Microsoft, typically known for a self-confident business approach has been sending clearly mixed signals on the health of Windows Vista that are perhaps indicative of the problems the OS is experiencing.  The situation, rather uncharacteristic for Microsoft, which has had a long string of successes, is best summed up in the words of its own executives.

While Microsoft Chairman Bill Gates recently described that Vista was moving units at a "rapid sales rate", Microsoft Chief Executive Officer Ballmer told executives in a recent meeting that Vista was a "work in progress".  The Microsoft designers who made Vista's unpopular User Account Control (UAC) admitted that it was designed to "annoy" the standard user.  Perhaps even more revealing, Ballmer, while praising adoption rates at MIX 08 admitted to problems with the OS stating, "we did make the choice to kind of hurt compatibility, and our customers have let us know that has been very painful."

Vista has not received a much kinder reception with customers.  While much of the blame for poor initial compatibility and problems since rests with third party hardware and PC manufacturers, Vista has been getting blasted for its problems.  Market research firm Gartner said that Windows could collapse if the trends from Vista continue.  The OS has earned Microsoft a major lawsuit for its high hardware requirements, which the plaintiffs allege Microsoft glossed over in advertising.  And fair or not, many customers have turned back to the reliable Windows XP, abandoning Vista, to the chagrin of Microsoft.

Microsoft is also experiencing severe struggles in the business sector.  According to BusinessWeek, a growing number of business are adopting a "Just Say No" policy on Vista, and are waiting until Windows 7, which should be due in 2010.  These companies mostly use XP and a major factor for many of them is that Vista is simply not lean enough for their infrastructure.

Among the latest to jump on this bandwagon is General Motors.  The automobile giant has said that it has encountered so many problems getting Vista to work on its machines that it is likely to skip the OS and wait for Windows 7.  Says GM's Chief Systems & Technology Officer Fred Killeen, "We're considering bypassing Vista and going straight to Windows 7."

Killeen says that the high hardware requirements are the nail in the coffin.  Many of the machines that have trouble running it won't be scheduled to be replaced until 2010 to 2011.  Says Killeen, "By the time we'd replace them, Windows 7 might be ready anyway."

GM, like many larger manufacturers, is also finding that many of its smaller supporting software vendors haven't guaranteed their programs to work in Vista. 

The GM situation is indicative of the market in general.  The end picture is that Vista can run well on only a smaller subset of machines at the average tech business, and much of the software that engineers and other professionals rely on is not Vista-compatible.

Microsoft has sold 140 million copies of Vista, but has failed to match XP's success.  Further, the majority of these copies were not sold individually, but included with new computers.  While customers could in some cases elect to downgrade to Windows XP, this would cost them time and effort, making Vista acceptance for some, more acceptance out of lack of options, as opposed to acceptance based on desirability.  Also, the number includes business customers whose deals with Microsoft automatically entitle them to copies of Vista.  While all these numbers count towards sales, some of these companies have not used their copies as they currently have declined to update.

Mike Nash, a corporate vice-president at Microsoft, disputes that Vista is struggling in business.  He points out that Bank of America, Continental Airlines, Cerner, and Royal Dutch Shell have all adopted the OS.  However, he acknowledges that the OS is selling the strongest among the consumer market.  He states, "We're seeing tremendous transition to Vista, particularly in the consumer space."

Some companies are opting to buy Vista merely to get XP licenses -- among these is Alaska Airlines.  Its 2,000 office workers will be using Windows XP machines, which will be replaced with XP downgraded Vista machines as necessary.  The company’s Senior Vice-President and CIO, Bob Reeder, states, "There's no business value in us continuing to chase that upgrade cycle."

In a recent market analysis it was found that at the end of last year Vista only held a 6.3 percent business sector OS market share, while competitor Apple's OS X held 4.2 percent.  This is not so much a comment on Apple's success as both shares are relatively trivial.  Rather it is more a comment on Vista's struggles in the business community.

The result has led to financial losses for Microsoft.  Sales of its desktop Windows group, its most profitable, slumped 2 percent in Q1 2008.  This led to an 11 percent fall in profits for the quarter.  This spells trouble for Microsoft, which has sustained many of its fledgling offerings, such as the Zune, MSN online offerings, and Xbox 360 through periods of lack of profitability with its Windows profits.

Analysts indicate that Microsoft has two options.  One is to try to improve its profitability in other market sectors, such as its online offerings.  This is tough challenge as Microsoft has struggled online to develop a good strategy.  While Microsoft has recently stated that it feels that it can achieve "independent" success, it has been left playing catch-up to Google for the last couple years.

The other big hope for Microsoft's continued success is for a turn-around with Windows 7.  Early reports on Windows 7 indicate that it's shaping up nicely.  It is supposed to be much leaner than Vista, which should win back some customers. 

While Microsoft is such a sales juggernaut that it can weather below average sales, it always strives for excellence, which has earned it its market position.  Thus it should be interesting to see how Microsoft reacts to the problems with Vista and the poor adoption in the business community.