Now that Windows 3.0 is about to celebrate its first birthday (which the proud parents in Redmond will doubtless celebrate with their usual hyperbole), what's the verdict of the marketplace?

The jury is still out. The biggest impact of Windows, we suspect, has been a dramatic shift in end-user psychology. For the first time, DOS-based GUI applications have become credible, and perhaps even inevitable, to the average Joe Sixpack user. Even people who don't see any immediate benefit from Windows now believe they'll migrate eventually to a graphical environment. That kind of expectation never occurred with OS/2, which inspired MIS managers but never seemed compelling to real users.

So why is the jury still out?

Well, psychology doesn't always translate into immediate sales. There's evidence that Windows 3.0 suffers from the same problem as windows 2--lots of sales (and giveaways) of system software, but not many active users. Between May and December, Microsoft says it shipped more than three million copies of Windows 3.0. In all of 1990, according to the Software Publishers Association, Windows developers sold 1.5 million copies of applications and aftermarket products. But those numbers include only a little more than 300,000 word processors and about 200,000 spreadsheets (mostly Word and Excel). In other words, more than 90% of Windows owners don't seem to be buying the two most basic productivity tools.

Won't the number of active users increase once Wordperfect and Lotus deliver their Windows versions?

Yes, these versions will attract perhaps another million or so active users in the next year. But is the bottleneck really a lack of adequate Windows-based applications? After all, both Excel and Word are mature, successful products from a company that certainly doesn't have distribution or credibility problems. The real question is whether even another million active users are enough to support all the new Windows developers who are crowding into the market. As a point of comparison, the current macintosh installed base is about five million machines (almost all in active use), yet developers are still complaining that the Mac market is too small.

Yet corporate buyers keep saying that their companies are standardizing on Windows.

Windows has become a checklist item for hundreds of large corporations, but it remains to be seen how fast top management will agree to massive hardware and software upgrades (in a recession, no less) to achieve speculative gains in white-collar productivity. We think it's more likely that Windows first will have to prove itself in hundreds of pilot projects before we see large-scale adoption of mass-market applications. In the short run, the fastest penetration of Windows products is likely to occur in specialized niches, among individual users who will insist on superior functionality, not just pretty screens.

So is Windows development a reasonable investment?

A good many new Windows products will never even recover their development costs, so we'll probably see the same kind of brutal shakeout that occurred among early Mac companies (yes, history repeats itself). But there's still a good argument for investing now in learning how to write graphical applications. Wordperfect, Lotus, Ashton-tate, Borland, and other DOS companies all discovered the hard way that graphical products are tough to get right the first time. Once the Windows user base gets bigger and more sophisticated, companies that try to walk before they crawl probably won't get a second chance.