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Windows 2000 sales figures only tell part of story

After promising for several months to release sales figures for Windows 2000 Server, Microsoft reveals that it expects to have sold 1 million licenses by the end of this month.

After promising for several months to release sales figures for Windows 2000 Server, Microsoft finally revealed Wednesday that it expects to have sold 1 million licenses by the end of this month.

But the company still won't talk about Active Directory, the high-end version of its Windows operating system, which is designed to run corporate networks and Internet servers. Among customers who have adopted Windows 2000 Server, how many are actually using the supposed crown jewel of the product? According to a recent survey, not many.

Active Directory allows technology administrators to more easily manage resources on a corporate network and speed the handling of security access, according to Microsoft.

Many analysts, Microsoft partners and customers are largely in agreement that Windows 2000 Server is one of the most stable and reliable products Microsoft has released. But they also agree that Active Directory has been such a bear to implement that very few Windows 2000 Server customers are using it. "For the great unwashed masses in the middle, there are no immediate plans to deploy Active Directory," said Giga Information Group analyst Laura DiDio.

The majority of Windows 2000: The next generationcustomers who have bought Windows 2000 Server and Advanced Server have used the products without Active Directory, according to new data from Giga. A number of those surveyed are using the old Windows NT 4.0 domain structure to link Windows 2000 desktops and servers, which results in Windows 2000 desktops operating more like dumb mainframe terminals than smart stand-alone clients, DiDio said.

A new study due out next week, conducted jointly by Giga and Sunbelt Software, will include survey data from 1,200 information technology customers worldwide. Of these, 30 percent have installed Windows 2000 Server. But only 10 percent to 15 percent of those have used Active Directory, according to the report, co-authored by DiDio and Norbert Kriebel.

That 10 percent to 15 percent comprises two groups: very low-end customers with a single domain and very high-end Fortune 500 firms.

DiDio said that of the 40 percent of customers who said they will upgrade to Windows 2000 Server over the next six to 12 months, the majority are delaying using Active Directory "indefinitely."

Why? Complexity is not the only reason. The fact that Active Directory only runs on Windows is another limitation, as is the lack of Active Directory-trained consultants and IT professionals, Giga said.

Internal customer politics also have proven to be a tough hurdle for Microsoft.

"You need to get your engineers and managers to sit together to agree on how to restructure your company's networking structure in order to deploy" Active Directory, said a consultant with a major New York financial institution, who requested anonymity.

The consultant said Microsoft needs tools beyond the rudimentary ones that Microsoft provides as part of its Systems Management Server add-on product to help customers implement Active Directory.

"You need to get the whole (Active Directory) deployment right from the start, or you'll just have to rip it out and start over," the consultant said.

Microsoft: We're working on it
Microsoft executives said they are aware of the concerns of customers and partners. Microsoft Group Product Manager Bob O'Brien attributed Windows 2000 Server's slower adoption in the infrastructure market to the lengthy Active Directory planning and release cycle.

O'Brien added that Microsoft is confident that it has delivered enough Active Directory training and educational materials to satisfy current and potential Windows 2000 customers. In the coming months, Microsoft will supplement these with new blueprint methodologies and navigation tools that will help Windows 2000 server customers wade through the reams of Active Directory information, he said. Microsoft also will make available more case studies to show customers how they can benefit from using Active Directory, O'Brien said.

Microsoft made public its


Gartner analyst Thomas Bittman says most companies are finding that fully adopting Windows 2000 Server technologies rapidly doesn't make business sense.

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Windows 2000 Server sales tally almost exactly one year from the date it launched Windows 2000, Feb. 17, 2000. Company executives declined to break down the 1 million licenses between the three versions of the product.

The Windows 2000 Server family consists of Windows 2000 Server, Microsoft's entry-level file and print server; Windows 2000 Advanced Server, its midlevel symmetric multiprocessing offering; and Windows 20000 Datacenter Server, which Microsoft has positioned as its mainframe killer.

In recent weeks, hardware and services partners have reported measurable Windows 2000 Server momentum. In the fourth quarter, for example, one-third of all Compaq Computer and Intel-based servers sold had various flavors of Windows 2000 Server installed, said Mary McDowell, general manager of the Industry Standard Server division at Compaq.

But the product remains the Mt. Everest of software. Customers are buying it because it is there.

"At one point, we thought that the technology would drive an upgrade cycle," McDowell said. "But we are finding it is more of a consequence of new projects rather than driver."

Datacenter disappointments
Meanwhile, the uptake of Windows 2000 Datacenter Server is thought to be very modest, with sales numbering in the low hundreds, according to sources close to the company.

Microsoft did not begin shipping this version of Windows 2000 until last fall. And the offering is quite expensive. Datacenter is sold only as a pre-configured, pre-certified hardware-software package from a handful of server makers, most of which resell Unisys hardware under their own brand names.

On the plus side, Datacenter can scale to run on 32-processor Intel systems, allowing Microsoft and its partners to pitch it as a system with mainframe-level reliability.

"Customers either love the lockdown, because they know it's certified and ensured, or they hate it, and they decide to go with Advanced Server, instead," said an executive with a Microsoft systems-integration partner, who spoke on the condition of anonymity.

Indeed, Microsoft's worst Datacenter rival seems to be its own Advanced Server.

"It's tough for us to sell the value-add of Datacenter over Advanced Server," acknowledged Peter Samson, vice president of Unisys' Enterprise Server Business.

The lack of application software that can take advantage of systems with more than eight processors has proven another challenge in selling Datacenter, Samson said. And Microsoft's rigorous certification criteria for high-end applications isn't helping any, he noted.

In the end, Microsoft's biggest Windows 2000 competition may turn out to be its own products, namely its Windows 2000 successors, Windows XP (formerly code-named Whistler) and the first Microsoft.Net release, code-named Blackcomb.

Microsoft plans to make a lot of noise about Windows XP next Tuesday, when the company is staging a press preview of the Personal and Professional desktop versions of Windows XP. Desktop versions of Windows XP aren't due to ship until the end of 2001, with server versions not expected to arrive until some time next year. But to maintain revenue momentum, Microsoft needs to sell Windows 2000 and avoid having customers wait for Windows XP or a later version of Windows.

With Windows XP vying for the press and customer spotlight on one side, and the Microsoft.Net software-as-a-service strategy grabbing attention on the other, Windows 2000 has gotten squeezed and will likely be squeezed further, analysts said.

"Windows 2000 is colliding with Whistler (Windows XP), which is colliding with .Net," said Giga analyst DiDio. "It's a huge train wreck that's creating confusion out there."

News.com's Michael Kanellos contributed to this report.