Can Gates the salesman sell Win2000?

Banks balk at backing Win2000Can Bill Gates still sell software? That's the critical question Microsoft faces, as its CEO hits the road to stir up corporate demand for Windows 2000.

Microsoft CEO Gates on Thursday spent his 44th birthday in the Big Apple. While there, he was scheduled to call on Chase Manhattan's top IT brass to discuss why Chase isn't committed to deploying Windows 2000 next year, say sources close to the New York bank.

Individual Chase divisions are, in fact, Microsoft shops. But the financial giant is largely committed to rival products Novell Directory Services, Lotus Notes and Unix.

That doesn't sit well with Gates. Microsoft's top ambassador needs banks and other big-name customers to tout Windows 2000 at Comdex/Fall '99 in Las Vegas, two weeks from now. At the show, Gates is slated to highlight customer wins in a bid to build channel enthusiasm for the product, which is scheduled to ship February 17.

Gates & Co. has a knack for lining up customers just before a product ships. In 1995, for instance, Microsoft gave Ford Motor at least 5,000 free Win95 licenses, according to a Ford employee at the time. In return, the auto giant promised to tout Win95 to the press before the operating system's official August 24, 1995, release.

Four years later, the stakes are even higher for Microsoft with Windows 2000. The company can ill-afford a lukewarm reception when the operating system hits the streets early next year. Some portfolio managers already are trimming their stock holdings in Microsoft because of a dip in "future earnings" on Microsoft's balance sheet. Recent sellers include First Capital Group and Commerce Bancshares' Commerce Growth Fund, according to The Wall Street Journal.

Though many financial analysts are still bullish about Microsoft, Windows 2000 is sure to get flak from chief information officers because of cost issues and migration problems.

The situation on servers is especially challenging for Windows 2000. One reason: Many large shops -- including Chase, National Semiconductor, Nissan and Nortel Network -- have embraced Novell's NDS to manage their networks. Ripping out NDS and migrating millions of network objects to Microsoft's unproven Active Directory (Windows 2000's new directory service) isn't a reasonable option for most Novell shops or their resellers.

Until, of course, Gates and Microsoft president Steve Ballmer come knocking. The duo often calls on Microsoft's largest customers to ensure commitments to Windows. Ballmer has paid a number of calls on New York financial institutions in recent months, say channel sources, many times to appease disgruntled CIOs.

Now, it's Gates' turn. When we went to press, 24 hours had passed since his planned meeting at Chase, and it was unclear whether he sold the bank on Win2000. Microsoft would neither confirm nor deny that the meeting occurred. Chase did not return calls for comment.

Regardless, Gates faced a tough sell. Even if he offered Chase the software for free -- a la the 1995 Ford Motor deal -- the bank still has reasons to balk.

For starters, Chase has used NetWare and NDS for more than four years. In mid-1996, Chase IT execs even visited Novell to design and test a WAN. Sources say Chase execs from that project remain firmly committed to Novell's software.Moreover, retired Chase fellow Elaine Bond is a long-time Novell board member. A source close to Novell says Bond and CEO Eric Schmidt would "visit Chase in a matter of hours" if the bank's NDS commitment wavered.

But therein lies the rub. Chase ultimately could embrace Windows 2000 for selected desktops and servers, and continue using NDS as its primary directory. In that scenario, Novell and Microsoft both would be winners, and Gates would score another customer to tout at Comdex. So far, Microsoft has lined up a handful of customers -- including Travelers Insurance and Credit Suisse -- to promote Windows 2000 at the show.

Despite such public commitments, some prized Windows 2000 accounts are privately hedging their bets. At a recent Win2000 customer meeting with Microsoft in Redmond, Wash., discussion of Active Directory replication glitches prompted a handful of customers to scale back their initial Windows 2000 deployments, say sources who attended the meeting.One major customer says the problem is a "showstopper" that will force his company to use Windows 2000 primarily on desktops, with only limited adoption on servers, at least initially.

Meanwhile, Microsoft is moving to address Win2000 scalability concerns. At Comdex, the company will ally itself with Unisys, Cisco Systems, Intel and EMC in a bid to prove that Windows 2000 is just as robust as mainframes and high-end servers from well-heeled competitors. The group will showcase a platform dubbed "data center of the millennium."

Microsoft leaked word of the millennium project last week at Unisys' e-commerce launch in New York. The platform, a Web order-entry system, will be based on Microsoft's forthcoming Windows 2000 Datacenter and Windows 2000 Advanced Server packages. Microsoft and its partners claim the system can handle 200 million hits a day, or 4,000 transactions per second across 32 processors.

To get more customers on board, Microsoft plans to market the heck out of Windows 2000.The effort could achieve epic, if not comical, status. During a marketing event in Las Vegas last week, Microsoft hyped Windows 2000 gear (T-shirts, pens, mugs, clocks and even Windows 2000 "Fun Putty") almost more than it hyped the actual software, say attendees.

Moreover, Microsoft is in the midst of a 30-city tour that aims to teach 15,000 system builders how to install and manage Windows 2000 Professional.

"We expect system builders to have lots of success in small business with Windows 2000," says Scott Porter, director of Microsoft's South Pacific and American OEM Division. "Large enterprises may take a bit longer to deploy it."

That's what keeps Gates up at night, and on the road on his birthday.

Mark Mehler contributed to this story.

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