is where Microsoft will primarily focus its promotional efforts, corporate shops say they are still occupied with rolling out a raft of other products they have bought over the last year or two. Many report they need time to properly weigh the upcoming operating system's new features and what the return on their investment will be.

"With just the major differences in the user interface between [Windows XP] and Windows 2000 alone and what it will cost to retrain my technical personnel and users, I have to take a look at just how much added productivity I am going to get for my money," said Tim McAllister, a CIO with a large regional insurance company in Dayton, Ohio.

Some analysts agree, saying that unlike Windows 95, most IT organizations are not holding up rollouts of internally developed applications for Windows XP's arrival.

"There are not many businesses sitting there waiting desperately for XP to show up so they can start rolling out their applications. This is not like Windows 95 where you will have a phenomenal number of people in the corporations clamoring for it," Gillen said.

Not even the overly aggressive price cuts Intel is expected to announce later this month on the Pentium 4, which Microsoft and Intel are expected to advertise as being made for each other, are expected to entice significantly more corporate buyers.

"[Price cuts] will serve only as a mild stimulus. If you look at things historically, pricing on processors almost never triggers buying binges among corporate users. These 'new' price points already exist in the market so it only serves to shift the volumes among existing price points," said Roger Kay, director of client computing at IDC in Framingham, Mas.

Still, some users like what they see in Windows XP and are ready to roll the much-anticipated operating system out to most of its users even by the end of this year. Going beneath XP's surface appearance, some believe its security features, improved reliability, and remote access capabilities make it more than their financial while to invest aggressively now.

"These days people do not work in the office 9 to 5. They work at home or in hotels so being able to provide them with high-speed access securely and to have that access be easy is important to us. We also like [XP's] firewall capabilities with the 802.1x standard now in there," said Dean Hertzog, director of CIO Operations for Enterasys Networks in Rochester, N.H.

Although corporate users may stay dry as the Microsoft-Intel marketing tidal wave washes over them, the massive effort should give at least a short-term boost to both Windows XP and many OEM's consumer-oriented desktop lines.

"Anytime you put this much money into the marketplace, it will have an effect. People are going to go out and buy something. I suspect consumer interest will be high initially with corporate interest getting there eventually," said Chris LeTocq, an analyst and co-founder at Guernsey Research in Los Gatos, Calif.

Top tier OEMs echoed this sentiment generally, saying they expect Windows XP to drive up sales of desktop systems aimed at consumers, particularly among those looking for back-to-school systems in September or as holiday gifts over the fourth quarter. But sales of XP-based systems targeted at businesses will be a slower ramp up.

"Typically, large accounts do not transition to new operating systems quickly. Consumers on the other hand tend to want the latest and greatest stuff,'' said Ray Gorman, an IBM spokesman. "Small and midsize market accounts are a mix of both where some will move to XP right away and other migrate over time," he said.

Microsoft officials remain confident that XP will have a good measure of success in both the consumer and business markets initially, driven by its much-improved reliability and communications features including its support of wireless networks.

"The feedback from most of our Joint Development Program Partners is that [XP] represents an incredible change from the Windows 9X line in that it is more reliable and easier to install company-wide from servers," said Charmaine Gravning, a product marketing manager at Microsoft in Redmond, Wash. "We think just the remote capabilities for desktop users represent a saving for most companies, as well as making them more productive," she said.

Most analysts agree that Windows XP will represent a significant and welcome change for corporate users of Windows 9x series. But despite its improved interface and other features goodies, they believe Windows 2000 desktop users will see it as merely as an incremental improvement.

"I think Microsoft understands that those who have deployed Windows 2000 Professional will see this as a point release, but with some nice-to-have things and some cool tools," said Peter O'Kelly, an analyst at The Patricia Seybold Group in Boston.

O'Kelly and others believe that XP's greater reliability and the technical convenience of having built-in wireless capabilities will be what attracts corporate accounts. But longer term, it will be its total cost of ownership value that will attract them to a more strategic commitment sooner rather than later.

"Instinct tells me people will upgrade faster than most believe. Focusing right to the bottom line, users will see that instead of using their five-year-old PCs, they can upgrade to a new machine for $600 per user that will be more reliable, faster, and that has a future. A lot of people will roll out XP with those machines," O'Kelly said.

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