Microsoft Gains in Server Market
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Emboldened by a growing appetite for its products in the enterprise server market, Microsoft is launching an aggressive push in the education and state-and-local government markets.
And its got its eye on customers of Novell's Netware (current and former) as part of its market share plan. A recent report from IDC showed that for the first time ever, there were more migrations from Unix to Windows than to any other operating system.
Perhaps trying to take thunder away from Novell's BrainShare conference last week, Microsoft is bragging that it took 1.8 million accounts away from Novell in 2005 and a total of 3.3 million over the last two years.
While Novell strongly reiterated its commitment to supporting Netware "through at least 2015," its focus is clearly on the Open Enterprise Server (OES), which is based on SUSE Linux.
Microsoft sees an opportunity to gain share of the government and education markets, as those institutions decide whether to stick with their Netware environments -- knowing there will be no upgrades to that product in the offing -- or upgrade to SUSE.
Moreover, Gavin thinks Novell's two-pronged approach of bundling Netware with SUSE Linux is alienating customers.
"Their customer base is not buying their vision, and even Novell isn't very clear about their own vision," he told internetnews.com.
"From a customer perspective, this is incredibly confusing."
Give a Customer Credit
However, Bruce Lowry, a spokesman for Novell, denies that customers are confused.
"Customers understand perfectly well what the strategy is," he told internetnews.com.
That strategy consists of encouraging customers to migrate applications from the Netware platform to SUSE Linux while giving them the option of running those applications on Netware for as long as they want.
Novell also intends to leverage virtualization technology so that applications will look like they're running on Netware while actually running off Linux.
Lowry said Novell's strategy is working.
"We've had a good uptake of [OES] over the last two quarters," he said.
Novell earned $34 million in revenue from OES in the quarter ending Jan. 31, 2006, representing approximately 16 percent of the company's total for that period.
However, Novell will no longer upgrade Netware and is focusing on Linux instead. According to Gavin, this means that Netware customers won't see the benefits of any innovations, and that, as those customers develop IT plans, they become rife for the taking.
In particular, Microsoft is confident that it can do well in the state and local government and education markets, despite some high-profile losses in the public sector.
The Finnish Ministry of Defence announced a switch from Unix to SUSE Linux this week, and Microsoft suffered a well-publicized humiliation when Massachusetts adopted an "open standards, open source" policy last year.
"[But] that's not representative of a larger trend," Gavin said.
Microsoft is banking on the fact that most governments and institutions are less interested in open versus closed-source philosophical debates than in getting more functionality less expensively.
"We're well beyond the religion days. This is about the capabilities. Reliability is the term most customers talk about," Gavin said.
To make inroads in this market, Microsoft has partnered with Quest to offer free network assessments, is offering free training on the Microsoft environment, and promises free support for one incident requiring help.
Microsoft is also looking to build on recent success on the Unix front, where for the first time it eclipsed all comers in new replacement shipments.
According to a study by IDC sponsored by Microsoft, 45 percent of migrations from existing Unix systems were to Windows Server platforms.
Of course, migration decisions are expensive and fraught with risk, and thus are never taken lightly.
"People don't throw out technology for no reason," noted Matt Eastwood, an analyst with IDC said. Patrick Dempsey, senior vice president and CIO at consumer packaged goods giant Spectrum Brands, agreed that migration decisions are difficult.
"We don't deviate unless there's a compelling business reason to do so," he told internetnews.com. "We're not going out exploring recreationally."
That said, if customers already running Windows in other environments see that they can save money by consolidating the skill sets of their in-house IT staff, they are likely to consider switching to Windows servers.
"There's an emphasis on standardization," said Eastwood.
Dempsey, who oversaw Spectrum's migration from Unix to Windows, said that the company will have saved approximately $1 million over four years by not picking a Linux-based system.
The cost savings will come primarily from consolidation, not having to hire or train staff on Linux, and less expensive hardware.
"It fell into the no-brainer category," he said.
Dempsey also made the point that, while people often equate Linux with Unix, the two operating systems require a different set of skills.
That said, Microsoft is not the only beneficiary, as enterprises migrate off Unix, with Linux taking 37 percent of those customers.
Furthermore, a significant portion of Unix users are unlikely to migrate in the near future, IDC's Eastwood told internetnews.com.
Spectrum, for instance, still has Unix installed for some of its applications, and Dempsey noted that he wasn't looking to switch those anytime soon.
According to Eastwood, customers are unlikely to migrate ERP and database applications off Unix, but are more likely to migrate IT and Web infrastructure applications. This, he said, is where Microsoft's efforts are most likely to pay off.
"The number of units is relatively small, but it's very strategic. It's where you can hurt your competition most."
Which seems to be the name of the game where Novell and Microsoft are concerned.