Microsoft's 'big bang' could be its last

That's a pretty long time to make customers wait for a new release. Too long, concedes Microsoft CEO Steve Ballmer.

"We just can't make our customers wait three or four years for the things which should have been on more interim cycles," he said at last week's Gartner Symposium/IT Expo in Orlando.

Although many Microsoft products have grown long in the tooth, the company is headed into a cycle that will see a flurry of big releases over the next year and a half. In addition to the new SQL Server, Microsoft is launching a revamp of its Visual Studio developer tools on Nov. 7. Next year will bring new major releases for both of Microsoft's core franchises: Office and Windows.

The company has been touting its coming attractions and is likely to do so further during its earnings report on Thursday. Microsoft is "at the beginning of 12 months of the greatest innovation pipeline we have ever had," Ballmer said.

However, the coming splash of new products could be the last such "big bang" for Microsoft. Many expect the company to offer more measured, but more frequent releases in the coming years.

"I think they have to do this," said Paul DeGroot, an analyst with Directions on Microsoft. "With things like Windows Client, we are now looking at least a five-year product cycle. Man, a lot of stuff has happened in five years."

Ballmer last week outlined a path in which the company tries to make both big and small releases simultaneously, as well as deliver more frequent updates. While he didn't say so explicitly, online services loom as a distinct possibility for the most rapid innovations.

"The key is to make sure that for every line of business, we have the things that pop every six or nine months, pop every couple of years, pop longer than that," Ballmer said.

The company has tried to get more frequent with its server operating system launches. Windows Server 2003 debuted about two years ago, and a fairly modest, but paid, upgrade known as Windows Server 2003 R2 is due by year's end. The next major release, still known by its Longhorn Server code name, is slated for 2007.

Smaller bites
Microsoft has also done more consistent, incremental releases with its Dynamics small-business products, such as Great Plains and Navision. DeGroot sees Microsoft's approach with those products, which Microsoft bought from other companies, as a model.

"I would expect that the company will try to train the market to accept this notion of major and minor releases," he said. "If Microsoft takes smaller bites and makes sure that stuff gets delivered in time with a known feature set--that would be very useful."

The challenge, DeGroot said, is there must be enough new features to make the minor releases compelling. At the same time, if changes come more rapidly, they have to be digestible enough that the costs of training and supporting the new software don't outweigh the benefits.

That so-called "legacy" problem has bedeviled Microsoft for years. Regardless of how frequently the company upgrades its products, it still faces the challenge of encouraging customers to move at all. Even with its comparatively slow pace in recent years, many customers have been slower still to upgrade, with generations-old programs

"Microsoft has a problem with their installed base being archaic," said Gartner fellow Tom Bittman. "Their installed base is stuck in the weeds, and because of that, they can't sell enough product."

Even some companies that are more progressive in using newer technologies don't expect to make an immediate leap to Vista or Longhorn Server. "It's something we are watching. But we have no real plans to make a tremendous investment in that direction at this point," said Joe Druin, TRW Automotive's global chief information officer.

A survey of corporate IT managers published last week by Merrill Lynch found that most businesses are taking a wait-and-see approach to Vista. Of the hundred or so CIOs polled by the brokerage, two-thirds were waiting for more information before planning an upgrade. Just 8 percent said they were planning to update in 2007, while 16 percent said they were eyeing a 2008 upgrade. Some 5 percent were planning on holding off until 2009.

Even if customers aren't clamoring for more frequent releases, Microsoft is under financial pressure to release software more quickly. In addition to the obvious benefit of new sales, having releases on a more frequent basis is important for the company's Software Assurance licensing program.

Under that program, customers pay the equivalent of an extra license fee when buying a new software product. In exchange, customers get, among other perks, any updates released over the next three years. Microsoft has tried to downplay the program as a subscription plan, but analysts still see the upgrade rights as a key factor that customers should consider when evaluating whether to buy a Software Assurance package.

DeGroot asserts that Microsoft's changes may already be too late to bolster the program.

"It is probably too late to save Software Assurance," he said. "Software Assurance as an add-on to license purchases has basically not proven itself in many cases."

While the program could make sense for some of Microsoft's newest products that are undergoing rapid changes, he said customers will consider their experiences when evaluating future Software Assurance deals.

"The only way you can begin to address that subject is to look at history--'Had I bought this back then, would it have paid off?'" DeGroot noted.

Too often, he said, the answer has been no, as Microsoft product cycles have crept beyond the three-year term that comes with the Software Assurance program.

"There is a mismatch," DeGroot added.

Open window for rivals
The long time between releases has also been a boon to Microsoft's competitors, both open-source and commercial rivals.

Since 2001, the year that Windows XP debuted, Apple has released five versions of Mac OS X. Another version of the operating system, code-named Leopard, is planned for late 2006 or early 2007, roughly the same time as Longhorn is due. Of course, Apple "doesn't have the installed base that Microsoft has, with 800 million PCs," said Michael Silver, an analyst with Gartner.

Still, the lag time between releases could be costly to Microsoft next time. "In the time Microsoft took to produce two versions of SQL Server, MySQL has produced five of them, each of them with substantial changes," DeGroot said. "Does anyone want to predict--if Microsoft takes another five years for the next version--what MySQL might be like?"

In many areas, Microsoft is competing against lower-cost companies whose goal is to be "good enough" as the comparable Microsoft product, DeGroot said.

"If the market leader isn't going anywhere, it is much easier to reach that goal," he said. "If the market leader is constantly moving the goalposts, it's a lot harder."

One way that Microsoft is trying to regain its nimbleness is by offering more services that connect to its server and desktop software. Then the company could sell and distribute incremental updates to Windows and Office much more quickly, either as a one-time sale or on a subscription basis.

The company has placed former Groove CEO Ray Ozzie in charge of its services push, as part of a major shakeup last month.

"For enterprises, I think we've just barely scratched the surface about which systems can...be brought into the cloud in some way, shape or form," Ozzie said at a San Francisco tech conference on Tuesday. Ozzie and Gates are expected to outline more about the services push in a press event next week.

CNET News.com's Mike Ricciuti contributed to this report.