Although the beta of Windows 7 released in January is getting good reviews, that may not be enough to inspire businesses to upgrade, given their tight IT budgets and the fact that many are cutting costs in any way they can.
"I think the down economy will hinder just about everything," said David Smith, a vice president and fellow at research company Gartner.
Windows 7 is expected to be available before the end of the year, or at the very latest, early next year. Unless there is a dramatic economic rebound, all signs point to the economy still squeezing IT budgets at that time.
Tens of thousands of jobs have been cut in the last several months as cost-cutting measures at companies across all business sectors. Not only do those job cuts show that overall budgets are tight, they also mean that companies will probably have a surplus of client PCs that they can reassign to other workers, said Michael Cherry, an analyst with research firm Directions on Microsoft, in Kirkland, Washington.
"If they're laying off employees, they have more than they need, so they may reallocate those to other employees," he said.
Those machines are probably running XP, because only 9 percent of nearly 1,000 North American and European businesses surveyed in a recent Gartner report said they upgraded to Vista.
Despite the economy, however, Windows 7 probably won't be as disastrous an OS as Vista was in the business market, analysts and IT professionals said. There are some good reasons to upgrade to Windows 7, even if companies have to scrape the bottom of their budgets to do so.
XP is now eight years old and beginning to show wear and tear, said Andrew Brust, chief of new technology at the IT consulting firm twentysix New York. "It stood the test of time very well, but it is now definitely showing its age," he said.
Even with budgets as tight as they are, companies that can upgrade to Windows 7 should and probably will, because they have waited so long to upgrade, Brust said.
"Many customers probably held off on Vista upgrades, choosing to wait for its successor, so there's real upgrade backlog to tend to," he said.
Moreover, companies will begin to see compatibility issues with XP and third-party applications as the OS gets older, Brust added.
"The economy doesn't just challenge customers; it also challenges software companies, who can only afford to support so many versions of an OS," he said.
Brust added that improved security features in Windows 7 and its superiority on 64-bit PCs are also reasons for companies to upgrade.
However, on the latter point, Cherry said that with the economic crisis, companies may not be purchasing expensive computers when they do loosen budgets to buy new machines, so the 64-bit argument for the OS -- one that Microsoft tried to make with Vista -- may not fly.
That's why Microsoft plans to make Windows 7 work well on older PCs and new low-cost PCs and netbooks. This, Brust said, will make Windows 7 "more attractive as an upgrade for the entire installed base of PCs inside an organization" than was Vista, with its complex hardware requirements.
Still, Cherry is reserving judgment about whether Windows 7 will run well on older or low-cost machines until he sees its final release.
"It's certainly a goal for the OS [to run well on low-cost hardware], but I don't think anyone's goal for a new OS is to make it thicker, dumber and slower," he said. "I'm sure it was the same goal with Vista. But we won't know until we see the final code."
For Cherry, a more compelling reason for companies to upgrade is a set of features in Windows 7 that take advantage of new capabilities in its companion server OS, Windows Server 2008 R2, which Microsoft is expected to release shortly after Windows 7, he said.
Microsoft traditionally updates both the client and server versions of Windows at around the same time, and pitches them to customers as "better together." This ploy did not work with Vista and Windows Server 2008, but the tie-ins between the two weren't so obvious, Cherry said.
There are networking and other features in Windows Server 2008 R2 that take advantage of new features in Windows 7, so Microsoft might have better luck promoting the two together this time around, despite the flagging economy, he said.