Quite a bit has been written about Microsoft's decision to create an add-on for Windows 7 to address one of Vista's most serious shortcomings - application compatibility. Dubbed XP Mode (XPM), this new feature will create a virtual environment inside Windows 7 that can be used to run applications that have yet to be updated to support Windows Vista. Don't expect Windows 7 alone to solve compatibility issues; remember, Windows 7 is the next evolution of Vista.
To be fair, responsibility for application compatiblity doesn't lie solely at the feet of Microsoft. By this point, with Vista having been around now for years, there shouldn't be a serious application or driver vendor out there without software and processes to support Vista. Unfortunately - for both Microsoft and for end users - some application and driver vendors have yet to develop software versions that support Windows Vista and, in the media at least, Microsoft is left holding the bag and has taken a beating for third party shortcomings. Sure, it was Microsoft that made underlying changes to the operating system that broke applications and drivers, but technology is certainly not something that stands still.
Microsoft's solution to the lingering application compatibility problem is to simply get out of the way by providing XPM. In doing so, Microsoft is, in a way, admitting defeat when it comes to third party application compatibility in some instances, and I can't really blame them. Further, the company knows that it has to do everything it can to hit Windows 7 out of the park and make it a homerun from day one. In "solving" the application compatibility problem in some way, Microsoft can remove what was a major negative and turn it into a major positive (as in, "run all of your Windows XP programs with ease"). XPM reminds me a little bit of the "Classic Mode" that ran on Macs for quite some time after the initial release of Mac OS X. It was a way that people could make the jump to Mac OS X without losing the OS 9 lifeline.
Some people are worried that XPM will prove to be a support nightmare for many organizations. After all, XPM is supposed to be a virtual machine running under the next version of Virtual PC. In essence, each user will get two desktops - one physical and one virtual. If XPM does ship in this way, there will be obvious resource implications from a RAM and processing perspective. The host PC will need whatever RAM is required to runs its own tasks, but the XPM virtual machine will need resources as well. Further, IT will have to support both the physical OS running Windows 7 as well as the virtual XP instance. Although Microsoft has yet to provide details on just how XPM will operate, I suspect that they've thought about these kinds of potential issues.
I see XPM as a way for Microsoft to sort of jettison the past, too. By providing a virtualized environment for the sole purpose of maintaining backward compatibility, Microsoft should be free to eliminate other backward compatibility mechanisms from the operating system, too. I don't know if we'll see such eliminations happen in Windows 7, but I can see them happening in Windows 8 (or whatever the next version is called). Further, since a 32-bit virtual machine can run inside a 64-bit operating system, XPM, if it remains a feature beyond Windows 7, could be a perfect way for Microsoft to rid themselves of 32-bit shackles and boldly embrace 64-bit desktop as the sole Windows desktop flavor.
Yes, XPM is definitely a case of Microsoft coverings its assets, but because of the company's reliance on third parties to keep their software current, I completely understand why Microsoft is taking this step. I also believe that it's a step in the right direction that allows Microsoft the freedom to develop a next generation operating system without being shackled to the past.