Microsoft Partners: New Windows Server Aimed At Linux

Ballmer suggested that Windows Server SKU is aimed at capitalizing on the demand for basic computing functionality that has been exposed in the consumer market by the netbook craze. "So we have something that's akin to netbook at the server level, and we'll be introducing our Foundation Edition over the next month or two," Ballmer told investors.

Ballmer noted that Microsoft has a small share of the hosting market, which suggests that Foundation Server will be an attempt to grab server market share away from Linux, according to Andrew Brust, chief of new technology at New York-based IT consultancy twentysix New York.

"It's a really interesting announcement," Brust said. "And the netbook analogy is striking, because that is yet another scenario where (a), Linux has made serious inroads and (b), Microsoft sells a version of Windows for less than the usual price."

Matt Scherocman, vice president of consulting services for Cincinnati-based PCMS IT Advisor Group, says Foundation Server is a reflection of the inroads Linux has made as well as the growing usage of virtualization.

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With virtualization, the ease of provisioning new servers means that companies are adding virtual Windows Servers to their environments, which frequently have limited work roles, Scherocman said. "A lower cost option for these limited work roles would benefit our clients and also help Microsoft protect workloads that could be moved to Linux-like Web servers and hosting," he said.

But Foundation Server also poses the risk of driving server prices down to an irreversible level. Brust believes Foundation Server is a reaction to the recession and says it could be difficult for Microsoft to reverse the downward pricing trend when an economic turnaround comes.

"The real question is whether, in going after Linux at cut-rate prices, Microsoft is gaining market share and revenue it had forfeited before, or if it is allowing Windows to become commoditized and thus revenue to be eroded," Brust said.