The "Gartner|IDC Groups Corrupted by Microsoft" series

THIS IS almost the last part of a series that comes in 5 parts (see part 1, part 2 and part 3). It reveals the ways in which IDC and Gartner interact with Microsoft [1, 2, 3, 4, 5, 6, 7] and today we turn some attention to IDC.

Going a day back, IDG News Service, which is linked to its parent, IDC [1, 2], spread some more lies -- as in "lies, damn lies, and statistics" -- about GNU/Linux.

We won't remark on this report in an elaborative fashion -- a report which bears the provocative headline "Enterprise Linux? Not so fast." Some people blindly fall for it, without a challenge.

“IDC has Microsoft as a major client and it counts only server revenue, not actual growth.”One need not wonder where it's coming from. IDC has Microsoft as a major client and it counts only server revenue, not actual growth. It discriminates against GNU/Linux by definition and design. We saw this before, carried by a reporter who is now a Microsoft employee. They measure the wrong thing; That's the 'Microsoft standards' for measuring things because it makes Linux (free) look bad; it assumes that the only thing in this world is money --- short-term gain from direct sales, not even services.

As for the figures collected in this latest article, there is something familiar about it. We saw IDC in the EDGI scheme [1, 2, 3]. IDC was asking about GNU/Linux in a form of 'survey', but it was asking only Microsoft customers (talk about biased population sample).

Either way, this news brings us to today's antitrust exhibit, Exhibit PX07175 (Sept 2002) [PDF].

Says one reader: "It's my belief that this vendor meeting shows the beginning of what became "Get the Facts."" On page 32 we find Microsoft's Jim Allchin casually mentioning the as-yet unpublished IDC study.

We include half of the text (manually extracted from the scans) in the Appendix, with its second part coming in the next post (due to length constraints in the CMS). Here is a summary of key points:

In this roundtable, Allchin opens by inquiring with partners about Linux:

I wanted to do this meeting specifically. I asked for lt because I wanted to know what was on your minds. I mean, it’s a tough economy. I wanted to know how we could help you be more successful in your business. I -- I’m very interested in what you see happening, what you see happening in the Linux base, what you see happening in terms of your customers, what we can do to improve things. You know, I’m -- I build my organization, the technology, mun If you want to wander down into licensing, we can talk about that as well.

That was just before a big server software release. Says Allchin:

We have Windows .Net server coming up within the next few months. Have you seen that? Had an opportunity? Okay. So we’re not going to ship it until it’s ready.

This includes the lock-in known as SharePoint:

But the thing that we’re probably the most excited about is -- yes, there’s a new version of Share Point coming on, which is also very cool. But I’m excited about the way the ASP .Net system works there. So how fast you can write applications and how well they’ll perform once you’re running in that environment.

Pushing people to buy new stuff is key here:

You know, we’ve got to get the people off NT-4. Can’t have -- it’s a 1996 technology and the level of concern over security and the like at this point I really think is quite different than not.

Back in 2002, Allchin also talked about "Longhorn" (to be Vista), which was expected to come soon with all these features which were dropped:

And then the future, at least from the platforms area, the next wave is something called Longhorn. And Longhorn is a whole new generation that has some fundamentals of a new storage system, which is much richer than what we have today. And the client thinks about it as a data-basing file systems integrated together. So at actually would be a storage system on the client’s server.

Then comes more fantasy (vapourware) talk from Allchin:

And we’ll add 3-D graphics through managed interfaces so that you can do these folders I just talked about. Imagine, you can do 3-dimensional presentations of these clusters so you can see nice shading going on in the background. And also digital media is being further integrated in.

Allchin then asks:

What can we do -- what’s the number one problem with Microsoft that you have?

The first reply?

MR. MARTIN: Security.

MR. ALLCHIN; Okay. Tell me about it.

MR. MARTIN: Just last week we were attacked from China. They were attempting to do a buffer overflow with closed Messenger -- Messenger server.

Mr. Martin was clearly unhappy:

MR. MARTIN: Actually, from France Telco and from China. And like I said, there’s nothing we can do to -every time we try to -- we got the FBI involved, but our hands are tied

MR. ALLCHIN: We’ve been there.

MR. MARTIN: I’m sure you guys are experiencing the same thing.

MR. ALLCHIN: And there’s no one home when you go to call.

MR. MARTIN: Yeah.

MR. ALLCHIN: And the FBI, although they will do certain things, it’s a hard problem.

Then come more promises from Microsoft that Windows will become more secure (false).

On it goes:

Last week I was at a seminar and I was speaking -- I was talking with a gentleman from Cisco who mentioned to me that recently there was an attack in Japan on their 911 system through the cell phones, through wireless

devices. That a virus had actually infected wireless devices; in turn, all at the same time they called 911 in Japan. And so security’s becoming much, much more important, not lust on operating systems and on applications, you know, desk tops, but also now on wireless devices as well. And I think that that’s something that our customers ask about. We’re working wlth Microsoft technology. Of course, all the heat, press lately about Microsoft and the security packages -

Allchin speaks of 'medicine' (Linux/UNIX):

MR. ALLCHIN: Let me push on this just a minute. We said that we were going to get focused on this trustworthiness. Jusd what that meant was more transparency. Anytime that we found something we were going to publish it. We’re now getting abuse -I mean, it’s not like Linux or Solaris or -- you pick your system.

Mr. Ratajczak remarks:

At the SMB market, mostly the S, you know, when Microsoft comes out or people come out with security issues and Linux penetration, they save -- you know, they don’t -- they remember that about 30 seconds and then they go on. But they do obviously know that it costs money to keep -- keep it going, get the updates and all that kind of stuff. And that’s probably the hardest thing I've run Into.

Ms. Hutchison on the upgrade treadmill:

I can’t believe I’m going to be talking about XML. Correct me if I’m wrong. But say you’re in an application and this is an operating system - let’s say it’s Office for a moment here. You -- you’re in Excel. You want to publish a pivot table as a Web page. Gee, it worked really great when we were running Office 2000. Now we’ve got Offlce XP. Guess what, the only people who can see this pivot table on a Web page are other XP users.

Later, 15 minutes from the end, they begin discussing "Linux":

MR. O’NEILL: We have about 15 minutes left. I want to make sure if there are other topics -

MR. ALLCHIN: want to switch gears unless you have one last thing.

MR. VINOKUR: Well, one of the questions you had - part of the question you had was Linux.

MR. ALLCHIN: Yeah, I’m about to get there.

MR. VINOKUR: I will let you lead.

MR. VINOKUR: I will let you lead.

MR. ALLCHIN: - want to know first your -- you guys are important partners for us so -- and you’re out promoting our products.

We feel a huge threat from Linux. Maybe we shouldn’t, which is a question you could answer from your perspective, but we’re trying to -- you know, there’s many characteristics of Linux. There’s Linux the community. We’re going to learn from Linux the community. Incredible what they aid. You know, our shared source effort, people on our news groups, our commitment to MVP’s. We’re on that one. We’re going to woodshed, woodshed. We’re going to practice and practice and practice.

Then Allchin mocks the GPL, saying it's bad for the United States:

MR. ALLCHIN: -- and improve. The second is GPL. GPL is the licensing model. We think it’s very bad for -- on an education, telling the world why we think it’s bad. We don’t think it’s the same as public domain. Somebody wants to put in a free DSB, we don’t have a problem with that, at least on licensing. But GPL, we think it’s very bad basically for the world, but especially for the United States.

Third is the product and we’re going to go compete with Linux. So what I want to know is how, from your perspective, are our product not matching up today; what should we, in your opinion, be doing about it? It could range from, "Nothing. It’s not a problem. Don’t worry about it," to, "Boy, you got a real problem here and you’d better do X." So that’s what I would like to hear about.

Then Allchin talks about the IDC study he's preparing -- the one he previously said he must have or buy.

MR. ALLCHIN: Don’t you think -- just to push on that a little bit. For the whole discussion that we just had about that it’s a traction of the cost. And we know -- there’s a study going to come out from IDC that shows that Linux costs companies more, but -

Allchin's partner try to reassure or calm him down, but he is not easily convinced.

MR. ALLCHIN: Why do you think it’s going to get tougher and tougher? [for Linux]

They respond with myths and FUD:

MR. WATTS: Because as you start getting to where you’re going to be writing more and more code to make Linux capable of doing what

Using Linux requires writing code?

It then turns out that some of Microsoft's partners actually use GNU/Linux (they kept quiet about it up until now):

MR. VINOKUR: We’ve set up a few Linux boxes, primarily...

And on it goes...

MR. VINOKUR: So with Linux when it came our, I can take a -- I had one customer, just to show them what we can do, because he was trying to save money, really trying to save money.

We took a 486 DX266 with -- I don’t remember how much memory, 64 -- I don’t remember, I really don’t. I think he needed like 5 megs worth, because it’s primarily XML doctuments, Word documents. He was happy, 100 bucks later and maybe 6 hours of my time and the computer that he had sitting holding a door open. so there’s -- there’s that - and I have more and more clients asking me about it. Two or three years ago nobody would ask me. Now they’re asking me. Now one of the clients who has two of those machines is asking me about work stations. Because all we do is documents and spread sheets. Star Office just came out -- I mean Sun just came out with Star Office 6.0. I hate to say it, but for the honey -- the $67.00, it’s incredible. Mac, Apple -- I mean, Apple, Windows and Linux and Solarls.

I mean, it’s -- so it’s -- it’s it’s that competitive side. So is Linux going to be harder? I disagree with you. There are so many tools out today that are also getting to be -- because the real reason why Microsoft is easier is because you have utilities that are graphics. Click, click, click you’re done. Same thing with Linux. Is it something to worry about? I believe so. The biggest -- the way I have always -- the reason I came back to the smaller market is because those 5 to 10 user companies will grow. If you help them, they will grow. And that’s a huge market out there that Microsoft just can’t seem to step in.

Desktop, okay, because a lot of it was not possible to get anything other than. Today, Dell, IBM, HP, they’re all selling other than Microsoft OS. So you can order a Redhead on the regular desktop and save 150 bucks or whatever the difference is. So it is -- it is going to be harder. And the tools that are coming out, and then the Linux community is learning from Microsoft. We need tools, we need to make it easy. The idea ms the more techies cut there that can support us, the more Linux is going to be in the market.

Later on, the subject of Linux comes up again:

MR. VINOKUR: I actually have learned to -- you know, you were talking about doing coding with Linux. It’s actually -- I have been following it for the last three, four years, Linux, and for the longest time I’ve been saying it’s for those people who have enough time on their hands.

And in the last probably year or so you have documents

MR RATAJCZAK: It’s getting -

MR VINOKUR: It has got -- and that’s what I keep saying. It’s going to get even easier. It will catch up with utilities and so on. And it’s already there. So I think it’s very close to being there.

It's important to remember that these are all Microsoft employees or close partners.

There are some more eye-opening bits in the next part, which also contains the remainder of the transcript. ⬆

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Appendix: Comes vs. Microsoft - exhibit px07175, as text - Part I

Part II here

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From: Pat Hayes Sent: Saturday, October 19, 2002 6:13 AM To: Jim Allchin; Michele Freed Subject: Dallas Vap roundtable transcript 9-25-02

Attachments: jim allchin roundtable notes.doc

Just received these in Word format last week. Thanks for the visit and giving us the opportunity to get some of your time.

Pat Hayes Sr. Director Seminar Sales Team

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Microsoft Corporation Vendor Meeting September 25, 2002

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Vendor Participants:

Jack Fleet, Sr. Vice President PFK E-Business Systems

Sharon Hutchuson, Web Developer ePartners

Joseph L. Martin, President Soft Solutions, Inc.

Shazad Mohamed, President and CEO GlobalTeck Solutlons

Andrew Marek, Principal Solutions Specialist Tych-Sys Solutions

Cleal Watts, Chief Financial Officer

John Quinn Ratajczak, sales Manager Quinn Technologies

Aron Vinokur, Mondial Systems

Microsoft Participants:

Jim Allchin Jennifer Turvold John Weston Bret Ronloff Mike O’Nell Pat Hayes Michele Freed

Stenographer:

David B. Jackson United American Reporting Services, inc.

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[Introductions.]

MR. O’NEILL: What we’re going to do is take the next hour and we’re going to have a chance to talk over bow’s business going, how is Microsoft’s relationship with you, how’s our relationship with the customers, et cetera, et cetera.

We hope that you will be active participants in this process, because this is your chance to be heard as well as, hopefully, Jim can ask questions of you to understand how things are going.

For Jim’s benefit I’ll introduce a couple of people.

Michele is Jim’s technical assistant, even though she has a big formal title; is that right? But she helps on the technical side with Jim, so she’s come here and joined us as well.

Pat Hayes, who’s down at the very end, is our director of our seminar sales team. All of you are here because you came to a Microsoft TS2 event. Pat is the manager of the seminar team which TS2 is a part of. That also includes Microsoft Big Day event that you might have heard of, Microsoft TechNet events, Diversity events. There’s about five different things we do. So all that falls under Pat’s domain.

John Weston, who’s right here, is our TechNet manager. He’s just starting up a brand new team. He’s inherited the TecnNet world. And you’ve got to go to launch with your first seminar -

MR. WESTON: Next Tuesday.

MR. O’NEILL: - next Tuesday. So it will be very exciting to go to some of these.

And then I have Jennifer Turvold, who is here. She, along with myself, manage the TS2 events that y’ail got a chance to see, hopefully, and enjoy.

And then we also have Bret, who’s been our lovely,

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gracious host this morning. Bret ls one of our technical presenters and he helps out doing all kinds of things. Kind of a universal guy.

So with that, what I would love to do is just start around the room and have everyone just kind of explain who you are, your company, just real quickly give an introduction.

MR. ALLCHIN: And whether you do development or not.

MR. O’NEILL: Whether you do development. We’ll start with you.

MR. MOHAMED: My name is Shazad Mohamed. I'm the chairman and CEO of GlobalTeck Solutions. We’re an application development and consulting company. Mostly do mobility and pocket PC’s, hospitality space. Work a lot with .Net and a lot of Mlcrosoft technologies as our core business.

MR. FLEET: Jack Fleet. I’m with PFK E-Business Systems. We are in application development shop. We predominately are a Microsoft shop. We dabble a little with other technologies.

We’ve created private trade exchanges, portals using QE technologies and are starting to work with .Net on some projects.

MR. ALLCHIN: MSNQ?

MR. FLEET: MSNQ.

MS. HUTCHISON: I am Sharon Hutchison. I’m the Internet web master at ePartners. We’re a Microsoft Gold Certified Partner. We’re a technology solutions provider for the middle market, primarily accounting systems, that sort of thing.

I’m a journalist who has proven that Microsoft Front Page can manage an intranet. I’ve done this for about five years.

I’ve done it for three years at ePartners, a couple years at Ernst and Young. So I’m as technical as I have to get. I use Sequel a lot. I see Bambi's eyes every time I open up a connection.

MR. ALLCHIN: That was a long time ago.

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MR. MARTIN: My name is Joseph Martin. I’m the president of Soft Solutions, Incorporated. I’m a Microsoft, IBM and Hewlett Packard partner. We’re a full service MIS shop for small/medium sized businesses internationally as well as, you know, domestic. We do development, but we do everything from A to Z for our customers.

MR. RATAJCZAK: John Ratajczak, Quinn Technology, IT service. Any development that we do is primarily on the Web site side, and have a very bag interest in the migratlon to the .Net world.

MR. WATTS: Cleal Watts, chief financial officer. Because ISR, in partlcular, is the one that handles all of the hardware, from heavy armor down to PDA’s. We don’t make PDA’s or tablets yet, but we’re tninking about it. And then all the additional software -- software companies -- developing software companies -- ~he strong ones we have running right now are law enforcement. Probably two thirds of the East Coast -- less -- run our software, lot of the states. We then have state s that have passed laws that if they’re using our software it’s automatically admissible in court.

One of the programs that our stuff will run on -let me think, 50 and under operating systems, right now we generally use Sequel. We also are international. We do things lake China’s postal service. We designed the software systems on that. We generally try to use Sequel. Oh, won’t use all of them but try to moderate to Sequel and pretty much stick with the TCIP for communications on wireless. We do dispatch. Anything that goes out anywhere, anytime we work on it.

MR. VINOKUR: My name is Aron Vinokur with Mondial Systems. We do NC services. Citrix inclined. Development projects management, the actual development. Somewhere in the mix.

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Primarily we call ourselves the (not audible].

MR. ALLCHIN: Well, I run the platform system at Microsoft, the operating systems area, the servers and the developmental side, Net Studio .Net. And I want to thank you for coming to have breakfast here and also -- you know, we can make this two way, but if you don’t ask me questions I will spend the whole time peppering you with questions.

You need to be very outspoken, because this is a huge opportunity for me to come and talk to you.

I wanted to do this meeting specifically. I asked for it because I wanted to know what was on your minds. I mean, it’s a tough economy. I wanted to know how we could help you be more successful in your business. I -- I’m very interested in what you see happening, what you see happening in the Linux base, what you see happening in terms of your customers, what we can do to improve things. You know, I’m -- I build my organization, the technology, mun If you want to wander down into licensing, we can talk about that as well.

But -- and I’m willing to share with you, you know, my view of what’s happening in terms of technology that’s coming from Microsoft. And in fact, let me start off on that.

I’m pumped In terms of this stuff that’s coming, in terms of new technical things. It’s -- the economy may be tough right now, but Microsoft's in a position to invest and we are investing in, I think, a number of advancements that are going to happen in technology that will make people’s businesses more effective, more productive. They can do things they’ve never done before.

We’re I’m more convinced that basically each year it’s just going to be another huge step up. I brought a tablet. I

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don’t know if you’ve ever seen a tablet. But just that alone going to change certain information workers, what it is that they could have done before. So have you seen the tablet? Okay. Great.

So we’re very, very excited about what products like that could do. And that’s just one type of innovation. And whenever I’m out showing people things like the tablet, they "Wow, you know, I could use this, you know, in my ....a dentist could use it, a real estate person could use it. Anybody that’s on the go could use it. And in schools, it’s an incredibly exciting area for them, for a student who wants to be mobile, needs the laptop, and they give up nothing to be able to make it essentially a -- a journaling, a note-taking item for their school, which they can then save that.

We have Windows .Net server coming up within the next few months. Have you seen that? Had an opportunity? Okay. So we’re not going to ship it until it’s ready. So we have a hold in terms of quality. But we think that it’s going to reduce the time that people -- you know, that it takes you to install it, if you actually install it, in terms of it’s a role-based system where you can decide, this is file server, this is a print, et cetera, et cetera, et cetera, and we lock it down, the surface areas are smaller, for security reasons, so we think it’s much better. But the thing that we’re probably the most excited about is -- yes, there’s a new version of Share Point coming on, which is also very cool. But I’m excited about the way the ASP .Net system works there. So how fast you can write applications and how well they’ll perform once you’re running in that environment.

If you have customers that are on NT-4, I think we need to help you in the business case to get them off of it. But

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in terms of security it’s night and day. You know, we’ve got to get the people off NT-4. Can’t have -- it’s a 1996 technology and the level of concern over security and the like at this point I really think is quite different than not. And Windows .Net server is focused on trying to take that to the level I think we should he.

So I mean, I can talk about what’s coming next. I will spend a couple more minutes on that. Then I will turn it around.

We have a new version of Sequel that will well, on the client side we have Office 11 coming. And Office 11 is -- it depends on which particular application that you’re interested in. I spend my life in Outlook so Outlook is significantly improved, significantly. It’s improved especially in the case of the mobile world. That’s the case where I’ve seen the biggest change. It’s a change because everything is basically cached. Before, if you were mobile, you were getting these messages popping up saying, "I just lost the connection." If you live with wireless, one wireless point to another, it’s very annoying to end up having to stop Outlook in some cases in order to get the you’re laughing at the end of the table -- in order to move it. That all goes away.

If there’s any connectivity that it can smell, it will lust start sucking down mail or pushing mail out. And you basically don’t see the lack of connectivity or see the fact that there’s any connectivity there. So you feel like you’re in a nice environment all the time. You can still put everything on the server, you know, you will still have that ability, where you’re basically -- you have a smart graphics interface, but all storage is remote. But in the case of the mobile, it’s much, much nicer.

It’s also just a lot smarter in the way it can

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organize mail for you. And if you have -- if you’re in a heavy mail environment, you can have previews on another monitor or on the same monitor, just side by side, which is very nice. And with the capabilities that we’re doing in terns of public use, you can now get encrypted mail set up very easily, so if you can have encrypted mail or assigned mail without having to be a genius in setting up the PKI structure. And, you know, even on the client side you have to be a genius to get the cert set up here. So than problem basically goes away. You can call that a security feature, but it can also be called ease of use. We sort of did it before, but now we make at practical for a lot of people, and it’s very nice.

Then we’ve got a big version of the Sequel server coming called Uconn. And what that does is there are two fundamental ways to think about it. First, put XML to the core of what we have an the data base, so it makes it much easier to store and manipulate XML. And second is that we put .Net, the .Net framework and CLR that are coming in Primetime inslde Sequel so that you don’t have to you can program in any language you like that’s a CLR based language inside of Sequel. So to store the procedures now at can be EB, and you will get performance and execution, unlike today. Or you could do C-Sharp or, you know, you could do Java, whatever you like, and store procedures inside the data base.

And then the future, at least from the platforms area, the next wave is something called Longhorn. And Longhorn is a whole new generation that has some fundamentals of a new storage system, which is much richer than what we have today. And the client thinks about it as a data-basing file systems integrated together. So at actually would be a storage system on the client’s server. You can do dynamic indexing. And the whole idea of having

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to force folders where you create the folders, the system can do the folders for you dynamically on the fly based on properties. Conceptually, you can thank of the folder or that particular grouping as just a property in the new world. So you could do a new folder based on date, so the system could automatically cluster based on when you wrote this particular document or when you put it on the system. So you could just collect them that way. This is true on the server as well. It’s an automatic dynamic indexing out there.

New graphics on the client side. 3-D -- most every machine has 3-D today, but no aps to use it. OS doesn’t really give you the deep support that you need. And we’ll add 3-D graphics through managed interfaces so that you can do these folders I just talked about. Imagine, you can do 3-dimensional presentations of these clusters so you can see nice shading going on in the background. And also digital media is being further integrated in. And it -- we think digital media is going to be key for businesses as we move ahead. Delivery of words, numbers, sights and sounds. So whether it be in the dentist’s office where they’re actually taking not only digital photos but digital movies, and you’re being able to categorize that, being able to watch progressions of jaws or whatever. And we’re trying to build that foundation into the system.

There’s a bunch of new networking that we’ve put In. Be network peer to peer. Nice collaborative, simple meeting. Suppose you don’t have any servers, just walk into the room and everybody opens their laptops, have synchronized power points happening. They can share things, et cetera. So I’m going to stop there, and I’m going to turn around and start asking questions.

What can we do -- what’s the number one problem with Microsoft that you have?

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MR. MARTIN: Security.

MR. ALLCHIN; Okay. Tell me about it.

MR. MARTIN: Just last week we were attacked from China. They were attempting to do a buffer overflow with closed Messenger -- Messenger server. And we were getting -- we could just watch their attack progress. And because we have international customers who do business in China, we can’t block off all of China. And we traced the attacks back to where it came from inside China. Actually, it was in China Telco. And their, quote, unquote, abuse e-mall just bounces the e-mails back to you, so there’s no way to report any abuse to them. And nobody can seem to do anything. And, I mean, I had to spend a day tracing back where all these attacks were coming from, you know, monitoring luckily we had everything patched up so that the servers were hard net, they couldn’t do anything. But you could just see their Messenger windows pop up as they were just trying to buffer overflow it. And you see each screen and they would just add more data and just keep trying to eventually get it to where it would break. But luckily Messenger was a okay, so it didn’t do anything to the servers. But, you know, I would like to see something more within the servers themselves of intruder detection, you know, making it a lot easier for us to say, oh, hey, you know what -- I mean, the only thing I can think of that makes sense is possibly a feature off of ISA server where you could assign a property list of IP addresses to a service. Or you can say, hey, you know what, this service should only be available to machines in my local subnet. And that way Messenger -- because we had to turn it off just to stop them from constantly I mean, we could have blocked their IP, but, like I said, the problem is, as soon as you block one IP they just turn around and just hop on another one, and another one

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MR. ALLCHIN: I understand.

MR. MARTIN: -- and another one.

MR. ALLCHIN: Where is their sites of attack that you might expect -

MR. MARTIN: Actually, from France Telco and from China. And like I said, there’s nothing we can do to -every time we try to -- we got the FBI involved, but our hands are tied

MR. ALLCHIN: We’ve been there.

MR. MARTIN: I’m sure you guys are experiencing the same thing.

MR. ALLCHIN: And there’s no one home when you go to call.

MR. MARTIN: Yeah.

MR. ALLCHIN: And the FBI, although they will do certain things, it’s a hard problem.

Well, I didn’t mention it, but we’re on a path to, if I could use the term, just get back to the basics. So over a period of years I hope that you’ve seen Microsoft improving their reliability, improving in scaleability. We made a commitment on security and we are -- we are woodsheddlng on security right now. And what you will see is that Windows .Net server is - this is a journey first, but in terms of big jump up, you know, Windows .Net server is a huge step up in terms of this. We retrained basically an entire platforms team. Just in Windows alone, probably 5,000 people. We retained all those, spent two months sort of backing up, retaining, doing threat modeling and walking through the system. And we improved -- some of those changes went back to SPI for Windows XP, and in terms of the Windows .Net server it got tons of that review implemented in terms of it.

We’re feeling pretty good. We also created the

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security business unit, which is focused on exactly the type things you mentioned --

MR. MARTIN: I go to Microsoft.com, forward slash, security and I’ve gone there and -

MR. ALLCHIN: There’s not going to be anything about what -- that new group because they’re -- they’re too new. And they don’t -- they owned ISA, the Internet Security and Acceleration products, bit in terms of their work on intrusion, we have some really good ideas. Today this antivirus approach is not -- may not be the right solution, so we think we can do some work in behavioral analysis that could do a set of rules that you could apply that don’t have to be updated. Se you wouldn’t have this constant stream of, "Oh, the next thing is found, do I have the right antlvirus, you know, vector on my machine?" Suppose that you could apply a more intelligent solution that’s watching for certain sequences.

MR. MARTIN: A pattern.

MR. ALLCHIN: A pattern that we know someone should think about before they allow. And so we’re investigating that. But it’s all about intrusion detection. I wouldn’t say detection; I would say intrusion prevention.

MR. MARTIN: Prevention, yeah.

MR. ALLCHIN: So that’s the path that we’re on regarding that. Okay. So I heard that. Security. What else? Someone else?

MR. FLEET: Well, I’ve heard security too from my clients as well. Security, thrustworthiness, privacy of information. Those are key issues for them. Last week I was at a seminar and I was speaking -- I was talking with a gentleman from Cisco who mentioned to me that recently there was an attack in Japan on their 911 system through the cell phones, through wireless

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devices. That a virus had actually infected wireless devices; in turn, all at the same time they called 911 in Japan. And so security becoming much, much more important, not lust on operating systems and on applications, you know, desk tops, but also now on wireless devices as well. And I think that that’s something that our customers ask about. We’re working wlth Microsoft technology. Of course, all the heat, press lately about Microsoft and the security packages -

MR. ALLCHIN: Let me push on this just a minute. We said that we were going to get focused on this trustworthiness. Jusd what that meant was more transparency. Anytime that we found something we were going to publish it. We’re now getting abuse -I mean, it’s not like Linux or Solaris or -- you pick your system. It doesn’t have as many -- in many cases more than we do; it’s just that we’re coming out and we’re being very proactive about. Is that a mistake on our part? I think it’s the right thing to do with the customer, so --

MR. MARTIN: Well, I agree with you it’s the right thing to do. And I’ll tell you, the one thing I’ve found so funny lately is that bug inside of SSL on Linux has so devastated so many customers just around the country. And all of a sudden everybody’s looking at that going, "Microsoft doesn’t have that problem, do they?" And all of a sudden now everybody’s like, "Oh, you know what, I don’t think I want to really consider Linux anymore, think I would rather look at what Microsoft’s fixing to come out with." And I’ve really gotten that feedback from customers.

MR. ALLCHIN: Okay. We -- we took the strategy, and I directed it, that, you know, we’re going to keep coming out -if we find it, we’re going to protect the customers, even if we continue to get whacked by the press, because I think it’s the right thing to do, and long term the right things will happen. But

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certainly we have taken a lot of abuse over it.

What will happen is -- when we made this, we knew that the number of fixes were going to go up because we were going to spend more time looking and taking other people’s input about what things they have found. But with Windows .Net server we think the numbers will drop when we get that deployed. And fortunately, deployment of Windows .Net services -- you may make some money deploying it because it’s going to be harder to deploy because we locked it down more. And so there are aps that are going to break or that will need to have their parameters changed because we closed a set of things down that we probably should have closed before. So once it’s installed, you know, the number of bulletins that we’ll produce will be much less. We -- for example, we -we had tools that detected the possibilities for buffer overrides before. And via mistake, the UP&P thing, which was the one that really blew our minds, me personally, got through. What we then did in Windows .Net server -- that was Windows XP. What we did in Windows .Net server is we changed the compiler so that the -every time that you dynamically allocate out of the stack we actually put a signature and the compiler code checks that signature that’s been changed. We recomplled the entire system with this. So any buffer overrun on Windows .Net server will in fact fall, either the -- if it actually -- if -- if it’s been a coding mistake and they’ve actually been able to overwrite that field, then that ap program will fail or the OF will fail, which is much better, in our view, than have the potential attack that you don’t know about. We think we’ve got them all. But this is an additional level of protection just in case, which -- okay. So we’re - we’re on that one. What else?

MR. RATAJCZAK: My primary focus is the SMB market.

MR. ALLCHIN: Yes.

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MR. RATAJCZAK: Mostly the S.

MR. ALLCHIN: Yes.

MR. RATAJCZAK: And the stuff that you’re talking about, security and which operating system. You know, the people that we service are -- you know, that’s all All fo them -MR.

ALLCHIN: Yeah, I know that.

MR. RATAJCZAK: -- because you just talk to me. Call Quinn, he’ll tell us what to do.

The biggest problem I have in that market, which would be helpful, and I don’t know if this is possible, but, you know, I think when you’re talking about SMB, they need to be educated, because I have to educate them that when you buy an operating system cr if you go to Dell to get a computer, that’s not the end of the cost. And I’m the one that has to educate them, and it’s a -- it’s a delicate process. Because when -- at the end of the year when they start totaling up their expenses for computer stuff and I’m more than -

MR. MARTIN: Than the hardware costs.

MR. RATAJCZAK: I’m more than that, then they’re surprised, you know, and I think there’s an education process.

At the SMB market, mostly the S, you know, when Microsoft comes out or people come out with security issues and Linux penetration, they save -- you know, they don’t -- they remember that about 30 seconds and then they go on. But they do obviously know that it costs money to keep -- keep it going, get the updates and all that kind of stuff. And that’s probably the hardest thing I've run Into.

MR. ViNOKUR: Since I delve in the same area -- I’ve been in the mid-sized market. I’ve sort of stepped down a little bit to the small to mid-sized -

(Interruption by the reporter.)

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MR. VINOKUR: I delve in this same market same market space. I was -- we were primarily in the mid-sized market, anywhere from 29 to maybe 200 users. We’ve found that that area tends to be sometimes not as reliable as the smaller businesses, which we consider anything from S to say 75 users.

The biggest problem for me -- for us has been not so much training them and teaching them as saying that cost of consulting or the cost of labor is much higher than the hardware or the software. That you say almost as soon as we meet someone. As soon as you sit down with a client and have the first meeting, the first thing that you tell them is you -- the first thing you need to realize is that the ectra $200.00 you’re going to spend for the faster, better computer -- Better quality computer is going to pay for itself at the end of the year when you see the labor costs. Because that’s going to be by for the highest cost. The initial acquisitior mode of, you know, $500.00 for Office Suite, a thousand dollars for the computer, and then you have an industry specialty application that’s even more expensive than that. So by the time you add up all of the above, that cost is about 35 percent of the total cost. The rest is labor. Someone has to install it and set it up. The biggest issues for the SMB market has been and I think the approach that we’ve taken is the very basic one that works, anything from one user to 10,000, needs, product slash services and price.

What we have found ms the pricing structure for not taking the income generation management of the company - not taking consideration of the gross revenues of the company, anything under 20 users is very hard to swallow to buy a $1,200.00 server or at that point $2,000.00 NT server, or 2000 server .Net. And then you’re talking about $200.00 for Windows XP or 2000 Professional. Because Windows 98 you really shouldn’t be in the business market,

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but you still find it, primarily because of the price.

MR. ALLCHIN: The price of -- the fact that it’s already there? No one should be -- in fact, It’s probably hard to actually find Windows 9x to install now.

MR. MARTIN: True. To install, out it’s prolific everywhere in the small business --

MR. ALLCHIN: Let’s talk about that. You guys, I assume you’ve all played with Windows XP. I happen to think it’s wonderful. I thlnk most people who have seen it

MR. MARTIN: It’s wonderful.

MR. ALLCHIN: Okay. What do we have to do to get these companies do they want to continue rebooting their machines? i mean, you guys can do remote assistance, visit them, help them, I mean -

MR. VINOKUR: Well, here’s -sorry, here’s -- I got this last week from one of my smaller clients. They have I have fought with them for a year to move them to a 2000 Pro platform. They finally -we finally moved them before the summer. The gentleman was either at CompUSA or Microsoft -- one of the bigger computer stores. He was looking -- I mentioned to him that the Windows XP Pro should be the next stage we go to for the machines that are prior to the Windows 2000 Professionals. He got a stage fright when he saw the prices. $300.00 for an operating system, $200.00 for an upgrade. I’m not delving on that. But when you have s€±x, seven, computers and you’re -

MR. ALLCHIN: Because that’s the wrong price. To go from a Windows 2000 Pro to Windows XP

MR. MARTIN: No, no, he’s saying from 98 to XP.

MR. ALLCHIN: I see.

MR. VINOKUR: And even from 2000 Pro to XP Pro, it’s still about $200.00.

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MR. MARTIN: No, it’s 89 bucks.

MR. VINOKUR: Oh, really? We haven’t done the upgrades. But essentially that’s the initial stage fright. So I think there’s s who|e issue that has not been brought out, as you said, teaching the the small business -

MR. ALLCHIN: That there’s a return.

MR. VINOKUR: -- that there is an upgrade path that is not as expensive as you might think.

MR. MARTIN: It’s worse than that -- in other words, they don’t see the value for the higher price.

MR. VINOKUR: And part of the issue ms the retail market, because all they sell is brand new product, so when somebody walks into the store they see $350.00 Windows XP Pro.

MR. WATTS: And that’s another thing too, because the OEM side -- dealing with OEM’s, you get into it. And the hard part is you get Dell or some of them, they’re paying 16 bucks, 25 bucks for an operating system.

MR. ALLCHIN: They’re not. Trust me.

MR. WATTS: Okay. I don’t know what they’re paying, but 50, 60 bucks. They’re paying a lot less than we are.

MR. ALLCHIN: In a system builder that’s true, but don’t think they’re getting those kinds of prices. That’s not happening.

MR. MARTIN: No, that’s net happening.

MR. ALLCHIN: I tracked it, you know, very very carefully.

MR. WATTS: Okay. We had one of the Microsoft guys -- or licensing told us that that’s what they’re getting is the 50, 60 bucks.

MR. MARTIN: That’s part of the total bundle that they have to be purchasing.

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MR. WATTS: Oh, I understand. We used to do it. I mean, I still have 600 licenses not used for DOS whatever it was 3.0. If you want, Z will sell it back to you. You know, we bought like 10,000 or 20,000, wnatevr~ it was. But I understand that, but it’s hard because what happens in a lot of these businesses -they’re talking about small business; it’s not the big companies that are giving the service. Hey, look, they have no idea they still think -- okay, let’s go law enforcement. Here’s what you would be surprised in a police station; they’re stilll running on 286’s on there. You would think it would be different, but guess what, it ain’t.

MR. RATAJCZAK: But that’s a standard problem of any technology. A lot of the vendors or machines in factory floors or whatever -MR.

WATTS: Exactly.

MR. RATAJCZAK: that’s a standard problem.

MR. VINOKUR: They have a 386 running WordPerfect to write forms -

MR. MARTIN: Oh, yeah. I’ve got some of those too.

MR. VINOKUR: One of two machines now. Others they have Windows XP, they have Windows 2000 Professional, I mean, they have the whole gamut. But they have one machine that’s Word Perfect that hasn’t crashed in 10 years.

MR. MARTIN: And they won’t change it for anything.

MR. VINOKUR: And they will not -it doesn’t matter. This is an office manager - not to gripe, but this is an office manager. She has a Windows 2000 Professional box. But when she wants to print something that she knows what it’s going to print like, she goes to that DOS box. It’s the most -- they wane to see those codes. Oh, that’s the other one. Microsoft Word. Beautiful product. But they want to see the codes. And you do the

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reveal code things and all you see is tabs and spaces and whatever.

And the legal world will not walk away from Word Perfect. And it’s not the attorneys. The attorneys are using Microsoft Word and the assistants and

MR. ALLCHIN: Paralegals.

MR. VINOKUR: -- supporting personnel is WordPerfect. And you can -- they will leave the jpb before they will switch.

MR. RATAJCZAK: Go to the next customer and call -

MR. ALLCHIN: What do you guys when you go in to try to sell a Windows XP system, what is the number one sales tactic? What do you tell them? You may have -

MR. MARTIN: It’s more reliable.

MR. VINOKUR: You start with, how many crashes do you have a day. And then you sell. Then it’s -- how much does it cost you? How many employees do you have? It all comes back to the simple formula I mentioned earlier. Needs, product and price.

And that once you show them the costs, then -- and the benefits, then usually it’s okay. It’s not as hard. It’s just that initial shock of, "My God, $300.30 just for an operating system."

MR. MARTIN: Yeah, because they’re used to the old less than a 100 bucks for the OS.

MR. VINOKUR: Right. There’s still that nostalgia, or -- I am non sure, but it’s -- it’s that -- that feeling of, "Walt, I’m paying you how much by the hour, then I got oh, my God." And the computer -- where before the computer was $3,000 or 2,000, now the computer is 500 bucks, for God sakes.

MR. MARTIN: Yeah.

MR. VINOKUR: So there’s a whole -- whole -there’s a whole teaching aspect. And more and more in the last three years we have seen how Microsoft is really trying hard to get

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in the small to mid-sized businesses and be marketed. And it’s going to take a little more teaching.

MR. O’NEILL: One of the things that surprised us, and I’m curious from this group to see this, is concerns about driver support with XP, especially with some the older Legacy standards -

MR. MARTIN: Not just drivers, applications.

MR. WATTS: Yeah.

MR. MARTIN: I mean, take schools. I’ll give you private schools, Catholic schools. We support several. And their biggest concern has always been, well, can -- can the new 0S run my old, you know, McAfee pattern. And XP does a great job of it --

MR. ALLCHIN: XP is far more compatible.

MR. MARTIN: Absolutely. You can go in and set the - it’s amazing.

MR. ALLCHIN: Exactly.

MR. WATTS: A lot of that’s from the culture shock from the 2000 when they tried to -

MR. MARTIN: But that was the key -- that was what the whole put off was, Workstation and 2000, they’re just like, "It won’t run it, I’m not going to look at anything, but 98."

MR. ALLCHIN: Is there more communication we need to do about that?

MR. MARTIN: I think so. I think --don’t think that the consumers as themselves have any idea of the flexibility or the backwards compatibility of XP.

MR. ALLCHIN: Okay.

MR. VINOKUR: What they see as the bells and whistles. And I would probably venture to say that 80 percent of SMB market really has no use for bells and whistles.

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MR. MARTIN: That’s true.

MR. WATTS: Not really. I get the exact opposite. Most of my sales, I’ll get anything from the schools that are coming some of the kids like the bells and whistles to the guys that are engineering -- engineering and manufacturing that are going -- I’m probably getting ehem to go from slide rules to a computer because it’s actually a tool that’s easier for them to learn. The big part, again, on that is -a lot of it is the -getting them into -- actually getting into the learning curve. Because once you start in -that first part is always slow. No matter what you’re going into, any field, anywhere in the world, anything, you’re slow at first, then it comes up. And it’s starting to be now with XP that it’s the little bells and whistles that’s starting them. I got one engineer that’s -- he has all 10 pages of logarithms memorized. You know, that kind of stuff, that he doesn’t need computers or anything else. But when he could take his digital camera and he hooked it up without knowing what in the world he was doing, plugged it in and XP picked at up, and brought down the pictures that he needed to send around the other side of the world on something breaking down on one of the machineries. I just gave hmm the camera, and he did it. He was like, "Hey, I like thls." He quit using the other stuff now, and he started -- now he’s wanting XP just because of the bells and whistles.

Now, there’s another side too on that too at some point we can get into. Medical -- one of my specialties is child development learning disabilities. And that’s another I want to mention at one point, that for the -- what is it, Texas speech and your voice recognition stuff that could be -- there’s a lot of things that can be done in -- like special learning disabilities which, you know, schools especially, that can be integrated that -- well, it can be dyslexic too. ~Anyhow. But there’s a lot

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things -- that can be an excellent teaching tool that you got that’s just sitting there and that even -- I work with like the grandfather of dyslexic, Dr. Richard Swayze, here in Dallas. Some of the top -earning disabilities are right here in Dallas. there’s things that could be done there that actually we found to do for learning disabilities-- and I’m switching guns here a bit, but you’ve already got it there. It’s lust a matter of implementing it. And it’s a trigger of the -- back on the subject, it Is the bells and whlstles, like the digital clock, things like that, that is sending up the XP. And it’s like, "Well, you know, if I could do that that easy, how hard is this that I have been putting off?" It’s just a weird thing.

MR. ALLCHIN: When you say -

MR. VINOKUR: It’s a question of market. It’s a question of which industry you’re in.

MR. MARTIN: It’s more along the lines of the level of education -

MR. WATTS: Yes.

MR. MARTIN: and sophistication of the customer. It’s not so such the market as it is the customer.

MR. ALLCHIN: So we’re going to go on a campaign here where we’re going to spend a lot of dollars talking about the scenarios that are enabled with Windows XP. We are probably going to be romancing, you know, the things that you may already -- that people may already know about, what you can do in media. And that may or may not be exciting, depending upon the business, but what you can do in media. We’re going to talk about what you can do in -- with -- with the Windows Messenger. The face you can do voice calls and video calls and ap sharing. We’re going to do examples of that stuff.

MR. MARTIN: It’s just that, you know, I get

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Part II here