Microsoft server share jumps in 2001

CNET News.com ^ | September 23, 2002, 2:05 PM PT | Joe Wilcox

[Bush2000]

Microsoft server share jumps in 2001

Microsoft's share in the server operating system market jumped in 2001, according to a new report, yet analysts question whether the software giant will be able to offer a repeat performance for 2002. The Redmond, Wash.-based company's market share for shipments of new server operating system licenses jumped to 49 percent in 2001 from 42 percent in 2000, according to a research report released by IDC on Monday.

Over the same time period, rivals either held steady or lost market share, the report showed. The IDC numbers represent sales of new licenses, not market share for server operating systems running on computers.

"We looked at Microsoft's growth in 2001 and found part of it was Microsoft's licensing programs, but we believe part of it was because already some Microsoft customers had gone into a large Windows 2000 upgrade cycle," said IDC analyst Al Gillen. "It's the combination of those two factors."

But analysts warned that Microsoft likely would not be able to sustain such gains in 2002.

"I don't think we can draw a straight line to 2002," said Gartner analyst Tom Bittman. "We've definitely seen a slowdown" in Windows server software shipments. He cited the economic downturn, as well as next year's expected broad release of Windows .Net Server 2003, as two reasons for the decline.

Competing products did not fare as well, according to IDC. Market share for the Linux operating system was constant between 2000 and 2001, at 25 percent. NetWare and Unix, which had both separately held around 15 percent of the server market, fell to under 12 percent last year.

Yet analysts believe that Microsoft didn't necessarily gain at competitors' expense.

"The share has shifted from year to year, but I don't know that Microsoft has taken share away from another vendor as much as another vendor wasn't able to grow its business," Gillen said.

Overall, the market for new server operating license shipments shrank about 1 percent year over year in 2001.

Windows 2000 catch-up

In some ways, analysts expected Microsoft to see a big jump in server operating system license shipments, simply because so few companies switched to Windows 2000 immediately following its release. While Microsoft launched the software in February 2000, fewer than 5 percent of Windows NT Server systems had been upgraded by the end of the year, according to research group Gartner.

"In 2000, there were some cold feet," Bittman said. "We said that it was going to be a slow ramp up, and after six to nine months, things were going to kick in and 2001 was going to be a big year."

For many companies, Microsoft pushed too many changes into Windows 2000 to make upgrading fast or even easy. Active Directory--Microsoft's software for managing computers, users and other resources on a network--played an important role in delaying upgrades.

"For most organizations it took six to 12 months to get a hold on Active Directory," Bittman said. "For most, it took a good six months just to plan. So most people weren't ready until 2001."

Microsoft's repeated delays delivering its version 2000 successor, Windows .Net Server 2003, contributed to the sales momentum.

"The only thing that could slow that down is if the next release came out early or on time," Bittman said. "It's obviously late, people saw that coming and jumped in."

Conversely, analysts do not see the release of Windows .Net Server 2003 igniting a large round of new upgrades, particularly as many companies would have just moved to Windows 2000 Server.

Microsoft had planned to release Windows .Net Server 2003 last year but twice pushed back the launch date. The product is seen as a crucial component for delivering Microsoft's .Net Web services initiative.

Licensing divides customers

Microsoft's controversial Licensing 6 program also contributed to sales of new server operating system licenses, but unexpectedly. The company announced the new program in May 2001, putting the first phase into place in October.

But Microsoft delayed the full switchover until August, because of customer resistance to the program.

Licensing 6 compelled customers to switch to an annuity-based model, where they annually pay up front for upgrades under a two- or three-year contract known as Software Assurance. This effectively raised volume-licensing fees from 33 percent to 107 percent, according to Gartner.

Implementation of the plan led to a spike in new license purchases as companies scrambled to get on the most current version of Windows and, thus, remain eligible for discounted upgrades.

Microsoft benefited two-fold in the server operating system market, where the licensing strategy boosted Microsoft's share over competitors and locked companies out of choosing alternatives for two to three years.

But Bittman sees other repercussions of the Licensing 6 plan, one that is likely to hurt sales.

"There are more questions about Linux now--as in, 'Should I be considering it?'--than there were before," he said. He credited this shift to customers seeking lower-cost alternatives to Licensing 6.

Analysts estimate that as many as 60 percent or more of eligible customers chose not to sign up for the controversial licensing program before the July 31 deadline.

"Linux is not really driving Linux, it's Microsoft licensing that's really driving Linux," Bittman said. "What's really turning Linux into reality is backlash on Microsoft licensing."

Microsoft has to "change the value proposition," Bittman warned. "They sold because Intel servers were cheap. But now you've got Linux out there, which is also cheap. They kind of have to defend themselves the way Unix has done."

Still, Gartner does not predict any massive groundswell of support for Linux that would have any serious impact on Windows Server market share.

[staytrue]

MSFT down 2 dollars or 5 percent today. Bahahahaha.

[Bush2000]

That's pretty funny -- considering that Sun's stock price is only a little over $2. Bwahahahahahahaha...

[lelio]

The Redmond, Wash.-based company's market share for shipments of new server operating system licenses jumped to 49 percent in 2001 from 42 percent in 2000
OS server license? I've paid for about 4 linux distro 'licenses' over the years and have installed it hundreds of times. Does that could as just 4 sales?
Microsoft's numbers could just be increasing as people aren't buying the Sun / HP machine and its license that costs money and instead are installing linux on an existing system.
Not that MS can be blamed for siting these numbers, you can't accurately gauge the number of seats of a free OS.

[Bush2000]

I agree. These numbers aren't all that significant because they don't reflect freebie Linux installations. However, it is pretty surprising to see server shipments up in the current climate.

[glorgau]

Just to post the obligatory Mac zealot viewpoint...

MacOS X Server 1.2 is actually not bad. It is usable within larger organizations. It might actually garner 1 or 2 % of the market when Apple manages to make some decent hardware. :-)

[Bush2000]

MacOS X Server 1.2 is actually not bad.

I agree. Mac OSX Server would be ideal for running a print queue or a streaming media server connected to a webcam aimed at pigeons or an aquarium...

[wireplay]

Keep posting. These comments are great!

[wireplay]

Let's see, that puts MS market cap at around $238B, around twice IBM, 5 times Oracle's, and 25 times Sun's. Not too bad. Sounds like a buy opportunity to me.

[tjblair]

what's the matter bush2000, can't you read, "microsoft licenses", not market share(you big dummy!)

linux world domination is just around the corner!

[Bush2000]

what's the matter bush2000, can't you read, "microsoft licenses", not market share...

What part of "Microsoft's share in the server operating system market jumped in 2001" don't you understand?

[Cicero]

On large systems the changeover may have been difficult, but I'm surprised that more companies didn't jump into Windows 2000. It was a big step forward, and I like Windows XP even better.

Microsoft will continue to gain share unless they get too greedy with the licensing. But it would be VERY hard for them to get greedier than Sun.

[Dominic Harr]

What part of "Microsoft's share in the server operating system market jumped in 2001" don't you understand?

MS's share of the *money* earned increased, but their share of total installed units decreased.

Yes, Enron-style accounting is about all you have left to fall back on, I suppose.

By your accounting, 'Opera' beat IE, since Opera has generated more sales than IE (which is offered for no charge)! As with all posts you make, once we look at the link you quote the real story is *very* different from you attempts to spin the story.

F. U. D.

But when it's all you got, it's all you got!

[tortoise]

Mac OSX Server would be ideal for running a print queue or a streaming media server connected to a webcam aimed at pigeons or an aquarium...

On a given piece of hardware, OSX should be able to eat Windows lunch, at least in theory. Only a fool scoffs at the ability of BSD to serve data; FreeBSD has held real-world single-server throughput records (for x86 hardware) for so long that nobody even keeps track any more. It is also why BSD drives a lot of backbone harware. On a given piece of hardware, FreeBSD will wallop Windows in the network server arena. Since OSX is built on top of FreeBSD, in theory it should inherit the second-to-none network performance it offers.

Half the reason Apple went with a FreeBSD kernel in the first place was to inherit the golden reputation FreeBSD has as a server OS.

[general_re]

On a given piece of hardware, OSX should be able to eat Windows lunch, at least in theory. Only a fool scoffs at the ability of BSD to serve data; FreeBSD has held real-world single-server throughput records (for x86 hardware) for so long that nobody even keeps track any more.

Shame that Apple insists on only running it on the rather anemic G3's/G4's, then...

[tortoise]

Shame that Apple insists on only running it on the rather anemic G3's/G4's, then...

Yep. Not that most people actually need more processing power than a G4, even for a lot of real-time multimedia stuff. Still, that is no excuse. My understanding is that they are going to attempt convergence with IBMs Power-series processors, of which the G4 is actually a cut down version. IBM charges a fortune for them, but if mass produced they shouldn't cost much more than anything else. And they would give Apple computers unreal floating point performance. Motorola is a second-rate CPU manufacturer, but IBM definitely knows their stuff. They should have ditched Motorola years ago regardless.

[general_re]

My understanding is that they are going to attempt convergence with IBMs Power-series processors, of which the G4 is actually a cut down version.

I've heard much the same thing. If so, the next few years or so should be very interesting in the processor world - the leaks of SPEC benches from Intel put Itanium2 somewhere in the Power4 ballpark, Moto's got the G5, IBM with something potentially resembling an affordable Power4 series, and AMD with their Opteron chip. Good time to be alive ;)

[HAL9000]

Microsoft's share in the server operating system market jumped in 2001, according to a new report, yet analysts question whether the software giant will be able to offer a repeat performance for 2002.

Let's take a look at Microsoft's marketshare in 2002 (the red line in the graph below) -

The Netcraft Web Server Survey is a survey of Web Server software usage on Internet connected computers. We collect and collate as many hostnames providing an http service as we can find, and systematically poll each one with an HTTP request for the server name.

In the August 2002 survey we received responses from 35,991,815 sites.

Market Share for Top Servers Across All Domains August 1995 - August 2002

There seems to be a strong correlation between the Microsoft and Apache marketshares shown on the chart. In 2001, many Apache sites switched to Microsoft servers. But after a brief peak at the beginning of the year, a large number of Internet domains are dumping Microsoft servers and switching back to Apache. Microsoft's marketshare has dropped about 10% of the 35,991,815 domains, and Apache has regained it.

[Bush2000]

MS's share of the *money* earned increased, but their share of total installed units decreased.

Based on what? Your opinion? IDC is looking at sales of servers. That doesn't include deployments of Linux/BSD/etc which aren't sold. But there's no way of knowing how sizable that market is. If that's your opinion, fine. I'll accept it. But if you purport it to be fact, ante up. Let's see your numbers.

[Bush2000]

On a given piece of hardware, OSX should be able to eat Windows lunch, at least in theory.

But that's not reality. OSX runs solely on overpriced Apple hardware, not PCs.