What a difference a debacle makes. Three years ago, Microsoft's introduction of the supposedly new, improved version of its flagship operating system was plagued by problems of every stripe. Vista, then the latest version of Windows, was years late. It was released to corporations in time for the yearend selling season but not available to consumers until January.
The software itself was riddled with glitches and incompatible with millions of printers and other electronics. What's more, Microsoft's (MSFT) $500 million ad campaign hyping the software fell flat with consumers and PC makers alike. "I didn't like the Vista launch," says Gianpiero Morbella, head of marketing for Acer.
But as Microsoft CEO Steve Ballmer took the stage in New York on Oct. 22 to unveil the new Windows 7, there was more glee than grumbling. This time around, Microsoft coordinated closely with PC makers, retailers, and consumers in the runup to the launch. "They've done a very good job this time," says Morbella. The result was a relatively glitch-free introduction that features a wider array of machines at varying prices than previous Windows launches. Says Alex Gruzen, senior vice-president for the consumer products group at Dell (DELL), "the Microsoft I've been working with for the past year and a half on Windows 7 is a very different Microsoft than I've ever worked with before. The level of openness and collaboration was really new."
Disciplined Development Process
Microsoft used that collaboration to ensure the software works well with computers, printers, and other peripheral machines from the get-go. The software maker shared more information and took more feedback than in the past. And unlike with the Vista launch, some 8 million PC enthusiasts have been kicking the tires on prerelease versions of Windows 7 to try to catch bugs before the general public does. "They carried out one of the largest beta tests ever conducted," says Carlos Montalvo, a vice-president for marketing and services at Hewlett-Packard (HPQ). Cooperating with Microsoft "was deep, ongoing, and across the organization."
Indeed, sources say Microsoft's Windows team has hit nearly all of the development milestones for Windows 7. Many credit Windows chief Steven Sinofsky, who made his name by consistently delivering new versions of the company's Office suite of programs, for putting in place the strict processes and managerial discipline. For example, teams were created to manage each major PC maker's efforts to take advantage of Windows 7. If a PC maker found that a particular antivirus program slowed down the boot time by a few seconds, engineers could work on the problem. "They've been very, very true to their word on development milestones, and delivered really solid code," says Dell's Gruzen.
Acer and Dell both say that as of launch day, there will be zero inventory of Vista-based machines going into stores. Any that remains is what was already languishing in distribution channels. "Someone did a great job in the supply chain making this happen," wrote longtime PC analyst Stephen Baker of NPD Group on his blog. "This will give Win 7 a tremendous boost out of the gate." And while it took six months for Windows Vista to be introduced around the world, Dell plans to be selling in 95% of its markets around the globe within two weeks or so.
The main reason for the optimism is the product itself. Partly because Windows 7 is not a total redo of Windows, Microsoft focused mostly on solving the day-to-day headaches most customers complain about, rather than on splashy but unstable new capabilities. "When there's a really exciting OS [operating system] like Win 7, we emphasize it a lot more," says David Roman, vice-president for marketing communications at HP's Personal Systems Group. Roman says his a-ha moment with Windows 7 came in February, when Microsoft released test versions of the software. "I took the beta and put it on a small netbook and discovered it was phenomenal," he says. "The performance was great."
Chinese PC maker Lenovo says its Windows 7 PCs will boot up 56% faster than Vista machines and will shut down and go to sleep faster, as well. At a time when the market is rapidly shifting toward laptops, such speed improvements are well-timed. "With a laptop, you want it to be ready when you open that lid and to shut down when you close it," says Dell's Gruzen.
The advertising strategy is similarly pragmatic, with coordination on marketing under way earlier in the process. "With Vista, there was a bit more of the 'Ta-da, now we'll remove the handkerchief,' " says Jason Bonfig, vice-president for computers at retail giant Best Buy (BBY). This time, Microsoft is putting more of its marketing might behind promoting particular products and offers from its partners. Dubbed "Seven Days of Windows 7," the promotion will help market deals such as an Acer all-in-one priced at $800 that usually goes for more than $1,000.
Combating Price Declines
One of the most eye-catching of these offers is from Best Buy. After sitting in on many engineering meetings with Microsoft, the retailer decided to come up with a package for families that wanted a fresh start with their PCs. The idea was to end the frustration of bringing home a state-of-the-art PC and not being able to take advantage of new features—such as improved networking. So Best Buy worked with HP to come up with a "Home Makeover" package that includes a desktop, notebook, and cheaper netbook, along with a liquid-crystal-display monitor and free setup from Best Buy's Geek Squad for $1,199. Bonfig, who says this represents roughly a $600 savings, says the deal will be promoted in stores through the end of the year.
Still, PC makers are hopeful that some of the new capabilities of Windows 7 will help them stem the accelerating price drops of recent years. Dell's pricey, top-of-the-line Adiamo notebooks will include location-awareness tools that help users automatically get local weather reports or find the nearest French restaurant. And the biggest opportunity for selling higher-end machines may come from computers that boast iPhone-like touchscreens.
Of course, plenty can still go wrong. Viruses, malware, and unexpected problems could render the performance claims of Microsoft moot for many users. And because Windows 7 needs less power than Vista did, it's possible many consumers may decide to forgo a new machine and simply upgrade their current one. PC makers say the combination of low prices and new features should take care of that. Lenovo marketing manager Tom Tobul notes that a middle-of-the-road new Thinkpad laptop starts at just $529, while Windows 7 by itself costs $149. "We believe a lot of customers are going to find the economics of new systems very compelling," he says.
Apple's Not Going Away
And there's the ever-present threat from Apple (AAPL). The company has been gobbling market share in recent years—including last quarter, when its Mac sales grew 17% in a PC market that grew 2%, according to IDC. Phil Schiller, Apple's senior vice-president for product marketing, says, "Windows 7 is still Windows, and there's no guarantee it will be a good experience."
As much as Apple has grown, it still commands only 6.6% of the market. And Microsoft, thanks in part to coordinating its release of Windows 7 closely with its PC-making partners and learning from the mistakes of Vista, aims to keep it from rising much further.