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Microsoft loosens Windows XP conditions for system builders

Microsoft loosened Windows XP restrictions so system builders can sell XP-loaded PCs up till May 30.

System builders will now be able to keep Windows XP-based PCs flowing to customers as late as May 30, 2009, as long as the distributor they source XP from ordered the operating system by Jan. 31.

And those system builders, or white box makers, will now be able to incrementally turn out their boxes over the that time span without having to stockpile their XP licenses by the January 31 deadline.

The big change, according to one large system builder who requested anonymity, is that before, Microsoft wanted the major distributors--Tech Data, Ingram Micro, etc.--to estimate how much Windows XP would sell and pay for it all. That meant that the system builders also had to make their estimate and pay for what they'd need. Now, Microsoft has agreed to hold product for the distributors without incurring charges till the licenses are deployed, he said. "The cost to Microsoft is nil, and neither the distributors nor the system builders wanted to pay up front for what would be deployed later," he said.

But confusion remains. Several system builders said it was their impression that Microsoft had shifted the distribution deadline from December 31, 2008 to January 31, 2009, a contention a Microsoft spokeswoman denied. The January 31 deadline for submitting XP estimates is unchanged.

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Compatibility problems still hamper Windows Vista migrations

The company has been trying to phase out the older but popular Windows XP for some time in order to anoint Vista as the go-to, strategic Windows client. Vista was made broadly available in January, 2007, but ran into trouble right out the gate for not meeting technical expectations Microsoft had set. And major features promised for Vista ended up being back-ported to run on XP, making Vista's value unclear to many users and VARs alike.

Microsoft at one point was going to bar sales of XP-loaded machines after Jan. 31, 2009, although it had already pulled back on that deadline.

The spokeswoman confirmed that under the vendor's flexible inventory program, first reported by CRN, distributors can order as much XP as they think their VAR customers will need up through Jan. 31 and then parcel them out as needed until May 30, 2009.

Microsoft has made noises that Windows 7, the post-Vista Windows client, could surface in late 2009, so the continued availability of Windows XP on newly built PCs right into the middle of that year illustrates that, despite Microsoft claims, Vista did not bowl customers over. Of course, Microsoft has a history of delivering its new operating systems very late.

Several system builders report that Vista downgrades to Windows XP are among their most requested services. And although some of these white box builders privately admit that Vista is much improved with service packs, many customers still see Vista as a resource hog and would rather skip from XP directly to Windows 7.

Joe Toste, vice president of sales and marketing at Equus Computer Systems Inc., a large Minneapolis-based system builder, gives Microsoft credit for tweaking its XP delivery plans. "In the channel there was this expectation of Dec. 31 being the last day we had to give a forecast to the distributors, and they would fulfill that," he noted. The extra month helps with planning.

Toste himself likes Vista, but said some customers with special applications want to stay with XP where all driver and other compatibility issues have long been worked out.

Todd Barrett, manager of security and networking sales for CPU Sales & Service, Inc., a Woburn, Mass., VAR, said the general consensus is that Microsoft is catering to business customers. "The overwhelming majority of our customers are not switching quickly from XP to Vista. A large proportion are content with the XP Pro environment. I'm not sure about what's going to happen next quarter, but I would say that in this economy, a company's willingness to cater to customers will outweigh that company's pursuit of new operating system upgrades."

Rich Constantini, production manager, at SuperLogics, a Waltham, Mass.-based white box builder, said Microsoft is under pressure from customers to keep XP, especially Windows XP Pro, available .

"We'll do 300 to 500 units a month and almost all of them go out with XP. No one wants Vista," he noted.

"It's funny. When Apple comes out with a new operating system, people can't wait. They want the new features right away. With Microsoft most people want to wait because they know Microsoft releases stuff early and they fear bugs," he noted.

Another system builder in the Midwest said his company has been aggressive going to Vista already and had long downplayed XP. "It is just easier and less confusing for the client if we offer one thing. There are some clients who require XP for their line of business applications and, in those circumstances, an extension is a good thing," said Tracy Butler, president of the Acropolis Technology Group, a Wood River, Ill. VAR.

While some in the channel say the Jan. 31 deadline for XP orders appears hard and fast, others disagree. Among those who still find Vista lacking, there is hope that Microsoft will reconsider. "In this macroeconomic environment, I think it's quite possible Microsoft will bend again," noted one of these system builders who requested anonymity.

This report was updated Tuesday morning with additional VAR and system builder comments.

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