In research on the economic impact of various software spending plans, Sarah Friar, from Goldman Sachs finds that as the economy tightens, two of the most likely projects to be delayed are upgrades to Microsoft Vista and Microsoft Office.

Reference: http://www.sandhill.com/opinion/daily_blog.php?id=18&post=436
Exhibit 11

For Microsoft Vista, we have studied in depth the savings realization, and there is indeed value and ROI in the upgrade. These savings include improving manageability and support, reduced power costs, improved security and more. These findings are reflected in this blog and Computerworld article (see reference). I have been a Vista user for a long time, and am a fan.

Reference: http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9008121

But in most corporate instances, the pain of testing and remediating application compatibility issues, and upgrade / delivery is so great as to marginalize the benefits - especially in these more frugal times.

Don’t get me wrong, crunching the numbers proves that there is still a net benefit to the upgrade, and a positive ROI, but the investment in precious resources to perform the remediation and delivery efforts the upgrade compared to the investment and ROI of other projects makes it a project ripe for delay - especially in these times.

The pain and risks vs. reward for Vista upgrade just pales in comparison to other cost savings projects in the data center like server / storage virtualization and systems management consolidation. And when you have less to spend, you want to get more for less. The upgrade to Vista is a more for more project, and these are flat out going to be postponed.

The numbers prove out that frugal IT executives are in-line with my opinion. In the aforementioned Goldman Sachs survey where over 40% indicate delay in implementing Vista, by far the highest project up for delay. But that was back in June of 2008 before the meltdown. We estimate the number to easily be double this today.

1) Freezing a market mistake 1:

Customers are hurting in these tight economic times and IT budgets are being reduced. The person next to you just got laid off and you fear for your job. It is no time to force customers to upgrade to a product that they would rather not upgrade to at this time.

From Computerworld reporting on Microsofts latest announcement on XP support:

a) On June 30th, XP will no longer be available for general purchase. However, some resellers have announced that they will factory-install XP Professional on new machines after June 30 by taking advantage of Windows Vista's "downgrade" rights.

b) Regarding support availability which many are fearful will end on XP, Jared Proudfoot, a manager in Microsoft's support life cycle group, reiterated the final support dates for Windows XP a Computerworld article. According to Proudfoot, Windows XP will remain in what Microsoft calls "mainstream support" until April 14, 2009, and continue in "extended support" through April 8, 2014, he added. The former delivers free fixes -- for both security patches and other bug fixes -- to everyone. During the latter, all users receive security updates, but non-security hot fixes are given only to companies that have signed support contracts with Microsoft.

Source: Computerworld
http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9080998&intsrc=news_ts_head

In normal times, the length of support on XP from initial release to current expiration dates is longer than normal, and some would say heroically long. This has been a good thing.

But unfortunately, the upgrade investment requirements in these not normal times mandates that Microsoft provide a better solution as the numbers clearly indicate that upgrading to Vista is not in the cards for most organizations. Funds are just not available to do the upgrade and are being spent on quicker payback, higher ROI projects – many of these involve other Microsoft solutions such as System Center, SharePoint, OCS, SQL, Hyper-V, App-V etc..
Giving customers a break when times are tough will definitely pay back later with loyalty and more business. And overall, these companies are investing heavily in other Microsoft solutions as a priority to help save costs.

Forcing customers to make an investment in Vista that they would rather delay, or wasting resources jumping through hoops in order to get the XP they would like to remain with will only cause rebellion.

I do believe Microsoft when it says it is not forcing the upgrade to Vista, but personal opinion polls and blogs would tell a different story. The PR war is being lost on this front.

1) Freezing a market mistake 2:

Microsoft has created a positive buzz around Microsoft 7 as a better upgrade path from Windows XP.

Technical reviewers love 7, and say it is everything Vista should have been.

Many, such as InfoWorld (see below) argue to skip Vista altogether and jump right to 7.

I have not tried 7, but our managed service provider raves about it every time I see him.

Those who are trying to figure out what to do next could not be more confused.

They know the upgrade to Vista will use precious resources and deliver some but not stellar returns. They know that support is going to be limited on XP.

Do you upgrade now to Vista? Stick with XP and wait for Windows 7 which technologist like better?

In uncertain times people are generally frozen as to what to do next anyway. Making a move often does nothing but put your head on the chopping block.

Throwing a new and exciting future version in the mix will only make the choice harder for those who would like to upgrade and make the case to Vista now, and will make easier for those who decided to wait anyway for 7.

Source: InfoWorld http://weblog.infoworld.com/enterprisewindows/archives/2009/02/dont_believe_th.html

The bottom line

These tougher times represent both good and bad for Microsoft solutions.

The bad news: Microsoft Vista sales can only be hurt more by these two market freezing actions. Expect the next Goldman Sachs survey to have Vista once again on the top of the delayed projects list. For Vista to move up the list, Microsoft needs to make it an even easier economic decision and represent a better value proposition in these tight times. If you want folks to upgrade, drop the price substantially and make it a no-brainer value proposition.

The good news: Other Microsoft data center virtualization, management and collaboration projects are getting approvals and unlike Vista, offer an incredible value proposition (versus just ordinary) that puts these projects at the top of the priority list.