Ballmer: Right product, right time

Microsoft's CEO touts the company's latest server operating system as what businesses should use to stretch their IT budgets. "No more toy operating systems" at Microsoft, he says.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
4 min read
SAN FRANCISCO--Microsoft CEO Steve Ballmer on Thursday launched Windows Server 2003, a new version of the company's server operating system, which he described as "the right product" to help companies stretch their information technology (IT) budgets.

The Redmond, Wash.-based company is positioning the new operating system as capable of pushing aside Unix servers and mainframes in the enterprise. That's been the software maker's long-term goal since the first release of a version of Windows for server systems nearly a decade ago.

"This is an interesting time," Ballmer said, referring to the tough economic conditions and questions about whether now is the right time to launch Windows Server 2003. "I think this is absolutely the right time."

Ballmer said he wanted to put the product's launch "in context with what's been going on in our industry." Technology budgets rose at the end of the 1990s because of Year 2000 technology bug worries and the dot-com boom. As spending decreased and the economy bottomed out, many technology managers had to put new projects on hold.

Those trends "put our customers in the IT industry in a real tight jam. The challenge isn't just a challenge of cost reduction...(It's) to do more with less," said Ballmer.

Ballmer said that Windows Server 2003 would "improve efficiency by 30 percent from where we've been, and (would deliver) even larger numbers" compared to other operating systems. That 30 percent cost reduction would come through server consolidation, improved management features and tighter security features.

But analysts didn't share Ballmer's enthusiasm. Many companies are very reluctant to commit money to upgrade servers that may be working just fine as is.

"In the (current) server environment, people do not upgrade," said Guernsey Research analyst Chris LeTocq. "You thought IT was conservative as a structure in the past? Right now, they're even more conservative."

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Ballmer unveils Windows Server 2003
Steve Ballmer, CEO, Microsoft
LeTocq speculated that, as with past Windows Server releases, most companies would wait until the first service pack--or collection of bug fixes--before upgrading to the new version. LeTocq expected Microsoft to release the first service pack in six months or so.

Microsoft plans to spend as much as $250 million promoting Windows Server 2003 in print, television, Web and outdoor advertisements. During the software launch event, Microsoft introduced marketing taglines "Do more with less" and "Because we can."

"The theme of the release is doing more with less," Ballmer said.

But LeTocq noted that many technology managers see a greater possibility to meet that goal using Linux, the open-source operating system that has rapidly gained a sizable share of the server operating system market. Several of Microsoft's competitors, including IBM, have invested heavily in promoting Linux.

"Linux is becoming a known quantity, and IT guys can see what's going on," LeTocq said.

Worth the wait?
Microsoft's CEO described the new product as the company's "highest-quality Windows Server product ever."

For customers, Windows Server 2003 has been a long time coming. From conception to final code release, Windows Server 2003 has seen four different names and four release dates.

In October 2000, Microsoft said the product would ship in the second half of 2001. But in April 2001, Microsoft pushed back delivery of the product, to early 2002. In March 2002, the software giant again delayed delivery until the second half of the year. And in November, the software titan delayed delivery for a third time, setting the April launch date.

"We had (more than) 5,000 people working on Windows Server 2003 for a number of years," Ballmer said. About 100 customers participated in the development process, about 10,000 servers were running the software ahead of the launch, and there are a million beta copies in the market," Ballmer said. Microsoft also spent $200 million overhauling the security technology in Windows Server 2003.

"We've gotten the message from our customers loud and clear" that security should be the top priority, Ballmer said.

Ballmer spent much of his nearly 90-minute keynote address focusing on Windows Server 2003's enterprise capabilities. It marks a "breakthrough," he said, in terms of security, reliability and manageability, and what it means to software developers."

The Kentucky Board of Education and JetBlue Airways were among the customers showcasing Windows Server 2003. Honeywell ACS described how it uses Windows SharePoint Services for collaboration.

Microsoft is positioning the collaboration feature as a means of doing away with typical file-sharing services. Within Microsoft there are over 12,000 team servers. "Nobody does a file-share anymore," Ballmer said.

LeTocq agreed that SharePoint is one of Windows Server 2003's "bright spots. As an end user, you can enable it in five minutes," he said.

Ballmer also discussed the importance of Windows Server 2003 for running enterprise business software from Siebel Systems. He claimed that, in testing, the highest Transaction Processing Performance Council (TPC) benchmark results came with 30,000 concurrent Siebel users on a single Unisys Itanium 2 server running Windows Server 2003 64-bit edition.

Ballmer joked about the ribbing Microsoft has taken in the past over Windows Server's capabilities compared to those of Unix systems and mainframes. Referring to previous efforts at making server operating systems, he said there are "no more toy operating systems" at Microsoft.