February 15, 2000 12:35 PM PST

Compaq backs Windows 2000 for business customers

Compaq Computer is gambling that small- and medium-size businesses will flock to the Windows 2000 operating system.

Days after a Gartner Group report indicated that one in four large businesses would have trouble moving to Windows 2000, Compaq has set its sites on smaller operations.

In a two-fold strategy, the Houston-based PC maker today announced Windows 2000 systems and a new Web site, MyWorkspace, especially for small-business users.

Compaq expects the small business market will more quickly adopt Windows 2000 than will the corporate market and plans a succession of initiatives aimed at garnering sales of Windows 2000 systems and services.

"We have found that small- and medium-business customers are quicker to move to newer technologies than are large corporations," said Ray Frigo, vice president of Compaq's iServices division.

In a recent survey conducted by International Data Corp., only about 5 percent of the smallest businesses said they planned to move to Windows 2000 in the next 12 months. But larger small business operations--those with 50 to 999 employees--are expected to move faster, with 17 percent planning to go to Windows 2000.

"But that's before more exciting things happen around Windows 2000 and they begin shopping around for new machines, most of which will come with Windows 2000," said IDC analyst Ray Boggs. "We expect the adoption rate to be much higher."

Microsoft will officially release Windows 2000 on Thursday, although Compaq and other PC makers have been shipping systems with the new OS since Jan. 24. Compaq initially offered Windows 2000 on iPaq and Deskpro PCs.

Starting today, Windows 2000 will be available on Prosignia PCs, notebooks and servers. Entry-level systems include: the Prosignia 340 PC, starting at $1,099, and the $2,799 Prosignia 170 notebook. All systems also come with Office 2000 Small Business Edition and Norton AntiVirus.

Compaq, in a turnabout on its direct sales strategy, will begin offering new Prosignia systems through major retailers, including Best Buy, Circuit City, CompUSA, Office Depot and Staples. Prosignia has been Compaq's most direct product line, unlike most others, which are sold more through dealers.

While the move comes at a time when Compaq is ramping up to take more business direct, the retail indirect strategy makes sense, said analysts.

"If Compaq is really going after the small, growing businesses, those are the companies that run down to the Circuit City or Office Depot and buy off the shelf," said Technology Business Research analyst Lindy Lesperance.

Compaq estimates about 25 percent of small business customers shop at retail.

Frigo said MyWorkspace reaffirms Compaq's relationship with MyWay.com, a CMGI company. Compaq holds about 17 percent in CMGI, following the sale of AltaVista last year.

MyWay.com set up the business-to-business Web site, which provides a number of services geared to business customers, such as electronic shipping and postage, online training and Web hosting.

While MyWorkspace is free for anyone to use, other offers and services are exclusive to buyers of Windows 2000 Prosignia systems. These include: three months free Internet access with Compaq.net, a customized e-commerce Web site and free Windows 2000 training.

The last item could be important to small business customers buying their first Windows 2000 system and looking for more, said analysts.

"When someone buys a new Windows 2000 machine, they be so amazed with the new operating system they will want it everywhere in the organization," Boggs said. The smallest companies, which typically do not have technology staff, will be looking for the most assistance.

But Boggs did not agree with Compaq that small business customers are technology innovators--just the opposite. "They're slow to adopt, but once they step up they tend to make the move more quickly than a bigger firm," he said.

 

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