With New Windows 7, Microsoft (MSFT) Takes Another Wrong Step

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The conventional wisdom about Microsoft (MSFT) will that it will never make a lot of money on its gadgets, the Zune and Xbox, and it will never make any money on its Internet business, MSN. On the other hand, it will always make large margins on its Windows operating system, business, and server software.

The conventional wisdom is right

Most software analysts are concerned that the PC market mutinied when Microsoft brought out its latest OS called Vista. Reviews were almost all negative and many businesses and consumers refused to upgrade, leaving Microsoft with a hole in its revenue.

Yesterday, the company announced with great fanfare that it was releasing for consumer testing the next generation of its software, Windows 7.

As it put the new product into the market for a series of test drives, According to the AP, "The new operating system — which could be available for purchase on PCs within a year — uses much of the same underlying technology as its predecessor, the much-maligned Vista. But Windows 7 aims to resolve many problems PC users had with Vista."

But, Redmond has missed one of the most critical points about the next generation of software, Businesses, and some consumers, want products like Windows to run on remote servers and not on their own PCs. This allows for the purchase of cheaper machines which need less memory. It also allows users to access their files from any number of locations.

Microsoft failed to say how it would drive remote computing with Windows 7, a feature that would allow it to more effectively compete with companies like Google (GOOG). Windows 7 may be a perfectly fine upgrade, but it is one that lacks the most important feature relative to the future of software.

Douglas A. McIntyre