May 21, 2003 -- (WEB HOST INDUSTRY REVIEW) -- Many Web hosting firms are welcoming Microsoft's new Windows Server 2003 and the lower price point it brings, though some are skeptical that it will match its biggest competitor in performance.
Microsoft's low priced, single-purpose Web Edition Windows Server is designed for mid-sized companies that do not need powerful management features. With plans to charge $399 for the new Web Edition Windows servers, Microsoft will be almost on par with the new version of Red Hat Linux, which typically carries a price tag of $349.
Despite Microsoft's newly priced package, which hit the market last month, many are playing down the notion that a full pricing war is underway.
"Typically, the way Microsoft goes about the market is to ignore the price war," said Melanie Posey, a hosting analyst at IDC (idc.com). "If Microsoft were to get into a pricing war, they would lose. Microsoft is making a pretty big push into the small- to medium-sized market, and this is part of their strategy." Posey called it the company's "Trojan horse strategy."
Charles LaPadula, CIO of New Jersey-based host uplinkearth (uplinkearth.com), says Microsoft has more in mind than just pricing when it comes to the new product launch.
"Microsoft has realized that the battle for the Web server market has long been severely skewed towards the various Unix-based operating systems," he said. "The various forms of Linux and BSD have not only been less expensive per server, and in some cases free, but they have enjoyed a reputation of being far more stable and reliable."
That reputation has some hosts believing that while the price may be right, the new Microsoft product will be hard-pressed to outperform most flavors of Unix-based operating systems.
"Microsoft focuses on building pretty good general purpose toolsets that can be used for a variety of purposes, but they do not focus on efficiency and minimizing system requirements," said Frank Rietta, owner of Rietta Solutions (atlantawebhost.com), a Georgia-based hosting company. "Linux has a very small memory and CPU footprint, which allows me to get more performance out of my equipment."
But while some Linux-based hosts are criticizing Microsoft's potential performance, Windows-based hosts remain true to the software giant and are looking forward to incorporating the new product. They are counting on the price cuts to make it easier for them to stay on a Windows platform.
"The biggest cost… for a Web hosting company that has started with Microsoft products is the significant time investment to learn [various Unix] platforms," said Wolf Leonhardt, VP of systems at Calgary-based host Chinook Webs (chinook-computers.com). "This learning cost is quite large."
While welcoming the price cuts, Leonhardt said he expects the change will take time to work its way into the system before it will benefit customers. "I think it will allow us to make some pricing adjustments but the Windows software is only one component in the pricing model. We still have to consider things like hardware and bandwidth costs," he said. "Although customers can be price sensitive, in reality the Web hosting cost is usually the smallest portion of what people spend on getting a Web presence put together. That being the case, I don't see where price changes on the server software will impact shared hosting. It may possibly impact dedicated hosting, but again, most companies that are in the market for that solution are not focused on the price of that component."
uplinkearth is also installing the new product, but LaPadula agrees the price change may not have immediate impact, stating that the cost of managing servers far outweighs the cost of licensing the software. "If the newest iteration of Windows and IIS truly is more stable and effectively reduces the labor required to maintain the servers, that will have a much more substantial effect for us," he said.
And while some industry leaders deny a price war is about to begin, some Linux-based hosts are taking advantage of the new price and jumping on the Microsoft platform, in hopes of attracting new customers.
"Microsoft's aggressive pricing schedule will enable iPowerWeb to provide an affordable Windows hosting solution with the same services we provide for our Linux Hosting customers," said Philip Marcus, chief systems administrator at California-based iPowerWeb (ipowerweb.com). "This allows iPowerWeb to reach out to new customers and cater to the specific needs of the customer."
While iPowerWeb plans to launch the Windows solution in the next eight weeks and uplinkearth has been testing the new version, Microsoft-based platforms are clearly not for everyone. As a result, exactly how many companies ultimately take advantage of the lower price points offered by Microsoft and Red Hat remains to be seen.
