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Wednesday, February 27, 2008 - Page updated at 12:00 AM

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Microsoft launching Windows Server 2008

Seattle Times technology reporter

Microsoft is celebrating the release of a new version of one of its most successful products outside of the desktop Windows and Office one-two punch.

Windows Server 2008, which is being feted in a series of launch events starting in Los Angeles today, is the flagship product of Microsoft's long-term effort to build a presence in the lucrative market for software that businesses run behind the scenes.

The part of the company that built the product, the Server and Tools unit, brought in sales of about $11.2 billion in the past fiscal year, more than one-fifth of Microsoft's total. It was very profitable, too, forming the third leg of the stool with Windows and Office.

Windows Server 2008, along with a set of programming tools called Visual Studio 2008 and database software SQL Server 2008, "will underpin growth from the Server and Tools business over the next several years," Microsoft Chief Financial Officer Chris Liddell said last month.

Microsoft launched its first server software 15 years ago. And while the venture has been successful — the business just chalked up its 22nd straight quarter of double-digit sales growth — the company does not enjoy the dominance it does on the desktop, which raises the stakes for each new server release.

Server software is the foundation layer for the workhorses of the information-technology world. The software controls powerful back-end server computers that run enterprise applications, networks, Web sites, e-mail and data centers.

Server sales last year, including hardware, reached $54.4 billion globally, the second-highest level on record after $61.6 billion in 2000, according to data being released today from market-tracking firm IDC.

Market "unforgiving"

Windows Server 2008 replaces the 2003 version and relies on much of the same code base as Windows Vista, the desktop operating system Microsoft released broadly just over a year ago.

Vista has disappointed some users because it didn't work well with some older applications and hardware — issues Microsoft has acknowledged and sought to address.

"Microsoft can't afford to have those incompatibility issues plague Windows Server 2008 as they have with Vista," said Laura DiDio, an analyst with the Yankee Group. "The market is very unforgiving. ... If there's one big bug or flaw, it will be magnified. That's just the way it is."

IT departments, many of which already run a combination of Microsoft and competing technology, can choose from vendors including Red Hat, Novell, Sun Microsystems, IBM and others. Also, as with many Microsoft products, Windows Server 2008 will compete with earlier versions of the software that are working just fine.

Microsoft claimed 36.6 percent of the server market, by revenue, in the fourth quarter of 2007, IDC reported. Unix servers had 33.3 percent and Linux claimed 12.7 percent.

Bill Hilf, general manager of Windows Server marketing and platform strategy, said Server 2008 is already well ahead of its predecessor in terms of application compatibility.

"Certainly, we have learned a lot from Vista about what happens when the applications aren't ready," he said.

Sharing code

Today, 80 software vendors have applications ready to go on Server 2008 compared with 13 when Server 2003 launched.

Also, there are many more applications and devices that a desktop operating system must support compared with a server operating system, Hilf said, so compatibility is less of a challenge in the first place.

With each release, Microsoft is expected to make improvements in speed, security, reliability and other fundamental attributes of an operating system.

Hilf said there are advantages to having both Vista and Server 2008 share code, a pitch Microsoft will continue to make as it uses Server 2008 to drive adoption of Vista and vice versa.

Redesigned networking technology in both products leads to "radically faster" file sharing — one of the most common actions between the desktop and the server, he said.

Another feature, called Network Access Protection, essentially performs a "health check" each time a computer connects to a corporate network. This process includes scanning for viruses and ensuring security software is up to date.

Michael Cherry, an analyst at Kirkland-based Directions on Microsoft, said IT professionals will be attracted by a "core installation" option for Server 2008 in which all but the essential pieces of the system are stripped away.

"This allows an organization to only install the smallest amount of Windows that is necessary to run a task," Cherry said. That's important because it minimizes the amount of code hackers can attack or that needs patching when Microsoft issues updates.

Morale booster

Based on early feedback from test versions, the product "appears to be far more stable and reliable than Vista," Cherry said.

But the true test comes when it becomes broadly available.

Said DiDio, "Once it's actually out there in gold code and they do that launch, the gloves really come off."

In addition to the marketing function a product launch serves, it's a meaningful day for Microsoft employees.

It's hard to get an exact number for how many people worked on Windows Server because various teams contribute pieces to multiple products. Hilf, whose responsibilities include approving launch-related expenses, said he saw an invoice for more than 5,000 "Ship It" awards — trophies that recognize Microsoft employees for their work on a completed product.

Cherry, who spent 10 years at Microsoft, said the launch helps make an employee's work more real to his or her family and friends.

"There's actually packaged product that you can point to and show it to your mom and dad or your wife and say, 'That's what I did,' " he said. "I think it has tremendous morale value for a team to have a launch."

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Copyright © 2008 The Seattle Times Company

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