Microsoft Focuses On Managing Complexity

Microsoft plans to spend $1.7 billion on research and development of its Windows and E-business servers during the fiscal year that starts July 1 as it gears up for new releases of its database, integration, and E-mail software and prepares for a 2005 wave of products built around its upcoming Windows "Longhorn" system. But the No. 1 software maker delayed the release of SQL Server "Yukon" by several months and indicated that it's still seeking the right formula for Software Assurance licenses of its server products.

"We do have a crisis of complexity and cost--Microsoft is part of this," senior VP Paul Flessner said during a speech at Microsoft's TechEd conference in Dallas last week. Over the next year, the company plans to invest $1.7 billion in areas such as data management, integration, firewalls and security technology, and information-sharing software for office workers. Microsoft last week delivered the first near-final release candidate of Exchange Server 2003 and said Windows Storage Server 2003, a file server, will ship to manufacturing in June. BizTalk Server 2004, in testing with customers now, is scheduled for general release this fall.

The new BizTalk Server, which can transform data and help IT departments formulate business processes, will be the workflow engine and run-time environment for upcoming software, code-named Jupiter, that combines E-commerce, content-management, and workflow functionality. HIP Health Plan of New York, a health-maintenance organization with an estimated $2.3 billion in annual revenue, is migrating to BizTalk Server as a broker between interactive client-server systems and a mainframe-based accounting system, CIO Pedro Villalba says.

Meanwhile, Microsoft pushed back the release of its database to ensure that it hits the market in conjunction with an upcoming version of its development tools. SQL Server Yukon, originally slated for release during the first half of next year, will come out in the second half, Flessner says. Microsoft considered making an early feature of Yukon for creating reports available only to customers who have bought Software Assurance maintenance contracts. Instead, it will be generally released as SQL Server 2000 Reporting Services by year's end. Microsoft is still exploring sales of discounted technical add-ons to customers who've bought the contracts, which have been criticized as expensive and inflexible, Flessner says.

Meta Group, an IT research firm, estimates that two-thirds of large Microsoft customers have purchased maintenance contracts for desktop products, but the percentage is much lower for servers. "That's a critical statistic for Microsoft--how many points can they get that up?" analyst Kurt Schlegel says. IT departments trying to get by on thinner budgets are balking at upgrades.

Microsoft is working on a new Longhorn desktop operating system and integrated versions of Office, Visual Studio, MSN, and enhanced server products due in 2005 that it thinks can spur new application development.

The company is also planning a simplified approach to managing security patches. It's reworking its software-patching technology and plans to reduce eight patch installers to two--one for operating systems and one for applications--by year's end. The number could be down to one in time for Longhorn, Microsoft chief security strategist Scott Charney said at TechEd, acknowledging that "patch management was broken."