Peaks, Valleys, and Vistas

Around the time of the release of Windows 95, Microsoft discreetly sold a small subsidiary that made its packaging. A decade ago that decision seemed to fit with the progression of computing and the nascent internet. Although people all over the world stood in long lines to be the first to buy boxed and shrink-wrapped copies of Microsoft's latest operating system, it was thought that such products would in future be delivered direct to their computers over high-speed networks.

On January 30th Microsoft releases to consumers the newest version of its operating system, called Windows Vista. Although the company said on January 17th that it would make Vista available for sale and download online, most people will buy the upgrade in old-fashioned boxes, just as they did back in 1995. But this time, despite plenty of razzmatazz, few customers will be queuing up to buy a copy.

This reflects the way in which Microsoft's dominance is slowly being eroded. Who produces the plumbing for a personal computer matters a lot less than it did in 1995. More PCs now talk to one another using open standards rather than proprietary ones. Many services and some programs are accessed online. People watch videos on YouTube, share photos on Flickr, check their e-mail and even work on files and spreadsheets, all using software that is based on the internet.

These changes are bad for Microsoft. Vista is being released with Office 2007, an update to its universally employed suite of word-processing, spreadsheet and other applications. Windows and Office are the backbone of the company. They represent nearly 60% of sales and 80-90% of its profits, estimates Directions on Microsoft, an independent research firm. Close to 1 billion PCs are now in use and because Windows and Office sit on nearly all of them, the programs are the inescapable tithe on belonging to the information society.

The question for Microsoft is whether it can continue to collect these dues. Vista took five years and $6 billion to develop. Some 8,000 people worked on it. Yet it is two years late. A corporate version was released in November — just before the holidays when few firms would install it. This gave Microsoft the chance to complete small bits of ancillary code to make it run smoothly. Most users are expected not to bother upgrading, but to acquire Vista only when they buy a new computer. With hindsight, the release of Vista may mark the moment when Microsoft's Windows and Office are seen as having reached the zenith of their supremacy.

Toppling the Software Babel
Computing has changed radically since Microsoft rose to prominence 25 years ago with its operating system for IBM's personal computer. Microsoft unified standards, which made life easier for users and software writers. Both Windows and Office were employed by software developers as platforms for their own applications, nudging Microsoft further towards ubiquity. Now three trends are changing this.

First is the rise of open-source software. The code for this is written largely by volunteers rather than a single company. The programs are usually free to use and open to continual enhancements. Companies ranging from start-ups to giants like IBM commercialise open-source software by selling services that support it.

As a collaborative venture, open-source can speed up development, make it easier to add features and save users money. The most popular web-server software, Apache, is open-source. So too is the Linux operating system, which is also widely used on servers. Firefox was unknown a few years ago, but now more than one in ten people use it instead of Microsoft's Internet Explorer.

The disadvantage of open-source is that some tedious bits of software development may not get much attention and programs end up a bit geeky. OpenOffice, an open-source version of Microsoft's Office, has been slow to catch on. Versions of Linux for PCs are still cumbersome. But, as Firefox shows, that could change.

The second trend confronting Microsoft comes from online applications and the rise of software as a service. The birth of the PC liberated users from their "dumb terminals" linked to giant mainframe computers. As a stand-alone device, the PC ran on its own software and networking was not important. Today the opposite is true.

More of the things that people want to do with computers now use the internet rather than a hard drive as a source of applications or to store data. So amorphous is the internet that many in the industry refer to it as "the cloud". Beside e-mail, photograph archiving and music storage, Google and others offer free online word-processing and spreadsheet applications.

Clouds in the Sky
For years Microsoft's Windows logo often appeared against a blue sky with cottony clouds. But the cloud has become one of the company's biggest threats. The operating system matters less when programs can be provided online. Moreover, online software can be delivered to customers more cheaply, there is immediate feedback from users and applications can continually be improved. Those are big advantages over software sold in a box, one version at a time.

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