Windows’ future looks shaky, as two Gartner analysts pointed out at a conference in Las Vegas, ComputerWorld reports. Michael Silver and Neil MacDonald said Microsoft is “collapsing,” a harsh term, but as they said, Microsoft needs to make significant changes in the operating system if they want that term to be just a bad dream.

In their presentation at the conference, entitled “Windows Is Collapsing: How What Comes Next Will Improve,” the two Gartner analysts said: “For Microsoft, its ecosystem and its customers, the situation is untenable,” due to future problems that are said to hit Microsoft such as compatibility problems, high management costs or failing to make meaningful adjustments to new releases.

“This is a large part of the reason [why] Windows Vista delivered primarily incremental improvements,” the analysts said. “Most users do not understand the benefits of Windows Vista or do not see Windows Vista as being better enough than Windows XP to make incurring the cost and pain of immigration worthwhile.”

With that being said, analysts say Microsoft’s perspective on their operating system upgrades are by far insufficient to deliver a meaningful experience on both mid- and long-term. Microsoft takes its time into delivering new versions of Windows, but it’s that time that will put others ahead of them in the future, the analysts predicted.

On the long run, Microsoft is going to find it hard to compete with smaller Web applications and devices, which is quite the trend right now. Microsoft will also have to acknowledge that its operating system needs to adjust to low-cost low-powered computers, which made Linux the preferred OS for this sort of devices.

“Apple introduced its iPhone running OS X, but Microsoft requires a different product on handhelds because Windows Vista is too large, which makes application development, support and the user experience all more difficult,” said Silver and MacDonald.

Their advice: “We envision a very modular and virtualized world. As OS, in this case Windows, will ride atop the hypervisor, but it will be much thinner, smaller and modular than it is today.”