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Server Wars: Battle Rages for the Next Big Prize

After dominating the desktop, Microsoft is stepping up its effort to develop its market share in the next frontier--network software.


Forget the desktop--Microsoft has won that war. But between any two desktops is a network, and on that network are servers. And there, the war for domination rages on.

Though it was barely a player nine years ago, Microsoft might be winning this war too. But the dust is not likely to settle for a long time.

Providing server software has become a very big deal: Client/server networks are the way America does business these days, both within offices and on the Internet. (A server is a computer that provides services to other computers linked to it.)

There are basically four combatants in the server wars, according to Dan Kusnetzky, an analyst at International Data Corp., a market research firm in Framingham, Mass. His latest figures peg Microsoft at a market share of 41% and growing, based both on its server version of Windows 2000 and its predecessor, Windows NT 4.0. But 40%, he said, is a long way from the 88% share Microsoft enjoys on the desktop.

Meanwhile, newcomer Linux, a committee-written system that can be acquired for free, has 27% of the market, and its share also is growing, Kusnetzky said. Unix is holding steady at about 15%, and Novell NetWare has less than 20% and is losing ground.

An IDC report this winter said Linux is growing at an annual rate of 24%--even faster than the 20% boost in Windows servers in the last year. In the last two years, Linux has gotten major support from such companies as IBM Corp., Dell Computer Corp. and Compaq Computer Corp., and if they had to give a final answer to the question of who will slug it out for the championship, most experts would pick Microsoft and Linux.

Microsoft's success, Kusnetzky said, is the result of pure salesmanship, with Windows growing from less than 1% of the server market in 1992.

"They understood before anyone else the inflection point that has happened in terms of who makes decisions to purchase technology," he said. "Eight years ago, it was bought by a technical person on the basis of technical merit. Today, it's a businessperson buying it on business merit."

And because server versions of Windows sell for many times the price of desktop versions, Microsoft has targeted the server market as a place it wants to see growth.

Microsoft's vision extends to something called ".Net," under which Internet integration will be inherent in all Microsoft products rather than force-fit as an afterthought, said Barry Goffe, group product manager at Microsoft.

In the next version of Microsoft Office, red underlining still will denote a misspelling and green will signal a grammar problem. But thanks to .Net technology, gray will denote hypertext links to such things as stock quotes or legal citations, he said.

In making a decision about upgrading or buying new software, most users try to balance cost and reliability.

Windows 2000 is about twice as reliable as NT, said Mike Gilpin of the Giga Information Group, a market research firm in Cambridge, Mass. And although it is still not as reliable as Unix, he said, the necessary hardware is cheaper. All in all, the cost of using high-end Unix systems is about three times more per transaction than using Windows 2000, he estimated.

"But you must consider the cost if the site goes down. And since Windows generally takes more servers to do the same job, it's harder to manage," he added.

Hank Marquardt, a freelance computer consultant in Chicago, said sales of Windows 2000 have been hurt by Microsoft's decision to make it hard for companies to mesh Windows 2000 with a rival system.

"Microsoft introduced security features in Windows 2000 that make inter-operation difficult with NT and Unix, so the migration path is all or nothing," Marquardt said. "That's why it has been slow to be accepted in corporate America. With a single-server work group that can be upgraded in one crack, it makes sense; but with a big system, it's another ballgame."

Christian Mack, president of GenerationE Consulting in Rosemont, Ill., said server-buying behavior varies between small, medium and large firms. Small companies tend to be comfortable using NT, he said, and are wary about upgrading to Windows 2000, seeing it merely as a way for Microsoft to squeeze more money out of them. Those that do upgrade find it's a smooth process, Mack said.

Windows 2000 is an easier sell for medium-size companies, which are often totally dependent on computers and welcome the single point of control that Windows 2000 offers, Mack said. But such companies often have inherited a Unix server somewhere along the line and recoil from rewriting the applications on them for Windows 2000.

"In large firms, you will find a lot who are switching from Unix to Linux," Mack said. "The hardware is cheaper--you can use PCs [as opposed to high-end work stations]--and the sources of support are less expensive."

Meanwhile, with users barely digesting Windows 2000, Microsoft has been cooking up the next generation of Windows, to be called Windows XP, which is set to emerge by year's end.

The server component of the new system, code-named "Whistler," will continue to enhance reliability, said Peter Conway, senior director of Microsoft's Enterprise Server Group.

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