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Originally published Monday, December 4, 2006 at 12:00 AM

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Silicon Valley view

Why Vista might be the last of its kind

Imagine this. One of the world's most powerful monopolies puts 10,000 people to work for five years to create one new product. And nobody is really...

San Jose Mercury News

Imagine this. One of the world's most powerful monopolies puts 10,000 people to work for five years to create one new product. And nobody is really sure if anyone wants it. How's that for a gamble?

That's what we have with Windows Vista, the new computer-operating system from Microsoft that debuted last week for businesses and, next month, for consumers. There has been so much buildup for this moment that you would expect Vista to cure cancer.

It's been so long in coming that I'll just be happy if it does the job and doesn't present me with a daily dose of the Blue Screen of Death. Already experts are predicting Vista may be the last of its kind. Obsolete before it's out the door? Geez, we haven't even had a chance to open our wallets yet.

"Suddenly, the market changed and competitors started delivering technology at the speed of the Internet," said James McQuivey, professor of market research at Boston University. "In some cases, they do it for free, and that's painful for Microsoft."

Redmond giant

The theory about the threat to the Redmond giant goes like this: Microsoft made Vista the old-fashioned way, as a single packaged product that it puts on a disk so users can buy it in a store and load it onto their computers.

By contrast, rivals such as Google are creating spreadsheets and browsers that you simply download from a computer server, which delivers what you need to your desktop as you need it. If Google follows through with more offerings of free, ad-supported software over the Internet, Microsoft won't be able to charge a premium for its operating systems anymore. Nobody will need its big upgrades anymore.

Suppose this threat, or the one from the free Linux operating system, is real. Maybe Microsoft will have to issue smaller upgrades every year or so to keep up. You have to wonder if it is possible or wise for Microsoft to throw more money at a future project than it has thrown at Vista. This will probably be the last operating system from Bill Gates, who retires to do philanthropy in 2008. Was it worth it?

It's worth noting just how complex Vista became. BusinessWeek estimates it took 10,000 employees about five years to ship Vista.

In an interview with Microsoft Chief Executive Steve Ballmer a few weeks ago, I asked if he had added up how much money it cost to develop Vista. He laughed, "I can't say I have. It would be impossible to count up. ... I'm sure it's a lot."

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If we assume Microsoft's costs per employee are about $200,000 a year, the estimated payroll costs alone for Vista hover around $10 billion. That has to be close to the costs of some of the biggest engineering projects ever undertaken, such as the Manhattan Project that created the atomic bomb during World War II. And while Microsoft toiled on Vista, its stock price stayed flat.

So many things went wrong with the building of Vista that it's hard to know where it all started. The original code name was Longhorn, kicked off in 2001 after Windows XP shipped.

The company tried to pioneer on a lot of fronts, trying to change the code language used to write the operating system and fiddling with the basic file system the software uses as its foundation.

It pondered many ideas for 3-D interfaces that would help users navigate the computer more easily. Not everything worked. After a few years, the company aimed lower.

Ballmer says Microsoft tried to innovate too much. So the company reorganized and tried to placate impatient consumers by shipping Service Pack 2 for Windows XP then rebooted the whole Vista effort in mid-2004. It's hard to imagine exactly how much Microsoft flushed down the toilet.

Microsoft has more than 500 early business customers for Vista, but companies by and large are expected to shrug at it, at least until Microsoft comes out with a service pack, or a new version that patches all the expected holes.

A survey by CDW, which supplies computers to businesses, found that only 20 percent of businesses plan to upgrade to Vista in the first 12 months after its release.

Monopoly profits

Still, Microsoft stands to reap monopoly profits if Vista takes off. Analyst Roger Kay of Endpoint Technologies estimates Vista will be running on 76 million computers by the end of next year.

And Vista sales should contribute $11.5 billion to operating profits from Windows in the year that ends June 30, 2007, according to Credit Suisse First Boston analyst Jason Maynard.

So Microsoft comes out with a product a couple of years late and it is still expected to hang on to the monopoly because it has no direct parallel competitor.

Those in other markets don't get away with this. Sony's delays with the PlayStation 3 video-game unit probably mean it will lose market share to Microsoft and Nintendo. No such catastrophe is awaiting Microsoft.

I've been playing around with the test version of Vista. It appears to accomplish things we ought to take for granted: better reliability, compatibility, security, search capability and task management. That said, it doesn't feel like a product that is the fruit of 10,000 brilliant minds and $10 billion in resources.

When I think about how much Microsoft poured into Vista, I'm reminded of a conversation I had with a longtime Microserf.

"I think about what it could have been," he said.

Dean Takahashi is a columnist with the San Jose Mercury News.

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