There is an article on DailyTech (Ballmer on Vista) that ask a few interesting questions about the future of Microsoft's ever fattening operating systems.
If the PC were to start making it's way to "thinner client"-style operating systems what would that mean for the CPU industry? Much of the reason why we have to continually upgrade our computers to faster harder is because of how fat Windows has become.
Ever try to run some old DOS game from the 4.77 MHz era on your PC today? It runs so blindingly fast that it is unplayable. If the applications of the future are going to be more and more thin client based, then where does that leave companies like Intel and AMD?
Also consider how fast your PC would feel if you stripped out all of the excess overhead of Windows. It seems like we've been living in a self fulfilling prophetic cycle of faster computers and under-optimized applications and operating systems.
There's no doubt that the Win overhead is enormous, however, if you run a mini-Linux OS on your PC it will react faster but surprisingly not that incredibly faster. You would think that it would do whatever you were commanding by the time your finger was off the mouse button, but the actual speed is far from that. It still isn't instantaneous because of all the other aspects of operations that have to be performed, data has to be bussed, etc.
Still, I find that everyday operations for Word 2007 on my 1GB RAM San Diego 3700+ is just about as fast as the earlier versions of Word were on my Mac SE/30 with 4MB RAM. So there ya go. The more things change the more they stay the same!
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