Army Extends Windows NT 4.0 Life Support; VARs Pay The Price

That's good news for the Army, which obviously has other non-IT priorities now. But it's not great news for a group of solution providers that were 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 that had beefed up their staffs for this work are now laying off employees, partner sources said.

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

That extension means the nine-year-old operating system is supported until June 30. The federal fiscal year starts Oct. 1, so the thinking is now that the Army will hold fire on upgrades at least until then.

Microsoft discontinued regular maintenance on NT 4.0 as of the end of 2004, but in early December said it would offer fee-based support on a case-by-case basis to cover companies until the end of 2006.

"It's well and good that the Army will keep [NT 4.0] up and running another six months, but we're in the process of laying people off this morning," the solution provider said. "We have huge Active Directory and Exchange migration plans in place because of the NT 4.0 end-of-life plans," he said.

A Microsoft spokesman referred questions on the extension to the Army, although he said that such deals are done at the customer's request. He also maintained that the $35 million figure mentioned sounded "off."

At press time, the Army had not returned calls for comment.

Another of Microsoft's federal partners said the extension is hurting business now but took comfort that the work was deferred, not nixed altogether.

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

Stalick said this hurry-up-and-wait is nothing new in government technology projects. In May 2003, Internosis was involved in migrating between 15,000 and 17,000 Microsoft desktops for the military, but half the project was cut as the Army diverted funding for "bombs and bullets."

As for migration plans, "they have money committed," Stalick said. "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."

Other solution providers, who requested anonymity, were not so forgiving. One Microsoft partner that does military IT work said the Redmond, Wash.-based software giant should mind the repercussions of its actions with customers.

"Whether intentional or not, [Microsoft] shouldn't take these 11th-hour payments that screw partners up," this partner said.

It is clear that the Army, as well as many other large accounts, is re-evaluating large software purchases and looking to trim costs wherever possible, he said. "If that means using old stuff much longer, so be it."

Microsoft executives have acknowledged that one of the company's biggest challenges going forward is moving existing customers from aging Microsoft products to new versions. Toward that end, the Office group, for example, is building more server products in an attempt to show off the value of Office client capabilities. But the perception that the latest Enterprise Agreement (EA) terms and conditions amounted to price hikes, along with a tendency toward inertia, has hurt the company.

Even Microsoft partisans acknowledge that, on the desktop, there is little in the way of a new killer features to drive users to Office 2003 from Office XP or Office 2000, for example.

And even some customers that have re-upped their EAs have yet to deploy software they've already bought. Microsoft and its partners know this "shelfware" represents a potentially big liability going forward. It's hard to persuade customers to sign on for yet another volume license agreement when they haven't used what they paid for last cycle, they say.

Large customers are using every weapon at their disposal, including threats of moving to Linux or OpenOffice, to negotiate more favorable licensing terms from Microsoft.

And some resellers say more customers are signing "transactional" rather than volume license deals, to buy only the software they will use rather than inking an EA that might include discounted software that never gets deployed.