Goodbye, Mr. Gates, Hello Vista Woes

Looking Back at 2008

What went wrong? This was supposed to be the year of Windows Vista. Instead, it turned out to be another banner year for Windows XP in 2008.

The arrival of Vista Service Pack 1 (SP1) last spring was, by the conventional wisdom, supposed to kick off large scale corporate adoptions of the new operating system.

However, instead XP saw another year of solid sales, demonstrating that it is still alive and kicking – thank you very much. In fact, XP got its own new service pack dubbed SP3 last spring as well.

Even though Microsoft drastically limited access to XP, corporate customers especially continued to line up to get it. They did that even at the added expense, in some cases, of a “downgrade fee” from PC makers, who sold new PCs with Vista but then actually shipped them with XP preinstalled. The company says it has sold more than 180 million licenses for Windows since Vista shipped, but many of those, critics say, are XP units – not Vista.

Additionally, ultra low-cost PCs, often referred to as “netbooks” turned out to be another market for XP. Despite Microsoft’s desire to kill XP off, it couldn’t turn its back on hard cash waiting to be scooped up.

Introducing Windows 7

Microsoft delivered the public beta of the second service pack for Vista in late November. However, company officials have already begun promoting Vista’s successor, Windows 7.

That’s right, even while Microsoft is still promoting Vista, it’s already psyching up customers to buy what it bills as Vista’s more stable, less complex, better performing sibling – so-called ‘Vista done right,’

In fact, Windows 7 is set to start public beta testing in mid-January with release planned in time to make it onto new PCs in time for the 2009 holiday sales season. (However, the official party line is that Windows 7 will ship by the third anniversary of Vista’s debut, which was January 30, 2007.)

Noted in passing, November heralded the 25th anniversary of Microsoft’s original announcement that it would have something it called Windows. With Windows 1.0, in fact, the company began the pattern that it has often inadvertently followed through the years – Windows 1 was more than a year late to market. Ding.

Ozzie as the New Gates

This was also the year for the unofficial passing of the baton from retiring chief software architect Bill Gates to his personally selected replacement, Ray Ozzie.

Although Ozzie, who created Lotus Notes, actually took on the CSA title as well as the mantel of chief visionary, two and a half years ago, 2008 was the year when he started to impart his own signature to Microsoft’s plans. (Gates finally retired on June 30.)

Those plans include the company’s growing “software-plus-services” strategy.

Azure in the Mesh

Ozzie kicked things off in April, when he debuted “Live Mesh.” The idea is that all of a user’s devices — from mobile phones to game consoles to PCs and Web browsers –- should link with each other and all of the user’s social activities, producing a seamless framework for both personal and business access anywhere, anytime, with connectivity produced by the computing “cloud.”

Mesh is only a part of the overall vision, however. At Microsoft’s Professional Developers Conference (PDC) in Los Angeles in late October, Ozzie introduced a key component of Microsoft’s developing “cloud computing” initiative – the Windows Azure Development Platform.

Azure, which is currently available as a community technology preview, provides the infrastructure for developers who want to write cloud-based applications as well as all the components and services needed to scale those applications to be as small or as large as the customer needs, quickly. Azure is designed to run across entire datacenters – like the giant datacenters that Microsoft is building across the country and eventually across the world.

Near the end of the year, Microsoft also announced it is working on Web-based versions of its Office Suite of productivity applications. Although they would have fewer features than the shrink-wrapped Office suite, Office Web apps can be run from a browser, including Internet Explorer, Firefox, and Safari.

In mid-November, the company delivered the latest versions – so-called “wave three” of its Windows Live Services, a set of applications that provide users with services via the Web, and complement Microsoft’s software offerings.

Next page: An Object Lesson for Lawyers

Looking Back at 2008

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An Object Lesson for Lawyers

One thing that Microsoft CEO Ballmer had hoped to put behind him in 2008 was the company’s continuing legal problems both domestically and abroad. Those efforts have not gone smoothly.

Microsoft decided last year to settle as many of its legal contretemps as it could in order to get them off the books and end their distraction from what the company needs to focus on – products. That included dropping appeals of its 2007 antitrust loss in the European Union (EU) over the European Commission’s (EC) victorious ruling that Microsoft had abused its dominance and violated antitrust rules.

Despite those moves, though, two other probes are currently underway in the EC. Additionally, despite paying fines totaling some $970 million to settle its antitrust tête-à-tête with the EC, Microsoft is appealing another fine – this one for dragging its heels in delivering required technical documentation to competitors – of $1.35 billion.

Meanwhile, Microsoft did get its Office Open XML (OOXML) formats – the default file formats for its Office applications suite – certified and published as a worldwide standard by the International Organization for Standardization (ISO). The victory did not come without a global controversy. Ultimately, Microsoft comfortably got a majority of voting nations to ratify OOXML’s standing with the ISO.

That’s important because a lot of large corporations and, particularly world governments, require ISO certified technology. Without the ISO’s imprimatur, Microsoft stood to lose a lot of money in lost contracts where it might not be permitted to bid.

However, apparently as a backstop, Microsoft officials also said they will support a pre-existing and competing document standard OpenDocument Format (ODF) in the next major release of Office – referred to as Windows 14. Support for OOXML won’t come until the next version of Office after 14.

That’s because, In making changes to OOXML in order to get it through the standards process, Microsoft also made the ISO OOXML submission not compatible with its original Office formats. Now, that work is progressing as the company tries to resolve differences between the two, while the anti-OOXML factions chortle with glee – Office will support ODF before it will support the standardized version of OOXML.

Microsoft’s legal troubles with the EC appear to not be over.

Indeed, Microsoft’s machinations in getting OOXML certified by the ISO may have exacerbated the company’s antitrust situation in Europe and other parts of the world. The anti-OOXML groups claimed the company manipulated the ISO voting. The EC, fresh from its victory regarding Microsoft’s antitrust status, has said it is investigating but has announced no results so far.

In June, Microsoft hired a new legal czar to handle EC and EU issues — Microsoft’s new vice president of European Union (EU) affairs, former General Electric executive John Vassallo.

Is Microsoft ‘Vista Culpable?’

Still, Microsoft’s legal affairs in Europe may be the least of its current litigation worries. Vista appears to be – in a cynical sense – the gift that keeps on giving.

What started in 2007 as a minor nuisance lawsuit over its pre-launch Vista ad campaign grew in 2008 into a full-scale consumer class action suit against the company. Discovery ended in late November.

The latest: in late November, the judge ruled that the plaintiffs could depose Ballmer regarding what he knew and when regarding the so-called “Vista Capable” sticker campaign.

At the same time, Microsoft petitioned to have both the class action status revoked as well as the suit itself to be dismissed. The judge has not ruled on those requests yet.

The suit revolves around the question of whether Microsoft deliberately loosened the standards on which computers qualified for the Vista Capable sticker. The stated goal of the Vista Capable logo stickers affixed to computer boxes was to assure customers that, if they bought a Windows XP PC prior to delivery of Vista, the PC was capable of running Vista, or of being upgraded to run Vista.

As it turned out, relaxation of the certification standards for the sticker, specifically accommodated the Intel 915 integrated graphics chipset, which meant that those PCs could only run the bare bones, lowest cost edition of Vista. That version does not run Vista’s trademark Aero Glass user interface, so the plaintiffs claim it is not a “real” version of Vista.

In fact, embarrassing Microsoft e-mails, unsealed by Federal Judge Marsha Pechman, state that one goal of the Vista Capable sticker program was to keep the market for new PCs from going through the floor during the 2006 holiday buying season due to the lateness of Vista in consumer channels.

The judge ruled in February that the suit deserved class action status, and the extended monitoring of Microsoft for an additional two years. (It had been scheduled to lapse in November 2007.)

Microsoft spent much of 2008 getting lawsuits and legal issues off its books and looking for strategic opportunities in search while advancing its cloud computing strategy.

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