With software spending down 16.5 per cent year-on-year, Windows 7's launch tomorrow will see it enter the market amid one of the toughest squeezes on IT budgets for some time.

The outlook from analysts, however, is a positive one.

According to James Governor, principal analyst at RedMonk, the adoption of Windows 7 will put that of Windows Vista in the shade.

"Vista was stillborn and its take-up was a trickle, in comparison I expect that the take-up of Windows 7 will be a river," he told silicon.com.

Governor believes Microsoft's (MSFT) sales will benefit from a thaw in corporate spending on IT, although he is less optimistic about its take-up within government.

"As the budgets free up this I think that Windows 7 will be a success in the private sector. With the state of the finances in the public sector however I do not think there will be a big take-up at all."

The signs are that the shift to Windows 7 will begin in earnest next year, with Quocirca analyst Clive Longbottom predicting large deployments by business will begin in March 2010 and a survey by analyst house Forrester finding that it will be the most commonly used OS in business by the end of 2010.

But for some CIOs on older OSes, the cost impetus to adopt Windows 7 is already stacking up, thanks to the aging nature of Windows XP.

The poor sales of Windows Vista means that today the seven-year-old Windows XP is still the desktop OS of choice for businesses worldwide. However, despite the recession, moving from XP to Windows 7 could prove a cost-cutting exercise for businesses, according to Longbottom.

"In the long term, the costs of sticking with XP outweigh those of moving to Windows 7—even in the downturn companies will be looking to upgrade.

"There are organisations sitting on Windows XP who see that Microsoft removed its prime level support for the OS this year and that Windows 7 is quicker and offers a better security model.

"Windows 7 has already outsold Vista in the consumer market and you will increasingly have users who have Windows 7 at home ringing tech support asking how they can do the same thing on XP."

But while the large number of businesses still using XP is expected to drive sales of Windows 7, the lack of an easy upgrade path could serve as a deterrent for some enterprises.

Quocirca's Longbottom said: "Microsoft advise to do a clean install to go from Windows XP to Windows 7.

"If you are in a medium-sized organisation you may not have the capability to do the clean install, put back all of the applications and find out where all the data is for every machine."

For those looking to make the switch from XP to Windows 7, Microsoft has built in a safety net for some applications. Windows 7 will have an XP Mode allowing XP programs to run in Redmond's upcoming operating system, helping the new OS avoid the difficulty Vista had in running existing corporate applications.

Longbottom said this is a huge advantage in the enterprise market: "There is a lot of software out there in the business market that is five to 15 years old that needs to be able to run on Windows 7."

For CIOs looking to build a case for the adoption of Windows 7 in their business, there are several new features that could prove useful to businesses, including advanced security tools, such as BitLocker To Go, and web technologies, such as an inbuilt ability to read and produce RSS feeds.

However, the main way Microsoft has made Windows 7 more attractive to business is by addressing the problems of poor performance and compatibility that plagued Vista.

Improvements to the way Windows 7 uses memory and processing power compared to Vista means that, unlike Vista, businesses will not have to invest in new PCs to run it.

"You are looking at 10 per cent or less of the hardware that will need replacing to run it," Longbottom said.

Nevertheless, hardware makers will be hoping the launch of a new OS will mean a sales boost and the first netbooks running Windows 7, such as Nokia's Booklet 3G (NOK) and Acer's Aspire One D250 have already been unveiled.

And it's not just netbook makers who stand to benefit from Windows 7: according to Gartner (IT) research director Annette Jump, Microsoft could see the impact on its bottom line too.

"Mini notebooks currently ship with Windows XP at a cost of about $10 to the machine manufacturers," she said.

"After its launch they will be shipping with the Windows 7 Standard edition at about $35 or Home Premium edition at about $55, giving Microsoft three to five times the returns."

The situation could change in the long term, she said, as netbook manufacturers look for a cheaper OS and consider alternatives such as Google's Chrome OS (GOOG), which is expected to launch in the middle of 2010.

With Microsoft reporting the company's first ever year-on-year sales decline for the financial quarter ended 31 March this year, it cannot afford for Windows 7 to fail.

RedMonk's Governor said: "OS and Office revenues are the company's lifeblood and it is absolutely critical for Windows 7 to succeed."

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