Analysts don't consider Windows Server 2003 a major upgrade, but its launch is strategically important for Microsoft as the software giant seeks to stave off open-source competitors and gain adherents for its Internet-centric plans.
Microsoft is banking on the new software -- for the computers that do networks' heavy lifting, database crunching and traffic management -- to push a host of add-on products that are collectively marketed under a new "Windows Server System" name.
These products, designed to integrate closely with its Office suite, include a new version of SharePoint Portal Server, which encourages collaboration among teams; a new Real-Time Communications Server software to allow people to instantly message others on their team; and a SQL database management server.
Microsoft is also hoping to attract more converts to its highly touted yet often vaguely understood ".NET" initiative, Microsoft's approach to Web services. It's a concept in which computers and devices can automatically communicate with one another over the Internet regardless of language or system.
Server software, though not glitzy, is selling.
For its most recent quarter, Microsoft's Server Platforms group saw a 21 percent increase in revenues over the previous year. Overall, the group, one of only three profitable business units for Microsoft, contributed about 23 percent of the company's revenue for the most recent quarter.
Still, selling an upgrade in the current economy is going to be a challenge, analysts said.
"[IT] departments are reluctant to spend money today because their budgets are under a lot of pressure and scrutiny," said Michael Cherry, an analyst with Kirkland-based Directions on Microsoft.
Some companies running Microsoft's most recent server operating system release -- Windows Server 2000 -- won't see an "earth-shattering" reason to change, said Ted Schadler with Forrester Research.
However, for those running the older, NT 4.0 version, companies will see improvements in the stability and security of the platform, Cherry said. In addition, the new version is better able to handle large-scale applications and database needs, reducing how many computer servers companies may need, he said.
Unlike its dominance in desktop operating systems, Microsoft has plenty of competition in the server market -- particularly from open-source Linux software offered by such companies as Red Hat and IBM.
"The onus is upon Microsoft to give a compelling reason to upgrade," said Vikas Deolaliker, a product manager at Sun Microsystems, another Microsoft competitor. "I think that the key point ... is for the first time perhaps in Microsoft's history, they are coming out with something and there is an alternative, which is quite threatening."
But Microsoft has been pitching a theme that its Windows Server System lineup -- combined together -- will save companies money in the long run.
The software, which was developed for better security, reliability and improved performance, can cut costs for businesses and free up network administrators to focus on more significant work, said Bill Veghte, corporate vice president of the Windows Server Division at Microsoft.
Businesses also won't have to spend the time and money of going to multiple vendors and ensuring those products work together smoothly, making Microsoft's products ultimately cheaper and easier, he said.
"This tough economic climate means [companies] are taking a very hard line and hard look at costs ... it's the operational costs that's the core issue," said Veghte. "That changes the game competitively for Linux."
That argument may gain traction as Microsoft continues to tout the ".NET architecture" that it is building into all its products, Schadler said.
"[It's] a new competitive factor that Microsoft hopes to exploit," he said.
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