Sure, Windows 2003 Scales, But Will It Sell?

No one accuses Microsoft of being out of touch with the times. At the kickoff for its latest version of Windows Thursday, CEO Steve Ballmer said the company's new technology is all about doing "more with less."

With Windows Server 2003, which becomes generally available today, IT shops can build apps in half the time, at twice the performance, and that are 30% more efficient to manage than software running on previous versions of Windows, Ballmer said during a keynote address in San Francisco. It's "the most significant piece of work we've ever done for IT pros," he said.

In addition to 32- and 64-bit versions of the operating system, Microsoft also released a 64-bit version of its SQL Server 2000 Enterprise Edition database software, and Visual Studio .Net 2003, a new version of its software-development tools. The new Windows server includes version 1.1 of Microsoft's .Net Framework, the first time the runtime environment for .Net apps has shipped inside Windows.

With this release, Microsoft hopes to put to rest questions about the scalability of its software that have dogged the company for years. A Windows system for the first time Thursday claimed the No. 1 spot on a closely watched industry list of the world's fastest data-processing machines. According to the Transaction Processing Council's single-system benchmark for database transaction systems, a Hewlett-Packard Superdome server running Windows Server 2003 and SQL Server--and with 64 of Intel's upcoming "Madison" Itanium 2 chips inside--performs 658,277 transactions per minute, a new record.

Intel president Paul Otellini says versions of Itanium due in the next two years will result in machines that double or triple that result, and a billion-transistor product due later this decade could yield a result 10 times as fast.

That could be good news to IT shops consolidating servers. "Companies are adding capacity--they're still doing that in the downturn," says Jean Bozman, an analyst at IDC.

So how critical is it for customers to upgrade from Windows NT 4, still the most widely used server operating system among Microsoft's installed base? "I'm bullish on the technology," says Mike Cherry, an analyst at research firm Directions on Microsoft. "I'm not bullish on the uptake. It's going to be slow." IT departments are feeling pressure to complete new projects ordered by their companies, while stretching budgets to maintain current systems. "IT can't stop everything to roll out servers right now," Cherry adds.

Microsoft says there are more than 10,000 production deployments of Windows Server 2003, including those at JetBlue Airways, Honeywell, and the London Stock Exchange. Microsoft has distributed more than 1 million beta copies.

Microsoft has released "the right product for this time," Ballmer said. Windows 2003 won't generate meaningful revenue until fiscal 2004, which starts in July, the company says. Its customers can bet that in the meantime, they'll get more of the hard sell on cutting soft costs.