Windows 98: Upgrade path remains unclear

Microsoft has marshaled its vast resources to try to paint a clear picture of the upgrade path for users of the various flavors of the ubiquitous Windows operating system. But with the release of Windows 98 looming, the reality that upgrade-weary users and systems vendors see worldwide is far murkier than the marketing message.

Microsoft has marshaled its vast resources to try to paint a clear picture of the upgrade path for users of the various flavors of the ubiquitous Windows operating system. But with the release of Windows 98 looming, the reality that upgrade-weary users and systems vendors see worldwide is far murkier than the marketing message.

By all accounts Windows 98, due to be released next week, is not generating the vendor hype and customer interest that its predecessor did. But reaction to the operating system says a lot about user strategies for the future, the possible fate that awaits the various Windows versions, and the relationship that IT companies have with the software giant as it battles antitrust charges on its home turf.

Many, if not most, corporate users fall in line with Microsoft guidance that Windows 98 is a consumer operating system. But for a sizable chunk of users with legacy applications built around Windows 95, Windows 98 may fill the need to stabilise their base platform without worrying about the upgrade hassles to NT -- which requires more robust hardware and has a different file format structure.

"If Windows 98 resolves the stability problems of the Windows 95 platform we will be interested in taking it into consideration," said Pietro Santo Palopoli, the director of the Italian state-owned software company Finsiel SpA.

And still other corporations are holding back their Windows 98 and NT plans to consider how Windows CE -- built for computer "appliances" and mobile devices -- will fit into the mix.

Running the mix of hardware needed for these various versions of Windows, and upgrading the various flavors of the operating system across hundreds, thousands and tens of thousands of PCs in companies is a very complex task.

It could be argued that Microsoft wins no matter what flavor of its software is chosen. But if the various permutations of Windows leads to user confusion and hesitation, it could put brakes on the operating system revenue growth that the market is used to seeing.

The uptake rate of Windows 98 is of intense interest to industry insiders, since there is a lot at stake even if it fails to be the hit Windows 95 was.

"We expect this to be the largest software launch since Windows 95," said a spokeswoman from CompUSA.

Microsoft will ship 12.8 million copies of Windows 98 this year, about 15% down from the 19.5 million units of Windows 95 that were shipped in 1995, according to Bill Peterson, an analyst at market researcher International Data, in Framingham, Massachusetts. The total number of copies shipped should reach 66 million by 2000, he said.

With so much software being pumped into the market, any confusion about the upgrade path for users could mean grave consequences. User hesitation can mean lost revenue for vendors, and mistakes in upgrading would be costly for users.

"The picture is very murky," said IDC's Peterson. Originally the message was supposed to be clear -- Windows 98 is for consumers, NT is for companies.

"In the past 18 months the message has changed. You have (Microsoft Chairman and CEO) Bill Gates now saying, in the trials and tribulations going on around the (U.S. Department of Justice antitrust) case, that the US economy will be crippled if Windows 98 doesn't ship on time," Peterson said. "Well, everyone knows that the corporate market is where the money is. Is he saying that corporate uptake of Windows 98 will be that great?"

Adding to the confusion is that although Microsoft is telling Windows 95 business users that NT is the upgrade path for them, the next major release of NT is not expected out for another year, Peterson said.

And Windows 98 has features which NT, currently at version 4.0, will not have until version 5.0, such as improved support for multimedia hardware, said Marco Hirminghaus, a computer consultant to the Informatik Zentrum Bayern GmbH & Co. KG, which maintains and installs the network for savings and loans institutions in the Bavaria region of Germany.

For instance, the new Windows 98 universal serial bus will let a PC hook up to numerous peripherals, for example joysticks, keyboards, and multiple monitors, Hirminghaus said.

Not all industry insiders agree that the upgrade path is confusing. Compaq Computer spokeswoman Nora Hahn said the PC giant believes Windows 98 uptake won't be dampened by NT and CE because Microsoft is clearly positioning them for different markets.

But even she hedged a bit when it came to making a prediction about the business side.

"Windows 98 will replace Windows 95 on the consumer side fairly quickly. On the commercial side, it's hard to tell. We'll have to watch the market," Hahn said.

Even retailers and systems integrators who are betting that NT will be the operating system of choice for business users say that Windows 98 offers a useful alternative in some cases.

"I don't have people ringing the phone off the hook," for Windows 98, said Pam Wiess, principal of infrastructure services & support practices at Metamor Technologies, a Chicago-based software and Internet developer and systems integration firm.

But the catch is that NT needs more infrastructure and more support -- and that hampers some companies from going to that platform, Wiess said. "If they're not willing to make that investment (for NT), then they may want to go for the Windows 95 or 98 platform," she said.

Another reason for business users to move to Windows 98 and avoid NT for the time being is that it will run current custom applications built for Windows 95.

Applications built especially for Windows 95 may not properly run on NT, which was a complete 32-bit rewrite of the operating system and also has a different file format structure than the Windows 95/98 line, said analysts. Shrink-wrapped applications bought in the last year for Windows 95 should run fairly well on NT, but anything older than that may not, they warn.

This may not concern some companies.

"I don't see what I call the more innovative, leading edge strategic IT shops jumping in any fashion on the Win98 bandwagon," said William Kerrigan, senior vice president of sales at Corporate Software & Technology, a software reseller for large companies.

But even Kerrigan allows that companies that want to protect investment in custom-built applications for Windows 95 may consider Windows 98, and said Windows 98 should see at least a "modest demand" from corporations.

One reason to consider protecting a large investment in the Windows 95 environment is that NT 5.0 is the first generation release in a next-generation platform.

"It's mostly new code, 30 million lines of it. It's very large, very complex and a very new offering, and as result we believe most companies will wait before moving to it in large numbers," said Rob Enderle, desktop and mobile analyst at the Giga Information Group Inc. in Santa Clara, California. "They'll want to make sure the bugs are out of the platform before deploying it."

As a result many customers may wait until NT 5.5 comes out before upgrading to the NT platform, and may consider Windows 98 as a maintenance upgrade to the current installed base, said a variety of analysts and users.

And further out, Windows CE will emerge, becoming installed in mobile devices at the factory level and attracting developers to write shrink-wrapped software for it.

"Windows CE is the real wild card," said Enderle. The industry is moving towards appliances and away from" bulky PCs, he said.

In fact, CE on simple, mobile appliances will outsell NT at a certain point, Enderle said, since most workers don't need the massive mainframe-like capabilities of NT. Starting in 2002 or 2003, the Giga Group foresees CE becoming the high-volume version of Windows.

"The idea of a future, always-connected, follow-me type communications link is quite interesting and has very significant business implications ... and one in which CE will play a significant role," said James Harris, director of information architecture at a large pharmaceuticals company.

In a sense, Microsoft is a victim of its own success -- a problem other vendors might love to have. With so many users on many versions of Windows, it's hard for Microsoft not to start cannibalizing its own installed base. It's also difficult to get across a simple message for users on so many different hardware-software combinations.

Despite Microsoft's vaunted marketing machines, the company's message on the upgrade issue "has been relatively muddy," said Enderle.

"The CE message is off into the future because they only have a first set of terminals out; they're not ready for the desktop yet. On the NT vs. 98 issue they try to be clear for corporations to move to NT, but corporations appear to favor the Windows 98 platform because it's the more cost effective, which puts Microsoft in conflict with itself," Enderle said.

While the message from Microsoft to the market may be unclear, the message from the market back to Microsoft is straightforward.

While NT and Windows 98 may offer network management and various other benefits, most companies simply don't have the budget and don't want to train employees on a new OS, said Clive Jackson, CEO of Global Beach Ltd., a marketing an communications software development company in Twyford, England.

"More goodies being heaped onto the pile just makes it (Windows) more confusing," Jackson said.

And that's not a good thing for vendors or users.

(Reported by Nancy Weil in Boston; Marc Ferranti in New York; Elinor Mills and James Niccolai in San Francisco; Kristi Essick in London; Phil Willan in Rome; Marybeth D'Amico in Munich; Rob Guth in Tokyo; and Juan Carlos Perez in Caracas.)

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