Insight CEO Talks Tepid Server 2003 Upgrade Demand, Microsoft's Education Push and More

Why are businesses not getting rid of Server 2003?

Demand has been muted for Insight Enterprises' products and services around migrating away from Windows Server 2003, even though Microsoft will stop supporting the product July 14.

Earnings for the Tempe, Ariz.-based company, No. 14 on the CRN Solution Provider 500, fell 2 percent to $11.5 million due to the limited increase in server sales and less interest in devices, while increased demand for software and services sent sales up 6 percent to $1.22 billion.

Insight CEO Ken Lamneck spoke with CRN about the lagging refresh activity for Server 2003, Microsoft's challenge to Google in the education device space and the company's continued hiring spree around technical salespeople.

Why has the Server 2003 refresh cycle been slower than you anticipated?

It's hard for us to get real solid, good data on that, but we've done some analysis that indicates how many millions of servers have been impacted and estimating where that would be in the journey. As we've talked amongst some of our vendor partners, as well as amongst some of the other consulting companies we do business with, we're all not seeing the complete uptick that we expected. People are going to have to do it, but it's probably going to extend itself beyond July.

What are the risks of not migrating?

It's not like their environment gets shut down or anything like that, but it does expose them. If they have to get security patches and those types of things, it's going to be pretty costly for them if they haven't done the upgrade. We expected to see a stronger sense of demand from both our services side as well as on the product side, but it's occurring, there's no question it's occurring, because we did have good growth in servers for the quarter but we still think that there's more to be had there.

Do businesses not feel it's worth upgrading at this point?

For some people, it's a little bit harder because your applications have to be rewritten because they're going from a 32-bit operating system to a 64-bit operating system, so not all the applications are immediately portable. It's more than just the cost of the server. It's the mediation of the app, and then you'll have a look at your storage environment a little bit. So it may be a little bit bigger than some think.

What will prompt companies to get off Server 2003?

There will be concerns if a company does have a security breach because of this, they really open themselves up for a lot of scrutiny … because it's very well-publicized. When that does occur, that really will be a catalyst I think for many companies to say 'We've got to make sure we're not the next one that's a problem around here.' … It's probably going to extend itself, which, by the way, isn't necessarily a bad thing, because if it all happened at once, there wouldn't be a lot of the services talent available to do it all in such a compressed time frame.

Have you seen much interest in getting SQL Servers upgraded?

No, we haven't seen that as much. That's April 2016 when that expires. What's interesting there is the data that we understand is that there's an 85 percent correlation between people on Windows Server 2003 and SQL 2005, so there's an opportunity to get sort of both done versus doing them in a serial fashion.

What efforts have you taken to drive the refresh cycle?

A lot of it's been on education, so we've done a lot of PR, we've done a lot of educational video snippets as well with our technical team, educating clients to what this means and how they should look at that. We do have a services offering that helps them through that, a lot of digital marketing activities and a lot of sales activities. We've been pretty out in front of Server 2003; we haven't really geared up that much for the SQL because if we can't get clients to address this issue, talking about something in 2016 seems like a lifetime away for them.

What are the key areas and geographies for which you've hired 60 people?

It's really around salespeople, technical salespeople and people that are basically SAEs -- services account executives, as well. So it's really around the sales front-end part of the engine, and the technical skills also to really help clients … It [the geographies] are pretty well spread, but it's mostly U.S.-based.

Has Insight taken any steps around the upcoming liability shift for payment cards?

Obviously, Europe is well ahead of us, as is Asia-Pacific. We don't see that nearly as much. It's certainly coming because we have a pretty good-sized retail business, where we do a lot of services and support around that, but I haven't seen it really get to the point where I can quantify it for you. There's no question that it is coming. I was just in Montreal last week, and every time I used my credit card, I had to use my pin. But I never have to use my pin here in the U.S. yet. So there's a lot of work being done.

What are some of the barriers to retailers adopting EMV technology?

As you know, it's pretty expensive. I've heard numbers that it could be another 60 cents per card … so there is some expense around that. And, of course, the whole infrastructure piece is going to have to be upgraded. Nothing right now that I can quantify from a business point of view. But, again, we see it only because we have a pretty significant retail practice that supports many of these retailers as they upgrade to omnichannel, and that becomes certainly a topic.

Where, in particular, within services are you seeing growth?

We have practices around managed services, so things that we do with our network operations center that we have, so that's a key area of focus for us. We do consulting services as well for clients -- so, again, this would be coming in to look at Windows Server 2003 and how should they address that problem, and how do we walk them through the assessment and implementation of that. So that's an example of our consulting services practice. There's a lot around Microsoft and their whole professional services aspect. We've got a lot of engineering folks that help clients there.

What about technical services?

And then our technical services, which is around ... the basic things from doing refreshes on laptops to imaging to asset tagging all the way up to much higher-level forms of integration that we could do in our labs ... We do a lot of these multisite deployments on a nationwide level where we go in and help clients to upgrade their environment on a national basis because they don't have staffs that can do an upgrade for all of their grocery stores, or retail outlets. All of those are starting to gain more and more traction for us, so that's where a lot of the growth has come.

What appears to be hot in education this year?

The Chromebooks certainly are doing well, and Microsoft really has a very, very solid offering with their whole focus around OneNote and their focus on the Surface 3 product. There's definitely a lot of interest there that we hadn't seen in prior years. They've done a nice job at the device level to really come up with some competitive offerings. Education continues to be a strong market across the board, so it's an area we're definitely putting a lot of attention and resources into.

What are you investing in for education?

A lot of people, a lot of technical talent, and again, services talent. Making sure we can support the client's environments, because again, it's not just about the devices. It's about their network, it's about their data centers that they have, and how do we help them in looking at cloud solutions and things like Azure from Microsoft. So we're helping them position with those solutions as well.