Guild Companies

In a little more than a month, Microsoft will launch Windows Server 2003, the "Whistler" version of its Windows operating system for servers. Whistler has plenty of technical advancements that are going to make it an attractive upgrade from the current Windows 2000 editions for servers. And because Microsoft wants to get lots of hesitant customers to spend money in a down economy, Whistler will have something else: prices that match Windows 2000.

Traditionally, as any company rolls out a much more advanced version of its operating system platform, the provider of that platform raises prices. The company does this for a number of reasons. First, it wants to recoup some of the substantial investments it has made in creating more advanced server software. Creating more reliable and scalable operating systems with more features than prior releases is hard enough, but, historically, new releases and versions have come out with increasing frequency. That means that operating system providers have to recoup larger costs in shorter timeframes. Luckily (sort of) the pace of change has slowed down a bit in the past two years, now that the dot-com bubble has burst, and the pressure on operating system providers is not so great when it comes to new features, but in making what they have work better. That doesn't mean that OS providers are not adding new features these days; they surely are. But it is increasingly difficult to get users to pay for them, because they don't just want to keep upgrading their machines all the time. They want to build systems, use them for a couple of years, and leave them alone. This is another reason why, as Microsoft did in the jump from Windows NT to Windows 2000, OS providers have tended to raise prices: As they announce each successor to the current operating system, a smaller and smaller portion of their installed base tends to move forward. If you're Windows NT 4.0 file server is working, you don't mess with it, even if Windows 2000 and Windows 2003 are available. Those who do move have to pay the price of all that development, and there are fewer of them, so the price hikes could be substantial.

Knowing all of this, and the threat that open-source Linux platforms are to Windows hegemony at small and midsized businesses, Microsoft has done something that makes perfect sense: It has locked prices on Windows 2003 to essentially the same levels as Windows 2000. There is a new low-cost edition of Windows 2003 aimed at Linux, which is different, and Microsoft has changed some of the licensing terms for the software with the Whistler release, so pricing is not exactly the same except for the base OS for each server.

Microsoft has not, as yet, released pricing for upgrades from Windows 2000 to Windows 2003, however. If Microsoft prices these upgrades too high, it may drive customers either to Linux, to staying put and not buying anything, or to acquiring new servers running Windows 2003 only in cases where Windows 2003 is necessary. We're on the prowl for upgrade prices, but no luck so far.

In any event, the entry Whistler product is Windows Server 2003 Web Edition, and this is the so-called Linux killer. This is a base version of the operating system that does not require customers to buy any Client Access Licenses (CALs). It only runs on 32-bit Intel processors and only supports two-way symmetric multiprocessing (SMP) and up to 2 GB of main memory. This Web edition will have an estimated retail street price of $399, but it could be lower depending on what Microsoft's resellers do. (The pricing information Microsoft is giving out is suggested retail pricing.) Microsoft cautions that this product will not be available from all resellers or through all channels, but it does not say who will get to sell it and on what devices. This has undoubtedly irked some of Microsoft's partners, although it is hard to say which ones without knowing Microsoft's plan.

Windows 2003 Standard Edition is the base version of Whistler that can support the full breadth of 32-bit applications and databases available in the Windows world. It will support four-way SMP servers and up to 4 GB of main memory. Microsoft is suggesting a retail price of $999 per server including five CALs, and $1,199 including 10 CALs. This edition only supports 32-bit Intel iron, just like the Web edition.

Windows 2003 Enterprise Edition supports both 32-bit Pentium and 64-bit Itanium processors from Intel, with SMP support scaling to up to eight processors, like the current Advanced Server edition of Windows 2000. The 64-bit Itanium variant of Windows 2000 will support up to 64 GB of main memory, while the 32-bit version tops out at 32 GB of main memory. The suggested retail price of the Enterprise Edition is $3,999 including a base 25 CALs.

Microsoft is not providing pricing information on the Datacenter Edition of Windows Server 2003, much as it did not for the prior Windows 2000 version of its high-end operating system. The company argues that it has "bundled" Datacenter Edition with the hardware, but this is hogwash, since Microsoft doesn't own a hardware platform on which to bundle the OS. Microsoft just doesn't want to publish pricing for Datacenter Edition, and the TPC benchmark council has looked the other way and allowed it to do benchmarks on the code without providing pricing. What is now known about Whistler Datacenter Edition--which has been keenly awaited because Windows 2000 does not scale as well as Whistler does--is that this variant of Microsoft's high-end operating system will support up to 32- or 64-way SMP scalability, with the 32-bit version supporting up to 64 GB of main memory and the 64-bit version supporting up to 512 GB of main memory. A 64-way machine with 512 GB of main memory is a behemoth, and it is what Hewlett-Packard expects to start shipping around the time the Intel "Madison" Itanium 2 chips are ready this summer.

CAL pricing is a little bit different this time around. In the past, every device (except a special generic Internet connector for Web users) that linked into Windows 2000 had to have its own CAL. Now a CAL can be used for each unique device or--and here's the new twist--for a unique person who might have multiple devices they use to access Windows networks and applications (but presumably not simultaneously). Microsoft is also charging one price for a base CAL, and then another (and much higher) price for users or devices that need to link through Terminal Services. An incremental five-pack CAL for Windows Server 2003 costs $199 and a 20-pack costs $799. A five-pack CAL including Terminal Services costs $749, with a 20-pack costing $2,669.