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Apple courts server subscribers

A new program lets buyers of the Mac OS X Server sign on for three years of unlimited access to software upgrades for the same price Apple charges for a single, onetime upgrade.

4 min read
Apple Computer is giving buyers of its Mac OS X Server the option of signing on for three years of unlimited access to software upgrades for the same price it charges for a single, onetime upgrade.

The Apple Maintenance Program for Mac OS X Server, available starting Saturday, is in part an attempt to stave off the threat posed by Linux and to grab Microsoft customers disgruntled with recent software-licensing price increases.

"For the price of one upgrade, you get three years of upgrades into the future," said Brian Croll, Apple's senior director of software product marketing.

Mac server buyers can pick up the subscription at the point of sale at a cost of $499 for 10 users and $999 for unlimited users, the same prices Apple charges for a single upgrade.

The program entitles subscribers to any upgrades released during the three-year period, thus its value would be negated if the company released only one major upgrade during that time. Apple upgraded its server software to version 10.2 in August.

Apple's position in the server market is minor, but the pricing plan could find some favor. That's because Microsoft charges more. A 10-user license of Windows 2000 Server costs $1,199, and to get an upgrade, customers have to enter into a license arrangement. Under many of these agreements, the cost of upgrades after three years comes to around the same as the price of the original software license.

In one sense, though, the new program's major beneficiary could be Apple.

"From Apple's point of view, they get the money up front and decide later whether to offer the upgrade," said Forrester Research analyst Frank Gillett.

Collecting the money up front is increasingly important to companies, not so much from a revenue perspective but because it discourages customers from later abandoning a company's product for an alternative. This could be beneficial to Apple as it tries to win customers considering a move to Linux. Apple also hopes to woo Microsoft customers that refused to pay recent licensing-fee hikes. Not coincidentally, Microsoft's program also locks in customers for a set time period.

Under Microsoft's Licensing 6 plan, users pay a "Software Assurance" fee--29 percent of the full purchase price annually--for two- or three-year contracts. Microsoft angered customers in switching over to the plan, which for many worked out to a 33 percent to 107 percent cost increase, according to market researcher Gartner.

Earlier this week, Microsoft CEO Steve Ballmer defended Microsoft's Licensing 6 plan, which he argued is simpler for customers to manage than its predecessors.

"Sometimes when you clean things up and simplify things, you wind up costing some customers more, and that's problematic," Ballmer said.

Analysts estimate that as many as two-thirds of customers refused to sign up for the program and began looking for options.

"I don't think that Apple is doing anything like Microsoft did, where Microsoft essentially changed the ground rules for obtaining upgrades for a lot of their customers," IDC analyst Al Gillen said. "This is a different scenario, so I don't necessarily see any negative push back because of it."

Uncertain benefits
But Gillen said he didn't see Apple grabbing much market share from Microsoft customers looking at alternatives, in part because many are looking at lower-cost Linux.

"Any Microsoft shop today that is looking for alternatives, it's pretty unlikely they would even consider an Apple solution unless it's a shop that already has a lot of Apple clients," Gillen said. "Apple clients are fewer and fewer throughout the industry, except for a few graphics-arts and desktop-publishing shops."

In fact, Gillen painted a bleak outlook for Mac OS X Server, which doesn't even register on IDC's Unix market share figures.

"Apple has moved into a market segment that is not a growing market," Gillen said. "The Unix server operating environment is declining at a fairly rapid pace year over year."

Last year, Unix server operating shipments declined 23 percent, according to IDC. The market researcher expects a slight decline for the period through 2006.

"It's a little late for Apple to get into this market, when Hewlett-Packard, IBM, Sun (Microsystems) and others are adding Linux server components to their lineups, because that's where the growth is," Gillen said.

Mac OS X Server as an alternative to Linux could be a tough sell, particularly with the big Unix companies aligned against upstart Apple. Last year, Linux captured more than 25 percent of the server operating system market, according to IDC.

Also, even with angry customers balking over licensing fees, Microsoft continues to gain market share in the server operating system market. Last year, Microsoft's share jumped to 49 percent from 42 percent in 2000, according to IDC. Following steep declines, Unix captured only 12 percent share.

Apple also will discount its maintenance program based on the number of servers. The base prices apply to licenses covering one to nine servers. For more servers, the pricing for 10 users is as follows: 10 to 99 servers, $449; 100 to 999 servers, $399; 1,000 or more servers, $349. For an unlimited number of users, pricing is: 10 to 99 servers, $899; 100 to 999, $799; 1,000 or more, $699.