Microsoft Cuts Prices on Terminal Server

Microsoft Corp. slashed the price of Window NT Server 4.0, Terminal Server Edition, amid criticism of its licensing structure. Some industry observers predict the move will bolster the thin-client market.

Microsoft Corp. slashed the price of Window NT Server 4.0, Terminal Server Edition, amid criticism of its licensing structure. Some industry observers predict the move will bolster the thin-client market.

Officially, Microsoft cited feedback from customers and sales channels that "in some cases Terminal Server access requirements were overly complicated." In interviews, Microsoft officials have acknowledged that Terminal Server licensing was expensive and inconsistent.

"I think they listened to the voice of the marketplace," says analyst Greg Blatnik of Zona Research (www.zonaresearch.com). "They were receiving feedback, I think, about the way Terminal Server licensing and pricing was structured, and there were some issues there."

Microsoft released Terminal Server Edition in June, a little more than a year after announcing a joint effort with Citrix Systems Inc. (www.citrix.com) to develop terminal servers. Formerly known as Hydra, Terminal Server allows customers to host multiple, simultaneous client sessions on Windows NT Server. Executing applications on the server and remotely displaying them on the client permits a broader array of client devices -- including non-Windows workstations, older desktop computers and handheld devices -- to access applications running in Windows NT Server.

Microsoft replaced the original requirement that customers buy an NT Workstation license for each client with a requirement that they buy a Terminal Server Client Access License (CAL) instead. The difference is about $160, from $269 for the workstation license to $109 for the Terminal Server CAL. Customers must still buy a $40 Windows NT Server CAL for each seat, making the overall price comparison about $150 per seat under the new model to $309 per seat under the old.

Microsoft now offers the base operating system bundled with five user licenses -- both Terminal Server CALs and NT Server CALs -- for $1,299; bundled with 10 user licenses for $1,899; and bundled with 25 user licenses for $3,999. Customers can expand the number of Terminal Server users by five at a time with a Terminal Server CAL Multiple License Pack for $749.

Other announcements, in addition to the price cuts, have built momentum around Terminal Server and thin clients in general. In the same mid-January announcement as the price change, Microsoft unveiled a new product, Internet Connector. The same day, Citrix announced a new version of MetaFrame, and Wyse Technology (www.wyse.com) dropped prices for its Winterm thin clients by up to 25 percent.

Internet Connector, a $9,999 add-on to Terminal Server, lets customers publish Windows-based applications to up to 200 concurrent users over the Internet. To prevent the Internet Connector from decimating Terminal Server revenues, Microsoft prohibits its customers from using the Internet Connector for company employees. Instead, target users include prospects, customers and suppliers who want to access product catalogs, do order entry or find technical support information. Microsoft’s new product and price changes are available this month. Citrix’s new product, MetaFrame SKU, complements Microsoft’s Internet Connector license. Pricing and availability have not been announced.

ThinPlanet Inc. (www.thinplanet.com), a marketing firm dedicated to promoting thin client technology, said in a statement that "Microsoft has lit the fuse on an industry that has been ready to explode."

Zona’s Blatnik says much of the attention on Microsoft’s licensing model is overblown. "I don’t think pricing was a great obstacle," Blatnik says. "It certainly was something that created a burden for certain types of organizations that had individuals basically coming in over the Internet to an application. That tended to be an expensive proposition."

Blatnik says his research, including surveys of limited samples of users, suggests Terminal Server has sold well, although Microsoft has not released official sales figures yet. "The new pricing and new programs are going to help it be more successful," he predicts. More important, in Blatnik’s view, is the general attitude among customers toward the product. "The good news for Terminal Server was that we saw people really begin to understand it and build plans for deploying it."