Value Equation

The rising cost of Microsoft technology is causing otherwise devoted customers to evaluate alternatives
For many businesses, though, it's not single, multimillion-dollar Windows servers that are the issue, but the cumulative effect when they license dozens of Microsoft products for hundreds of servers and thousands of desktop PCs over three-year contracts. That's what's causing more companies to consider cheaper Linux options. American Electric's Foster says he's open to using Linux servers as a "creative alternative" if necessary. "I'm not even hiding that from Microsoft," Foster says. "They know it."

That kind of talk has Microsoft contemplating new defensive tactics. Among them: .Net Server will ship in a stripped-down edition for use on Web servers-exactly where Linux is most popular.

The vendor also commissioned research firm IDC to conduct a study on the total cost of ownership of Windows 2000 versus Linux. IDC found that Windows 2000 was ultimately cheaper in four of the five IT workloads measured. That's because the higher costs of Windows software were offset by lower management and staffing costs, according to IDC.

Microsoft officials concede that some customers have seen prices rise, but they say the opposite is also true. (CEO Steve Ballmer, in an October interview, said most customers signing new enterprise agreements saw per-desktop costs drop.) Microsoft officials point out that, in tests, performance doubled on .Net Server for some applications. And they note the list price of Windows XP Professional, $299, is $20 cheaper than a Windows 2000 client.

Mary Kay Inc. is fully engaged in Microsoft's .Net strategy-and happily so, says Barry Bloom, chief architect of E-business for the cosmetics company and author of a book on how to use .Net technology. "The benefits just keep coming in," says Bloom of the company's months-long development effort to port hundreds of Visual Basic applications to the environment. "It's unbelievable how much faster it is, how much better it deploys, how stable it is." Still, Bloom says, Mary Kay isn't using certain Microsoft products, Content Management Server among them, because of their price tags. "The value-add for some of these things just isn't there."

Microsoft's endless product refinements have created devoted fans. "Who in their right mind would move away from Microsoft's platform?" asks a business executive with a major financial company. "It's a good thing we have an industry standard. They continue to innovate."

The catch: His company is close to standardizing on Lotus Notes, despite his pro-Microsoft feelings. The reason: lower costs.

Price Hike In The Works?
What Microsoft might charge for Windows .Net Server 2003
ProductList priceDiscount price
Windows 2000 Server, Standard Edition$799$738
Windows .Net Server 2003, Standard Edition$899$815
Windows 2000 Server, Advanced Edition$2,999$2,399
Windows .Net Server 2003, $3,299 $2,699
32-BIT Enterprise Edition

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Samuel Greengard, Contributing Reporter
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