Microsoft to Lure Competing Business Partners to Windows

Published: March 20, 2006

by Alex Woodie

Microsoft is in the middle of ramping up a new program to convince independent software vendors (ISVs) to make the move from OS/400, Unix, Linux, and other platforms to the Windows Server System. Under the "NXT" program, Microsoft is offering resources to ISVs in exchange for migrating ERP, supply chain, and other enterprise applications to Windows. NXT is currently in a pilot mode, and Microsoft expects to bring it to full force later this year.

According to the NXT Web site at www.isvnxt.com, Microsoft is targeting ISVs--with more than $5 million in revenues--that are interested in migrating their non-Windows solutions to the Windows Server system, including support for Windows Server 2003, SQL Server, and Visual Studio.

ISVs that participate in NXT can expect to receive help from Microsoft in several areas, including the technical aspects of planning, migration, and re-development, as well as assistance in marketing and sales. Microsoft would not comment on how much money it is spending on NXT, nor on how much money it's prepared to spend on ISVs that participate in the program. In fact, the vendor wouldn't answer any questions about NXT, except to say more information will be available when the program goes live sometime in 2006.

The Redmond, Washington, software and services giant is employing several techniques to persuade ISVs to join the NXT program, ranging from objective analysis using cold, hard statistics ($91 billion in software revenue generated from sales of Windows programs industry-wide from 2002 to 2004, compared to $53 billion for Unix and $4 billion for Linux, according to the IDC), to gentle nudging and emotional pleas ("stay comfortably in your current status, or . . . take your business to a whole new level") to the downright questionable ("…and now customers are coming to depend on the inherent security and reliability that .NET delivers.")

In addition to trying to attract vendors who have historically targeted the Unix and Linux operating systems--which pose the largest threats to Windows' dominance on servers--Microsoft is also targeting the OS/400 platform with NXT. IBM has thousands of business partners and software vendors, who are central to maintaining relations with the 220,000 organizations around the world that rely on the OS/400 server (AKA: the AS/400, iSeries, eServer i5, and now the System i5). That's a very respectable installed base for a platform that has been on analysts' death watch for the past decade, and Microsoft is understandably envious of its application portfolio and the proven business know-how that exists in this tight-knit community.

It's important to note that, with NXT, Microsoft is now pushing the migration option on the iSeries ecosystem, as opposed to the message of extension and co-habitation that Microsoft rolled out in late 2004 with its Midrange Alliance Program (see "Microsoft Extends Laurel Branch to IBM Midrange Shops"). Co-existence still sounds like it's part of the NXT agenda, but don't be surprised if Microsoft seriously ramps up the migration rhetoric, and the financial incentives, when Longhorn finally arrives next year.

It should come as no surprise that Microsoft is telling users of competing platforms to migrate their server applications to Windows, instead of just building new components in Windows, or paving the way for better integration between their legacy apps and Windows. The company has made great strides in the stability and security of its Windows Server operating system since the debut of Windows NT nearly 10 years ago, and--while it may have a ways to go before it can match the security and stability of the business systems it is suggesting customers replace--nobody can doubt that Microsoft is winning where it matters the most: in the checkbook.

This much is evident from the latest server numbers from IDC and Gartner, which show that Windows surpassed Unix in revenue for the first time last year, when $17.7 billion was spent on Windows operating systems, compared to $17.5 billion spent on Unix. Windows has the lion's share of the market now, in both volume (which it has led for sometime) and, more importantly, total revenue. Linux is growing faster than Windows, although it will take many years before it catches up to Microsoft.

After all, when you've got your opponent on his heals, as Microsoft has with Unix and other legacy operating systems, you don't back off--you continue to push forward. That is the strategy that Microsoft has successfully employed for years, and what it is now doing on multiple fronts with NXT, the Midrange Alliance Program, the Mainframe Migration program, the "Get the Facts" campaign, and others.

Despite the observers who say Microsoft has lost its mojo, can no longer innovate, and has become a big slow company like IBM during the early 90s, Redmond still has a ton of momentum built up from its monopoly on desktop operating systems and applications, and there's nothing stopping it--now or in the foreseeable future-- from fully transferring that momentum to server operating systems and enterprise software.