Microsoft Feels the Linux Heat

Cuts SQL price, cites open-source concern.

Microsoft Corp. is starting to react more aggressively to the Linux and open-source threat, last week slashing the price of its SQL Server 2000 Developer Edition by $450, to $49.

The second major price cut in as many weeks followed the Redmond, Wash., companys decision to reduce the retail price of Office XP by 15 percent.

For the first time, Microsoft officials are admitting that Linux is affecting the way the company prices products. Paul Flessner, senior vice president of the Server Platform Division, told eWEEK at the Tech Ed conference here last week that Linux factored into Microsofts decision to cut the price of its SQL Server 2000 Developer Edition, effective Aug. 1.

"Microsoft is about making technology available to all audiences and as ubiquitously as it can," Flessner said. "Giving developers great access to our technology helps further that mission, so that was the call around the developer edition." (For more from Flessner, see Face to Face, Page 26.)

Flessner said Linux was not the only reason for the price drop, but he said he would be "remiss if I said that wasnt one of the factors. ... It was. Linux has certainly brought these things to our attention."

Microsoft CEO Steve Ballmer echoed those thoughts in a companywide memo last week following an annual retreat for senior managers. In the memo, Ballmer said Linux in particular posed a competitive challenge to Microsoft and the rest of the industry.

"There is always enthusiasm in our business for new concepts. So-called free software is the latest new thing," Ballmer said. "We will rise to this challenge, and we will compete in a fair and responsible manner that puts our customers first. We will show that our approach offers better value, better security and better opportunity."

Flessner acknowledged almost every enterprise has deployed some Linux. "Were seeing it in commodity workloads, low-value Web servers like Apache, for instance. Weve seen it in devices, gateways, security, stuff like that," he said. "And you know what? Good for them. It puts the competition in there and makes us really focus on total cost of ownership. But sophisticated customers are not fooled by a price of zero."

Linux recently beat out Microsoft for a lucrative deal with the city of Munich, Germany. Some enterprise customers are also cautioning Microsoft that they will consider alternatives.

Gafar Lawal, director for private client architecture at financial services company Merrill Lynch & Co. Inc.s technology group, in Pennington, N.J., told eWEEK that Microsoft products currently meet his needs. But there is no certainty about the future, Lawal said. "If we find that something, like Linux, works as well or better at the same or lower total cost, we will certainly consider migrating to it," he said.

Nathan Hanks, managing director of technology for Continental Airlines Inc., said his concern is making sure that he can turn the Houston companys airplanes around as quickly as possible. As such, the open-source-community concept is not as appealing to him. When the SQL Slammer worm hit earlier this year, Microsoft responded immediately and addressed the issue. Its executives also visited him to discuss the matter. This would not be possible in the open-source world, Hanks said.