Addressing Users’ Concerns: Altered Licensing and Support for NT

As Microsoft prepares to roll out Windows 2000, the company is facing a convergence of difficulties it has never experienced before.

• 08/18/1999

As Microsoft prepares to roll out Windows 2000, the company is facing a convergence of difficulties it has never experienced before. The company is trying to usher an unprecedented number of customers through a major transition aboard server systems -- which are traditionally much more difficult to upgrade than user desktops -- and it is also expected to adjust licensing terms for its software to what will be less favorable to end users.

An early indication of Microsoft’s intent to cull more money from its customers came from the upgrade scenarios initially presented for server versions of Windows 2000: direct upgrades will reduce processor support, and a new high-end -- and presumably more expensive -- product will join the suite.

Sites running the standard edition of Windows NT Server have the option to run up to four processors. In its October 1998 announcement, Microsoft revealed that companies seeking to deploy Windows 2000 systems with four processors will have to upgrade from the standard edition to Advanced Server. For existing four-way systems, a grandfather clause permits an upgrade without going to a more expensive version of Windows 2000.

Under this scenario, deploying an eight-way system requires the adoption of the new Datacenter Server, except for NT Enterprise Edition customers who already run an eight-way system, which also is protected by a grandfather clause.

The details of the upgrade plan didn’t go unnoticed by customers. Multiple sources close to the company confirm Microsoft is backing down due to customer pressure. Under a revised packaging plan currently being finalized, processor support for Windows 2000 Server, Advanced Server and Datacenter Server will be respectively upped to four-way, eight-way and over-eight-way SMP. Microsoft officials refuse to comment on the issue, but note that an announcement on the final pricing for Windows 2000 is planned for the fourth quarter.

For many firms, the potential licensing changes with Windows 2000 only complicates their deployment decision. "I'm going to be adding databases, along with disk space and processors," says Michele Bovee, AVP and capital finance computer engineering manager with The CIT Group (www.citgroup.com), a financial services company. "Does that mean all of a sudden I'd have to upgrade my license also? The more complex the licensing, the easier it is to get tripped up and unintentionally break licensing. It can get confusing, and we want to stay legal."

Other firms facing the license-upgrade issue may opt to stay put on NT 4.0. With the exception of a mission-critical Exchange Server implementation at his site, Joe DeRosa, enterprise network manager at The Marcus Corp., doesn't see a whole lot to gain in a license upgrade for four-way processing. Under such a scenario, the company "probably wouldn't upgrade to Windows 2000, I'd probably stick with NT 4.0," he says.

Microsoft's initial licensing plan for Windows Terminal Server -- which required client upgrades to Windows NT Workstation -- caused DeRosa to look elsewhere to control total cost of ownership. "We already had a Windows desktop operating system license, so it just didn't make sense for us," he notes. "They lost our business for that. We found other ways to do it, through increased bandwidth and application tuning."

While Microsoft still debates how it will define Windows 2000 pricing, some analysts are warning users to brace for a major jolt, possibly as much as 50 percent more for their Microsoft licenses by the end of 2000. Microsoft is "moving toward the more capacity-based licensing models," warns Alexa Bona, research director at GartnerGroup (www.gartner.com). "You're not going to see mainframe MIPS-based pricing with Windows 2000 just yet. But they are moving closer to the mainframe model, in which the server fee will become more capacity-based, while still leveraging client access fees. They will be charging on both sides of the fence." These fees are expected to incorporate BackOffice products as well.

Licensing has long been both a strategic and tactical weapon for systems vendors in their battle for market share. "Microsoft certainly understands how to achieve their strategic goals through licensing, perhaps better than many other vendors," Bona says. "Microsoft tends to price attractively when they enter a market space." Bona points to Microsoft’s battle for the network operating space, which is still dominated by Novell Inc.

There is also the battle shaping up between Windows 2000/NT and Unix for mission-critical applications. "As long as Microsoft is trying to increase market share, and trying to increase revenue numbers, they will price pretty attractively," Bona points out. "When they get more market dominance, that’s when the pricing looks less and less attractive. Look what happened to Office, which has grown more expensive as Microsoft obtained more market dominance."

Eventually Microsoft will be leveraging its license agreements to promote market share of its BackOffice suite as well, Bona predicts. For example, additional licensing for SQL Server is typically a fraction of competing databases, such as Oracle.

Several end-user companies informally polled by ENT have no intention of moving mission-critical applications to the Windows 2000 platform during the next 12 months, at least not until the first Service Pack is released. "I can't foresee us switching over to 2000, at a corporate level, until mid next year," CIT Group’s Bovee says. "We have to be good and solid in the technical end. We have to have a level of comfort until the bugs are worked out." She notes, however, that her site is an all-Microsoft shop, and that her goal is to increase the use of BackOffice products.

"The earliest we would be changing would be over the next eight to nine months," says Clarence Hoops, IT director at the Office of the Undersecretary of Defense Comptroller, U.S. Department of Defense. "We aren't going to rush."

"Our [NT 4.0 to Windows 2000] migration plans are somewhat limited, at least until the first Service Pack is out," The Marcus Corp.’s DeRosa says. When his company is ready to switch, he plans to deploy Windows 2000 on several non-production machines, mainly file servers, at some of the smaller departments. DeRosa explains that there is no compelling business need for him to migrate to Windows 2000 at this time. "Some of the features, increased reliability, better backup and restore -- that's all great. But we don't have problems with any of that right now. We're fortunate to have very high uptime with all of our servers."

Concerns over Windows 2000’s licensing and stability, along with satisfaction with Windows NT 4.0, is likely to keep a large percentage of Microsoft's user base on a previous version for several years to come. For these users, the question becomes: "How long after the release of Windows 2000 will Microsoft begin to pull the plug on Windows NT 4.0?"

In the past, Microsoft has scaled down support for releases one to two years following the introduction of a subsequent release. For example, full support of Windows NT 3.51 was phased out at the end of 1997, about 18 months after the introduction of Windows NT 4.0.

Microsoft may break that model this time around and provide full support for Windows NT 4.0 longer, maybe years longer. "In general, we don't drop support for products unless there is no longer a customer demand," says Eileen Crain, product support service manager at Microsoft. "We anticipate at this point continuing full support for NT 4.0 for the foreseeable future. There's absolutely no discussion of any change in the level of support for the product. We have increased staffing for Windows 2000; we're in the process of staffing up for Windows 2000 support issues. We'll add the necessary people to support that product, but we won't change the level of support for NT 4.0." Microsoft support professionals are being trained to handle both Windows NT 4.0 and Windows 2000 issues.

Hot fixes for NT 4.0 will still be available for an indefinite time, Crain says. "We will maintain the same type of hot-fix procedure as we have today," she says. This usually consists of product teams and product support personnel jointly working to identify potential issues with the software.

Crain says earlier versions of Windows NT -- such as 3.51 and 3.5 -- are still supported, although not at the level that NT 4.0 is supported. "Surprisingly, we still have not made any sort of announcement around discontinuing support [for NT 3.5 or 3.51] because we still have customer demands for support for the product," she explains. "Until we see some sort of leveling off, or steep decline, we won't be looking at reducing the support."

Microsoft appears to be taking a page from IBM Corp.'s play-book: Taking a more direct role in supporting its largest customers, says Dwight Davis, analyst at Summit Strategies (www.summitstrat.com).

News of long-term support for Windows NT 4.0 is good news for the sites that have no intention of giving it up anytime soon. Windows NT 4.0 has been performing well at The William Morris Agency, Beverly Hills, Calif., and the firm sees no need to shake things up in a move to Windows 2000. Hopefully, Microsoft will keep the Service Packs rolling for some time to come, remarks Michael Naud, network administrator at William Morris. "I know we won't see any new technologies in the service packs, but I hope they don't forget about updates for NT 4.0 users, especially if they find new security vulnerabilities."