Microsoft's NT weapon: schmooze

SEATTLE--The message: Assimilation is easy.

The translation: Though Unix-based workstations may now outperform comparable technologies in the PC world, volume economics will drive the adoption of machines based on software from Microsoft and hardware from Intel even in the highest reaches of the market. So you'd better get on board now, according to "Wintel" executives.

At its core, that's what the two most dominant forces in the PC industry, Microsoft and Intel--sometimes known as the "Wintel duopoly"--offered to developers and customers in order to rally support around the fast-growing market for workstations based on their technology.

"Over time NT will totally dominate the business desktop," said a predictably confident Bill Gates, chairman and CEO of Microsoft, at an event here designed to show off the market progress being made in PC workstations based on the Windows NT operating system.

The rapid growth of PC-based workstations more than partly reflects Microsoft's propensity to schmooze its way into the hearts and minds of the masses. Competitors, observers, and even Microsoft partners point out that often it is the company's capacity to fund marketing and training programs that many find most difficult to resist.

The results? One comment from a company that garnered $683 million of its $700 annual revenue from Unix-based workstation software sales last year speaks volumes: "Vox populi. The people have spoken," said Aart de Geus, president and CEO of Synopsys, in trumpeting his company's move to NT and Intel.

And another from a Unix-based software developer: "Merced [Intel's next-generation chip] is going to allow NT to do lots of things it couldn't do before," said Jon Hirschtick, CEO of SolidWorks. "We really see it as the foundation for the next millenium."

The schmooze factor reveals itself in other ways. For instance, Microsoft, Intel, and others today announced a Migration Assistance Program that will provide product discounts, training, and technical and marketing assistance to Unix integrators and software vendors to convert to NT. (See related story)

Programs like this essentially subsidize product acquisition and training and can eliminate several thousands of dollars in the operating budgets of participating system integrators, software developers. Five-figure sales bonuses under various programs are common, sources have said.

If they resist, their competitors might not.

The total amount of funding by Microsoft is unknown, but many believe it runs into the millions. You can even get meetings with Bill Gates.

One of the biggest selling points of NT workstations, of course, is the prevalence of the Windows platform. NT remains a difficult sale on strict performance, but corporate customers are attracted to the idea that these workstations will be compatible with their existing systems, said Rand Morimoto, general manager of Inacom Oakland.

Still, the schmooze and subsidy definitely helps, said others. "It [the schmoozing] is a full-court press with the CIO with all sorts of stuff," said an executive at one corporate integrator. A CIO is a chief information officer, the executive who typically makes a company's purchasing decisions regarding which computing platform to adopt.

On a broader scale, Microsoft's efforts become even more far-reaching in consequence. Bountiful subsidies put Unix companies like Sun at a severe marketing disadvantage.

"Being a big software company where their gross margin is infinite, they can invest a whole bunch of their revenue in marketing, a whole bunch more than we can," said Ken Okin, vice president and general manager for the workstation product group at Sun. "The good news is that our products are better," Okin claimed.

Companies with mixed platforms are in a potentially more difficult situation. The migration program announced today began last July when Microsoft, Intel and Hewlett-Packard created the Enterprise Interoperability Program.

Under that program, 37 Unix system integrators were given training, discounts on HP Kayak systems, and marketing funds to help them move toward workstations running NT, said John Ford, channel development manager for Microsoft. In turn, the integrators had to meet certain Microsoft-centric staffing requirements.

The integrators, many of which have worked closely with Sun Microsystems for years, also had a private breakfast meeting with Bill Gates in July, said sources.

Of the 37 participants, 25 have met Microsoft's requirements, said Ford. The other 12 are closing in on the goal and 14 more have asked to join the program.

The key to getting people in the program, however, was an effort by the HP and Microsoft to ensure them that they could make a profit of off NT machines, which universally incorporate Intel's chips. "Their No. 1 concern was margin. They said, 'We're not sure we can make the same margins,'" said Ford. To get around that problem, HP gave special discounts on its Kayak workstations to participants.

Such activities feed into the proliferation of Windows NT as both a workstation and server operating system. "It's just vertical segment after vertical segment falling to NT," said Dwight Davis, Microsoft analyst for the Summit Strategies research firm.

With workstation sales booming, Microsoft officials believe it will give them wider entry for servers. "It basically bleeds into the server--winning the workstation is just the first step," said Charles Stevens, vice president for the company's application developers customer unit.

A Microsoft event held last spring to highlight its NT server efforts was criticized for being long on futures and short on specifics. But in the workstation market, where NT-based machine sales grew over 80 percent in 1997 versus a decline in Unix shipments, it's a different story. "A lot of what we're hearing today is fait accompli," noted Davis.

Michael Kanellos contributed to this report.