February 20, 2003 12:45 PM PST

Microsoft's migration plan

A deal cinched Wednesday could help Microsoft tackle a long-standing problem: How to sell new software to customers reluctant to give up a 7-year-old version of Windows.
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Microsoft's acquisition this week of software and related patents from Connectix, a maker of virtual machine software, also gives the company a new weapon for its battle with rivals including Sun Microsystems and Oracle, analysts said Thursday.

Connectix makes software that lets a single computer perform like several independent computers running their own operating systems. It makes client software that permits Windows to run on a Macintosh, and server software that has yet to be released.

The server software drove the deal, said analysts, and will play a key role in helping Microsoft to attract users of its aging Windows NT 4 server operating system to Windows Server 2003, slated to debut on April 24.

Microsoft estimates that about 35 percent of Windows customers are still running Windows NT 4, which debuted in 1996.

Microsoft's sales pitch to companies reluctant to give up NT 4 is that they can save money by using Connectix Virtual Server software to run multiple Windows NT 4 instances on a single Windows Server 2003-based computer. Virtual Server is set to debut in test form on April 15.

The ability to consolidate Windows NT 4 servers is "a pretty powerful concept," said


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Al Gillen, an analyst with IDC. "This scenario is that customers can run their NT 4 applications on modern hardware, and not be saddled with the support of older systems. Microsoft has for some time been talking about how Windows Server 2003 will be such a good platform for moving NT 4 customers. The fact that (Microsoft is) talking about that confirms that they are having a hard time moving these customers."

More important, Microsoft needs to persuade NT 4 customers to make the switch in order to make its .Net plan a success, and to lay the foundation for future products, said Greg DeMichillie, an analyst with Directions on Microsoft.

"Microsoft is getting push-back from (Windows NT 4) customers reluctant to migrate to Windows Server 2003. They are trying to allay any fears that those companies have about costs to migrate or any loss of function with their existing applications," DeMichillie said.

The competitive scene
The Connectix software also allows Microsoft to counter a marketing push from rivals such as database maker Oracle, which claims that their software can help companies save money through consolidation of servers. Oracle is specifically targeting Microsoft customers with multiple servers running Microsoft's Exchange e-mail server.

"Microsoft is taking a lot of flak from Oracle through ads that say they can consolidate Exchange better than Microsoft can. Microsoft looks at Connectix as a way to run more Exchange Servers on a single Window server," DeMichillie said.

Sun, IBM and other server makers are also pushing the idea of virtual servers, which can save budget-conscious IT departments money by grouping multiple software applications onto a single server. Instead of maintaining multiple, specialized servers and databases for each business function--customer service, purchasing, human resources--companies can spread those applications across any available server to wring out the maximum return on investment.

Analysts expect Microsoft to include the Connectix server software in a future release of Windows, greatly increasing the chances that companies already licensing Windows would use that software instead of a competitor's product.

With the Connectix deal, Microsoft can now claim that companies can consolidate older Novell Netware and IBM OS/2-based servers onto a single Windows Server system.

The software also works with Linux--which is increasingly seen as a serious threat to Microsoft's server operating system business. Conceivably, Windows Server users could also consolidate multiple Linux servers using the Connectix software.

That possibility, while potentially appealing to customers, goes against Microsoft's policy of distancing itself from Linux and open source, Gillen said.

Still, the company may have no choice but to continue Connectix Linux support, he said. "Microsoft has said there are no plans to change that, and Linux support will stay (in the product). If they take it out, it will diminish the appeal of the product to customers, and that will open up the market to VMware (a Connectix rival) or others to displace Microsoft in this area.

"So they (Microsoft) really don't have any choice in the matter, despite how it goes against corporate policy, if they expect this product to be successful in its own right," Gillen said.

Jim Hebert, general manager of Microsoft's enterprise server business, would not elaborate on the company's plans for Linux support on Connectix software.

"Microsoft has made no changes to which operating systems are supported at this time. Microsoft will carefully evaluate market opportunity and customer requirements before making any product or support decisions," Hebert said.

News.com's Joe Wilcox contributed to this report.

 

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