Windows 2000: Renamed, Repackaged NT at a Higher Price

On Oct. 27, 1998, Microsoft renamed its upcoming Windows NT Workstation version 5.0 to Windows 2000 Professional and NT Server (NTS) 5.0 became Windows 2000 Server. Microsoft then tiered the server product by creating three -- compared with the current two -- server packages: Windows 2000 Server (W2S), Windows 2000 Advanced Server (WAS) and Windows 2000 Datacenter Server (WDCS). Pricing was not announced.

The Windows name changes should not be confused with a technology change. GartnerGroup believes Microsoft changed the name to create an opportunity for further tiering of server products to raise server operating system prices. The tiering also enables Microsoft to realign the packaging of its BackOffice products to raise BackOffice prices. Furthermore, the name change creates the illusion for its enterprise Windows 95/98 installed base that Windows 2000 is the logical upgrade path in an attempt to convince business users to move to the higher-priced Windows 2000 from Windows 95/98.

Product Differences
The name Windows 2000 was well-chosen, especially since a reasonably stable version will not ship until at least the first half of 2000 -- a 0.7 probability. The difference between W2S, WAS and WDCS is primarily the number of processors supported. W2S will support up to two-processor servers, WAS will support up to four processors and WDCS will support up to 16 processors. Two-node failover clustering, IP load balancing and large-memory support will only be available in WAS and WDCS. License limitations are based on installed processors, not the maximum processor capacity of the server.

Pricing was not announced, but GartnerGroup expects the base workstation and server product pricing to be priced slightly higher than their respective NT 4 prices -- increasing by about the same amount as between NT 3.51 and NT 4. WAS will be priced between the current prices for NTS 4 and NT 4 Enterprise Edition (EE), and we expect WDCS to be priced between $6,000 and $8,000 per server -- a 0.8 probability.

One positive from the repackaging is that Microsoft’s cluster server functionality will be available with WAS at a lower price point, since this is only available in EE today. But once a typical mix of one- to eight-way NT servers in large enterprises is considered, large enterprises installing Windows 2000 servers through 2002 will, on average, pay 35 percent more for new NTS deployments -- a 0.8 probability.

Price Changes
Overall, for new server license purchases, the following price changes will apply. For those who would have purchased EE for failover clustering, WAS will be about 25 percent less -- a 0.8 probability. For those who would have purchased base NTS 4 for a four-processor server, WAS must be purchased at approximately triple the cost -- a 0.8 probability -- but it will include clustering and large-memory support. For those who would have purchased EE for support of servers with more than four processors, WDCS must be purchased at about double the cost -- a 0.8 probability.

For NT 4 servers, Microsoft will allow licensees of base NTS 4 using four processors to upgrade to W2S supporting all four processors without requiring an upgrade to WAS. Likewise, current licensees of EE using eight processors may upgrade to WAS and support eight-processor servers without upgrading to WDCS.

Initially, WDCS will add no value except the support of more than four processors. GartnerGroup believes WDCS is a "placeholder" version for Microsoft. In future releases, high-end features will be introduced in WDCS first and in some cases exclusively, thereby convincing many users to spend the extra money and purchase WDCS even for four-way servers, beginning in 2001 -- a 0.8 probability.

Bottom Line
Windows 2000 is the same technology planned for NT 5.0. The renaming and repackaging exercise enabled Microsoft to increase server operating system prices while arguing that prices have not changed. Through 2002, larger enterprises should budget for an additional 35 percent for new Windows 2000 server deployments compared with NTS 4, while midsize enterprises should budget an extra 30 percent. Also, organizations should expect further BackOffice repackaging and price increases tiered around Microsoft’s new server packages by year-end 2001 -- a 0.7 probability -- and should expect that other software vendors will follow suit. Organizations with Microsoft enterprise software agreements should insist that it allow upgrades from NT 4 to four-processor support on base Windows 2000 Server licenses regardless of installed processor count in current servers.

Grandfathering Multiprocessor Support

Current Windows NT Server 4.0 licenses give enterprises the right to run up to four processors, regardless of whether they are installed or not. But the standard upgrade path for NTS 4 licenses is to Windows 2000 Server, which only supports two processors. Microsoft plans to allow upgrades from NT 4 to Windows 2000 Server with support for four processors only for upgrades of servers with four processors installed. To minimize upgrade costs, users of four-way servers with fewer than four installed processors should pressure Microsoft to allow them to upgrade NT 4 licenses to base Windows 2000 Server with four-processor support, regardless of the installed processor count.