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Microsoft Linux Chief Urges Channel To Resist Short-Term High Of Linux Margins

Microsoft's chief Linux strategist, Martin Taylor, advised the company's partners not to be seduced by the higher-margin service opportunities offered by commercial Linux platforms because they won't last.

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Faced with the impending launch by Red Hat and SuSE of major upgrades to their distributions in October--and their increasingly avid efforts to entice channel partners--Taylor came out swinging during a meeting with CRN and sister publication VARBusiness at Microsoft headquarters in Redmond, Wash.

"It'll give you a short-term high, and part of the allure of the Linux world to partners is that short-term high, but we have better long-term economics," said Taylor, Microsoft's general manager of platform strategy. "Solution providers think they can cobble the thing together, but the economics of Windows will play out over time."

Taylor insisted that a Windows server implementation is up to 28 percent less expensive than IBM's Linux J2EE solution. And Microsoft has seen few instances in which a Windows server was "turned off" and a "Linux server turned on," he said.

Still, Microsoft has no plans to sit still in the face of the Linux threat. Taylor acknowledged that Microsoft slashed the price of its Windows Small Business Server 2003 in part to fend off competitive threats in the SMB space, and said the company eventually will have to cut the price of its software across the board. Microsoft has already lowered the price of Windows clients to $2.50 per user in some improverished nations, Taylor said.

Microsoft plans to compete against Red Hat and SuSE on total cost of ownership and "facts," not on the "rhetoric and emotion" that has characterized Linux's rise in the software industry, he said.

The Microsoft Linux chief insisted that Red Hat's plans to service and support a full open-source infrastructure that includes the platform, middleware and management service is more of a threat to IBM than to Microsoft.

Meanwhile, Red Hat, the leading commercial Linux software house, recently announced plans to distribute its own open-source application server, J2EE, messaging and security layers for its Enterprise Linux 3 platform, which is being launched this month.

"It's a natural evolution of the strategy, and it'll draw some discussions in the IBM world," said Taylor, predicting a schism between IBM and Red Hat. "IBM has fully embraced Red Hat, but now Red Hat is putting JBoss into the Linux [distribution]. That will become a tension point. How fully embracing can IBM be when this [Red Hat stack] encroaches on their software?" he said.

The movement of commercial Linux into the middleware stack is not a death knell for the lucrative software industry, Taylor said. "I'm in disagreement with anyone who says that there won't be a commercial software market," he added.

As for the increasing support for Linux being offered by Microsoft's OEM partners, which once supported Windows only, Taylor conceded that there isn't too much Microsoft can do.

"Increasingly, we stand alone," said Taylor, noting, however, that Dell has not gone so far as to offer customers indemnification for running Red Hat, as Hewlett-Packard did recently. "Once 3.3 million Unix servers go away, it's tough to ask them to be 100 percent Microsoft," Taylor said. "But they don't want outright commoditization either."

Just a week before Microsoft's Momentum partner conference kicks off, Taylor urged solution providers to look past the price of Linux. He said they may see a bigger bang for the buck on open-source-based commercial platforms in the near term, but the total-cost-of-ownership benefits of Windows and integration opportunities available to partners deliver big service profit opportunities.

At Momentum next week, Microsoft is expected to launch new tools that partners can use to show the benefits of Windows infrastructure over Linux, including a product life-cycle development tool that states when servers will ship and the dependencies between various new releases, according to sources. In addition, Microsoft plans to provide some online demonstrations that illustrate how the products integrate, sources said.

Microsoft is intent on showing partners that the platform "is a differentiated asset to a company, not a commoditized utility," Taylor said. "The licensing and margins on software is the smaller piece of the pie."

Taylor, a longtime Microsoft veteran now three months into his new role, acknowledged that his job is a difficult one but is confident Microsoft's value will prevail. "In many ways, I feel like a politician," he said. "Everybody wants to tell me how to do my job, but very few people want to run for this office."

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