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Latest Windows OS Starting to Penetrate Corporate IT Shops

By Stuart J. Johnston (Send Email)
Posted Apr 26, 2010


Amid the excitement that Windows 7 propelled Microsoft's revenues and earnings to stellar heights once again, one emerging trend is that the traditional corporate "wait and see" approach to new versions of Windows has been overridden by the need to replace aging enterprise PCs. If you work in a corporate IT shop, then Windows 7 is mostly likely in your future, and it may come sooner rather than later, according to a panel of financial and technology analysts queried by InternetNews.com.

Although numbers are still more anecdotal than fact, it is difficult to deny that the long-awaited corporate refresh cycle has begun, according to analysts interviewed by InternetNews.com.

However, some observers say it would be an incorrect assumption to credit Windows 7 with causing the trend on its own. Rather, it's likely a combination of factors, including a large number of out-of-date PCs running Windows XP, an improving economy, and strong sales of Windows 7 machines at retail that is driving enterprise moves to snap up the new system.

"The most interesting thing is they're seeing this recovery in business PC spending, which should help [Microsoft's numbers] in the second half of calendar 2010," Brendan Barnicle, senior research analyst for enterprise software at Pacific Crest Securities, told InternetNews.com.

Microsoft executives said that business PC sales grew approximately 14 percent in the company's third fiscal quarter, which ended March 31, and that Windows licenses to businesses grew by about 15 percent -- both indications that an expected business refresh cycle has begun. However, many enterprises have an inordinate number of older PCs that need to be replaced, with or without Windows 7.

"The typical PC refresh rate has tended to be three to four years, max, but because of the recession, we see a lot in the four to five-and-a-half years range," Tim Bajarin, president and principal analyst at Creative Strategies, told InternetNews.com.

However, refresh cycles come in stages, noted one analyst. "Most companies that we talk to don't replace everything at once ... it's not like there's one huge refresh cycle," Matt Rosoff, research vice president for corporate news at Directions on Microsoft, told InternetNews.com.

One of the key drivers of the apparent early adoption trend is, not surprisingly, money. With the new calendar year, analysts said, many corporate IT shops have new annual budgets, helped by what appears to be a recovering economy.

Another driver, Creative Strategies' Bajarin said, has been Microsoft's aggressive push to get enterprise customers to test Windows 7 earlier than for many previous launches.

"By the time Windows 7 launched in October, a lot of IT directors had already gone through the evaluation and approval process, but couldn't pull the trigger until new budgets kicked in," Bajarin added. It didn't hurt that final code for the system was already available to corporate customers months before the consumer launch.

Still, remembering that there is no one refresh cycle, analysts that track numbers are not yet able to neatly pin down identifiable trends with figures.

"[Corporate uptake of Windows 7] has been fairly regional but we expect it to become more global in the second half of this year," Richard Shim, research manager for IDC's PC team told InternetNews.com, adding that so far he only has anecdotal data to refer to.

In fact, Microsoft's CFO, Peter Klein, told financial analysts Thursday that he expects corporate upgrades to continue for some time.

"We expect the PC refresh cycle to continue through 2011," Klein said.

That mirrors the outlook espoused in a research report by Jefferies & Company analyst Katherine Egbert in October that predicted the early onset of corporate adoptions of Windows 7.

One thing that almost all of the analysts agreed with, though, is that Windows 7 will not falter in the corporate marketplace the way that Windows Vista did.

"Now, it's a question of how big it's going to be ... It looks to be a pretty strong one because we have a pretty old installed base out there," Rob Enderle, principal analyst at the Enderle Group, told InternetNews.com.

Stuart J. Johnston is a contributing writer at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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