How important is Windows XP to Microsoft?

Microsoft chief executive Steve Ballmer is in no doubt. "Mark your calendars now, the release of Windows XP on 25 October is going to be an historic day for our customers and for the industry," he proclaimed.

Overhyped or not, XP is vital to the software giant, which saw profits drop 42 per cent for the first quarter of its 2002 fiscal year. The company is spending about £10m in the UK alone. Worldwide, its promotional budget will be double that spent on Windows 95.

Whether it can breathe new life into the PC industry may be down to factors beyond even Microsoft's control, such as the economy. The operating system is crucial to its .Net strategy, which it believes will attract the big money in the future.

What happens if it's not as successful as anticipated?

Microsoft's powerful market position means that XP will not be allowed to fail. Although it hasn't released any figures on how quickly it will be adopted, the success of the last launch of comparable importance, Windows 95, should be an indicator. In the first four days after 95 was launched, it sold more than one million copies.

Microsoft relies on regular cash injections through new product versions and, added to its ambitions for .Net, it has no option but to make XP work.

Dan Kusnetzky, a leading analyst and vice president of IDC's system software research, maintained that Microsoft's determination will ensure it reaches this goal.

"If you look at the dynamics of Microsoft's relationship with the hardware suppliers, XP will replace all other versions in the channel. So if you want Windows, it will be XP," he said.

IDC predicts that there will be about 73 million new licence shipments during 2002, the bulk of which will be XP.

So how will users benefit from Windows XP?

Microsoft claims it is more reliable, and offers good value to home and professional users. XP will be available in two versions, Home and Professional, the latter being targeted at corporate users at a cost of £169.99 for an upgrade and £259.99 for the full version.

XP is based on the same kernel as NT and is the first time since Windows 3.1 that Microsoft has offered the same platform for businesses and consumers. It boasts enhanced internet and communications features such as Passport and Windows Messenger.

But many businesses are unhappy about its built-in multimedia functions, which they don't necessarily want their employees to use. And stability has always been an issue, something Microsoft now admits.

"Doing this will allow us to branch into the consumer market and replace the long-in-the-tooth Windows 98 and Millennium family of machines with something that's based on Windows 2000 and the more robust NT core. People are so used to crashing under the Windows 9x family," said John Gray, Microsoft's group program manager for Windows XP.

"It will be newer and zippier, but the most important thing is that it is going to be more stable," said IDC analyst Al Gillen. But a hardware upgrade may be needed to run the software.

What will the cost of upgrading be to businesses?

Microsoft's shift in focus from packaged software to software as a service requires a change in licensing. Its response has been to introduce a subscription-based model, but the idea has faced hostility from users.

The cheapest upgrade mechanism - Upgrade Advantage - is to be scrapped, putting pressure on businesses to ensure they have the latest software. Microsoft says some users will make savings, but analyst Gartner predicts that many will be paying between 35 and 107 per cent more to upgrade.

Bowing to pressure from individuals and user groups, Microsoft has already extended the deadline twice. Users now have until the end of July 2002 to upgrade.

Who is backing Microsoft?

In the current climate hardware vendors and partners will support any product that raises PC demand and there are already many users, including Cornwall County Council, BT, the Halifax, Warwickshire LEA, the Commonwealth Games and Marks & Spencer.

Cornwall County Council is spending £1.2m on upgrading its 2650 desktops to Windows and Office XP, and expects to save £2.6m over the next three years.

But Microsoft's plans have also faced opposition from competitors and the courts, which have questioned the legality of some of XP's bundled features.

What are the alternatives?

Few organisations would consider totally replacing Microsoft products. IDC predicts that Windows will dominate client operating environments until at least 2005. But competitors, particularly from the open source community, claim there are alternatives.

Sun Microsystems has said that the arrival of XP is a bad thing for the industry, and asks users to put a stop to Microsoft's dominance by choosing its open standards as an alternative.