Microsoft Makes Share Gains with Windows on Servers

by Dan Burger

Microsoft came within a whisker of commandeering one half of all server operating systems shipped in 2001. According to market researcher IDC, Microsoft continued to pull away from its competitors, based on 2001 sales, which show Windows NT and Windows 2000 accounting for 49 percent of all server operating systems shipped that year. IDC's report on sales in 2000 showed Microsoft with 42 percent of the market.

Microsoft's gain in revenues, unit shipments, and market share, for both its server and client operating systems, is largely attributable to the upgrade cycle for Windows 2000 as Windows NT fades into the history books. However, as Al Gillen, director of IDC's system software research team, pointed out, part of the increase can be attributed to Microsoft's much-maligned changes in software licensing terms and in customer transitions from older Microsoft technologies to current middleware and application products, which often require a move to Windows 2000.

To give this a larger perspective, Gillen noted that Microsoft, in 1996, was in the low 20 percent range of market share. Back then, NetWare had more shipments than Windows, and the collective Unix platforms--Solaris, AIX, HP-UX, Tru64, UnixWare, and a few others--had a larger portion of the new license shipment total than Windows. Microsoft has more than doubled its server-operating-environment market share from 1996 to 2001, which is a pretty mean feat.

"Microsoft has taken market share away from all the vendors that used to own this market," Gillen said. "The market size grew significantly from 1996 to 2001, and Microsoft absorbed most of that new growth in the server operating environment market."

The IDC report indicates that the overall operating system market, combining clients and servers, increased by 0.7 percent from 2000 to 2001, with the client side growing 3.8 percent and the server side declining by slightly less than 1 percent. Microsoft built its share of client operating systems on the desktop from 92 to 93 percent during this same time frame.

In addition to Microsoft's commanding share of the 5.7 million new server-operating-system licenses shipped in 2001, Linux achieved an impressive 25.7 percent of shipments, NetWare accounted for 11.7 percent, and the Unix platforms combined represented 11.6 percent of shipments. Other server operating systems fought over a scant 2 percent of the remaining shipments. OS/400, by our estimate, accounted for about half of that 2 percent share, by the way.

Although IDC didn't provide the data, we know that IBM shipped several tens of thousands of new OS/400 licenses in 2001. The exact number is hard to quantify. IBM said earlier this year that it sold 25,000 OS/400 V5R1 licenses between the end of May 2001 and the end of January 2002. That's 25,000 new V5R1 operating systems in nine months, or an annual run rate of about 34,000 operating systems. Prior V4 releases of the OS/400 operating system could have accounted for anywhere from 10,000 to 20,000 shipments in 2001. Call it 50,000 total, just for argument's sake. While these numbers are low, compared with Windows 2000 and Windows NT shipments, each OS/400 license drives a lot more hardware, and OS/400 is only used for strategic, mission-critical applications, unlike Windows, which is also used for these purposes, but is more times than not used for print, file, Web, or e-mail serving.

Shipment numbers are not the only measure of the importance of an operating system platform. OS/400 drives roughly $2.5 billion in server sales a year, giving it about a 6 percent share. Windows drives about $12 billion in sales for all kinds of workloads, giving it about a 27 percent share, but if you only look at servers that support the database, application, and groupware applications that run on OS/400 servers, and in the same price bands as the iSeries line, it is hard to imagine that Windows servers drive more than $5 billion to $7 billion in sales. This is still considerably larger than the OS/400 platform, to be sure. But, in terms of platform revenues, the water separating the two platforms for enterprise applications is not as wide as mere shipment numbers indicate.

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