What If Windows 7 Flops?

The most recent Dell earnings showed steep declines in PC sales, which dragged overall corporate earnings by 23 percent. The numbers are stark: sales to large corporate customers down 32 percent and PC sales down 33 percent.

The trend is not unique to Dell. HP, Lenovo, Acer and other Windows-based PC manufacturers have noted declines in conventional desktop and notebook computers throughout this recession. Microsoft has seen its PC software sales slump, as well.

The culprit was once the recession forcing businesses to extend the age of PC fleets. Now, the culprit and potential savior of the PC marketplace is Windows 7. Analysts are projecting stronger sales and financial performance for Dell, Microsoft and other PC manufacturers coinciding with the release of Windows 7 later this year. They believe that Windows 7, the much-improved follow-up operating system to the disastrous Windows Vista, will be the catalyst that draws businesses and consumers to start buying computers again in great numbers.

It’s a helluva bet. But what if Windows 7 fails to ignite the marketplace?

In the conventional technology marketplace, a new Windows release–still the dominant PC platform–would be enough to compel (another way of saying force) businesses to plan mass purchasing cycles or else risk losing support for their installed licenses or be forced to buy expensive ongoing maintenance contracts for aging operating systems. Microsoft once commanded this planned cycle of obsolescence by releasing a new version of Windows every three to five years.

The cycle was broken with Vista. Released in 2007, at least two years overdue, Vista landed with a big thud. Its features and functionality were mostly elements that Apple’s OS X and new versions of Linux already sported. It was a resource hog, consuming a huge hard disk footprint and an inordinate amount of memory. And its graphics requirements made it unusable by older PCs.

What really damned Vista was the lack legacy support for many applications. Microsoft had promised that Vista would arrive out of the gate with a full boat of applications tested and certified for use. It didn’t happen that way, and the lack of legacy support for existing infrastructures prompted businesses to stay with XP.

You can see this phenomenon at work in Windows-based netbooks, all of which sport XP. The XP version they’re running has a smaller footprint and memory requirement, making it more suitable for the tiny machines. Businesses picking up on the netbook prefer XP since it does support all of their legacy apps.

PC manufacturers have not sat idle waiting for Windows 7’s arrival. Dell, Hewlett-Packard, Acer and others have launched machines with Linux distributions as their operating systems. Several netbooks are exclusively Linux-based, too.

While Windows-based PC manufacturers have suffered stark declines in desktop and notebook sales, Apple is bucking the trend with its sleek machines designed for simplicity and functionality. While PC loyalists poke holes in the aura of invincibility that surrounds Apple, there’s no denying Mac’s track record for performance and reliability. The migration to Apple is so great that Tech Data recently told Channel Insider that Macs and their accessories are the best-selling line in its PC division.

As Apple and Linux continue to make gains at Microsoft’s expense, another threat looms on Microsoft’s periphery: Google. The search giant is working on converting its Chrome browser into a full-fledged operating system for release in 2010. Google’s entry with a lightweight “good enough” OS could further disrupt Microsoft’s dominance. At the very least, it will steal buzz and cause businesses to rethink their platform strategy – and that’s enough to slow sales cycles.

Computer manufacturers, distributors and resellers are gearing up for the release of Windows 7, which reviewers thus far have given high marks for quality and performance. But it remains to be seen whether Windows 7 can reignite the PC marketplace, particularly in business environments.

Consider this: In previous Windows releases, consumers were typically the early adopters of the new platform, since retailers were given the home versions first. Businesses, on the other hand, typically waited until Service Pack 1 was released, giving the new version shakeout time for bugs, vulnerabilities and interoperability problems. So it stands to reason that trend won’t change with Windows 7, particularly given the collective experience with Vista.

What if Windows 7 is released and no one bites? What if Windows 7 performs no better than previous iterations? What if businesses and users decide to sit on the sidelines and wait for cloud-based alternatives? What if they decide that rather than refresh with a Windows machine that they go with a Mac or a Linux machine (at least they would be buying)? What if businesses decide to migrate more to thin clients and cloud-based applications that don’t require a full-featured operating system like Windows 7?

For the marketplace’s sake, Windows 7 needs to be a success. However, even a sluggishly performing Windows 7 spells trouble for the PC market and, potentially, could mark the end of the conventional PC buy/spend cycle.