When Is a Downgrade a Good Thing?

Microsoft has spoken. Windows XP’s days are numbered, and the clock runs out on June 30, 2008… or does it?

It turns out that creative thinkers at Dell and Lenovo – and reportedly HP – have figured out a way that some customers can continue to get new PCs configured with XP Professional through January 31, 2009.

The key is in what’s called “downgrade rights.” That is, you can purchase a new PC with Windows Vista Business or Vista Ultimate, and have it downgraded to XP Professional. This option is not available if you buy a PC with Vista Home Basic or Home Premium, however.

Both Dell (NASDAQ: DELL) and Lenovo clearly describe the downgrade options on their Web sites.

Microsoft is scheduled to release XP Service Pack 3 to the public on Tuesday, April 29.

The moves are apparently independent of Microsoft’s own initiatives to keep XP alive a little while longer. For instance, Microsoft recently announced it will make XP available as an operating system for so-called ultra low-cost PCs (ULCPC).

Additionally, Microsoft CEO Steve Ballmer told attendees at its Most Valuable Professionals Summit in Seattle two weeks ago that the company will do what customers demand when it comes to XP.

“We have some customers, a lot of customers using Vista … and we have a lot of customers that are choosing to stay with Windows XP, and as long as those are both important options, we will be sensitive, and we will listen, and we will hear that,” Ballmer said. In fact, the company has already extended that cutoff period by five months from January 30, 2008 – the first anniversary of Vista’s consumer launch.

In fact, one analyst thinks the new options may be in Microsoft’s best interests.

“It does underline that there are customers looking to skip versions of the operating system and it may be an indicator that some may wait for Windows 7,” Rob Helm, director of research at Directions on Microsoft, told InternetNews.com. “That puts pressure on Microsoft to get Windows 7 out quicker.”

Microsoft has said repeatedly that Windows 7, the next release of Windows after Vista, will ship around three years after Vista shipped – which was January 30, 2007. If the company stays roughly on schedule, that would put Windows 7 out in early 2010.

The company doesn’t have a good record of meeting Windows ship dates, however. Vista itself was delayed several times and came out after the crucial Christmas 2006 sales season. So the pressure may be good for both users and Microsoft.

“Ballmer has said there won’t be any more five-year spans between releases,” Helm said.

As a matter of fact, there have been Windows releases in Microsoft’s past that some customers simply skipped because they didn’t provide enough added value at the time. Most notable was probably Windows ME, although some Windows 2000 customers skipped Windows XP as well – at least initially.

So what groups does Helm think might benefit from taking advantage of what some refer to as “pre-downgrade rights?” Many large corporate customers already have contractual rights to downgrade systems to XP, he pointed out.

“It’s in the sweet spot for small and medium-size businesses. For them, I can see the attraction with sticking with XP,” Helm said, adding, “It doesn’t seem like a good move for individuals.”

Why not?

If you’re buying a PC with Vista in order to downgrade to XP, you still have to pay for the Vista license.

Microsoft confirmed that its contracts with OEMs allows the PC vendors to continue to offer downgrade rights to customers.

“OEM versions of Windows Vista Business and Windows Vista Ultimate provide the end user with downgrade rights,” a company spokesperson told InternetNews.com. “We are enabling OEMs who manufacture OEM Activation-enabled Windows Vista Business or Windows Vista Ultimate systems to order Windows XP media so they can include the disks in-box.”

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