A lot of businesses have already decided to boycott Windows Vista and many consumers would like to skip it, too. In order to avoid the same mistakes in the next version of the operating system, there are five things Microsoft needs to do with Windows 7.

We’re going to be hearing a lot about Windows 7 over the next two weeks as Microsoft convenes its Professional Developers Conference (PDC) and the Windows Hardware Engineering Conference (WinHEC) — both in Los Angeles.

Ballmer and company know that Vista has been rejected by businesses and that it has dreadful reputation among the general public. They know they screwed up. And Microsoft is nothing if not responsive to customers and public opinion. In fact, I’ve argued before that the company is actually hyper-responsive and that’s why they’ve crammed way too many features and way too much code into both Windows and Microsoft Office.

So how can Microsoft recover from the Vista debacle and breath life back into Windows? If nothing else, here are five things the company needs to do to start.

5. Speed it up significantly

One of the worst qualities of Windows Vista is that it is almost always slower than its predecessor Windows XP when running on the same hardware. And most of that performance drag is not simply due to the fancy graphics. Even if you turn off the Aero interface, Vista is still usually slower.

The problem is that the underlying Windows code is way too bloated — over 50 million lines of code in Vista — and even today’s ultra-fast multi-core processors can’t overcome that. The Windows development team has to find a way to streamline Windows 7 so that it’s faster and more stable than both XP and Vista, whether it’s running on netbooks and nettops with the Atom processor and only 1 GB of RAM or tomorrow’s 8-core machines with 10 GB of RAM.

That’s an extremely difficult task, but no one said this was going to be simple or easy. One way to start is by turning Windows into just the core OS and further modulizing it by making a lot of the other software such as the Media Center, Tablet PC, and Admin Tools available as downloadable add-ons.

4. Avoid compatibility problems

In the process of streamlining Windows 7, the developers can’t sacrifice software compatibility. One of the things that has killed Vista is that Microsoft spent so much effort trying making it more secure with User Access Control (UAC) that it broke a lot of software in the process.

You can argue that a lot of the stuff that broke in Windows Vista was poorly programmed to begin with and deserved to break so that it could be rewritten more securely. The problem is that not much of the software has been rewritten and the UAC approach has not worked because users get so many dialog boxes that they just blindly click OK until all of them go away. A better approach is needed — one that balances security and compatibility.

The other compatibility issue that Windows 7 has to juggle is the 32-bit vs. 64-bit split. While most modern processors are 64-bit, most of the software and device drivers are still written in 32-bit code. I’ve seen a number of PCs with 64-bit CPUs that have 32-bit Windows installed simply because it has better compatibility. I’ve also seen and heard about a number of business systems that have 64-bit Windows Vista installed, but are running into significant software and/or driver incompatibility problems.

Microsoft, Intel, and AMD need to lead the charge to get software vendors on-board with 64-bit before Windows 7 is officially released.

3. Undercut OS X on price

Mac sales have been growing much faster than the overall PC market and Mac OS X has continued to nibble away at Windows’ massive market share over the past two years. However, Apple showed the same chink in its armor that has long plagued it when it recently announced its new line of laptops and the cheapest one was priced at $999. The message being sent is that Apple wants to be a premium computer brand with high margins and has very little interest in selling low-margin, high-volume machines.

Over the next two to three years the lion’s share of the growth in computer sales is very likely going to be in the sub-$500 netbook and nettop market. These machines are essentially just glorified Web browsers in a diminuitive hardware package. The OS doesn’t matter much. As a result, Linux is a major threat to become the OS powering a lot of these machines, because of its minimal price.

However, with Apple relegating itself to the high end of the market and most users still not very comfortable with Linux, Microsoft has the opportunity to swoop in and deliver a Windows 7 that is fast and cheap and can run very well on these little machines, while also scaling all the way up to the fastest workstations. A lot of users and businesses would probably gravitate toward the idea of a common OS experience (and one that most users already know) in Windows, especially if the price is comparable between Linux and Windows machines.

The key here is making Windows very inexpensive and very scalable while preparing to sell it in larger volumes than ever before on the cheap machines that are going to flood the market over the next couple years.

2. Sell only one version

There were primarily two editions of Windows XP: Home and Professional. With Windows Vista, that doubled to four primary editions: Home Basic, Home Premium, Business, and Ultimate. It’s time to simplify and go back to just one version of Windows with one price.

This is a case of Microsoft just getting out of the way and letting Windows be Windows. Having just one edition of the client OS will make Windows 7 easier to understand, easier to purchase, and easier to support (for both Microsoft and IT departments).

Of course, the one version of Windows 7 needs to be cheaper than Mac OS X ($99), easier to use than Linux, and easier to set up and get started than any of the recent versions of Windows.

1.  Make it the last shrink-wrapped OS

The old way of building and packaging operating systems in shrink-wrapped boxes that are released every few years is just not fast enough or nimble enough to meet the demands to today’s Internet-driven computing environment. It’s also counterproductive for an OS maker because you end up competing against yourself the way XP and Vista are now competing against each other.

There’s only one Windows, and it has merely evolved over time. That’s the message Microsoft needs to drive home by making Windows 7 the last shrink-wrapped version of the OS. From here on out, Microsoft should simply make Windows a constantly evolving platform with new features and functionality enhancements added several times a year through Windows Update.

The business model would be to turn this into a subscription product, albeit a very inexpensive one. As long as you have a current Windows subscription then you can continue to download new features, patches, and updates. If your subscription lapses then Windows still works but you can no longer download the new stuff, or any add-ons, and you can only download highly critical security patches.

For enterprises that are currently using Software Assurance, they are already buying Windows as part of a subscription so there would be no change in the business model for them.  For consumers and small businesses who aren’t part of Software Assurance and typically buy Windows from OEMs such as Dell, Toshiba,  and Hewlett-Packard, the Windows license that comes with their PC could last for three years and then it’s up to the buyer to pay something like $30-$40/year to renew. For those who want to build their own system, a full version of the OS could cost something like $50-$75 for the first year.

Bottom line

Windows 7 needs to be fast, inexpensive, and widely compatible. Microsoft also needs to change the development and business models to make Windows one continually evolving OS.

Let’s face it, the OS is not as flashy as it once was. It’s also not nearly as relevant as it was a decade ago. The Web browser is gradually usurping its position as the most important application platform, as has long been predicted.

Because of that, Windows is at a crossroads where it could begin losing large chunks of market share to competitors that are better prepared to operate in this new reality, or it can greatly simplify its OS while turning into more of a background utility that makes good money off of a low-margin, high-volume business.

If it can pull that off and clearly communicate to businesses and consumers that Windows 7 is the start of a new approach to Windows then Windows 7 could be a watershed release. If Microsoft simply releases a mild revision to Vista and maintains the same development and business models, then Windows could become more vulnerable to its competitors than it’s been in almost two decades.

Author: Jason Hiner from TechRepublic