UK-based research group Ovum says a potential new dispute between the EU and Microsoft concerning the forthcoming Vista operating system has the potential to damage the European software industry through excessive regulation.

The dispute concerns the potential bundling of functionality such as internet search and digital-document management into the Vista operating system and could potentially turn into another anti-trust dispute.

According to David Mitchell, software practice leader at Ovum, it is time for the EU to pull its head in and stop making demands on Microsoft to change its code after its already been developed.

"The industry does not need another chapter in the epic saga of the EU's battle with Microsoft. Indeed, it needs to draw the existing threads of the various debates to a timely close," says Mitchell.

"Rather than protecting the European software industry, another lengthy and acrimonious dispute will harm it. The industry needs to focus on technological innovation and hard-but-fair competition. If the industry is continuously stopping to look over its shoulder, then it will spend less time developing great products and selling them to customers. More agile markets in Asia and the US will ultimately beat a European software industry that is over-mired in regulation.

"Software development is a lengthy process. Asking for modifications to be made to software is best done at its design stage, not when the product has been in technical development for many years. It becomes progressively more costly to fix software as it nears completion - up to 100 times more expensive. If the EU wishes to have a deeper regulatory role in the software markets, it would be much more effective to intervene at the product design and conceptualisation stages. To do otherwise will generate increased friction, tension and dispute with the global software industry."