Microsoft hopes to gain entry to corporate data centers via its newest operating system, Windows 2000.


Windows 2000 is now shipping, yet the waiting game continues. Key components of the product line are still missing, and few companies are racing to upgrade to the products that are available. While Windows 2000 has received raves for its technical merits, even its biggest fans advise companies to move in measured steps toward adoption, and many are taking a wait-and-see attitude. That means that Microsoft Corp. will also have to wait, and wonder: Will this newest version satisfy Bill Gates's dream of making Microsoft the indisputable keystone of Corporate America's technology infrastructure?

In its current desktop and server iterations, Windows already dominates the PC and workgroup realms, but the goals for Windows 2000 go well beyond this traditional Microsoft terrain. Boasting major improvements in what could be considered the core competencies of such a product--performance, scalability, reliability, and security--Windows 2000 is readying an assault on the data center.

Microsoft is confident its new system ( /windows2000) provides enough low-cost power to muscle out the high- end servers that run Unix or a variety of proprietary operating systems. The question is, has the Redmond, Wash.-based colossus accurately gauged the needs and preferences of corporate IT departments?

The answer won't be immediately apparent. While the hoopla surrounding February's official launch--replete with a huge dancing laptop computer and quips about the future from pitchman Patrick Stewart, a.k.a. "Star Trek"'s Captain Picard--could lead the casual observer to believe Windows 2000 is here, only some products (for the desktop and smaller servers) are shipping now. Windows 2000 Data Center, arguably the most critical piece, will begin shipping this summer, along with several related E-com-merce versions.

"Data Center takes Microsoft up to enterprise- level computing," says Dan Kusnetzky, vice president of system software research at International Data Corp., in Framingham, Mass. At that level, he warns, "you encounter a completely different selling situation--one that Microsoft may not be ready for."

Romancing IT Execs

In Kusnetzky's view, Microsoft has tended to sell around corporate IT departments rather than through them, to business managers content to view Windows as a commodity that needs to be upgraded every 18 months or so. "It becomes a nice annuity business for Microsoft," he says, "but IT people don't like to upgrade without a compelling reason. They like to solve a problem once and move on." The Data Center version will require buy-in from senior IT executives, an audience that Microsoft has not traditionally gone to great lengths to romance.

As one example of Microsoft's inability to cater to the needs of IT departments, Kusnetzky cites the company's improvements to Windows 2000, achieved in such a way that compatibility with existing applications may pose a problem. "Other vendors find ways to add new features without raising doubt about how older programs will run," he complains.

And companies that piloted the new system with Microsoft say it requires substantial training, but they view that as a price to pay for the sorts of new features that make the system suitable for larger applications. Massimo Villinger, chief technology officer at Lockheed Martin Enterprise Information Systems (EIS), the Orlando-based IT services division of Lockheed Martin Corp., says that companies will need to plan carefully before rolling out Windows 2000 but that the effort will be worth it.

"We did a TCO [total cost of ownership] study in a distributed environment, and we think we'll cut costs by about 17 percent by upgrading to Windows 2000 from our current mix of Windows 98 and NT," he says. One reason: new management features mean a company can serve more users with fewer of those newly trained administrators.

But those savings come at the departmental level, where Microsoft brings deep experience to bear. As for the Data Center version, Villinger simply says, "The performance figures Microsoft announced look interesting. We run Sun and Hewlett-Packard today, and have no immediate plans to make major changes."

Windows 2000 Data Center set a transaction- processing record earlier this year, easily besting a system from Sun Microsystems, which dominates high-end Unix installations and is the competitor most clearly visible in Microsoft's cross hairs. Perhaps more important than raw power, however, are the early reports of reliability. At the February launch, Gates devoted considerable attention to an independent lab test that had failed to crash the system at all. This, despite the fact that the product shipped with 63,000 known bugs.

The promise of greater reliability has made an immediate impression on IT departments, according to Joe Clabby, a vice president at Aberdeen Group, in Boston. "I thought the improved management features would be its most appealing aspect," he says. "I've been surprised to hear so many people praise its reliability." But one reason cited by those companies not immediately upgrading to the new system is the desire to see how these bugs manifest themselves, and how quickly Microsoft responds.

New Cost Increases

One aspect of Windows 2000 that doesn't appear to bother anyone so far is the change in licensing arrangements, but at least one expert believes companies would be wise to take a closer look. Alexa Bona, an analyst with Gartner Group Inc. in London, describes the new licensing terms as "subtle but significant," and certain to cost most companies more than previous upgrades.

"List prices are staying flat or almost flat," she says, "but if you wade into the fine print, you see a number of cost increases, particularly those involving client access." That means companies would have to foot a bill for employees or outside business partners (including, potentially, E-commerce customers) who use applications that barely touch Windows 2000.

In the past, for example, employees who used Microsoft Exchange for E-mail but relied on Novell for various network operating services didn't require a client-access license. Now, each desktop configured that way will require a $12 to $25 license. Related fees, Bona says, could go up by 500 percent to 800 percent, depending on the systems in question. "Microsoft makes more money, but at the same time it's difficult to cost-justify moving to another system just to avoid these fees," Bona says.

Another new version of Windows, dubbed Millennium Edition (ME), is scheduled to ship in the third quarter, but don't expect to pinch pennies by deploying it on desktops. While prices haven't been set yet, Windows ME is aimed at home users and very small businesses, but lacks many of the features necessary to achieve the desktop-to-server integration of the Windows 2000 product line. That may not be a huge loss, however, because Windows ME still uses much of the code found in Windows 98, which makes some analysts wonder just how reliable it will prove to be.

Ultimately, Bona says, it comes down to total cost of ownership--which means that even if some users chafe at the higher licensing fees, they may not have the economic incentive to do anything about it. She encourages large companies (those with 5,000 desktops or more) to sign contracts that lock in use rights so as to avoid further increases.

Evolution, Not Revolution

But Windows 2000 also promises certain economies. Scalability, the ability to run effectively even as more hardware is added, has also been greatly improved, meaning that companies could link several machines together and run critical applications on them.

But even the Data Center version of Windows won't run on the largest servers; Sun and other Unix providers still rule the roost there. The question is whether Microsoft's ability to "scale out," or run well on a network of low-cost, Intel-based servers, will allow it to match Sun's ability to "scale up," or run on computers that have hundreds of microprocessors. "I think the Data Center version won't displace Unix," says Kusnetzky, "but it might sit side by side and be used for new applications."

That suggests evolution, not revolution. Despite its ardent embrace of Windows 2000, Lockheed Martin EIS will spend years rolling it out in the parent corporation, usually in conjunction with hardware upgrades. Analysts expect most companies to do the same.

While it won't be an overnight sensation, Windows 2000 will span the organization as it never has before--from the desktop to the data center, with a suite of E-commerce servers in between. This next-generation version of Windows would seem a vital part of Bill Gates's vision of complete ubiquity. Can he make it so? Only Captain Picard knows for sure.


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