Microsoft yesterday continued its hand-in-hand development of Windows Server 2008 and Windows Vista's first service pack, publishing release candidates (RC) for each product.

The big updates in Windows 2008 RC1 revolve around enhancements to Group Policy, a management framework first introduced in Windows 2000 Server. Group Policy Preferences, as it has been renamed, was formerly known as PolicyMaker Standard Edition and Policy Share Manager. The main benefits of Preferences appear to be more granularity for admins and simplified administration through reduced complexity of configuration scripts.

The release of RC1 means that Windows 2008 is essentially feature complete, with only very minor tweaks made going forward. Tina Couch, who described herself as the "newest member to the Windows Server team," blogged that Windows 2008 will be released to manufacturing (RTM) by the date of the "Global Launch Wave" on Feb. 27.

In an interesting side note, the Launch Wave itself has undergone a name change, now called "Heroes Happen Here." Couch claimed that it's the "largest enterprise launch in history, a whopping $150 million+ worldwide for outreach and demand generation to IT Pros and developers."

Vista SP1 is at the same stage of development as Windows 2008, and most of the changes since the most recent beta release concern installation issues. Vista Product Manager Nick White, on Microsoft's Vista team blog, wrote that the changes include:

    * Significantly smaller installer packages, reduced in some cases by half
    * Reduced disk space needs to install the SP
    * Better cleanup and deletion of files used for the install
    * Bug fixes to smooth the install process
    * More built-in guidance on how to install

White also added that Microsoft intends to "complete and release" SP1 in Q1 next year, putting it on nearly the identical release path as Windows 2008.

Since Windows 2008 and Vista SP1 share most of the same codebase, it makes sense to keep the releases close together, since getting the codebases too out of sync can cause problems. In an earlier story about delays in the Windows 2008 rollout timetable, analyst Rob Enderle of the Enderle Group speculated about the delay. "From the standpoint of servers, Microsoft would rather have [Windows 2008] at [Vista] SP1 level when it ships," Enderle said in late August.

Vista RC1 was made available today to TechNet and MSDN subscribers. White said that it will be available publicly next week on the Microsoft Download Center.

Both Windows 2008 and Vista SP1 have been hit hard by delays. Windows 2008, formerly code-named "Longhorn," has been in development for years, and has had a number of major features altered or completely eliminated; even then, its ship date kept slipping until the Global Launch Wave date was announced. Vista SP1 is a much-anticipated release for Microsoft, as corporations typically wait until the first service pack is released for a product before it's deemed stable enough to roll out on the network.

Vista could use a boost, as its sales figures have sagged well below expectations since its release early this year.

The other products scheduled to be announced at the launch event in Los Angeles include SQL Server 2008 and Visual Studio 2008.

Microsoft and its partners say the adoption cycle for Windows Vista is still in the early stages, particularly for businesses -- many of which are likely waiting for the release of Service Pack 1. Likewise, many businesses need to upgrade their hardware to run Vista, which is a major proposition. For consumers, this holiday season is the first in which Vista-loaded computers will be on store shelves.

Still, one year after Vista and Office were launched for businesses, some headlines today might have some people at Microsoft cringing.

There's this, from CNET, on a Qualys study that shows a major increase in Microsoft flaws between 2006 and 2007. "We have seen a huge jump in the vulnerabilities in Microsoft Office products," Amol Sawate, manager of Qualys' vulnerability-management lab, told CNET. "These charts show growth of nearly 300 percent from 2006 to 2007, primarily in new Excel vulnerabilities that can easily be exploited by getting unsuspecting users to open Excel files sent via e-mail and instant message."

And the AP's locally based correspondent covering Microsoft, Jessica Mintz, has this report on tests showing that an updated Windows XP will perform faster next year than Vista. Key passage:

    [The testers] found the original Vista performed 50 percent to 100 percent slower than the prevalent XP Service Pack 2, or SP2.

    Vista SP1, due out in the first quarter of 2008, barely improved the operating system's performance.

    But XP SP3, scheduled for the first half of 2008, did improve on XP's earlier performance, running 10 percent faster than SP2.

Microsoft says its too early to make such comparisons.

In the latest sign of what appears to be growing trouble for Windows Vista, Microsoft has decided to keep its forerunner, Windows XP, in sales and OEM channels for another five months.

Microsoft announced the move on its Website Thursday. XP, scheduled to be taken off shelves and out of OEMs' hands next January, got a reprieve until June 30, 2008. By that time, Vista will have been out for almost 18 months.

Microsoft tried to put the best face possible on the news. Mike Nash, vice president of Windows Product Management, said in a press release that customer feedback drove the decision.

"Although our research with customers before and since launch has reaffirmed our belief that the previous plan to offer Windows XP through Jan 2008 would address the needs of most customers, we did get clear feedback that there was a set of customers who needed a bit more time. Feedback from our OEM partners and from customers is that the June 30, 2008 date will address those needs," Nash stated in the release.

Nash continued to tout Vista's license sales, but for the first time publicly, Microsoft admitted that things are not going as hoped. "With more than 60 million licenses sold as of this summer, Windows Vista is on track to be the fastest-selling operating system in Microsoft's history. And while many large businesses are moving incredibly fast to Windows Vista ... we are committed to helping customers of all sizes with the transition. Some need more time, and we understand and respect that," Nash said in the statement.

The "60 million" license figure is one Microsoft has trotted out repeatedly to show Vista's popularity. In May, Chairman Bill Gates announced that 40 million licenses had been sold, followed by the 60 million figure by Microsoft COO Kevin Turner in July. Despite the license sales figures, though, evidence continues to mount that there is broad dissatisfaction with Vista, dissatisfaction reflected in the continued -- and perhaps increasing -- growth of XP, a six-year-old OS.

For instance, in July Microsoft CFO Chris Liddell said that the company changed its revenue forecast from its desktop OSes in Fiscal Year 2008, revising Vista's revenue down from 85 percent to 78 percent, and XP's revenue up from 15 percent to 22 percent.

There were warning signs in the sales channel even before that. Last April, Dell decided to re-offer XP on six different laptop and desktop computer models, citing customer demand. Then in August, Fujitsu said it will begin including an XP disc with laptops and desktops.

Market research firms noticed the problems. Several prominent ones, including Gartner, In-Stat and NPD, reported on the relative softness of Vista sales. In a late June press release, Gartner analyst George Shiffler stated that "The release of Microsoft Windows Vista operating system at the end of January has, so far, failed to stimulate the market in the way many hoped."

Another ominous sign came in August, when Microsoft announced it was running out of XP product keys due to continuing strong sales. Following on the heels of that was the recent news that over the summer, Redmond quietly made process changes that made it easier to downgrade from Vista to XP. Some of the world's biggest OEMs, including Dell, Hewlett-Packard, and Lenovo, are taking advantage of the program.

Microsoft is also continuing to improve XP, announcing at the end of July that it's working on XP SP3, for release sometime in the first half of 2008. The company has yet to update that timetable.

Meanwhile, Vista continues to suffer from a poor perception industry-wide, at least some of which is justified. In the beginning, much of it had to do with application compatibility. Just 650 applications enjoyed "Works with Vista" or "Certified for Vista" recognition upon release. Although the situation has improved markedly since its launch, there are still numerous complaints about hardware and specialized business application compatibility.

Add to that problems with User Account Control (UAC), a security technology that assaulted users with endless pop-up boxes asking for permission to do basic tasks, and increased hardware requirements to make use of the Aero graphical interface, and the reasons behind Vista's sluggish sales become clearer. Combined with the familiarity users have with XP, and that OSe's stability and broad compatibility, it may not be so surprising after all that Microsoft is looking for ways to extend XP's freshness date.

Microsoft has done an about-face on virtualization licensing for Windows Vista and decided to maintain the status quo.

Microsoft was going to announce today that it had loosened up its licensing restrictions regarding what versions of Vista can be run on a VM, allowing the "Home" versions to be run without paying for another license. Mary Jo Foley, a Redmond magazine columnist who blogs about Microsoft for ZDNet, added in a blog entry that "the revised Vista EULA also was going to allow for the use of information-rights management, digital-rights management and BitLocker encryption in virtualized environments."

But Microsoft has had a sudden change of heart. In a brief e-mail statement to the Redmond Media Group, the company stated: "Microsoft has reassessed the Windows virtualization policy and decided that we will maintain the original policy announced last Fall." No further details were given.

Basically, the only versions of Vista that can be legally used on a VM are the business editions: Business and Ultimate. Home Basic and Home Premium aren't eligible.

Scott Braden, a Microsoft licensing consultant and columnist for Redmondmag.com, said the abrupt change could be due to miscommunication within Microsoft. "It seems like it could be a classic case of the right hand not talking to the left within Microsoft. They do these about-faces pretty frequently."

Braden, in fact, said Microsoft's initial decision to broaden the licensing terms was at odds with its normal practice. "I was surprised they'd even consider opening [Vista licensing in VMs] up more than what they had in the fall." Braden explained that with products like OSes, new versions like Vista are usually subject to tighter licensing restrictions instead of looser ones.

Braden does not feel, however, that the decision will have any significant impact on Microsoft's bottom line. "I can't imagine this being a blip on anybody's earning statement," Braden said. Businesses, he continued, would be using the business editions of Vista, while the typical home user, who is being cut out of the licensing option in this case, doesn't use VMs.

Service Packs can be good and bad for Microsoft. On one hand, they fix vulnerabilities, upgrade the usefulness, efficiency or functionality of components, and sometimes add new features. On the other hand, consumers, and especially corporations, will often wait until an SP is released before upgrading to the new product, assuming that the first generation of a release isn't quite ready for prime time.

Some have even wondered if Microsoft's various Update services have made service packs obsolete. Some of that speculation has been spurred by the fact that Microsoft has been very tight-lipped about an SP1 for Windows Vista, leading some to wonder if service packs would be foregone totally.

For instance, Redmond magazine columnist Mary Jo Foley, who blogs about Microsoft for ZDNet, wrote an article discussing the conflicting signals Microsoft was sending out about SP1's existence.