May 6, 1999
Rivals Gain From Windows 2000 Delays
As Sales Shift to Sun, Novell and IBM
By DAVID P. HAMILTON
Staff Reporter of THE WALL STREET JOURNAL
Late is better than never for Microsoft Corp. and the next incarnation of
Windows -- but it may not be good enough to trump some re-energized
competition.
This week, Microsoft began shipping what is expected to be the final test
version of Windows 2000, an operating system that is the company's most
ambitious attempt yet to take on high-end corporate computing chores. Up
to now, those kinds of jobs have been dominated by rivals, notably the
widely used Unix system.
Yet where the Redmond, Wash., company
was once expected to dominate corporate
data centers as thoroughly as it does desktop
computers, Microsoft now faces a drastically altered landscape.
Windows 2000, the successor to its Windows NT line, is widely
considered the largest and most complex commercial software program
ever written. The software giant is a year late in finishing it, effectively
sidelining the company at a pivotal time -- as companies invest in powerful
server computers to manage exploding Internet traffic, electronic
commerce and increasingly sophisticated corporate data systems.
The final version of Windows 2000 isn't expected until late this year at the
earliest. Making hay in the meantime have been some of Microsoft's chief
competitors, notably Sun Microsystems Inc., International Business
Machines Corp. and Novell Inc.
"There was a high-water mark a few years ago when people thought NT
would take over the high end," says Scott Winkler, an analyst with Gartner
Group. "Today, NT is used for certain roles in the enterprise but not
others."
Not that Microsoft has done badly. The company boasts that it has sold
four million licenses of the server version of Windows NT, and the product
was a major factor in a 43% jump in its net income in its fiscal third quarter
ended March 31. International Data Corp., Framingham, Mass., estimates
that Windows NT accounted for 36% of server operating-system units
shipped in 1998, compared with 24% for Novell's NetWare and 17% for
Unix of all types.
But unit sales aren't the only important measure. Unix-based computers
and IBM mainframes have larger market share in revenue than Windows
NT, in part because they run big databases and other corporate
applications that serve many more individual users. Windows NT, while
sometimes used in more demanding roles, is most often used to handle
simple tasks such as managing a group of PCs that share files or a printer
cluster. "It's clear that one is not replacing the other," says Dan Kusnetzky,
an IDC analyst.
Unix systems are particularly popular at Internet service providers and
increasingly complicated Web sites that handle electronic commerce,
where reliability, security and ease of maintenance are paramount.
Consider the experience of TheStreet.com, a financial-news Internet site in
New York City, which earlier this year replaced its Windows NT servers
with Sun servers running that company's Solaris brand of Unix.
Dan Woods, chief technology officer at the company, said the NT systems
were slower than the new Sun machines, prone to crash under heavy
Internet traffic, and difficult to administer even with a large technical
support staff. "When we'd get to a certain load level, NT would totally fall
apart, and the whole machine is dead," says Mr. Woods. "Unix, when it
gets to a certain level, response times go up, but everyone eventually gets
through, and the machine doesn't blow up." Microsoft declined to
comment on TheStreet.com's experience.
Other rivals have benefited from delays in Windows 2000. The free
program Linux, for example, is used at some Internet service providers
and corporations that want to be able to modify the underlying source
code of key software to tune performance.
Novell, all but given up for dead a few years ago, has also gotten a new
lease on life. The Provo, Utah, company's NetWare operating system
competes with NT in managing corporate data networks. Lately, Novell
has been promoting the product's directory technology, which keeps track
of every user logged into a network and all devices connected to it.
Windows 2000 will include a long-delayed response called Active
Directory, but Novell is expected to retain its technology edge for a while
yet, raising the odds that NetWare will retain a place at companies that use
the Microsoft operating system for other tasks. "Customers are looking to
us to manage NT [servers] with our directory," says Christopher Stone,
Novell's vice president for strategy. "This is a whole new game."
Steve Ballmer, Microsoft's hyper-competitive president, at times sounds a
bit frustrated that his company hasn't put such rivals away. But he and his
subordinates argue that economic forces are on their side. Windows NT
servers, built from the same components as personal computers, continue
to fall in price faster than rival machines, and run cheaper software.
Windows 2000, meanwhile, will help close the performance and reliability
gap. It is designed to scale up to work on much more powerful computers,
Microsoft executives say, and is much less likely to require frequent
rebooting. "This will be an operating system that people will be
comfortable using in extraordinarily demanding situations," says Edmund
Muth, a Microsoft group product manager for Windows NT.
After three years of development, Microsoft engineers partied last week
when its third test version went to manufacturing plants. Some of the most
exhausting work has been eliminating bugs that have sometimes
accompanied other new Microsoft operating systems. Jim Allchin, the
senior vice president who oversees all Windows products, says the
company remains on track to ship Windows 2000 in 1999, but believes
meeting customer-quality demands is more important than meeting the
deadline. When that job is done, there always will be successor products
to think about.
"This is not the end, this is just a place in time," Mr. Allchin says. "We'll all
have jobs for a long time improving this thing."
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