Well, the long wait is nearly over

Well, the long wait is nearly over. Microsoft's elephantine parturition has produced an heir. Last week the company distributed 'Release Candidate 1' (RC1) of Vista, the new incarnation of Windows, to about 5 million favoured customers. Think of it as the final beta of the software. Microsoft says it is still on course to deliver a version to corporate customers in November, followed by a consumer release to high-street dealers in January.

Microsoft also released details of US pricing for the new operating system. The 'Home Basic' version will cost $199. 'Home Premium' comes at $239. 'Vista Business' is priced at $299. And 'Vista Ultimate' weighs in at a whopping $399. Security vulnerabilities come free with all versions. There is also to be a 'Vista Starter' edition which will be marketed to people in poor countries in a futile attempt to stop them pirating Vista Ultimate and selling it on the streets of Shanghai, Bangkok and Singapore for a dollar a pop.

There will be a predictable (and expensive) PR campaign to coincide with the final release of the software. But in Redmond, Washington, the Microsoft campus, the only sounds to be heard are of people muttering 'Never Again'. For the Vista story has turned out to be an interminable corporate nightmare. The system is two years behind schedule, and in its released version will be only a shadow of what was envisaged when it was first given the code name 'Longhorn'. It has left behind it a trail of corporate wreckage and prompted a major reorganisation of the company's senior management. Jim Allchin, one of the company's most hardline ideologues (and the guy whose internal memo about 'leveraging' the Windows monopoly probably triggered the anti-trust suit in 1998), announced that he would go when Vista shipped. And even as RC1 was released, it was announced that Brian Valentine, Microsoft's operating systems chief, is leaving to join Amazon.com. According to the Seattle Times, Valentine's departure is amicable, but his exit signals the end of an era.

The Vista saga has two interesting lessons for the computer business. It raises, for example, the question of whether this way of producing software products of this complexity has reached its natural limit. Microsoft is an extremely rich, resourceful company - and yet the task of creating and shipping Vista stretched it to breaking point. A lesser company would have buckled under the strain. And yet while Microsoft engineers were trudging through their death march, the open source community shipped a series of major upgrades to the Linux operating system. How can hackers, scattered across the globe, working for no pay, linked only by the net and shared values, apparently outperform the smartest software company on the planet?

Microsofties retort that Vista is much more complex than Linux. But it's not the whole story. It could be that purely networked enterprises like the Linux project are actually a better way of producing very complex products, much as Toyota's 'lean' production system is the best way of making cars.

The difficulties in developing Vista stemmed from its monolithic structure and the need for 'backwards compatibility', ie ensuring that software used by customers on older versions of Windows will work under Vista. This vast accumulation of legacy applications acts like an anchor on innovation. The Vista trauma has convinced some Microsoft engineers that they will have to adopt a radically different approach.

Its outlines are already visible. It involves, firstly, abandoning the idea of an operating system as a monolith and breaking it into modules, and, secondly, adopting 'virtualisation' - a key technology that enables a single machine to run several operating systems (or modules thereof) in parallel - to deal with the backwards compatibility problem.

Virtualisation is the Next Big Thing in computing, and the lesson of Vista is that Microsoft will have to embrace it to survive in the operating system market. The trouble (for Microsoft) is that the leader in the technology is Xensource, a spin-out from Cambridge University's Computer Laboratory. And here's where the delicious ironies begin. For not only is the lab housed in the William Gates Building (in recognition of a donation by the Microsoft boss), but Xen's core technology is - wait for it! - open source, which in Redmond is still viewed as the spawn of the communist devil. In due course, an accommodation will be reached - and Xensource will go through the roof. If you were thinking of investing, however, I'm afraid you've missed the boat. John Doerr, the world's greatest venture capitalist (Sun Microsystems, Compaq, Lotus, Intuit, Genentech, Millennium, Netscape, Amazon and Google, inter alia), got there before you. In this business, you have to get up early if you want to get into bed.