Microsoft Makes Its Move

At issue: Whether Microsoft&s Remote Application Integrated Locally (RAIL) project for the Longhorn Server—due in 2007—could offer a more compelling, less expensive alternative to Citrix.

“This is going to impact Citrix eventually in the SMB market,” said Mitch Northcutt, CEO of RapidApp, a Chicago-based Citrix partner. “But as long as Citrix continues to add key pieces of functionality, they should hold their share of the enterprise business.”

At Citrix&s iForum last week, Citrix and Microsoft held a special joint session to highlight the future of their partnership, aimed at quieting concerns of customers and partners.

Rob Bernard, Microsoft&s general manager of developer and platforms evangelism, said Microsoft&s RAIL project will result in a Longhorn feature called remote programs and will not kill Citrix. “It&s a [Microsoft client-side] mechanism for wrapping up MSI packages and [pushing] them to the desktop. It&s for people with a low number of applications,” he said. That means small and midsize businesses, which the Fort Lauderdale, Fla.-based vendor has largely ignored.

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Partners are weighing their options.

One partner claimed the Longhorn Server is a viable threat to Citrix because it will suffice for many SMB customers, at a better price point.

“We&re a small to medium-[size] solution provider, and we&re moving a decent amount of Terminal Services without Citrix because our clients don&t need what Citrix has to offer,” said Pete Busam, COO and vice president of Decisive Business Systems, Pennsauken, N.J., which has done an increasing number of installations of Windows Server 2003 Terminal Services in the SMB market.

“If Terminal Services does it, why am I going to add another Citrix layer if I don&t have to?” Busam said.

For his part, Citrix President and CEO Mark Templeton said he&s not worried about a potential shadow cast by the 800-pound gorilla on his company&s sunny software landscape.

“We&ve always had a partnership with Microsoft that allows us to understand their direction,” Templeton said, pointing to an extended development pact Citrix signed with Microsoft last year that lasts until 2010. “If I want to be a partner of Microsoft, I can&t have angst around Microsoft going after broad horizontal services.”

Still, Microsoft&s plans come amid slowing growth of Citrix Presentation Server sales. Citrix partners are looking for greener pastures and bigger margins.

Over the past year, for instance, several Citrix partners have joined VMware&s partner program and are investing more heavily in that space. Although the vendors& respective technologies are different, the Citrix skill set carries over well to the VMware platform, said Northcutt of RapidApp, one of Citrix&s top consulting firms that is banking heavily on VMware.

“RapidApp will continue to provide consulting services in the Citrix space as long as we continue to have demand,” Northcutt said. “I have, however, shifted focus to providing services around server virtualization and VMware,” he said. “You would not believe how easy it is to get a meeting with senior IT management of an organization if you want to talk VMware. Virtualization has the mind share right now.”

Another longtime Platinum partner severed its relationship with Citrix after forming partnerships with VMware and Provision Networks, a startup whose Citrix-like Provision Management Framework is priced and targeted at the SMB market.

”We always thought Citrix was a little overpriced, and we knew there was a whole market they were ignoring,” said Paul Ghostine, CEO of Emergent OnLine, which has closed several large deals for Provision and has more deals pending. “We make more money to our bottom line than selling Citrix,” he said.

Citrix knows customers and partners are concerned about the impact of Longhorn Server on its business and is working on damage control. At Citrix&s iForum, for example, Citrix unveiled a set of technologies under development, code-named Constellation, that will offer advanced application virtualization features and unique application delivery capabilities to a broad spectrum of client/server, Web and desktop applications on various devices. Nabeel Youakim, vice president of Citrix&s Global Microsoft Relationship, said Constellation is being built to light the sky for Citrix for the rest of the decade—or for the duration of the romance between the two software companies, whichever lasts longer.

“This relationship is solid,” at least for the next five years, Youakim said. “Who knows what the future holds? But even if we don&t [sign a new agreement in 2010] for the next five years, you can be sure of support. Microsoft and Citrix will be there with you.”

Citrix also hopes to assuage partners& fears after the recent departure of Citrix channel chief Ross Brown. At iForum last week, it named Mitchell Parker as its new channel chief. Parker, who has Brown&s endorsement, pledged to stay the channel course.

Even so, one former insider said Parker comes from a consulting services background and will build up Citrix Consulting Services.

As for the Microsoft threat, many loyal partners say Citrix can stay on track by delivering its Constellation technologies for the Longhorn Server and enhancements in Ohio, Citrix&s next upgrade for Windows Server 2003 Release 2.

One such partner is Michael Goldstein, vice president at LAN Associates, a network integration firm in Central Islip, N.Y. The way Goldstein sees it, Citrix partners can still make a lot of money from advanced Presentation services, as well as the newer Citrix Online, Citrix Gateway and NetScaler products.