Exchange Server 2007 and Outlook 2007, released Nov. 2006, mark the first major upgrade of Microsoft’s e-mail platform in nearly four years. Besides enhancing existing capabilities, Microsoft added new regulatory compliance (information retention and privacy), unified messaging, and high availability features. While many Exchange 2007 and Outlook 2007 features will pique the interest of organizations, upgrading to Exchange 2007 is not as simple as upgrading from Exchange 2000 to 2003, and some of the new capabilities impose additional licensing costs-even for customers covered by Software Assurance contracts.

Exchange Server 2007 and Outlook 2007 include significant improvements in five areas that are important to businesses-availability, regulatory compliance, unified messaging, cost of ownership, and mobility. These features have the potential to justify an investment in deploying Exchange 2007 or upgrading from earlier versions.

Availability

Users have come to count on e-mail to be as reliable and available as the telephone. An expanded set of redundancy features helps Exchange 2007 tolerate failures in individual system components without taking down the whole e-mail service for extended periods of time.

Microsoft is keenly interested in building and selling software that can aid collaboration among what it terms “information workers,” especially since many of its leaders realized that enhancing collaboration among its own employees was key to Microsoft’s success. With the imminent launch of Windows SharePoint Services, a free add-on to Windows Server 2003, and Office SharePoint Portal Services 2003, a separately licensed server application, Microsoft hopes to deliver an integrated Web-based collaboration platform that scales from ad hoc sites for small teams to centrally managed corporate intranets and extranets.

Windows SharePoint Services for Team Sites

The foundation of Microsoft’s new collaboration and portal strategy is Windows SharePoint Services (WSS), a document storage and Web site hosting service for Windows Server 2003. Microsoft believes WSS will make group work on documents quicker and less error-prone and will help teams coordinate and organize their work in ways that make sense to them, with little IT support. WSS promises two key functions:

Few major technology vendors rely on partners as heavily as Microsoft does. The company sells few products directly to customers and maintains a relatively small field sales force of its own, relying on partner channels to deliver 96% of its revenue. OEMs that preinstall Windows on the PCs they sell account for about a third of Microsoft’s revenue and a larger percentage of its profits. Software developers create thousands of applications that drive sales of Microsoft platforms, such as Windows and SQL Server. Thousands of systems integrators and consultants recommend, deploy, customize, and manage Microsoft-based solutions for their customers. Training partners have taught, tested, and certified more than a million people at some level of expertise on Microsoft products. Software resellers distribute the company’s products worldwide and advise customers on volume licensing.

While partners often like to have exclusive relationships with vendors to help distinguish themselves from their competitors, it is in Microsoft’s interest to encourage as many companies as possible to promote and sell its products. Such competition can drive down prices for customers, making Microsoft solutions more attractive. However, this strategy has serious drawbacks, notably the likelihood that partners who rely on high-volume sales will drive out companies that provide ongoing services and high-quality advice to customers. A well-designed partner program must thus strike a careful balance between encouraging competition and rewarding distinguished service. It must also provide assurances for end customers that the advice they get from partners is accurate, relevant, and suited to the customer.

Microsoft has fielded a pair of related products for creating and managing team, corporate, and personal portal Web sites. Windows SharePoint Services (WSS) 3.0, the latest release of the company’s platform for team collaboration sites, has better features for organizing and storing content than its predecessor. SharePoint Server 2007, which is built on WSS 3.0 and thus inherits all of that product’s features, is the latest version of Microsoft’s strategic platform for corporate portals (the product was formerly called SharePoint Portal Server). SharePoint Server offers incremental improvements for portals and takes on a variety of new roles, including enterprise content management and business intelligence. These new features could expand SharePoint Server’s installed base and offer new opportunities for partners to integrate and customize the product.

For an overview of the tools, services, and applications provided by WSS 3.0 and SharePoint Server 2007 and the relationship of the two products, see the sidebar “SharePoint Server 2007 Builds on WSS 3.0“.

Microsoft is keenly interested in building and selling software that can aid collaboration among what it terms “information workers,” especially since many of its leaders realized that enhancing collaboration among its own employees was key to Microsoft’s success. With the imminent launch of Windows SharePoint Services, a free add-on to Windows Server 2003, and Office SharePoint Portal Services 2003, a separately licensed server application, Microsoft hopes to deliver an integrated Web-based collaboration platform that scales from ad hoc sites for small teams to centrally managed corporate intranets and extranets.

Windows SharePoint Services for Team Sites

The foundation of Microsoft’s new collaboration and portal strategy is Windows SharePoint Services (WSS), a document storage and Web site hosting service for Windows Server 2003. Microsoft believes WSS will make group work on documents quicker and less error-prone and will help teams coordinate and organize their work in ways that make sense to them, with little IT support. WSS promises two key functions:

Exchange, Microsoft’s e-mail server product, has been available since 1996 and is second only to SQL Server in generating server application revenues for Microsoft. Furthermore, it is now the dominant corporate e-mail server, with roughly 50% market share in terms of mailboxes served. Although the corporate e-mail server market is fairly stable, and it will be difficult for Microsoft to drive its share higher, the company cannot afford to sit on its heels either: Exchange is a strategic product and it is vital to keep current customers upgrading to new versions, both to keep revenue coming in and to ensure that it remains competitive.

Exchange’s primary client program, Outlook, is also an extraordinarily successful product and is in a similar position. Whether because of its popularity with users, its inclusion in the Microsoft Office suite, or the free Outlook licenses that come with Exchange Client Access Licenses (CALs), Outlook is the market-leading e-mail client, used on more than 60% of all PCs. New features in Outlook could help drive Exchange upgrades and Office upgrades as well.

Navigating the complex array of Microsoft licensing policies, procedures, and programs is a financial and legal necessity for any organization using Microsoft software. A company that thoroughly understands Microsoft licensing and how it is changing can stay in compliance without paying for more licenses than it needs, and can budget intelligently for future software purchases. Recent changes, such as per-user licensing, Terminal Server changes, and new support options, make it more critical than ever that Microsoft business customers, salespeople, and service partners understand the company’s volume licensing programs so they can analyze their impact and plan accordingly.

This report offers an overview of Microsoft software licensing for executives who plan and manage IT systems, salespeople and service partners who sell them, and line-of-business managers who approve departmental IT budgets. It pulls together key material on all the major aspects of Microsoft product licensing into one easy-to-digest package, and is suitable for those just getting started as well as those who want to fill gaps in their existing knowledge of licensing.

Few major technology vendors rely on partners as heavily as Microsoft does. The company sells few products directly to customers and maintains a relatively small field sales force of its own-according to the company, its partner channels deliver 96% of its revenue. Even among customers to whom it sells directly-typically large enterprises-the company relies heavily on partners to help make the sale and to provide after-sale services. To ensure that these relationships are fruitful for both partners and Microsoft, the company has extensive programs in place to identify, court, enroll, and manage hundreds of thousands of other companies with which it works. These partner companies span the entire gamut of IT markets, segments, and business models, from global consulting companies with tens of thousands of employees that engage in multibillion-dollar IT deployments to small software companies run out of basements.

OEMs that preinstall Windows on the PCs they sell account for about a third of Microsoft’s revenue and a larger percentage of its profits. Independent software developers create thousands of applications that drive sales of Microsoft platforms, such as Windows and SQL Server. Thousands of systems integrators and consultants recommend, deploy, customize, and manage Microsoft-based solutions for their customers. Training partners have taught, tested, and certified more than a million people at some level of expertise on Microsoft products. Software resellers distribute the company’s products worldwide and advise customers on volume licensing.

To establish the Windows PC as a home entertainment device, Microsoft is building technologies into Windows that improve the PC’s ability to work with digital audio and video (digital media). This effort continues with Windows Vista, which will support new types of content, particularly high-definition video. The company and its partners are also creating a wide variety of entertainment products and services, from portable audio players to online music stores, that support the PC in this role.

The main goal of this strategy is to increase sales of Windows. Just as demand for Web access and e-mail created a huge spike in consumer PC demand in the mid-1990s, Microsoft hopes that new entertainment scenarios will spur consumer PC sales, particularly because working with digital media requires significant processing power, memory, storage, and other hardware (graphics cards, sound cards, speakers, microphones, and so on) that will require most users to buy a new PC. Microsoft also expects to earn royalties by licensing and selling its digital media technologies to device manufacturers and content distributors.

Launched in Nov. 2005 after five years in development, SQL Server 2005 includes a long list of new features and enhancements that strengthen the product as both a corporate database management system and a platform for building database applications.

Improvements to SQL Server as a database management system fall into three primary categories:

• Manageability enhancements that will increase the productivity of database administrators and boost its ease of use, which is one of SQL Server’s main advantages over competitors such as IBM and Oracle in the database market for small and midsize companies
• New server-side database programming features that could increase developer productivity, improve the stability of database applications, and compete with Java, which IBM and Oracle support for server-side programming.
• New features in SQL Server’s high-end edition will help customers improve the scalability, performance, and availability of mission-critical databases and the applications

Application development is quickly moving away from “roll your own” infrastructure technologies toward packaged application servers that encapsulate current best practices in application development. The upcoming release of Windows Server 2003 marks Microsoft’s formal entry into the application server market, which is currently occupied by two major competitors: BEA WebLogic and IBM WebSphere Application Server. Although, unlike competing products, Microsoft’s Windows Server 2003 isn’t explicitly packaged and labeled as an “application server,” Windows Server 2003 does provide a complete set of core application server functions built in, at no additional cost. Corporate IT planners looking to accelerate application development should include Windows Server 2003 on their evaluation list, especially considering the strength of Microsoft’s Visual Studio .NET development tools.

Application servers are software platforms that simplify the development, deployment, and maintenance of large-scale multiuser applications, such as corporate payroll or benefits systems or high-volume e-commerce Web sites. The application server technologies included in Windows Server 2003 are not new; they build on COM-based technologies already present in Windows NT 4.0 and Windows 2000, and on the .NET development platform released in early 2002. What is new is the fact that these features are now included in every copy of Microsoft’s server operating system (OS) and that the company is marketing and positioning Windows Server 2003 as an application server. In addition, Windows Server 2003 includes support for Web services-an emerging technology for integrating applications via XML.

The Directions on Microsoft Developer Platform Roadmap summarizes current and planned versions of Microsoft’s most important developer technologies and products. The Roadmap provides a single reference for Microsoft customers and partners who need to answer basic planning questions, such as the following:

• What technologies does Microsoft provide for building the user interface of an application?
• When does support for Visual Studio (VS) 2003 end?
• What are my options for building an Office-based client application?

The information in this report is based on our interpretation of the most credible public sources. Microsoft does not endorse this report, and its product plans are subject to change at any time.

Planning for Product Retirements

The life-cycle information provided for past product versions can help organizations prepare for product retirements. Microsoft divides a product’s life cycle into phases, the most important of which are Mainstream, Extended, and Online Self-Help. (For more details on the life cycle, see the chart “Product Life-Cycle Phases and Options“.)

The Directions on Microsoft Developer Platform Roadmap summarizes current and planned versions of Microsoft’s most important developer technologies and products. The Roadmap provides a single reference for Microsoft customers and partners who need to answer basic planning questions, such as the following:

• What technologies does Microsoft provide for building the user interface of an application?
• When does support for Visual Studio 2003 end?
• What are my options for building an Office-based client application?

The information in this report is based on our interpretation of the most credible public sources. Microsoft does not endorse this report, and its product plans are subject to change at any time.

Planning for Product Retirements

The life cycle information provided for past product versions should help organizations prepare for product retirements. Microsoft divides a product’s life cycle into phases, the most important of which are Mainstream, Extended, and Online Self-Help. (For more details on the life cycle, see the chart “Product Life-Cycle Phases and Options“.)

More than five years in the making, SQL Server 2005 includes major enhancements to its business intelligence (BI) platform. BI is a catch-all term for the process of extracting raw business data from operational data stores (such as sales orders in an enterprise resource planning system) and combining, correlating, and summarizing those data for analysis of business trends and conditions, and to make business-related decisions. Microsoft’s BI platform is a collection of development tools, programming interfaces, run-time services, and management utilities for building BI applications. A more flexible, better performing platform and a new integrated development environment based on Visual Studio 2005, coupled with new data integration, analysis, and reporting features, will help developers create sophisticated BI applications with less custom or third-party code compared with past versions. This set of improvements could drive upgrades to SQL Server 2005 and help Microsoft draw customers with complex, enterprise-class data integration, analysis, and reporting needs away from competitors such as Business Objects, Informatica, and Oracle.

To establish the Windows PC as the hub of home entertainment, Microsoft is building technologies into Windows that improve the PC’s ability to work with digital audio and video (digital media). The company and its partners are also creating a wide variety of entertainment products and services, from portable audio players to online music stores, that support the PC in this role.

The main goal of this strategy is to increase sales of Windows. Just as demand for Web access and e-mail created a huge spike in consumer PC demand in the mid-1990s, Microsoft hopes that new entertainment scenarios will spur consumer PC sales, particularly because working with audio and video requires significant processing power, memory, storage, and other hardware (graphics cards, soundcards, speakers, microphones, and so on) that will require most users to buy a new PC. Microsoft also expects to earn royalties by licensing and selling its digital media technologies to partners, particularly device manufacturers and content distributors.

The digital era presents a problem for organizations whose business depends on controlling access to content: once in digital form, content can be copied an infinite number of times with no loss of fidelity and redistributed at lightning speed over computer networks. The recording industry blames digital piracy for several consecutive years of declining revenue. Movie studios remain reluctant to release content on the Internet for fear of a similar outcome. Corporations see employee salaries sent around the company via e-mail or top-secret product plans posted on Web sites.

Rights management, sometimes called digital rights management (DRM), addresses this problem. Rights management technology allows the owner of digital data to define what users may and may not do with that data-that is, their “rights” to that data-and enforces those rights as the data travels among computers and other devices. So far, rights management software has primarily been used as a way for content producers, such as record companies or movie studios, to prevent their content from being used without payment and to support new business models, such as renting music via online services. However, it’s increasingly being used to protect sensitive corporate data, such as documents and e-mail messages, as well.

Visual Studio (VS) 2005 is the most significant VS release since the introduction of Visual Studio .NET in 2002. VS is Microsoft’s flagship developer product and provides tools to design, develop, and debug applications for both desktop and server versions of Windows, as well as for devices running Microsoft’s Windows Mobile software.

VS 2005 addresses longstanding weaknesses that have caused some customers to delay moving to .NET and also brings a raft of new features designed to help teams of developers, testers, and project managers work together. Partners benefit from new team features that provide a better development platform, although other partners will find that Microsoft is now also a competitor. VS 2005’s integration with SQL Server 2005, a critical product for Microsoft’s Server and Tools division, as well as the possibility of increased tools revenue from the higher-priced team editions offer clear benefits for Microsoft.

Specifically, VS 2005 brings improvements in four major areas: developer productivity, Web development, database programming, and software project management.

Operations Manager (OM) 2007 moves beyond monitoring Windows servers to client PCs and non-Windows devices and delivers other marked technical improvements to Microsoft’s computer monitoring product. OM 2007 also takes an important step in Microsoft’s long-term initiative to support highly automated (“dynamic”) IT. In particular, OM 2007 employs computer system models, a technique that Microsoft believes will ultimately enable more automated and reliable systems management. However, Microsoft’s march toward “dynamic IT” will be long, and success is not guaranteed: the company has major product development ahead, and an uphill battle to enlist customer and partner support for model-based systems management.

Beyond Windows Servers for Monitoring

OM is Microsoft’s product for automated monitoring of IT systems, designed to detect problems early and capture data required to resolve them. OM relies on a human operator for problem resolution in most cases, but helps by delivering timely alerts of possible problems, providing reports and documentation for problem diagnosis and resolution, and storing and running scripts to resolve recurring problems. The goal is to avoid downtime by enabling an early response-possibly before users have even noticed a problem-and making it more likely that the response is the correct one and does not create further problems.

Over the last two years, Microsoft has substantially expanded its product lines for business intelligence (BI), the process of extracting raw data from operational business applications and databases and analyzing the data to help organizations and workers make business decisions. Ideally, BI solutions allow workers to make better decisions based on hard data from day-to-day business activities. Typical BI users could include the following:

• A regional manager in a retail sporting goods chain who examines seasonal or demographic sales patterns from customer relationship management and enterprise resource planning (ERP) systems to plan product promotions or campaigns
• Security personnel at a financial institution who search transaction records for specific credit-card use patterns that are indicative of fraud
• Analysts at a large parts manufacturer/distributor who use historical data from an ERP system and predictive models to forecast product demand and manage inventory.

Historically, Microsoft’s strategy has centered on the SQL Server BI platform, bundled tools and services for consolidating historical data from business applications and summarizing and distributing the data. (Consolidated data are frequently stored in specialized data warehouses, historical databases dedicated to BI.) While bundled with the SQL Server product, Microsoft’s BI platform can work with data warehouses or application data managed with other technologies, including IBM DB2 databases, Oracle databases, flat files, and others.

Microsoft’s systems management software has become increasingly important to its customers and to the company. Broadly defined, systems management software helps automate some of the routine work of computer systems administrators, yielding higher availability of IT services with less staff. Recent events suggest that systems management has gained a higher priority at Microsoft and that the company has begun to execute on a plan that, if successful, could markedly simplify the life of Windows administrators.

Management Software Includes OS, Products

Microsoft’s systems management software today helps administrators configure computers; deploy, install, and patch applications; monitor the health of systems in operation; and track hardware and software. The goal is to automate these kinds of tasks so they can be done more cheaply, more reliably, and on larger numbers of systems and sites.

Microsoft distributes systems management software in two ways:

Windows OS features such as Automated Deployment Services, Group Policy, and the Windows System Resource Manager help administrators deploy and configure computers. Windows also delivers base infrastructure, such as the Windows Management Instrumentation monitoring and configuration interface, that is used by OS features and systems management products.

BizTalk Server 2004, the successor to BizTalk Server 2002, became generally available in Apr. 2004 and offers significant changes to the product’s underlying architecture, improved support for Web services, a new integrated development environment based on Visual Studio .NET (VS.NET), and a host of new tools and capabilities for business and IT workers. These changes could drive BizTalk Server adoption and in turn further Microsoft’s push to establish the .NET platform as the preferred tool for Web services development. Customers will also benefit from the improved product: relative to previous versions, BizTalk 2004 will yield faster BizTalk applications, easier solutions development, and new integration scenarios, such as human-oriented workflow applications. In addition, opportunities abound for partners. For example, broad adoption of the product will fuel demand for interfaces that allow BizTalk to communicate with external applications, and many businesses will require the assistance of integrators and ISVs to build and deploy complex BizTalk Server solutions.