Windows 2000 Introduction No Rival to ’95 Software Debut
In its biggest and most important launch of a product since the explosive introduction of Windows 95 five years ago, Microsoft today is unveiling Windows 2000, an enormously complex program the company hopes will help solidify its position in an increasingly competitive marketplace.
The long-awaited program has been more than three years in the making and cost an estimated $1 billion in development costs. The program itself is one of the largest works of software ever commercially marketed, amounting to as many as 40 million lines of “code,” or instructions written in computer language.
But its introduction has been nothing to rival the full-scale circus that accompanied the launch of Windows 95, a dramatically improved consumer product that had buyers lining up at computer shops at midnight on launch day to be the first owners on their blocks.
This launch has been timed to coincide with a three-day Windows 2000 conference in San Francisco, but the attendees are almost exclusively business and computing professionals. By contrast, Windows 95 was born amid a clamorous commercial promotion, including a television ad campaign set to the Rolling Stones’ hit “Start Me Up.”
That’s because Windows 2000, an upgrade of the Windows NT operating system, is aimed at business and professional users, especially those who manage servers--computers that run networks of other computers or supervise traffic in and out of Internet sites.
Microsoft’s share of that market is not in the same league as its 87% share of consumer PC operating systems. One reason is that among its rivals is a fast-growing and essentially free system known as Linux. For that and other reasons, Windows 2000’s market penetration is expected to be gradual.
“Over a three-year life span, they’re going to sell a lot of copies” of Windows 2000, said Michael Gartenberg, vice president of Gartner Group, a technology consulting firm. “But they’re going to have to fight every battle that comes along. They will not be dominant.”
Windows NT has about 38% of the 5.4 million server operating systems that aren’t free like Linux, according to market researcher International Data Co. But its share of the revenue generated by server systems is only 30%, IDC analyst Dan Kusnetzky said.
The reason is companies such as Sun Microsystems, Hewlett-Packard and IBM dominate the market for truly large-scale server software, in which fewer systems are sold but the price of each one is enormous, costing $100,000 or more. Those companies sell server programs based on the Unix operating system, a standard that is considered more reliable than Windows when running on large networks.
That hints at the obstacles and risks Microsoft faces in even trying to move into this market. The company’s consumer marketing plan has always been to sell large numbers of programs relatively cheaply--and then sell existing users nearly annual upgrades.
That won’t wash in the corporate market, in which buyers expect programs to remain serviceable for many years.
Corporate buyers of high-end programs also have far more exacting standards for program reliability and technical support than do ordinary consumers.
“They’re trying to move into a corporate computer room they haven’t been in before,” Kusnetzky said, “and different people with different standards are making the buying decisions. If Windows 2000 has a failure anywhere, the news will be all over the planet in minutes.”
The expected slow conversion rate is bad news for Microsoft, whose shares have slumped 8% in the last four days. In recent weeks, Microsoft stock has pulled back 18% from its mid-December record high of $119.13. It fell 94 cents to close at $97.63 on Wednesday, the lowest since Dec. 13.
It may also be bad for Dell Computer and Compaq Computer, the world’s biggest personal computer sellers. Compaq Chief Executive Michael Capellas said last month that Windows 2000 is Compaq’s top priority for the year and that the company has trained 1,000 technicians to handle customer questions.
And Dell Chairman and CEO Michael Dell said last week that he didn’t expect Windows 2000 to have a dramatic effect on sales at his company, the biggest PC maker.
“The short-term impact [on computer makers] will be very minimal,” U.S. Bancorp Piper Jaffray analyst Ashok Kumar said. “We’re not seeing any change in the replacement rate.”
The introduction of Windows 2000 comes at a critical moment for Microsoft, which faces unprecedented challenges to its long-term domination of consumer and business computing at several levels.
For one thing, computing applications formerly available only on desktop and laptop computers can today be bundled in a new generation of hand-held portable devices, including wireless phones, pagers, and information appliances such as the Palm. Microsoft’s operating system for such devices, a stripped-down version of Windows known as CE, has failed to win a leading share of the market.
In the server market, the company faces a growing challenge from the Linux operating system, which has been developed communally and is thus not under the control of a single corporate owner.
Linux is especially useful for Web servers, or computers that control Web pages and Internet applications. Another attraction is its price; Microsoft will charge some businesses about $200 per computer, or as much as $4,000 per server, to install Windows 2000. And one of Linux’s traditional drawbacks, the lack of applications such as word processors written to run on the system, is fading as major application developers begin to produce Linux-based programs.
But Microsoft’s real Achilles’ heel in the professional market has been the doubt that Windows NT is sufficiently reliable when running sizable computer networks--that is, that it will not cease working when burdened by a heavy computing load.
Another issue has been NT’s “scalability”--that is, the ease of adding computers or processors to an NT-based system when needed. That’s particularly crucial in e-commerce, for which companies often have to pump up the size of their computing systems to accommodate surges of business.
“For the most part, we found 2000 to be more reliable” than NT, said John Taschek, director of PC Magazine Laboratories, which has done extensive testing on interim versions of 2000. “But that’s not the case in every instance.”
He also noted that because of 2000’s complexity--and the almost infinite variety of specialized software that businesses run on their systems--the real-world performance of the program is impossible to assess in advance.
“In corporate settings, big, small and medium companies all have custom-made code, and that’s going to be problematic,” he said.
Some critics have also suggested that Windows 2000 is riddled with bugs. Microsoft contends that most are minor and others will be fixed quickly.
Asked this week whether Windows 2000 has more bugs than its predecessors, Michael Dell dodged the question, saying only that his company’s ability to find such problems has improved in the last several years.
For now, many business users say they will wait before spending thousands of dollars to switch their systems to the new program.
“I haven’t seen anything exciting about it,” said John Stuart, Information Technology Manager at a Petaluma, Calif., travel company, who experimented with advance versions.
Stuart attended the San Francisco Windows 2000 conference, but many of his peers stayed home. Organizer IDG World Expo said it was expecting 20,000 people--fewer than attended IDG’s Linux conference in New York earlier this month. In many areas of the show floor, exhibitors outnumbered non-exhibitors.
Others, however, said Windows 2000 is a distinct improvement on its predecessor, NT.
“The performance is considerably better than what we anticipated,” said John Bolz, a technology executive at San Francisco-based Wells Fargo Co., which received a discount in exchange for helping Microsoft develop the code.
But Microsoft programmers gave up a lot to make Windows 2000 more stable, including speed and interactions with other software.
“It’s so reliable, it doesn’t take any chances,” balking at running many older programs and games and at supporting digital cameras and other recently developed hardware, said Andy Rathbone, co-author of “Windows 2000 Professional for Dummies.”
It probably will take six to nine months for Microsoft to fix the most important bugs, and buyers such as Michael Obando, of Sausalito, Calif., consulting firm Zen Systems Inc., said they won’t even consider upgrading before then.
“Before I deploy it, I’ve got to be 95% or 98% sure it isn’t going to impact what we have,” Obando said.
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