Is it possible to boot from usb external hd?

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Nottingham
My uncle has gone out and bought a new laptop with Windows 7 64bit installed, but a major programme that he uses for work only supports 32bit os. I was wondering if it was possible to get an external hard drive, install Windows 7 32bit and boot from that on the laptop whenever he needs to use that particular programme. Is this possible or am I overlooking a simpler solution? Any help would be greatly appreciated. Thanks.
 
Thanks for the replies so far - the compatibility mode thing definitely doesn't work. The idea of creating a partition sounds good, though I've not done it before - is it difficult to do? The laptop has 3GB of Ram, but since it's brand new I might use the installing 32bit instead of the 64bit as a very last resort.
 
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