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Servers in the home remain scarce

A year after its release, Microsoft's Windows Home Server product still rare on store shelves and well known only among hard core techies.

With its first update to Windows Home Server, Microsoft has fixed a critical bug that threatened to undermine the product's main utility--securely and reliably backing up computer files.

But the software maker still has to find an answer to the bigger problem--many consumers have no idea what a server is and fewer still have any reason to think they would want one in their home.

Microsoft tried to make fun of the notion of a home server with a faux children's book. However, it faces the real challenge of trying to convince consumers that they want to install a server at home. Microsoft

Microsoft knew it would face this challenge even before Bill Gates announced the product at the 2007 Consumer Electronics Show. It even tried to make light of the issue, penning a fake children's book dubbed "Mommy, Why is There a Server in the House?"

Unfortunately, the child's question is still a prescient one. For many who need to back up their files, network-attached hard drives offer a less costly and intricate answer to installing even a simplified Windows Server. As a result, the product has proved to be a tough sell.

"This is a very difficult product category to be selling," said Forrester Research analyst J.P. Gownder. "Consumers, generally speaking, don't know what a home server is."

Microsoft insists that its sales, as of June, remained ahead of internal targets, though it won't give any specifics. Home Server marketing executive Steven VanRoekel told CNET News in January that as of that point, the product's sales had reached the tens of thousands. It's not clear whether they have advanced far, if at all, into the next order of magnitude.

IDC is projecting that home servers, including those running Linux, will only add up to 78,000 devices this year. "We have it growing fairly modestly," said IDC analyst Richard Shim, noting that IDC is forecasting the home server category will only get to 1.1 million devices by 2012.

Microsoft has also failed to get much excitement from within the industry over its approach to home servers. The only big-name U.S. computer maker that uses the operating system is Hewlett-Packard, which sells the MediaSmart server.

Retailers have had a tough time trying to come up with a sales pitch that works in-store. As a result, the product is mostly sold online.

"It's basically Circuit City and online," said Forrester's Gownder. "You are not seeing it on store shelves."

Select Best Buy stores are also selling HP's home server, although the No. 1 electronics retailer has not broadly started carrying the product.

Microsoft Senior Product Manager Joel Sider said the company expected it to take time to gain support both in the industry and with consumers, but said the company hopes to see additional makers add Home Server products in the coming year.

"It is a new product category," he said. "The awareness is growing at a good, steady pace."

Fixing the data corruption bug was an important step, Sider said. "Certainly it's great to get that behind us and continue moving on."

Microsoft's target group is people with a home network, more than one PC and a lot of music, video, photos, and other files that they want to share. The problem, Gownder said, is that only the techiest of that bunch even know that a server could be the best answer. And even among those, Microsoft hasn't yet clearly demonstrated why it is better than other options, such as adding an external hard drive or network storage or using an online service.

The selling point of Windows Home Server is supposed to be its ability to do other things, but thus far, there has not been the proverbial "killer app."

"It solves an interesting problem in the home but its potential remains in the future," Gownder said. Among the things that Gownder said could boost adoption of Windows Home Server is if it could offer a simpler way to get commercial video, say, from Netflix or the cable company.

On that front, though, devices such as Apple TV and Microsoft's Xbox seem to have more traction. Others have taken a different approach on the backup front as well, such as Apple, which offers desktop-based backup through Time Machine and cloud-based storage via MobileMe. Microsoft, for its part, also has cloud-based options including Windows Live SkyDrive and Live Mesh.

If Windows Home Server is to stand out, Shim said, Microsoft must make Windows Home Server more like Windows is on the desktop--a place where lots of applications flourish.

"The only reason Windows is so popular and important is there are a ton of people developing for it," Shim said. Microsoft points out that there are already more than 60 applications made for Windows Home Server, with more in the works.