Microsoft Targeting Corporations With New Windows 2000
After three years in development, Microsoft finally released the code last week for its long-delayed new operating system, Windows 2000, to its manufacturing partners. The news drove up Microsoft’s stock 10% that day to a record close.
The excitement is because Windows 2000 is more than just an upgrade. It is an entirely new system that aims to strengthen the company’s e-commerce and Internet business and targets the high-end computing of Fortune 1000 corporations.
The main market for Windows 2000 is made up of corporate customers that require high-powered servers--the computers that run business networks and big databases.
Windows 2000 replaces Windows NT 4.0 and is supposed to service everything from laptops and desktops to high-end clustered servers. It is based on different software architecture from Windows 98, which is aimed at the home market.
Although Microsoft shipped Windows 2000 to manufacturers one year later than expected, company executives said the delay was necessary to ensure a reliable software program.
“Windows 2000 is the most reliable, highest-performing operating system in our company’s history,” said Jim Allchin, group vice president for Platform Groups at Microsoft.
But many companies intend to delay any purchases up to a year until they are convinced the system is robust and virtually crash-free, analysts say. In an International Data Corp. survey of 788 North American firms, more than half said they would wait six months to a year before adopting the new operating system.
“The reason people will wait is that they are concerned that the technology is not stable and that they can’t rely on it,” said Dan Kusnetzky, an analyst for IDC. “Most are going to wait for the technology to stabilize.”
Microsoft’s new operating system will be sent to computer makers in the next few weeks and released on the retail market Feb. 17.
The yearlong delay of Windows 2000 has opened the market for rivals such as Sun Microsystems, Novell’s Netware and the many firms supporting the increasingly popular Linux operating system.
Last year, Microsoft’s NT system held 38% of the smaller desktop market based on the number of copies shipped, dwarfing Novell Netware’s 23% share. The various Unix-based systems held a combined 19% and Linux had 16%, according to IDC.
Windows 2000 will face its stiffest competition from various Unix-based operating systems led by Sun’s Solaris. These companies build the software and computers to support larger corporate systems, and the business generates much wider profit margins.
Despite all this, investors are betting that Windows 2000 can elbow its way into a leading share of the market for the muscular servers that power big data processors as well as the smaller servers and applications for Web-based businesses.
“Windows 2000 is the platform for all of their enterprise system initiatives going forward,” said Christopher Galvin, financial analyst for Hambrecht & Quist in San Francisco. “I think it’s going to be a huge release.”
Prices for the new operating system begin at about $149 for each user. Versions for network users fetch about $599 and rise according to the number of users licensed. But a Giga Information Group study shows that the price of Microsoft’s software is only a small fraction of the total cost to put this complex system into corporate use.
In a study of a sample network of 30 servers and 5,000 computer workstations, Giga found that a company would shell out $535,000 to run Windows 2000 in its servers, plus an additional $973 per workstation, for a total of $5.4 million.
Part of Microsoft’s strategy is to gradually convert existing NT users to Windows 2000. Microsoft has sold 3.4 million copies of Windows NT. Over the next five years, analysts are projecting that sales of Windows 2000 will grow about 28% every year.
Windows 2000 is also targeted for the more lucrative and larger server market that drives the big databases of the Fortune 1000 companies.
“Microsoft is wanting very much to get into the enterprise-caliber market because that’s where the higher profit margins exist,” Kusnetzky said. “They’ve been knocking on the door of the major corporate data centers for some time, but Windows is rarely in that room.”
Skeptics believe Microsoft will have a tough time cracking that market. The company’s reputation for somewhat unreliable operating software for small servers and business desktops won’t fly with the purchasers of large-scale corporate servers. These executives are the gatekeepers of any large corporation’s mission-critical data. This information traditionally is stored in mainframe computers or large Unix-based servers. If the computer or one of its applications fails, it can shut down the company.
But some of the early testing suggests that Windows 2000 is far more reliable than Windows NT.
Steven Blyth, senior vice president of operations for Supermarkets.com, said his company was very concerned about the reliability of Windows 2000. The online grocery company’s Web operations are based in Anaheim.
But in full-scale testing over the Supermarkets.com system, Blyth found Windows 2000 to be stable and efficient. The new operating system doubled the amount of Web-based transactions without needing additional servers or databases, Blyth said.
