Naming Rivals

By Steven Vaughan-Nichols  |  Posted 2004-07-08 Print this article Print

Dickey said it was telling to see which companies Ballmer named as key competitors: IBM, AOL, Sun, Oracle and Sony. "Its interesting to see this list not only to understand the breadth of Microsofts ambitions, but to learn who is missing from the lineup—names like HP, Google, Dell, etc., let alone Novell, Red Hat, Lindows and so on," Dickey said. "I guess there just wasnt room to list all of the companies that Microsoft views as targets."

In his final mention of Linux, Ballmer observed, "With Windows Server 2003, we can compete for every commercial workload running on Linux or Unix today—even mainframes and high-performance computing—at lower cost, more efficiently and more reliably. In addition, we are unique in offering an integrated platform including our server and IW applications and partner ISV workloads and applications."

Laura DiDio, senior analyst at the Yankee Group, said she thinks Ballmer is pragmatic in general, although also a little "rah-rah." Still, she said, "Server 2003 has turned out to be a sleeper product for them, especially in the SMB [small to midsize business] market. While the margins are terrible—$5 to $10—resellers are making money from deploying it, servicing it and trainings staffers on it. This is buying Microsoft a lot of good will in the SMB reseller and customer space."

DiDio said the SMB market in general is proving especially fruitful for Microsoft. "Were not out of the economic downturn yet, but Microsofts promotional discounts are starting to drive it. And Linux, while its gaining traction in academic and government markets, isnt really a factor in the SMB space."

While IT departments may be ready to migrate from Windows, DiDio said, the people holding the IT buying dollars often view such a move as risky. "IT buying power has largely been ceded to CFOs [chief financial officers], and CFOs are pragmatic and risk-aversive," she said. "While IT departments may say that theyre sick and tired of grappling with Microsoft security issues and patch management, the CFOs see it in terms of replacing complete application environment, and Linux at this point cant compare with Windows, Unix, Macintosh or even NetWare."

Linux has been making gains, DiDio said, in IT departments that are technically self-sufficient, have an awful lot of help from system integration or have a very simple environment with few applications.

For example, she said, "When Novell makes the rounds of its NetWare customers and tries to get them to switch to SuSE Linux, the CFOs want ZENworks and eDirectory now, and Novell cant give them that yet." Microsoft, on the other hand, "particularly with Server 2003, can offer SMB customers a full package of services."

In addition, DiDio said CFOs suffer "sticker shock" when looking at the full cost of switching a network to Linux. "They look at Linux and see that they need to add third-party programs to get the same functionality, so they turn back to Windows."

But she said Microsoft cant afford to be too haughty about its position. "Ballmer has reason to be cautiously optimistic," she said, but "Microsoft cant be cocky. They have to be careful with pricing, and they must be pristine in how they deal with people on licensing issues and stop arm-twisting tactics by their sales department."

Nevertheless, Raymond said he believes that Linux is "past the uphill part. Linux is now at early majority stage in some important vertical markets, notably financial services and the movie biz. From here, the news for Microsoft is only going to get worse."

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Steven J. Vaughan-Nichols is editor at large for Ziff Davis Enterprise. Prior to becoming a technology journalist, Vaughan-Nichols worked at NASA and the Department of Defense on numerous major technological projects. Since then, he's focused on covering the technology and business issues that make a real difference to the people in the industry.

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