Windows evolution: XP, Vista, and Windows 7 (and 8, 9, 10, and 11)

Microsoft began planning a major replacement for all of its operating systems in 2001. The project, code-named Longhorn, encountered numerous delays, in part because of efforts to address the public’s growing concern with computer security and consumers’ desire for PCs to have greater integration with a full range of entertainment equipment within the modern electronic home.

The company started over, and the new operating system, renamed Vista, was released to other software developers late in 2006 and to the general public in 2007. Like most new operating systems, Vista met with initial problems involving incompatibilities with older computer peripherals. More problematic for the new operating system was its “bloated” structure, which required a very fast microprocessor and large amounts of dedicated computer memory for proper functioning. Its high threshold for adequate system resources deterred many companies and individuals from upgrading systems from earlier, and perfectly serviceable, systems such as Windows XP (derived from the term Windows Experience). In addition, consumers were baffled by the numerous Vista options—Home (Basic or Premium), Ultimate, Business, and others—while business users (Microsoft’s core market) balked at its major change to the user interface and were unwilling to port their internal applications to the new system.

Microsoft’s corporate users had other reasons to stick with Windows XP. Though still problematic compared with other operating systems, XP was significantly more secure than its predecessors. XP was also faster and much more stable than Windows 95 or 98, and it ran tens of thousands of software programs written specifically for it, which made business users reluctant to switch operating systems. It can be argued that customer satisfaction with XP is what killed Vista among business users. PC makers, who were contractually required by Microsoft to ship products with Vista, were compelled to offer “downgrades” from Vista to XP, and user appreciation even compelled Microsoft to extend its official support of the older OS through 2014, three years beyond its normal support policies.

Adding to Microsoft’s OS problems was increased competition in the marketplace. Apple’s Mac OS X, riding on the huge success of the iPhone and iPod consumer products, grew in popularity. Linux, long an operating system for the technically adept, began to appear in more user-friendly versions, such as Ubuntu, and by the end of the first decade of the 21st century, Linux had captured one-third of the growing low-cost netbook market. Yet, despite its problems in the marketplace, Microsoft remained the dominant supplier of operating systems. Windows held a worldwide market share of 86–92 percent, depending on the research analysis.

With the release in 2009 of Windows 7, the replacement for Vista, to critical praise by reviewers and analysts, Microsoft’s lead remained intact. In 2012 the company released Windows 8, which offered a start screen with applications appearing as tiles on a grid. Windows 10, released in 2015, featured Cortana, a digital personal assistant capable of responding to voice commands (as did the iPhone’s Siri), and a new Web browser, Microsoft Edge, which replaced Internet Explorer.

In 2021 Microsoft released Windows 11, which featured a redesigned start menu and faster operating speeds. However, Cortana was removed from the OS because its performance lagged behind virtual assistant competitors such as Siri and Amazon’s Alexa. Cortana was replaced, in some senses, by a new generative artificial intelligence (AI) feature known as Copilot, which uses large language models to generate content in an effort to improve productivity. The software, which uses the technology popularized by ChatGPT and Google Gemini, responds to user commands (for example, “create a budgeting spreadsheet”) by generating new content and is integrated into applications such as Microsoft 365 (which includes Microsoft Word and PowerPoint, among others), Bing, and the Windows task bar.

Windows 11 has been met with resistance from those who had been using Windows 10, and the majority of Windows users continue to use the prior OS. Users are especially critical of the newly redesigned start menu, which features less flexible options than the previous OS and lacks the older version’s “live tiles” feature, which pulled information and news in real-time from the Internet. The feature was replaced by a widgets dashboard separate from the start menu. Additionally, the task bar in Windows 11 is centered at the bottom of the computer screen, although it can be aligned to the bottom left (its default position in Windows 10). Many users thought that this limited the flexibility of the OS and chose not to upgrade. Windows 11 also requires PCs to run on a 64-bit processor, so users with 32-bit processors cannot use the new OS unless they purchase a new computer.

The Nadella years: Cloud innovation and the AI revolution

When Satya Nadella took the helm as Microsoft’s CEO in 2014, the company’s market capitalization stood at approximately $300 billion. By 2024, the company’s market cap had increased to more than $3 trillion. Although there are many internal and external factors that can drive a company’s share price, leadership (and its perception in the market) plays a crucial role in shaping a company’s success, particularly on Wall Street.

Nadella has been largely credited for Microsoft’s major advances in its Azure cloud computing division, increasing cloud revenue tenfold since beginning his tenure as CEO. The cloud generated 5 percent of Microsoft’s revenue in 2014; that percentage grew to more than 50 percent in the fiscal year fourth quarter of 2023.

Microsoft continued to expand and enhance its product and service portfolio from 2014 to the early 2020s, but the company’s investment in artificial intelligence is one of the more notable developments in the company’s trajectory. Microsoft’s $1 billion investment in OpenAI in 2019 marked the beginning of a strategic partnership with an institution that, in just a few years, would reshape the entire technological landscape upon its 2023 release of ChatGPT, the first publicly accessible (and, as of 2024, the most successful) conversational AI chatbot.

In earnings conference calls during 2023 and beyond, Nadella confirmed Microsoft’s commitment to infusing AI technology into every layer of the “tech stack” across all three business segments, with the expectation that AI could reshape the future of commercial and consumer technology applications.

Microsoft’s journey since the 1980s from operating system dominance to cloud computing and (in the 2020s) artificial intelligence showcases a strategic evolution characterized by a capacity to adapt to new technologies while allowing its long-running product lines to evolve and adapt.