Microsoft targets server growth

Microsoft’s server division, which has become its most significant source of growth, plans to accelerate its development cycle to avoid a repeat of the sort of delays that have characterised some of the company’s most prominent products, according to the executive who heads the division.

The comments from Bob Muglia, who took over during the broader management changes at Microsoft two months ago, came as the software company on Monday released the latest instalment of its SQL Server software for databases, a product that has taken more than five years to complete. The delay echoes the long wait for Vista, the next version of the Windows PC operating system, which is due out late next year.

Despite that, however, Microsoft’s server and tools division has continued its rapid expansion to become a key part of the group’s business as its more mature desktop software products have slowed. It has contributed more than any other part of the group to Microsoft’s overall growth during the past four years. That contribution has accelerated in recent quarters, with the division accounting for 40 per cent of growth in its last fiscal year, to the end of June, and 49 per cent in the most recent quarter.

With its revenues expected to exceed $10bn this year, the server division has become Microsoft’s first successful venture beyond its stronghold on the desktop – though that success has attracted the attention of antitrust regulators over concerns that the company used its PC dominance unfairly to boost its standing in servers.

The delay to SQL Server could weaken Microsoft’s efforts to persuade more corporate customers to buy subscription agreements to its software, a shift that is intended to make its revenues more consistent and predictable. Customers that bought three-year subscription agreements at the time the last version of SQL came out would have received nothing for their money, said Rob Helm, an analyst at Directions on Microsoft.

Mr Muglia said that his aim was to release new versions of all of Microsoft’s server products every two years in future. He blamed the delay in SQL Server
on the need to rewrite the software to comply with Microsoft’s broader “dotnet” architecture, a framework for web-based software that has been under development for the past five years.

Mr Muglia also outlined Microsoft’s plans to fight back against the open-source software product Apache, which dominates the market for web servers used to “host” software applications – a part of the market that is expected to explode  in the coming years. While conceding that Apache was “a darned good product”, Mr Muglia claimed that Microsoft would have a better product once the next version of Windows was completed.