Intel is attempting to educate IT managers about the perils of remaining behind while hardware and software technology race ahead. Information security, lost productivity and the higher costs of managing older networks should make IT managers, and their bosses, think about upgrading now to avoid a bigger problem in the future, said Steve Asbjornsen, manager of the business demand sector for Intel.

Many IT managers have avoided replacing their older systems as IT budgets have been slashed in the face of a worldwide economic downturn heading into its second year. While those businesses have been getting along with their current systems, they are prevented from upgrading their applications or operating systems by the lack of processing power in those older PCs, according to Asbjornsen.

"Delaying client replacements decreases the ability to adopt new tools, applications and operating systems," said Asbjornsen.

Intel cited analyst figures that show that running Windows XP across a network offers cost savings over running older versions of the operating system. The client management features of Windows XP and the increased stability and security of the OS mean IT departments will spend less time fixing client problems and more time working on other much-needed IT improvements, Asbjornsen said.

And, conveniently for Intel, Windows XP will run more efficiently on a faster processor.

"All those points are absolutely true," said Stephen Baker, research director for NPD Techworld. "But no one knows where that tipping point is, where the need for upgrades gets to be greater than the cost of maintaining what you have".

But for IT managers frustrated by the inconsistency of Windows 98, the improved stability of Windows XP can bring peace of mind, as well as the freedom to assign IT employees to work on other tasks apart from troubleshooting user problems, said Roger Kay, director of client computing at research firm IDC.

"Stability means less helpdesk time, which is measurable. Even if [companies] aren't doing the studies, they have a gut feeling of where these things are running and whether their people are able to work efficiently," Kay said.

The industry has never really faced this type of problem, said Baker and Asbjornsen. Most businesses upgraded to systems running the latest versions of Microsoft's operating systems in the late 1990s when IT budgets were still soaring, and the new operating systems far outperformed existing ones, they said.

"People have always upgraded before it became hard to maintain [older systems]; the new things offered so many advantages over the old things, and new software required you to upgrade your hardware," Baker said.

But while recent advances in Microsoft's software have brought more stability and security to Windows, PCs running older operating systems such as Windows 98 or Windows 2000 are working fine, which has caught the notice of many chief financial officers (CFOs) at businesses looking to cut costs, Kay said.

"CFOs have been nixing client upgrades, because the ones in place are doing the job for which they were designed," Kay said. "But pressure is building for an upgrade."

The lack of a compelling application that doesn't run on older operating systems has helped to delay the upgrade process, but wireless applications might become that fabled 'killer app' that the technology industry is looking for, Kay said. Windows XP comes with several features to help IT managers support a wireless environment.

Intel clearly has a vested interest in reviving the PC market, with data from Mercury Research showing that the chip maker shipped 86.8 percent of desktop and notebook processors in the third quarter. The Intel architecture group, which makes its desktop and notebook processors, was also the only division at Intel to record a profit in the third quarter, albeit a healthy one.

But a recovery in corporate IT spending will not come necessarily from hardware purchases, both analysts said.

"People are looking for software that solves business problems and makes them more efficient. This doesn't necessarily require the latest and greatest stuff," Baker said.

And while modern processors greatly outperform ones sold just a few years ago, the difference between most companies with applications running on older 300MHz processors from Intel or the company's latest 3.06GHz processor due out tomorrow comes down to "the amount of time you spend watching the hourglass," said Kay.

"With new processors, it might not be one-tenth of that time, but it might be a lot less. The question is how much is that productivity worth? At some point, that's a compelling argument [for an upgrade] when that gap gets big enough," he said.