Microsoft: No One's Catching the Vista Bug

The youthful enthusiasm of the software business ain't what it used to be.

Today, after years of industry consolidation, a handful of companies dominate the corporate software world. And in a market where software advancements are mostly incremental and rarely real breakthroughs, the entrenched players are challenged to maintain their margins and drive earnings growth.

As we do every quarter, we recently surveyed more than 1,600 Alliance members involved with IT spending in their organization to take the temperature of corporate software spending.

Our findings show that the spending is quite healthy overall, but it is nonetheless showing signs of slowing. Particularly notable is the sluggish adoption rate for Microsoft (MSFT) Vista by companies as well as consumers.

But before turning to the Vista story, here's a quick look at the broader picture:

Slower Spending Growth Rate

In our July survey, we looked at corporate spending plans for software for the next 90 days compared to the previous 90 days:

For the second-consecutive survey, we're seeing a slowdown in the corporate software spending growth rate -- only 18% of respondents said their company plans to spend more on software in the next 90 days, a four-point decline since our April survey. Moreover, 14% said they'll spend less, four points worse than previously.

Note that the slower pace may well be due to the summer season, as the current results are in-line with the spending growth rate from a year ago (July 2006).

Next, we examined two key drivers of the software purchasing decision:

First, in a sign of slower software spending, a very high percentage of respondents (29%; up 15 points) said their company "currently does not need to purchase any new software." This represents a two-fold increase on this key issue since our previous survey in April.

Secondly, only 23% of respondents cited "software is getting outdated and must be replaced" as a key driver for their company -- down 14 points from previously.

All told, the current ChangeWave survey findings point to a sluggish corporate software purchasing environment.

Businesses Unexcited Over Vista

Similar to previous survey findings in April, there is still no great rush in the corporate world to adopt Vista. Most importantly, 62% of respondents said their company has no plans to upgrade to Vista -- one point less than previously.

Moreover, just 15% reported their company has an upgrade plan in place -- down two points from previously.

As for PC installs, 28% said their company has some computers with Vista already installed -- a three-point uptick from April.

When we asked Alliance members about future purchasing plans for the next 90 days, Vista still lagged.

The survey findings still showed a better than 2-to-1 preference for computers installed with Windows XP rather than Vista -- almost unchanged since April.

Additionally, among companies that have not yet purchased Vista installed computers, only 9% of respondents reported that they expect to see their company buy its first Vista installed computer before the end of 2007.

Consumers Yawning at Vista

As in the corporate world, Vista has also been slow to catch fire among consumers.

In an August ChangeWave consumer survey, 61% of respondents reported that Vista came preinstalled on the computer they purchased during the past 90 days, versus 32% for Windows XP.

But when we asked future PC buyers what they'd like to have preinstalled on the computer(s) they planned on buying, Windows XP (43%) still edged out Vista (42%).

It's pretty clear from these results that few consumers are dying to have Vista on their computers. But why?

According to our survey, the biggest reason for the slow Vista adoption curve was the negative response from current Vista users. Among the 13% who currently use Vista at home, one-in-three said they were unsatisfied with the product -- up eight points since June.

The outlook for Vista isn't likely to improve much for the remainder of 2007. Only 4% of consumers said they plan to upgrade an existing home computer to Vista during the next 90 days -- a one-point drop from our previous survey in June, and a four-point decline since March.

Bottom Line

The current corporate software spending environment remains sluggish -- perhaps due, in part, to the vacation doldrums of the summer season. But we're also witnessing a Vista adoption rate among companies and consumers that can at best be characterized as plodding.

Stay tuned. In the next couple of weeks we will present fresh survey results on third-quarter corporate sales and an updated look at whether there are signs of momentum in the software industry.

--------------------------------------------------------------- This article summarizes the results of a recent ChangeWave Alliance survey. The Alliance is a research network of 11,000 business, technology and medical professionals who spend their everyday lives working on the front line of technological change. For more info on the ChangeWave Alliance, or if you are interested in joining, please click here.

Comments

[Jon T:]

The satisfaction rating chart for Vista above seems to point to the fact that the longer you live with Vista the less satisfied you become with it.

Ouch!

And it begs the next question, 'are you considering moving to Mac OS X'.

2007 Sep 19 08:39 AM

[Tom B:]

You mean people don't want an upgarde that is slower than already-pokey XP?

2007 Sep 19 09:31 AM