Once considered a niche player, Microsoft's Server & Tools Business is now a robust and growing business, and one of the company's most promising.

By Joshua Isaac

January 25, 2008

Microsoft’s formal launch of its next generation of server and tools software next month will help solidify the Server & Tools Business’s position as a formidable and growing competitor in this crucial market.But it wasn’t always this way.

At the Windows 2000 launch eight years ago, Microsoft demonstrated its commitment to the enterprise business by lining the stage with servers powered by Windows Server 2000. The launch foretold a breakthrough for STB, which would grow into a market leadership position.

The launch in San Francisco in February 2000 conveyed Microsoft’s willingness to bet big on the server business despite doubts voiced by the press and a crowded field of competitors.

How wrong those skeptics were.

An InfoWorld article from the week of the launch captured the prevailing sentiment. One analyst said Microsoft's growth rate was tapering off in the server space. Another commented that with the range of options now available, such as Linux and hosted applications, Microsoft wouldn't be able to rely on the dominance of Windows with hardware manufacturers and ISVs to be successful.

Indeed, with established players in the server marketplace like Oracle and IBM and the open source movement gaining steam, Microsoft faced huge challenges.

“We were literally being laughed at by two different groups,” said Dave Mendlen, director with Developer Marketing. “The Linux guys thought that we would never take their market share because they were free. The established companies like IBM said, ‘You want enterprise? Then don't compromise.’”And the marketplace turned away from Microsoft, too. While business decision makers fretted over going with established companies or using free open-source software, developers preferred Java to Microsoft's .NET offerings. But “Microsoft kept coming,” said Mendlen, who described the Windows Server 2000 launch as a tipping point. “That was when our aspirations to be an enterprise company took off.”

Through the Get the Facts campaign, Microsoft countered the notion of “free software” by focusing on the total cost of doing business. In addition, the benefits of consistent upgrades to Microsoft's server and tools offerings helped the company make significant headway. In just 10 years, STB grew from virtually nothing to an $11.175 billion annual business and approximately one-fifth of Microsoft's revenue. This includes 20 consecutive quarters of double-digit percentage growth led by SQL Server, which now sells more units than Oracle and IBM combined.

“Starting from not much of anything, we quickly became established players,” said Udai Kumar, strategy manager of data and storage with Server Finance. “This shows a different success story for Microsoft than Windows and Office – that we are not a one-trick pony. We can cover the whole breadth of our enterprise customers’ needs.”

If STB were a standalone entity today, it would rank in the top half of the Fortune 500 and would be one of the largest software companies in the world. Yet, even now, its success is not solidified. A recent Microsoft-commissioned worldwide study shows that the threat from free software remains formidable.The next wave in Microsoft’s march into the enterprise software market, intended to solidify STB’s position, will come on February 27 in Los Angeles, with the formal launch of Windows Server 2008, Visual Studio 2008, and SQL Server 2008. The event is billed as the Heroes Happen Here launch.

“This launch should fuel the next wave of STB growth and momentum,” said Mendlen. “It positions us to keep building on a rich Internet experience for our customers.” And the positive momentum helps propel Microsoft's business as a whole.

“The success of the server and tools business in general is amazing,” said Carlos Gonzalez, a senior finance manager with Server Finance. “But part of the success of STB is that we are one Microsoft altogether. So the success of STB certainly helps Windows and Office, and vice versa.”

The geek in question: Alex Turner

The job title: Program Manager, C#

How did you end up at Microsoft?
I got my start as an intern with the Visual C# team in 2005, and then came back the next summer as an intern again. After getting my five year Bachelor's/Master's from Stony Brook University, I was hired back on the Visual C# team. I'm now the C# Compiler Program Manager.

Nice! So what do you do now?
I'm in charge of making sure the Compiler ship stays the course — that design gets done the right way and that milestones are accomplished at the right time. The C# Compiler has a lot of dependencies — a lot of other teams count on us, so it's important to manage all those intergroup relationships well.

And I hear you've worked with Anders Hejlsberg, the international superhero of C#.
It was really a rock star experience for me. I remember when C# was still in a 1.0 beta, and I was trying it out, and I thought, this is really awesome. I remember trying to learn C++ in high school and I was picking up the concepts, but I still found it a lot to trudge through to do just simple things. And C# lets simple things be simple. So, I was really excited to get an internship on the C# team. When I started my internship, I introduced myself to Anders and probably said something awkward.

How did an awkward hello eventually become Anders handing you $200?
We were preparing the first preview of the LINQ project — what became Language Integrated Query in C# 3.0/Visual Studio 2008. It was secret at the time, which was cool, getting to see it and play with it before anyone else. I got to work with Anders to do the samples for that product. I was responsible for the 101 Query Samples, which provided a whole bunch of sample query methods you could use to try out LINQ and see how it worked. Anders felt passionately about getting the samples done, and we were on a tight schedule, so half as a joke he offered me a dollar per query.

It was fun: I put in the hours and ultimately got 101 LINQ to Objects queries done, as well as 101 LINQ to SQL queries done over the course of a couple weeks. So, I ended up at the LINQ design meeting, and Anders asks, "How many queries do we have?" I told him I'd done the 202 queries, and he pulled out his wallet and handed me $202 dollars.

Was it all in ones?
Ha! No. I didn't really expect him to follow through — but there he was, handing me the money! Everyone in the meeting was staring and smiling and I didn't know what to do. So I just reached across the table and grabbed the money, and the room erupted in laughter. It was a surreal experience.

What did you do with the money? Insane things that can't be spoken of on the internet?
Not really. I took some of my fellow interns out for dinner.

Scandalous!
Now that I'm back on the team as the Compiler PM, I work with Anders regularly — and it's interesting to get used to that. Seeing secret betas, interacting with super-smart people. It's weird when these kinds of things just become a part of your day-to-day life.

Linkee love, s'il vous plait?

• Anders on Channel 9
• The LINQ Project
• Alex's 101 LINQ to Objects queries

The Geek in question: Suzanne Hansen

The job title: Program Manager, Non-Professional Tools

How did you get here?
Well, I was doing my master's degree at University of Victoria, working on an open source project for Eclipse and other very non-Microsoft things. Some people from Microsoft Research came by campus to look at student projects, and mine was slightly different because I was looking at how novices learn how to program.

I'd applied once to intern at Microsoft and didn't even get an interview, and I'd thought to myself, "Fine. So that's how it's going to be." But apparently the Microsoft Research team remembered my student project a year later when John Montgomery (my manager) was forming the Non-Professional Tools team, and I was called in.

When you're doing a master's degree you don't always think you're going to find a job that actually relates to what you've been studying, so the opportunity to be a PM with Popfly was really exciting.

How does it feel to work on a project that's so visible?
The short answer: It's really cool. When you're trying to build a new program at University, it can be a struggle to get, say, six people to use your tool and give you feedback. But we've got customers who are willing to take 10 hours to test the product and write an email, because they're just so excited. It's great! You get so much feedback from people, and we're really serious about taking the feedback and putting it back into Popfly.

We recently switched from alpha to beta, and it was great to sit back for a few hours and just watch at all the blogs and feedback coming in. I'm not obsessive about it, but we definitely watch Technorati to see people's responses, and if a blogger has a complaint, we try to respond so that they know we hear them.

So, it's not daunting at all? 'Cuz this is Microsoft, and people looooove to bitch about Microsoft.
You get some people who will misinterpret something that we do — and sometimes customers forget that oh, wait: they're dealing with real people on the other end of the feedback. They see Microsoft as this evil empire.

I mean, I was at University too, so I get it. There was definitely the feeling that Microsoft was the enemy! Then you come here, and you realize that not everybody is a Type A jerk. For example, I had no idea how serious Microsoft is about what personal information you can collect about users, and how it can be used. I have a lot more respect for Microsoft now, especially when I see how some other companies are sneaky about how they use personal information.

It sounds hokey, but the people I work with? They're smart. We've got this developer on our team who writes all these books. He's been here for years, and is really REALLY knowledgeable — I mean, he's writing books about this stuff.

Are you a compulsive student? What have you learned since you started a year ago?
I've dealt with a lot of things I didn't deal with in school. Working for Microsoft, you need to follow the security process or else you won't make your release. All the sign-off steps to actually do a release at such a huge company — there's a lot to it.

We're a little different from many products here — we're not Windows. We're not Office. We're not Visual Studios. Popfly is only about 15 people, and we're pretty agile and do a release really every four or five weeks, so we've really had to work to figure out our place in Microsoft's release process.

So, I have to ask: what's up with the Popfly ducks?
We had all these different photos on the website, stuff like dandelions and whatever. But the ducks were our favorite — we were told we can't actually use them as a brand, so now we have this logo with these two bubbles. But the ducks will stay. We love the ducks.

Oh, so you want some linkeez, hmm?
Popfly homepage Popfly team blog