What’s Behind the Door?

Onequestion that has been presented to me repeatedly in recent months is, “How isthe uptake progressing for Windows 2000?” The short answer is, “Better thanpreviously expected.”

Windows2000 uptake was never expected to follow a Windows 95-like adoption curve.Business users don’t upgrade just because a sexy new product is released. Butthe short answer glosses over what is a very complicated transition scenario.There are two distinct transitions taking place with the adoption of Windows2000.

Behind doorNo. 1 we have the relatively fast acceptance of a new client operatingenvironment -- an upgrade that offers tangible benefits with little negativeimpact on long-term infrastructure plans.

Data thathelps confirm this trend was presented in Microsoft’s most recent quarterlyresults. The company posted a year-over-year revenue increase of about 13percent in its desktop platform business. This line item includes revenuestreams coming from the Windows 9x family, Windows NT Workstation, and Windows2000 Professional, as well as Microsoft’s Office suite.

DuringMicrosoft’s first quarter fiscal year 2001 financial analysts’ briefing,Microsoft’s corporate controller Scott Boggs stated that revenue from WindowsNT Workstation and Windows NT Professional increased 30 percent over theprevious year. Windows 9x client shipments historically have outnumbered NTWorkstation shipments, but they also carry a considerably lower price tag.Together, these factors suggest that Windows 9x product growth probably wasbelow the 13 percent year-over-year revenue growth.

IDC’sexpectations are for Windows 2000 Professional to, over time, eat into thekingdom owned by the Windows 9x family of products. It appears that Windows2000 Professional will account for over one-third of the combined Windows NTWorkstation/Windows 2000 Professional shipments during calendar year 2000.

Behind doorNo. 2 is the migration to Windows 2000 Server. It now is clear that Microsoftis still working to renew revenue growth after its product transitions thisyear. Microsoft’s enterprise software segment, which includes both Windowsserver products as well as key BackOffice applications such as Exchange and SQLServer, has struggled to find significant year-over-year growth for the pastthree quarters. This follows two quarters during the second half of calendaryear 1999 that saw growth rates between 30 percent and 50 percent year to year.

Despite thegeneral difficulties of increasing revenue, the fact that the company grewrevenue during a time with so much transition going on is an encouraging sign,especially considering Windows 2000 list pricing is largely identical to theWindows NT pricing structure.

Acceptanceof Windows 2000 Server and Advanced Server is increasing. While these productswill account for a minority share of the combined Windows NT Server/Windows2000 Server product shipments during 2000, it is likely that this split willreverse itself during 2001.

What isless clear is how those licenses are being deployed and configured. There areseveral reasons why Windows 2000 use is a difficult metric to understand.First, Microsoft sells Windows 2000 Server with a “downgrade” license, whichallows a customer to buy the Windows 2000 license, but deploy Windows NT Server4.0. So even if 100 percent of the new licenses being sold were Windows 2000Server, there would still be Windows NT Server roll-outs going on.

The otherkey question is how many of those systems will be deployed as members of aWindows 2000 domain, rather than as a member of a Windows NT 4.0 domain or as astand-alone server. Given the difficulty of migrating to Active Directory, itis unlikely that full-blown implementations of Windows 2000 are tracking on asimilar rate as the operating system shipments, or that it will begin to do soin the near future. In fact, with no major directory-enabled serverapplications available until little over a month ago, the motivation toimplement Active Directory wasn’t there.

What isbecoming increasingly clear is that even if a full Windows 2000 migration withActive Directory and DNS migration is complicated and might not happen rightaway, this won’t an major impediment to Microsoft when it comes to sellingWindows 2000. This goes for both client and server shipments. --Al Gillen is research manager for systemsoftware at IDC (www.idc.com)and former editor in chief of ENT.Contact him at agillen@idc.com.