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SAN FRANCISCO -- Microsoft Chief Executive Officer Steve Ballmer officially launched the company's long-awaited and thrice-delayed Windows Server 2003 operating system Thursday, claiming it is the right product for businesses that want to "do more with less" in these tough economic times.

Customers are in "a real tight jam" because of the sagging economy, Ballmer said. "But customers still want to do more. The challenge is not just cost reduction. The challenge is for people to be able to do more with less."

Windows Server 2003, a major new release of Microsoft's operating system software for servers, launched at many events around the world Thursday that attracted over 200,000 people, according to Microsoft.

Windows Server 2003 is available worldwide in five versions: Datacenter Edition, Enterprise Edition, Standard Edition, Web Edition, and Windows Small Business Server 2003.

Pricing is based on a server and client access license (CAL) model similar to that of Windows 2000. Microsoft offers two types of CAL, so a customer organization could count either end users or devices. A server license for the Enterprise Edition costs $2288, with the user CAL and device CAL each priced at $29, the company said. The Standard Edition of the product is priced at $704. An External Connector license (the new name for the Internet Connector license) costs $1960.

Product Called Solid

"This is one of the most significant pieces of work we have ever done and certainly the most significant piece of work we have done in terms of IT professionals and the data center," Ballmer said, at the Bill Graham Civic Auditorium here.

In his well-known energetic presentation style, Ballmer summed up enhancements to reliability, manageability, scalability, information sharing, and collaboration in the new server software. Addressing a key area and a longtime Microsoft weakness, Ballmer said "security is tattooed on our brains," referring to Microsoft's software programmers.

Windows Server 2003 has undergone code reviews, includes a new software update service, and comes with a newly built Internet Information Server Web server, among other security enhancements. IIS is one of the most vulnerable parts of previous Windows server versions.

"I can't say there will be no issues; there will be fewer issues, and we have built better technologies to help you respond to the issues that do in fact come about," Ballmer said.

Also, Ballmer made a pitch to Windows NT 4.0 users to upgrade. Windows Server 2003 reduces downtime by a factor of eight over Windows NT 4.0 and offers twice the performance, among other advantages, he said. More than a third of Microsoft's server installed base still consists of systems running NT 4.0, despite the vendor's efforts to get users to upgrade, research firm IDC said recently.

Formidable Entry

Windows Server 2003 is "an order of magnitude" more reliable than Windows Server 2002, according to analysis firm the Yankee Group, which calls 2003 a "banner year for Microsoft and its corporate customers" with a raft of major new product introductions. Later this year the company plans to introduce Office 2003.

However, with corporate buyers curtailing spending, Microsoft has to make the case that Windows Server 2003 is worth expending funds on, said Rob Helm, research director at Directions on Microsoft, an independent research firm focused on Microsoft strategy and technology. Reliability and security are important parts of that case, he said.

"Windows Server 2003 has gone through a more rigorous development process. And just the fact that some features are turned off out of the box make it a harder product to attack," Helm said.

Combined with new Intel processors and systems built by vendors such as Unisys, Windows Server 2003 presents tough competition for Unix server vendor Sun Microsystems, according to Helm.

"It gives Microsoft a very big stick to beat Sun with," Helm said. "Microsoft and its hardware partners can go after very large-scale server deployments. Windows Server 2003 alone does not change the competitive landscape. Along with trends in the hardware market, it could have some serious impact on competing server vendors."

Evolution Predicted

Even with all the enhancements, adoption of Windows Server 2003 won't be dramatic, said Chris Le Tocq, an analyst with Guernsey Research.

"This is replacing Windows 2000, which has been shipping in various iterations for about four years. One of the things with adoption, especially of a server operating system, is that corporations don't change quickly. For a lot of people Windows 2000 is now a known quantity," he said.

Le Tocq expects slow but steady adoption, with most users signing on because they buy new hardware. In the short term, between 6 percent and 7 percent of newly sold servers will likely come with the new Windows operating system, Le Tocq forecasts.

Le Tocq's expectation is guarded. The Yankee Group in a recent survey of 1000 current Windows server users found that 34 percent of current users plan to switch, and of those users, 37 percent hope to do so in the coming 12 months.

Martyns Kanu, a systems engineer and network specialist at the San Mateo County Community College School District who attended the San Francisco launch event, said he is looking at upgrading the 15 systems running Windows 2000 Server at his organization's three campuses.

"But we are not upgrading yet. I think it will take at least six months -- we do not want to rush it," Kanu said.

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