Microsoft's server business faces tough times

It is a rocky going for Microsoft Corporation India’s Server Business Group (SBG). On one hand it has to deal witxh competition from Linux that is fast becoming the de facto backbone for applications on servers as well as vendors like IBM and Oracle. On the other hand, it has yet to gain the confidence of independent software vendors and solution providers and get them to port their applications on SQL servers and also recommend the product and services to their own customers. Pallavi Kathuria, Director, SBG, Microsoft Corporation India candidly admitted that though the going was tough the company was going all out to change this ratio into its favor.

There is no denying that Linux has the top of the mind recall when it comes to server deployment, especially in high performance clusters, blade servers and a growing presence in web application hosting as well as messaging. It is estimated that Linux server shipments totaled 6,200 units in Q3 2006, up from 4,000 in Q3 2005, though there are no firm figures available.

This growth is faster than the growth of the x86 server per se. And this growth has come because several vendors have pledged their allegiance to open source.

Pallavi Kathuria: Trying to get more partners on Microsoft’s side of the table

Undoubtedly this has put Microsoft in a spot, because it is not able to match the growth rates of the server market and is also losing its existing market share. Add to this, Microsoft still has to create a partner eco-system that will proactively recommend SQL servers to its customers.

“Currently, we have a good network of ISVs and solution providers, but we need to work closely with them, to increase their own confidence in porting their applications on SQL. We have made good headway here and will soon have some success stories to share with partners,” remarked Kathuria.

Another challenge is building strategies for future growth business especially in management and security applications for servers. Here, Microsoft will have to weather competition from IBM Tivoli and Symantec, largely.

And the cherry on top of this bundle of difficulties is declining customer demands. With the concept of virtualization gaining ground, customers are not going for more server units, preferring to create mirror images of the applications on a single server. This is especially true in enterprise companies, which see great cost savings and easy management in the wake of virtualization. Even SMBs are waking up to this reality of virtualization, which adds to the existing hurdles Microsoft is facing in this particular business stream.

While Kathuria admitted she has a tough job to make SQL the most preferred brand in the server market, she is not daunted by this task, because she believes she can turn this business around. She outlined some of the initiatives the company has already undertaken in this regard.

To begin with, it is training more partners on its products, offering them certifications, support, generating business leads and providing good margins. Especially the latter.

Currently, Microsoft offers partner margins in the region of 14 to 15 percent, while its peers offer in the range of 23 to
30 percent on top of the discounted price, which is a substantial difference. “We are trying to create an economic differentiator closer to what our competition is offering, so that our partners have a level playing field, when they go to their customers,” Kathuria noted.

Microsoft is also investing in SI readiness to train partners and ISVs on its technology and enable them to port applications on SQL server. “Partners have been historically working on other proprietary platforms and a shift to SQL will mean rewriting the entire code again. They themselves need to have trained anpower in place to do this, which is why we are extending training to their technical teams. And we are also adding more technical people in our own team who can and hold partners for pre- and post-sales support issues,” Kathuria noted. The vendor will also have some proof of concept centers operational shortly in addition to referential case studies that partners can then leverage while pitching Microsoft to their clients.

Talking about building enterprise product credibility, she said that the challenge was to build confidence in CIOs that they would not lose their jobs due to downtime or some infrastructural breakdown if they deploy Microsoft applications. “This is because most CIOs are comfortable working with Oracle or IBM on the database level and are not very keen on experimenting with other applications, even if it is a stable one like SQL server,” Kathuria noted. She added that her company was working hard towards changing this perception, and would soon release case studies highlighting the ease of use after SQL’s deployment and also its scalability and security aspects.