t Microsoft's recent Scalability Day event in New York, the
company's goal was to demonstrate that Windows NT, its
emerging middleware and clustering technologies, and its
database and applications servers are finally ready for
corporate prime time.
Indeed, as our cover story (
IW, May 19, P. 14
)
that week attests, a large number of large corporate CIOs are
moving in that direction. They find the commodity appeal of
Microsoft's marketing message very attr
active, but they still
distrust the company in some areas, most notably in
transaction processing applications and in services and
support.
Microsoft is currently caught in a dilemma. To keep its stock
price growing, it has to maintain its phenomenal growth rates
in sales and earnings. That is essential not only for its
non-employee shareholders, but also because the company uses
stock options as a large part of the remuneration for its
employees. Without those "golden handcuffs," attracting and
keeping top engineering talent dedicated to working killer
hours in the "velvet sweatshop" would become much more
difficult. In fact, Microsoft's largest future cash liability
is the $20 billion in outstanding stock options to employees
that it will have to meet in coming years.
Exacerbating this dilemma is that the lower levels of the
corporate enterprise are already saturated with Microsoft
products and technologies. Like the one for PCs, the market
for desktop operating systems and applications is rapidly
b
ecoming a replacement market with little room for growth.
Microsoft executives have said for several years that it is
critical that they go after those portions of the enterprise
computing pie that they do not already own. That area also
happens to be the biggest piece of the pie, no matter how you
cut it.
Microsoft executives, strategists, engineers, and marketers,
like everyone else, see new experiences in light of past
ones. How we respond to current challenges based on those
earlier experiences has a lot to do with whether we succeed
or fail.
Now, in order to broaden its market appeal among enterprise
customers, Microsoft has signed up partners and formed
alliances with the companies that heretofore have ruled those
high-end markets that Microsoft so dearly covets. The company
has recruited Amdahl, Data General, Digital Equipment,
Hewlett-Packard, IBM, NCR, Tandem Computers, Unisys, and
several others.
Those are the companies corporate customers rely on to meet
their high-end computing nee
ds because they provide the soup-
to-nuts products, services, and support offerings customers
have come to expect for critical business applications. That
includes high-reliability hardware, software, service,
support, engineering, and consulting -- and the ability to
have the vendor's staff at the customer's site 24 hours a
day, if necessary.
Those are strong points in those vendors' favor when it comes
to customer satisfaction, which is a big contributor to
determining purchasing decisions.
There are primarily two points where those vendors are weak,
from a Microsoft marketing point of view, anyway. First,
those solutions are very expensive to implement and maintain.
Second, they are, by and large, proprietary. The "lock in"
factor is high.
Microsoft, therefore, has chosen to undermine them with the
arguments that commodity-based servers are drastically less
expensive in terms of price/performance, and that because NT
is the same on all platforms, it avoids proprietary lock-ins
by the vendors. I
t's a value proposition that sells -- at
least it has lower in the enterprise.
In fact, despite NT's growing pains, (
IW, Jan.
13, P. 14
), the momentum is definitely building behind its
adoption in big corporate sites. And it is not just being
installed as a departmental server any more.
Even the big vendors of glass-house solutions have gotten
that message loud and clear; they have virtually all chosen
to move their products to NT server and risk having their
higher-priced products undermined by their own server
products on NT, rather than risk losing that market
altogether to an interloper like Microsoft.
These folks are not dummies. They already have decided that
half a loaf is better than nothing. Even Oracle has seen that
the light at the end of the tunnel is a speeding locomotive,
and has decided that it had better climb aboard rather than
get run over.
But here's the crux: Given Microsoft's desperate need to
grow, if there is one area where it is vulnerabl
e, I suspect
it lies among those partnerships.
Just last month, Tandem demonstrated its own NonStop
transaction processing and database technologies manipulating
a nearly 2-terabyte database on NT -- one of Microsoft's
goals for Scalability Day. Also early in May, IBM
demonstrated its own technologies performing well over a
billion transactions per day, also on NT -- another
Scalability Day promise.
In fact, most of Microsoft's "partners" in the enterprise
computing realm have their own clustering, middleware, and
database technologies which they have now ported or rewritten
to run on NT server.
They see NT as a strategic inevitability. But, meanwhile they
don't intend to help Microsoft undermine their old
proprietary, high-end/high-price sales model more than
absolutely necessary. So most of them, in one way or another,
appear to be setting up to cut Microsoft off at the pass --
or rather at the server applications market.
There are variations on that theme. Some companies, like
Tandem, have
decided to adopt Microsoft's clustering
technology -- formerly code-named Wolfpack and now formally
named Microsoft Cluster Server -- as soon as it is available,
and will forsake its own. Others, like NCR and Digital will
adopt Cluster Server at the low end and continue to sell
their own clustering technologies at the high-end of the NT
server market.
Tandem, for instance, will cede the operating system and the
clustering markets to Microsoft, but it will still compete
with Microsoft tooth-and-nail for the server applications
market, where the money really is.
IBM has also been talking up its own NT applications at the
same time that it is saying that Microsoft's database,
middleware, and clustering technologies are "not there yet."
In fact, IBM is currently claiming that it has captured 30%
of the NT server applications market.
No matter where the line is drawn, many of these "partners"
are obviously trying to limit Microsoft's success by ceding
to it the server operating system market while str
iving for
dominance of the enterprise server markets.
While Microsoft and its enterprise partners have been making
nice in public, I can't help but think there is a seething
undercurrent of ill feeling that we'll see erupt from time to
time as the struggle begins in earnest. Of course, customers
will make the decisions that ultimately determine the
outcome. The message of portability across all NT systems,
and price/performance weigh in favor of Microsoft.
But, to my mind, the psychological edge still lies with the
partners because they are the ones that corporate IT has come
to feel comfortable with through for last 20 years. And that
warm, fuzzy feeling is something that Microsoft can't buy, no
matter how many marketing dollars it throws at IT. That
confidence in a vendor's ability to deliver without fail is
something that can only be earned through years of dedication
to providing service beyond the promise of marketing hype.
So, Microsoft must maintain a delicate balance between
keeping its pa
rtners on board and competing for the choice
enterprise application server market -- without things
breaking out into open warfare. Can Microsoft do it? Maybe.
Probably. But the earnest young men and women in Redmond had
better pay heed the old adage: Be careful who you trust
because with friends like that, who indeed needs enemies?
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