Update: Partners Pay The Price For Army's Win NT Support Extension

That's the good news for the Army, which obviously has other, non-IT, priorities right now. But it's not so good for a group of solution providers slated to help migrate the Army's directories, server operating system and mail servers to next-generation Microsoft products. In fact, some of the solution providers who had staffed up for this work are now laying off employees, partner sources said.

"We got the news late [Tuesday] that the Army dumped $35 million on a service extension fee to keep Windows NT 4 supported for another six months," said one Washington D.C., area VAR.

A Microsoft spokesman referred questions on the extension to the Army but said such deals are typically cut upon customer request. An Army spokeswoman confirmed the extension on NT 4.0 lasts till the end of June, but said the fee was $100,000 and that Active Directory migrations are continuing as before.

That extension means the nine-year-old operating system is supported until June 30. Because the federal fiscal year starts October 1, the current thinking now holds that the Army will put off upgrades until at least that long. Microsoft discontinued regular maintenance on NT 4.0 as of the end of 2004.

"It's well and good that the Army will keep it up and running another six months but we're in the process of laying people off this morning," said the solution provider. "We have huge Active Directory and Exchange migration plans in place because of the NT 4 end-of-life plans," he said.

Another of Microsoft's federal partners said work is being deferred, not nixed altogether.

"It's definitely having an impact. It is already impacting some projects we expected to be starting, frankly, right now," said Robert Stalick, CEO of Internosis, Greenbelt, Md. He said he thought government accounts in general were delaying projects to better plan technology architectures.

Stalick said this hurry-up-and-wait dance is nothing new in government IT projects. In May 2003, Internosis was involved in migrating between 15,000 to 17,000 Microsoft desktops for the military. Half of that project was cut as the Army diverted funding for weaponry.

"They have money committed, the project schedules have changed and are moving out a little bit so work that might have been started next week or the following week won't start for a month or two," Stalick said.

Others Microsoft partners, who would not speak on the record, were not so forgiving. One partner handling military IT work said Microsoft should mind the repercussions of its actions. "Whether intentional or not, they shouldn't take these 11th hour payments that screw partners up," he said. It is clear, he added, that the Army, and other large accounts are reevaluating large software buys and looking to trim costs wherever possible. "If that means using old stuff much longer, so be it," he said.

Many Microsoft executives would agree that one of the company's biggest challenges is getting customers to move from old versions of its products -- whether it's Office, or Exchange Server or Windows NT-- to newer releases. Windows Server 2003 has been widely available since April of that year, Windows Server 2000 is five years old -- and yet many customers remain ensconced on Windows NT 4.0.

That may even be true in accounts that spent big on large Enterprise Agreement (EA) licenses but have yet to deploy the latest and greatest software. Those undeployed seats and servers represent a potentially big future liability, as companies continue to scrutinize the return on their IT investments.

PAULA ROONEY contributed to this story.

This story was updated Friday with Army and Army comment.