Channel Marker

Nov 13 2006   6:28PM GMT

Misplaced optimism: Channel should just move on from Vista



Posted by: Brein Matturro
Tags:
Channel partner programs
IT buyer market research
Microsoft
Reseller channel business development
Systems and systems management

As the ship date for Microsoft. Corp.’s Windows Vista operating system grows closer, the marketing to both end-users and solution providers gets more intense – and not only from Redmond. CDW Corp., for example, released a report this morning predicting that 86% of U.S. companies expect to adopt Windows Vista, with a total of 20% of organizations doing so within 12 months. The 86% figure sounds impressive, but ultimately it means that fewer companies are currently planning to upgrade to Vista than are currently running on Windows. It turns out saying “eventually” was a way of touting the most optimistic figure without being too precise about saying either how fast people will upgrade, or whether they ultimately have a choice.

According to Gartner Group studies, various flavors of Windows account for 96.04% of all currently active PCs, though that percentage could drop as low as 95.69% next year, the report predicts. So if only 86% of companies ultimately upgrade to the dominant operating system, Microsoft will actually lose market share? Probably not, according to both Gartner and International Data Corp. Both predict that about 10% of U.S. companies will migrate to Vista within the first 12 months after it’s released. That’s still more pessimistic than Microsoft, which predicts Vista will be adopted twice as fast as XP was. That would put Vista at about 20% of the Windows share of the market after 12 months.  But CDW’s report, wildly optimistic on the surface, CDW’s report — which is based on 761 online responses from IT decisionmakers who are familiar with Vista –  shows 14% of respondents don’t plan to upgrade at all, 10% have a tentative rollout plan and only 2% have a detailed, scheduled plan. Despite the low number with a detailed plan, 13% of respondents expect to upgrade in three months, 23% more within six months, and half of the total within 12 months. That’s where the 86% figure comes from. But the number responding to that particular question was only 120, of the total 761 surveyed. So of the 16% who responded at all to the question of when they’ll upgrade, 86% plan to do so. That’s 103 respondents – 13.5% of the total. CDW calculates that the actual prediction is 20%, and I’m not about to pit my math against theirs. But either figure still looks unrealistic. No major end-user survey so far has indicated corporate IT buyers are going to upgrade any faster than the speed with which they replace their existing hardware, and many will insist on an even slower adoption, to coincide with their own application-development cycles, training or other budget issues. Gartner predicts that Windows 2000 Professional will still have a 9% of the total OS market share at the end of next year, in fact, while Vista will have only 9.2%. That’s not a great showing against a seven-year-old operating system, especially one as comparably clunky as Win2K. This all doesn’t bode well for the channel’s hardware sales; but on the other hand, it doesn’t bode ill, either (not by itself anyway). Gartner’s PC sales forecast cuts expected unit-sales growth from 11.3% between 2003 and 2005 to 5.7%. It cuts revenue growth from 4.7% to 2%. Vista doesn’t seem to be a factor in the downturn, which seems to have more to do with budget cycles and a lack of a screaming need for hardware upgrades. But it’s not driving new sales, either. 

Fifty-one percent of responders to CDW’s survey said they would have to upgrade their PCs to handle Vista; but the sales-growth figures show not many of them are willing to do so. None of this means that PC hardware is dying as the staple product of the channel. And it doesn’t mean that any solution provider that doesn’t become a managed-service provider  is doomed to failure. PC and server hardware is still the core of most non-networking solutions; keeping both the computing and networking gear running and secure will continue to be the bread and butter of the channel. What it does mean is that Microsoft’s resource-intensive, environment-churning core products (add Office 2007 into the list of things that aren’t going to sell as fast as Microsoft would like) aren’t going to give the channel the kind of bootstrapping infusion of revenue they have every three or four years in the past.  End users aren’t excited enough about PCs to do huge upgrades every time Microsoft ships one; but they’re not excited enough by IT do want to manage it all themselves, either.     

 

VoIP, location-aware communications, online and physical security, outsourced maintenance and administration, software-as-a-service, storage design, management and outsourcing and all-around-outsourcing will continue to feed and expand the channel.

Even if the Vista vision is, for the companies who sell it, a lot dimmer than Microsoft or CDW, or even the channel companies themselves, wish it would be.  

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